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TMI Blog2024 (3) TMI 879X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that penalty proceedings u/s 271(1)(c) of the Act has to be initiated separately. However, the AO has made a reference to the Addl. CIT to initiate the proceedings u/s 271D of the Act for violation of section 269SS of the Act. Once the AO decided to initiate penalty u/s 271(1)(c) of the Act, subsequently, reference was made to Addl. CIT to initiate penalty proceedings u/s 271D of the Act, the AO ought to have been recorded his satisfaction. However, Ld. AO has failed to do so. The same is in violation of CBDT Circular no. 09/DV/2016 dated 26.04.2016 advising Assessing Officer to make a reference to the Range Head regarding violation of provisions of Sec.269SS and 269T during the course of assessment proceedings itself. Thus, the action of Ld. AO was in gross violation of departmental circular. Thus as following case of CIT v. Jai Laxmi Rice Mills [ 2015 (11) TMI 1453 - SUPREME COURT ], Srinivasa Reddy Reddeppagari [ 2022 (12) TMI 1446 - TELANGANA HIGH COURT] , T. Shiju v. JCIT ( 2019 (6) TMI 603 - ITAT CHENNAI] , Smt. S.B. Patil [ 2016 (2) TMI 1206 - ITAT BANGALORE] and Anglican India Consultancy Pvt. Ltd. [ 2017 (12) TMI 1518 - ITAT DELHI] the ground raised by the Department i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. The reference made by Ld. AO was duly considered and accordingly, the assessee was given a show-cause vide letter dated 02.11.2021 and 27.12.2021 to furnish his reply as to why penalty under section 271D of the Act should not be levied for violation of section 269SS of the Act. The assessee assailed the proposed penalty, inter-alia, on the ground that the initiation of penalty was barred by limitation. However, rejecting the submissions of the assessee, the appropriate authority levied 100% penalty under section 271D of the Act for the assessment year under consideration. 4. In the assessment order, Ld. AO noted from the seized material that the assessee has paid an amount of ₹.5,93,62,500/- as interest to Sri Anbuchezhiyan for the period from 01.01.2015 to 31.03.2016 towards unaccounted cash loans. Out of the total interest, an amount of ₹.90,75,000/- paid for the relevant period from 01.01.2015 to 31.03.2015 was added back to the total income treating it as unexplained interest/cash payments. 5. Thereafter, since the payment of interest in cash was in violation of the provisions of section 269T of the Act, the Assessing Officer moved similar proposal for l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court in the case of CIT Vs. Jai Laxmi Rice Mills (2015) 379 ITR 521 (SC) relied on by the appellant, it is seen that it was held therein that no penalty u/s 271E could be levied in the absence of recording of satisfaction by the AO in the assessment order. The relevant portion of the decision of the Hon'ble Supreme Court is reproduced as under: 5. As pointed out above, insofar as, fresh assessment order is concerned, there was no satisfaction recorded regarding penalty proceeding under Section 27 JE of the Act, though in that order the Assessing Officer wanted penalty proceeding to be initiated under Section 271 (l)(c) of the Act. Thus, insofar as penalty under Section 271E is concerned, it was without any satisfaction and, therefore, no such penalty could be levied. These appeals are, accordingly, dismissed. 19. The abovementioned decision of the Hon'ble Supreme Court rendered with reference to penalty u/s 271E has been followed by the Hon'ble Telangana High Court in the case of Srinivasa Reddy Reddeppagari Vs JCIT in WP No.44285 of 2022, while disposing off the writ filed against the penalty order passed u/s 271D of the Act. The Hon'ble High Court held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y could be levied. These appeals are, accordingly, dismissed. 24. Reverting back to the facts of the present case, we find that petitioner had submitted reply to the show cause notice on 02.06.2022. In his reply, petitioner mentioned that no satisfaction was recorded by the assessing officer in the assessment order as to infraction of Section 269SS of the Act. Therefore, no penalty could be levied under Section 271D of the Act without recorded satisfaction. In this connection, reference was made to the decision of the Supreme Court in Jai Laxmi Rice Mills Ambala City (I supra) wherein it was clarified that provisions of Section 271E are in pari materia with the provisions of Section 271D of the Act. However, this aspect of the matter was not considered by respondent No.1 while passing the impugned order. Respondent No.I relying upon the Kerala High Court decision in Grihalaxmi Vision (2 supra) noted that competent authority to levy penalty is the Joint Commissioner. He has also referred to an earlier decision of the Supreme Court in CIT V. Mac Data Ltd. wherein it was observed that assessing officer has to satisfy himself as to whether penalty proceedings should be initiated or not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 269SS of the Act warranting levy of penalty under section 271D of the Act, whereas, against various additions including disallowance under section 40(a)(ia) of the