2022 (11) TMI 1170 - AT - Income Tax

Penalty proceedings u/s 271D - contravention of provisions of section 269SS - recording of satisfaction for penalty proceedings - HELD THAT - We find considerable force in the contention of the assessee that the penalty order passed u/s 271D of the Act is void ab initio and bad in law as there was no satisfaction recorded by the AO as to the contravention of provisions of section 269SS while framing the assessment order under section 143(3) - On perusal of the assessment order the AO initiated penalty proceedings u/s 271(1)(c) and there is no satisfaction recorded for initiation of proceedings u/s 271D nor given any finding that there is any contravention of provisions of section 269SS of the Act. Following the decision of the Hon ble Supreme Court and various Tribunals held that in the absence of recording of satisfaction in the assessment order for initiation of penalty proceedings under section 271D/271E of the Act, the penalty order is bad in law. Respectfully following the decision of the Hon ble Supreme Court in the case of CIT Vs. Jai Laxmi Rice Mills 2015 (11) TMI 1453 - SUPREME COURT we hold that the penalty order passed under section 271D of the Act is bad in law and accordingly the same is quashed. Ground No. 1 of the grounds of appeal of the assessee is allowed.

Summary

Issues:
Appeal against penalty order under section 271D for contravention of section 269SS - Failure to record satisfaction by Assessing Officer - Violation of natural justice in penalty proceedings - Reasonable cause for accepting cash advance - Discrepancy in penalty amount imposed.

Analysis:

1. Satisfaction Recording for Penalty Proceedings:
The appeal challenged the penalty order under section 271D for contravention of section 269SS. The Assessing Officer failed to record any satisfaction regarding penalty proceedings under section 271D while framing the assessment order. The Tribunal noted that there was no recorded satisfaction for initiating proceedings under section 271D or any finding of contravention of section 269SS in the assessment order. Citing the decision in CIT Vs. Jai Laxmi Rice Mills, the Tribunal held that in the absence of recorded satisfaction, the penalty order was void ab initio and bad in law. Consequently, the penalty order under section 271D was quashed.

2. Violation of Natural Justice:
The appellant contended that the penalty proceedings lacked adherence to natural justice principles as the appellant's submissions on the National Faceless Appeal Centre were not considered, and no reasonable opportunity of being heard was provided. The Tribunal acknowledged this argument but primarily focused on the absence of satisfaction by the Assessing Officer, leading to the quashing of the penalty order.

3. Reasonable Cause for Accepting Cash Advance:
The appellant argued that there was a reasonable cause for accepting a cash advance from the purchaser, emphasizing that it was a customary practice to provide token money for deal assurance. The appellant, a widow with dependent children, explained the circumstances surrounding the transaction, including lack of awareness of legal provisions. However, the Tribunal's decision to quash the penalty order was based on the procedural irregularity rather than the merits of the reasonable cause argument.

4. Discrepancy in Penalty Amount:
The discrepancy between the amount accepted as cash advance and the penalty imposed was highlighted by the appellant. The Tribunal noted that the penalty was levied assuming a higher cash amount than actually received, which was not justified by the evidence. This discrepancy further underscored the procedural deficiencies in the penalty proceedings.

5. Final Decision:
Given the procedural flaw in the satisfaction recording by the Assessing Officer, the Tribunal allowed the appeal, quashing the penalty order under section 271D as void ab initio and bad in law. As a result, the other grounds of appeal were not addressed on their merits, considering the academic nature of the discussion after the primary issue was resolved. The appeal was allowed in favor of the assessee.

This detailed analysis of the judgment from the Appellate Tribunal ITAT DELHI provides a comprehensive understanding of the issues raised, arguments presented, and the Tribunal's decision regarding the penalty order under section 271D.