2023 (9) TMI 1213 - AT - Income Tax

Penalty u/s 271D - violation of provisions u/s 269SS - mandation of recording satisfaction - treatment of the advance as 'specified sum' after taxing the same as unexplained income - AO treated the said cash received as advance from the sale of land as unexplained income and taxed the same under the provisions of Section 69A r.w.s. 115BBE - HELD THAT - The penalty cannot be imposed on the basis of alleged undisclosed income and simultaneously treating the said amount in violation of 269SS of the Act. As decided in the case of CIT vs. Standard Brand reported 2006 (7) TMI 126 - DELHI HIGH COURT issue in favour of the assessee by holding that the penalty cannot be imposed on the basis of alleged undisclosed income and simultaneously treating the said amount in violation of 269SS of the Act. In our view, the requirement of 269SS is that the specified sum had been accepted by the assessee in cash which is prohibited by the Act. Undisclosed income is contrary to the disclosed income i.e. specified sum disclosed in the return. Also we are of the opinion that recording of the satisfaction by the AO is sine qua non for initiating the penalty u/s 271D - AO though had mentioned that the AO has proposed the imposition of penalty u/s 271D for violation of the provisions of section 269SS, however, after looking into the assessment order reproduced herein below, it is abundantly clear that neither such proposal for imposition of penalty u/s 271D was proposed by the Assessing Officer nor any satisfaction for initiation of penalty was recorded in the assessment order. We are of the opinion that the penalty imposed by the AO had been rightly deleted by the learned CIT (A). In view of the above discussion, the appeal of the Revenue is dismissed.

Summary

Issues Involved:
1. Whether the CIT(A) erred in granting relief to the assessee by not treating Rs. 75,00,000/- as unexplained income.
2. Whether the CIT(A) erred in deleting the penalty imposed under section 271D for violation of section 269SS of the IT Act.

Summary:

Issue 1: Treatment of Rs. 75,00,000/- as Unexplained Income
The Assessing Officer (AO) noticed that the assessee received Rs. 75,00,000/- in cash from Shri Balakrishna Goud as an advance for the sale of land. This amount was recovered by police in a theft case and was claimed by the assessee as sale consideration. The AO treated this cash as unexplained income under section 69A r.w.s. 115BBE of the IT Act. However, the CIT(A) found that the cash receipt contained all necessary elements of an agreement of sale and was supported by statements from both the assessee and the buyer. The CIT(A) concluded that the source of the cash was explained and thus, section 69A was not applicable.

Issue 2: Deletion of Penalty under Section 271D
The AO initiated penalty proceedings under section 271D for violation of section 269SS, which prohibits accepting certain sums in cash. The CIT(A) deleted the penalty, reasoning that once the amount was treated as unexplained income, it could not simultaneously be treated as a specified sum under section 269SS. The CIT(A) relied on precedents from the Delhi High Court (CIT vs. R.P. Singh & Co. Pvt. Ltd. and CIT vs. Standard Brands Ltd.) which state that undisclosed income and specified sums for penalty under section 269SS are mutually exclusive.

Additional Considerations:
The Tribunal noted that the AO did not record satisfaction for initiating penalty under section 271D in the assessment order, which is a prerequisite for such penalties. Citing the Supreme Court's decision in Jayalakshmi Rice Mills Ltd. and the jurisdictional High Court's ruling in Srinivasa Reddy Reddeppagari vs. Jt. CIT, the Tribunal held that the absence of recorded satisfaction invalidated the penalty proceedings.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the penalty under section 271D and dismissed the Revenue's appeal, affirming that the cash received was not unexplained income and could not be penalized under section 269SS.