Act, the Assessing Officer proposed for initiating penalty proceedings under section 271(1)(c)of the Act, which is an identical provisions, where the income escaped assessment or furnishing of inaccurate particulars of income, attracts penalty. It is pertinent to reproduce the relevant paragraph of the judgement of the Hon'ble Supreme Court in the case of CIT v. Jai Laxmi Rice Mills (supra): As pointed out above, in so far as, the fresh assessment order is concerned, there was no satisfaction recorded regarding the penalty proceeding under section 27 JE of the Act though in that order the Assessing Officer wanted penalty proceeding to be initiated under section 271(1)(c) of the Act, Thus, in so far as penalty under section 271E is concerned, it was without any satisfaction and therefore, no such penalty could be levied. Thus, in view of the above facts and circumstances, we are of the considered opinion that the trait preposition laid down by the Hon'ble Supreme Court in the case of CIT v. Jai Laxmi Ric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission we rely on the recent decision of the Hon'ble Supreme Court in the case of CIT Vs. Jai Laxmi Rice Mills Ambala City reported in (2015) 379 !TR 52J(SC)/64 taxmann.com 75{SC}, wherein it has been held as under: 4. The Tribunal as well as the High Court has held that it could not be so for the simple reason that when the original assessment order itself was set aside, the satisfaction recorded therein for the purpose of initiation of the penalty proceeding under Section 271E would also not survive. This according to us is the correct proposition of law stated by the High Court in the impugned order is concerned, there was no satisfaction recorded regarding penalty proceeding under Section 271 E of the Act, though in that order the Assessing Officer wanted penalty proceeding to be initiated under Section 271(1)( c) of the Act. Thus, insofar as penalty under Section 271E is concerned, it was without any satisfaction and, therefore, no such penalty could be levied. These appeals are, accordingly, dismissed. In view of aforesaid facts and findings given thereon and respectfully following the aforesaid decision of the Hon'ble Apex Court in the case (referred to supra), we ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act have not been validly initiated and consequently, the penalty order passed by the Addl. CIT is bad in Law 25. Another legal ground raised by the appellant by way of Additional Ground No.1 is that the penalty order is barred by limitation of time as the said order has not been passed within 6 months from the end of the month in which the reference was made by the AO to the Addl. CIT for initiation of penalty proceedings u/s 271D. In support of this contention, the appellant placed reliance on the decision of Hon'ble Delhi High Court in the case of Principal CIT Vs Mahesh Wood Products P Ltd (2017) 394 ITR 312 (Delhi). 26. The legal ground raised by the appellant has been carefully examined. In the said decision, the Hon'ble Delhi High Court held that the date on which reference was made by the AO to the Addl. CIT requesting for initiation of penalty proceedings u/s 271D is required to be considered as the date of initiation of penalty proceedings and the limitation of time of 6 months from the end of the month in which action for imposition of penalty is initiated as laid down in sec 275(1)(c) has to be reckoned from the said date and not from the date on which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the authorities below. In this case, the assessee has raised two important legal grounds before the ld. CIT(A). The first ground raised by the assessee is that the Assessing Officer has not recorded satisfaction before initiating penalty under section 271D of the Act and in support of the same, the assessee relied upon various decisions before the ld. CIT(A). The ld. CIT(A), by following the judgement of the Hon ble Supreme Court in the case of CIT v. Jai Laxmi Rice Mills 379 ITR 521 (SC) and also the judgement of the Hon ble Telangana High Court in W.P. No. 44285 of 2022 in the case of Srinivasa Reddy Reddeppagari v. JCIT, the decisions of Chennai Benches of ITAT in the case of T. Shiju v. JCIT in ITA No. 2829/Chny/2018 dated 07.06.2019 and in the case of Smt. S.B. Patil v. JCIT in ITA Nos. 1053 1054 (BNG)/2014 dated 10.02.2016, the decision of the Delhi Benches of ITAT in the case of Anglican India Consultancy Pvt. Ltd. v. Addl. CIT in ITA No. 121/Del/2016 dated 03.10.2017, held that the Assessing Officer has not been validly initiated the penalty proceedings under section 271D of the Act and consequently, the penalty proceedings initiated by the Assessing Officer is bad-in-l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that petitioner had submitted reply to the show cause notice on 02.06.2022. In his reply, petitioner mentioned that no satisfaction was recorded by the assessing officer in the assessment order as to infraction of Section 269SS of the Act. Therefore, no penalty could be levied under Section 271D of the Act without recorded satisfaction. In this connection, reference was made to the decision of the Supreme Court in Jai Laxmi Rice Mills Ambala City (1 supra) wherein it was clarified that provisions of Section 271E are in pari materia with the provisions of Section 271D of the Act. However, this aspect of the matter was not considered by respondent No.1 while passing the impugned order. Respondent No.1 relying upon the Kerala High Court decision in Grihalaxmi Vision (2 supra) noted that competent authority to levy penalty is the Joint Commissioner. He has also referred to an earlier decision of the Supreme Court in CIT V. Mac Data Ltd.