Case Law Details
Parivar Television Pvt. Ltd. Vs DCIT (ITAT Surat)
The Income Tax Appellate Tribunal (ITAT), Surat, allowed the assessee’s appeal against the order of the Commissioner of Income Tax (Appeals) relating to penalty imposed under Section 271D of the Income-tax Act for the block period from 1 April 1995 to 19 December 2001. Besides the original grounds challenging the penalty on merits, the assessee raised two additional grounds before the Tribunal: first, that the penalty order was barred by limitation under Section 275(1)(c), and second, that the penalty was invalid because the Assessing Officer had not recorded satisfaction for initiating penalty proceedings under Section 271D in the assessment order.
Read HC Judgmentin this case: Section 271D Penalty Cannot Survive Without Recorded Satisfaction: Gujarat HC
The assessee submitted that both additional grounds were purely legal in nature, required no fresh evidence, and arose from the existing record. Relying on judicial precedents, including the Supreme Court’s decision in National Thermal Power Corporation (NTPC), it sought admission of the additional grounds. The Revenue opposed the second additional ground, contending that it had been raised for the first time before the Tribunal, that no such objection had been taken during the penalty proceedings or before the CIT(A), and that failure to record satisfaction was merely a curable defect causing no prejudice to the assessee.
The Tribunal examined the submissions and admitted the second additional ground, holding that it was a pure question of law arising from the orders of the lower authorities and did not require any additional facts for adjudication.
On the facts, the Tribunal noted that the assessment was completed on 31 December 2003 under Sections 158BC read with Sections 158BG and 144, making additions of Rs. 1.09 crore. While passing the assessment order, the Assessing Officer did not initiate any penalty proceedings or record any satisfaction regarding initiation of penalty under Section 271D. Subsequently, by a separate reference dated 14 May 2004, the Assessing Officer referred the matter for initiation of penalty under Section 271D for alleged violation of Section 269SS relating to acceptance of cash deposits or loans exceeding Rs. 20,000. Based on this reference, the Additional Commissioner of Income Tax imposed penalty under Section 271D by order dated 20 June 2005.
The penalty was initially upheld by the CIT(A), and in an earlier round of litigation, the Tribunal restored the matter to the CIT(A) for fresh adjudication after examining certain evidence, including bank statements. Pursuant to the remand, the CIT(A) granted partial relief by order dated 30 March 2016, following which the assessee again appealed before the Tribunal.
The Tribunal carefully examined the assessment order dated 31 December 2003 and found that it contained no reference whatsoever to initiation of penalty proceedings under Section 271D or to any proposal or recommendation for referring the matter to the Joint Commissioner or Additional Commissioner for levy of penalty.
The Tribunal relied on the Supreme Court’s decision in CIT v. Jai Laxmi Rice Mills, where it was held that in the absence of recorded satisfaction in the assessment order for initiating penalty proceedings under Section 271E, the penalty could not be sustained. It observed that Sections 271D and 271E operate on similar principles, one dealing with acceptance of loans or deposits in contravention of Section 269SS and the other relating to repayment in contravention of Section 269T. The Tribunal also referred to the coordinate bench decision in Nizar Taluka Sahkari Kharid Vechan Sangh Ltd., which had applied the Supreme Court’s ruling to penalty proceedings under Section 271D and held that penalty cannot be levied where no satisfaction has been recorded before initiation.
Following the binding precedent of the Supreme Court under Article 141 of the Constitution of India, the Tribunal held that the absence of any recorded satisfaction in the assessment order rendered the penalty proceedings unsustainable. It rejected the Revenue’s argument that non-recording of satisfaction was merely a curable defect, observing that such a contention could not be accepted in view of the Supreme Court’s clear findings in Jai Laxmi Rice Mills.
Accordingly, the Tribunal allowed the second additional ground of appeal and quashed the penalty order dated 20 June 2005 passed under Section 271D.
Since the penalty itself was set aside on this legal ground, the Tribunal held that adjudication of the remaining original grounds relating to the merits of the penalty and the first additional ground concerning limitation under Section 275 had become academic and required no further consideration.
The appeal of the assessee was therefore allowed.
FULL TEXT OF THE ORDER OF ITAT SURAT
1. This appeal by the assessee is directed against the order of learned Commissioner of Income Tax (Appeals)-II, Surat (in short, the ld. CIT(A)) dated 30/03/2016 for the Block period 01/04/1995 to 19/12/2001 wherein the assessee has raised following grounds of appeal:
“1. On the facts and circumstances of the case, the ld. CIT(A) erred in retaining penalty u/s 271D of Rs. 2,17,11,192 out of Rs. 2,79,47,692.
