Raja Reddy Nalla Vs ACIT (ITAT Hyderabad)
The Income Tax Appellate Tribunal (ITAT), Hyderabad, disposed of two appeals together as they involved identical issues relating to Assessment Year 2019-20. The first appeal concerned an assessee against whom a penalty of ₹40 lakh had been imposed under Section 271D of the Income-tax Act for allegedly violating Section 269SS by accepting cash as advance consideration towards the sale of immovable property. During a search and seizure operation, loose sheets indicated that ₹2 crore had been received in cash on behalf of five sellers, including the assessee. The assessee admitted receiving ₹40 lakh as his share, and the Assessing Officer initiated penalty proceedings under Section 271D. The Commissioner (Appeals) upheld the penalty, holding that the cash constituted a specified sum received towards the transfer of immovable property and that the provisions of Sections 269SS and 271D were clearly attracted. The Commissioner (Appeals) also rejected the assessee’s plea of ignorance of law and observed that the cash transaction had come to light only during the search proceedings.
Before the Tribunal, the assessee raised an additional legal ground contending that the penalty was unsustainable because the Assessing Officer had not recorded satisfaction in the assessment order for initiating penalty proceedings under Section 271D. The Tribunal admitted the additional ground, observing that it was purely a legal issue requiring no further investigation of facts. The assessee relied upon the jurisdictional High Court’s decision in Srinivasa Reddy Reddeppagari v. Joint CIT, which had followed the Supreme Court’s decision in CIT v. Jai Laxmi Rice Mills, to contend that recording of satisfaction in the assessment order is mandatory before initiating penalty proceedings under Section 271D. The Revenue opposed the plea and argued that the Supreme Court decision related to Section 271E rather than Section 271D and that the Commissioner (Appeals) had correctly sustained the penalty on merits.