(2013) 352 ITR 1 wherein it was observed that assessing officer has to satisfy himself as to whether penalty proceedings should be initiated or not. Assessing officer is not required to record his satisfaction in a particular manner or reduce it into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case. Secondly, in that case, even though in the original ex-parte assessment order, the Assessing Officer has recorded satisfaction that the assessee had contravened the provisions of section 269SS of the Act, but, while framing fresh assessment order, the Assessing Officer has not recorded such satisfaction regarding penalty proceedings under section 271D of the Act and thereby, the Hon'ble Supreme Court quashed the levy of penalty. In the present case in hand, the Assessing Officer has not at all recorded his satisfaction that the assessee has contravened the provisions of section 269SS of the Act warranting levy of penalty under section 271D of the Act, whereas, against various additions including disallowance under section 40(a)(ia) of the Act, the Assessing Officer proposed for initiating penalty proceedings under section 271(1)(c)of the Act, which is an identical provisions, where the income escaped assessment or furnishing of inaccurate particulars of income, attracts penalty. It is pertinent to reproduce the relevant paragraph of the judgement of the Hon'ble Supreme Court in the case of CIT v. Jai Laxmi Rice Mills (supra): As pointed out above, in so far a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of the original assessment order could not still survive when that assessment order had been set aside because the satisfaction recorded therein for the purpose of initiation of the penalty proceedings would also not survive. On further appeals: Held, dismissing the appeals, that in the fresh assessment order there was no satisfaction recorded regarding penalty proceedings under section 271D of the Act though in that order the Assessing Officer wanted penalty proceeding to be initiated under section 271(1)(c) of the Act. Thus, the penalty under section 271D was without any satisfaction and, therefore, no such penalty could be levied. 8.1 The assessee filed copy of the assessment order, which revealed that the Assessing Officer has not recorded anything as regards violation of provisions of section 271D of the Income Tax Act. The Assessing Officer did not record any satisfaction regarding penalty proceedings under section 271D of the I T. Act in the assessment order. Though in that order the Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Income Tax Act. Thus, the penalty under section 271D was without any satisfaction and, therefore, no such pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the same was theft took place from the assessee's house and later, the cash recovered by the police. As per direction of the court, the Police Department handed over the cash to the Income Tax Department. According to the assessee, in these circumstances the said transaction could not be routed through the bank. 5.0 The assessee's claim that the purchaser intended to deposit the cash and obtain a Demand Draft for payment to the acceptable. There was no cognizable need for the assessee to keep cash in his custody when he intended to get paid by a Demand Draft on the very next day. The claim of the assessee is mere afterthought which is not corroborated by any independent documentation. In the absence of the same, the submission of the assessee is rejected as an afterthought and unsubstantiated. Since, both the payer and payee in transaction possessed valid operational bank accounts, no reasonable cause has been demonstrated for receiving the monies outside the banking channels. Moreover, the assessee could not substantiate the unavoidable circumstances/bonafide reasons under which it accepted the cash more than Rs. 20,000/-, otherwise than by an account payee cheque or acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of section 271D and 271E are pari materia to each other and the recording of satisfaction is a must. The relevant observation of the Hon'ble High Court reads as under: 13. We have considered the rival submissions made at the bar. 14. Issue raised in the writ petition is whether without satisfaction being recorded in the assessment order, penalty Order dated 08.07.2015 passed by the Kerala High Court in ITA.Nos.83 86 of 2014 can be levied by the Joint Commissioner under Section 271D of the Act ? 15. Insofar the present case is concerned, we find that in the assessment order dated 24.03.2022 passed under Section 153A of the Act, return of income filed by the petitioner was accepted by the assessing officer and accordingly, the total income was assessed. In the return of income, petitioner had admitted receiving total income of Rs. 80,84,180.00 which was also accepted by the assessing officer. 