Ram Lubhaya Jassal Vs ACIT (ITAT Amritsar)
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) dated 29 June 2017, which had confirmed the penalty imposed under Section 271D of the Income-tax Act. Before the Tribunal, the assessee contended that the Assessing Officer had failed to record the mandatory satisfaction for initiating penalty proceedings under Section 271D in the assessment order. The assessee relied upon the Supreme Court’s decision in Jai Lakshmi Rice Mills (64 taxmann.com 75), wherein it was held that if the required satisfaction is not recorded in the original assessment order, the initiation of penalty proceedings under Section 271E cannot survive.
The assessee submitted that the same principle applied to the present case and that the penalty proceedings were liable to be quashed. The Revenue, on the other hand, supported the orders of the Assessing Officer and the Commissioner (Appeals).
After considering the rival submissions, examining the assessment order, and perusing the judgments cited by both sides, the Tribunal found that the assessment order was completely silent regarding the recording of satisfaction by the Assessing Officer for initiating penalty proceedings under Section 271D. The Tribunal held that recording such satisfaction is an essential requirement for initiation of penalty under Section 271D. It further observed that failure to record the satisfaction in the manner required by law, particularly in light of the Supreme Court’s judgment relied upon by the assessee, is fatal to the penalty proceedings.
