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2024 (2) TMI 218 - AT - Income TaxPenalty u/s. 271D - sustainability of the penalty imposed u/s. 271D in absence of any satisfaction for initiating the said penalty proceedings by the A.O in the body of the assessment order - allegation of violating the provision of sec.269SS by accepting cash deposit for more than Rs.20,000/- from the parties - whether or not penalty imposed by the JCIT u/s. 271D de-hors recording of satisfaction by the A.O for initiating the said penalty proceedings in the body of the assessment order passed u/s. 143(3) is sustainable in the eyes of law? - HELD THAT - A.O in the fresh assessment order had not recorded his satisfaction regarding penalty u/s. 271D of the Act, therefore, de-hors recording of requisite satisfaction the penalty imposed u/s. 271D of the Act could not be sustained and was liable to be quashed. See Jai Laxmi Rice Mills Ambala City 2015 (11) TMI 1453 - SUPREME COURT A similar view had been taken by the Hon ble High Court of Gujarat in the case of Pr. CIT Vs. Parivar Television, Tax 2023 (10) TMI 707 - GUJARAT HIGH COURT , wherein the Hon ble High Court had approved the view taken by the Tribunal and observed that as no satisfaction regarding initiation of penalty proceedings u/s. 271E of the Act was recorded in the assessment order, therefore, no penalty under the said statutory provision could be levied. Considering the fact that the issue before us is no more resintegra in light of the judgment of the Hon ble Supreme Court in the case of CIT Vs. Jai Laxmi Rice Mills Ambala City (supra), therefore, in the backdrop of our aforesaid deliberations, the penalty imposed by the Jt.CIT u/s. 271D of the Act cannot be sustained and is liable to be struck down for want of valid assumption of jurisdiction. Appeal of assessee allowed.
Issues Involved:
1. Imposition of penalty under Section 271D for violating Section 269SS by accepting cash deposits exceeding Rs. 20,000. 2. Validity of penalty proceedings under Section 271D without recording satisfaction in the assessment order. 3. Penalty proceedings being time-barred under Section 275(1)(c). Summary of Judgment: Issue 1: Imposition of Penalty under Section 271D The assessee, engaged in wholesale trading, was penalized Rs. 27,00,000 under Section 271D for accepting cash deposits exceeding Rs. 20,000 from five parties, which was found to be in violation of Section 269SS. The assessee contended that these were trade advances, not loans or deposits, and were used to purchase goods. However, the Jt. CIT and CIT(A) did not accept this explanation, citing inconsistencies with the assessee's business practices and the substantial time gap between receiving the cash and making sales. Issue 2: Validity of Penalty Proceedings without Recording Satisfaction The assessee argued that the penalty under Section 271D was invalid as the AO did not record any satisfaction regarding the violation of Section 269SS in the assessment order. The Tribunal referred to the Supreme Court's judgment in CIT Vs. Jai Laxmi Rice Mills, which mandates that the AO must record satisfaction in the assessment order for initiating penalty proceedings under Section 271D. The Tribunal found that the AO had only initiated penalty under Section 271(1)(c) and not under Section 271D, thus invalidating the penalty imposed by the Jt. CIT. Issue 3: Penalty Proceedings Being Time-Barred The assessee also contended that the penalty proceedings were time-barred under Section 275(1)(c). The Tribunal did not address this issue in detail as the penalty was already quashed on the grounds of invalid jurisdiction due to the lack of recorded satisfaction by the AO. Conclusion: The Tribunal quashed the penalty imposed by the Jt. CIT under Section 271D for want of valid assumption of jurisdiction, as the AO had not recorded the necessary satisfaction in the assessment order. Other contentions regarding the validity of the penalty order were left open and not addressed. The appeal of the assessee was allowed. Order Pronounced: The order was pronounced in open court on January 2, 2024.
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