ACIT Vs Seven Seas Hospitality Pvt Ltd (ITAT Delhi)
No Satisfaction, No Penalty: ITAT Delhi Quashes 271DA Penalty Following Supreme Court’s Jai Laxmi Rice Mills
ITAT Delhi quashed the Section 271DA penalty after holding that the Assessing Officer failed to record mandatory satisfaction in the assessment order, a requirement firmly established by the Supreme Court in Jai Laxmi Rice Mills. Treating Section 271DA as pari materia with Sections 271D and 271E, the Tribunal ruled that penalties initiated without such recorded satisfaction are invalid in law, making the Revenue’s appeal unsustainable.
A search was conducted on Seven Seas Hospitality Pvt Ltd on 03.05.2018, during which documents relating to alleged unaccounted sales were found. Based on these, AO determined unaccounted sales of ₹12.31 crore in the assessment u/s 153A. However, AO did not record any satisfaction in the assessment order for initiating penalty u/s 271DA for alleged violation of s.269ST.
Subsequently, the JCIT issued notice u/s 274 r.w.s 271DA & levied a penalty of ₹12.40 crore. Assessee argued before CIT(A) that the penalty was void because the mandatory satisfaction in the assessment order was missing, relying heavily on the Supreme Court ruling in CIT Vs Jai Laxmi Rice Mills (379 ITR 521) holding that recording of satisfaction in the assessment order is a sine qua non for valid penalty under pari materia provisions.
