Case Law Details
Ishwar Singh Dabas Vs ITO (ITAT Delhi)
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) allowed the assessee’s appeal and deleted a penalty of ₹65,00,000 imposed under Section 271D of the Income Tax Act for alleged violation of Section 269SS on account of cash received from the sale of immovable property.
The assessee challenged the order of the Commissioner of Income Tax (Appeals), which had upheld the penalty. Before the Tribunal, the assessee contended that no assessment had been made for Assessment Year 2016-17 and that no satisfaction had been recorded by the Assessing Officer for initiating penalty proceedings under Section 271D. It was argued that penalty proceedings could not be sustained in the absence of a concluded assessment and recorded satisfaction. The assessee relied on the ITAT Agra decision in ACIT, Central Circle, Agra vs. Saurabh Gupta.
The Revenue argued that penalty proceedings under Section 271D are independent proceedings and therefore do not require an assessment.
After considering the submissions, the Tribunal noted that it was an admitted fact that no assessment had been made in the assessee’s case for AY 2016-17 and, consequently, no satisfaction had been recorded by the Assessing Officer for initiating penalty proceedings under Section 271D. The Tribunal found the decision in Saurabh Gupta applicable. That decision held that the Assessing Officer must record satisfaction regarding the alleged violation of Sections 269SS and 269T in the assessment order itself for valid initiation of penalty proceedings under Sections 271D and 271E. It further held that when the basis of penalty proceedings ceases to exist, the penalty cannot survive independently.
Following the ratio laid down in Saurabh Gupta, the ITAT held that the penalty under Section 271D could not be sustained in the present case. Accordingly, the Tribunal deleted the penalty of ₹65,00,000 and allowed the assessee’s appeal.
FULL TEXT OF THE ORDER OF ITAT DELHI
This captioned appeal has been filed by the assessee against the order of the learned Commissioner of Income Tax (Appeals), NFAC, Delhi [‘CIT(A)’ in short] dated 30.09.2025 arising from the penalty order under section 271D of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) on 21.08.2019 passed by the Joint Commissioner of Income tax, Range 64, Delhi for the Assessment Year 2016-17.
2. Brief facts of the case are that the assessee is an individual. On perusal of the record, it is found that AO has passed a penalty order levying a penalty of Rs.65,00,000/- under section 271D of the Act on account of cash received on sale of immovable property. Aggrieved by the penalty order of the AO, the assessee was in appeal before the CIT(A), where CIT(A) passed an order dated 30.09.2025 and dismissed the appeal of the assessee. Aggrieved, assessee is now in appeal before us with the following grounds:
1. “On the facts and circumstances of the case, the order passed by the Ld. CIT(A) has erred confirming the penalty u/s 271D of the Act is bad both in the eyes of law as well as bad on the facts of the case.
2. On the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law in confirming penalty of Rs. 65,00,000/-under section 271D of the Act for violation of provisions of section 269SS of the Act.
3. On the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law in confirming the penalty under section 271D of the Act despite the fact that the sale consideration received in cash for transfer of property was prior to the amendment by Finance Act 2015 made applicable w.e.f 01.06.2015.
4. On the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law in ignoring the fact that transfer of property was effected before the insertion of the amendment and that it does not fall within the ambit of section 269SS of the Act.
5. That the appellant craves leave to add, alter or amend any of the grounds of appeal.”
3. At the outset, learned Counsel for the assessee stated that it is the case of penalty levied under section 271D of the Act on account of alleged cash received on sale of immovable property. It is submitted by the learned Counsel for the assessee that no assessment was made in the case of the assessee for A.Y. 2016-17. It is also submitted that the penalty u/s 271D was levied in absence of any satisfaction recorded for levying of penalty. It is argued by the learned Counsel for the assessee that it is well established that for imposition of penalty, assessment proceedings must be concluded in the case of the assessee. Since, no assessment was made in the case of the assessee and no satisfaction was recorded for imposition of penalty, proceedings under section 271D of the Act are not sustainable in the eyes of law. The assessee relied on the decision in the case of ACIT, Central Circle, Agra vs. Saurabh Gupta ITA Nos.165 & 166/Agra/2025, dated 15.01.2026.
4. Per contra, learned DR relied on the order of the learned AO/CIT(A) and submitted that the penalty proceedings under section 271D of the Act is an independent proceedings, therefore, no assessment was required.
5. We have heard the rival submissions and perused the material available on record. We find that it is an admitted fact that no assessment was made in the case of the assessee for AY 2016-17 and consequently no satisfaction has been recorded by the AO for initiating the penalty proceedings under section 271D of the Act. In such circumstances, we find that the case relied upon by the assessee in the case of Saurabh Gupta (supra), is apt which held as under:
“6. It is undisputed fact that the additions made by the Assessing Officer have been deleted by the first appellate authority, vide order dated 30.11.2023 passed in Appeal No. CIT (A)-IV/KNP/10331/2014-15, which has been confirmed by ITAT vide order dated 13.02.2025 passed in ITA No. 36 & 37/Agr/2024 for A. Yrs. 2015-16 & 2017-18. The impugned penalties were levied solely on the basis of those additions and were thus consequential in nature. Ld. CIT(Appeals) relied K.C. Builders vs. ACIT, 135 Taxman 461(SC), wherein Hon’ble Apex Court held that where the additions in the assessment order, on the basis of which penalty was levied, are deleted, there remains no basis at all for levying the penalty. Since the additions forming the very basis of the penalty proceedings are deleted, the very foundation of the penalties collapse. The penalties cannot thus be sustained independently. The law mandates that the Assessing Officer must record satisfaction regarding the alleged violation of sections 269SS and 269T of the Act in the assessment order itself for valid initiation of penalty proceedings under sections 271D and 271E of the Act. When such an assessment order is annulled or set aside by a higher authority, the satisfaction recorded therein also ceases to exist, rendering the penalty proceedings invalid. In view of the above, we find no infirmity in the orders passed by the learned CIT(Appeals) deleting the impugned penalties. Accordingly, both the appeals filed by the Revenue are dismissed.”
6. Following the ratio of the above decision of ITAT, we delete the impugned penalty levied under section 271D of the Act. Appeal is allowed.
7. In the result, appeal filed by the assessee in ITA No.7797/Del/2025 is allowed.
Order pronounced in the open court on 29.05.2026
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