16. Subsequently, respondent No.1 took the view that petitioner had sold immovable properties for a total sale consideration of Rs. 92,13,000.00 out of which he had accepted cash to the tune of Rs. 87,80,000.00 which was in violation of Section 269SS of the Act, attracting penalty under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived by it otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who had made the loan or deposit or who had paid the specified advance or by use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, if such an amount is twenty thousand rupees or more. As in the case of Section 269SS, Section 269T of the Act also does not apply to the Government, banking company, post office savings bank etc. Section 271E of the Act reads as under: Penalty for failure to comply with the provisions of section 269T. 271E. [(1)] If a person repays any [loan or] deposit [or specified advance] referred to in section 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the [loan or] deposit [or specified advance] so repaid.] [(2) Any penalty imposable under sub-section(1) shall be imposed by the [Joint] Commissioner.] 21. Thus, sub-section (1) of Section 271E of the Act provides that if a person repays any loan or deposit or specified advance referred to in Section 269T of the Act otherwise than in accorda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty could be levied. These appeals are, accordingly, dismissed. 24. Reverting back to the facts of the present case, we find that petitioner had submitted reply to the show cause notice on 02.06.2022. In his reply, petitioner mentioned that no satisfaction was recorded by the assessing officer in the assessment order as to infraction of Section 269SS of the Act. Therefore, no penalty could be levied under Section 271D of the Act without recorded satisfaction. In this connection, reference was made to the decision of the Supreme Court in Jai Laxmi Rice Mills Ambala City (1 supra) wherein it was clarified that provisions of Section 271E are in pari materia with the provisions of Section 271D of the Act. However, this aspect of the matter was not considered by respondent No.1 while passing the impugned order. Respondent No.1 relying upon the Kerala High Court decision in Grihalaxmi Vision (2 supra) noted that competent authority to levy penalty is the Joint Commissioner. He has also referred to an earlier decision of the Supreme Court in CIT V. Mac Data Ltd.3 wherein it was observed that assessing officer has to satisfy himself as to whether penalty proceedings should be initiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d direct the Assessing Officer to cancel the penalty levied u/s 271D of the I.T. Act, 1961. Since the assessee succeeds on this legal ground, the grounds challenging the levy of penalty of Rs. 40.00 lakhs u/s 271D on merit become academic in nature and therefore, not adjudicated . 15. In the light of the above, we are of the opinion that the penalty imposed by the Assessing Officer had been rightly deleted by the learned CIT (A). In view of the above discussion, the appeal of the Revenue is dismissed. 16. In the result, appeal filed by the Revenue is dismissed. 11.6 We have considered the judicial pronouncements and principles laid down by the Hon ble Supreme Court and also the judgement of various Hon ble High Courts and as per the above judicial pronouncements, the Assessing Officer has to record his satisfaction before initiating penalty under section 271D of the Act in respect of violation of the provisions of section 269SS of the Act. In this case, the assessment order was passed on 30.12.2017 and reference was made by the Assessing Officer to the Addl. CIT on 14.03.2021 to initiate penalty proceedings. There is a time gap of more than three years In the assessment order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 ITR 312 (Delhi). 26. The legal ground raised by the appellant has been carefully examined. In the said decision, the Hon'ble Delhi High Court held that the date on which reference was made by the AO to the Addl. CIT requesting for initiation of penalty proceedings u/s 271D is required to be considered as the date of initiation of penalty proceedings and the limitation of time of 6 months from the end of the month in which action for imposition of penalty is initiated as laid down in sec 275(1)(c) has to be reckoned from the said date and not from the date on which the penalty show-cause notice is issued by the Addl. CIT. The relevant portion of the decision of Hon'ble High Court is extracted as under: However, this question came up for consideration in JKD Capital Finlease Ltd. (supra). The date on which the AO recommended the initiation of penalty proceedings was taken to be the relevant date as far as Section 275(1)(c) was concerned. There was no explanation for the delay of nearly five years in the ACIT acting on the said recommendation. The Court held that the starting point would be the 'initiation' of penalty proceedings. Given the scheme of Section 275(1)(c ..... 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