2. The appellant submits that item wise explanation of 114 deposits spanning over 19 pages was prepared and culled from the seized books and records and not from the computerized books as has been mentioned by the learned CIT(A).
3. The appellant further submits this entire statement prepared and furnished was neither examined by the Additional Commissioner of Income Tax, Baroda in remand proceedings though it was with him for seven months and the Assessing Officer at Surat though it was with him for two years and therefore, the details prepared by the appellant remained uncontroverted.
4. The appellant further submits that the learned Commissioner of Income Tax (Appeals) was not justified in confirming penalty on amounts received and shown in the seized cash book/ledger were cheques numbers were mentioned.
5. The appellant further submits that the learned Commissioner of Income Tax (Appeals) erred in confirming penalty on amounts which were not received at all.
6. The learned Commissioner of Income Tax (Appeals) erred in not considering the plea of the appellant for deletion of penalty based on judgments given for
(a) ignorance of law; (b) urgent necessity; (c) no intention to evade tax; (d) not considering the impact of Circular No. 387 dated 06/07/1984.
7. The appellant craves leave to add, alter or vary any of the grounds of appeal.”
2. The assessee has raised additional ground of appeal which reads as under:
“Penalty order u/s 271D is time bared in terms of limitation U/s 275(1)(c) of the Act.”
3. The assessee again vide application dated 11.11.2022 has also raised second additional ground of appeal which reads as under:
“With no satisfaction recorded for initiating penalty proceedings u/s 271D in the assessment order, the penalty is required to be deleted in view of the Supreme Court decision in case of Jai Laxmi Rice Mills Ambalal City (64 taxmann.com 75) and Surat Tribunal in case of the Nizar Taluka Sahkari Kharid Vechan Sangh Ltd. (3157/Ahd/2015).
4. In support of additional grounds of appeal, the learned Authorised Representative (ld. AR) of the assessee submits that first and second additional grounds of appeal is purely legal in nature. No additional fact is to be brought on record for adjudicating the additional grounds of appeal. All facts for consideration of additional grounds of appeal are emanating from the orders of lower authorities. Both the additional grounds of appeal are purely legal in nature and goes to the root of the matter. To support his submission, the ld. AR of the assessee relied upon the decision of Hon’ble Apex Court in the case of National Thermal Power Corporation (NTPC) 229 ITR 383 (SC), West Bengal State Electricity Board ( 198 –CTR-122 (Cal), Bharat Rice Mill- 148 Taxman 145 (All), Dalmia Dairy Industries Limited 319 ITR 2 (SC) .
5. On the other hand, the learned Commissioner of Income Tax-Departmental Representative (ld. CIT-DR) for the revenue submits that the assessee has raised second additional ground of appeal for the first time before the Tribunal. No such factual objection was ever raised by assessee either at the time of levying penalty under Section 271D dated 20/06/2015 or before the ld. CIT(A) or before the Tribunal in first round of appeal. The ld. CIT-DR submits that no recording satisfaction at the time of initiation of penalty proceedings in the assessment is curable defect and that the assessee has not explained the prejudice caused to the assessee in not recording such satisfaction at the time of passing of assessment order. On the first ground of appeal the ld CIT-DR for the revenue submits that in first round of appeal before Tribunal, similar ground of appeal was taken and was decided against the assessee. The ld. CIT-DR also filed his written submission dated 29/12/2022 which is also taken on record.
6. We have considered the submissions of both the parties for admission of second additional ground of appeal. We find that the assessee has raised second additional ground of appeal for the first time before the Tribunal. The second additional ground of appeal is purely legal in nature. We further find that no new or additional fact is required to be brought on record for adjudicating such additional ground of appeal. The fact relating to adjudication of such second additional ground of appeal is emanating or apparent from the orders of lower authorities. Considering the decision of Hon’ble Apex Court in the case of NTPC (supra) wherein no new facts for adjudication of additional ground of appeal is required to be brought on record and/or the additional ground of appeal is purely legal in nature, may be admitted for adjudication. Therefore, in view of the aforesaid factual and legal discussion, the second additional ground of appeal raised by assessee is admitted for adjudication. Now adverting to the facts of the case.
7. Brief facts of the case are that the assessment in the present case was completed on 31/12/2003 under Section 158BC r.w.s. 158BG/144 of the Act in making total addition of Rs. 1.09 crore. The Assessing Officer at the time of passing the assessment order has not initiated any kind of penalty. Subsequent of passing the assessment order, a reference was made by the Assessing Officer for initiation of penalty proceedings vide reference dated 14/05/2004 for initiation of penalty under Section 271D for violation of Section 269SS in respect of various deposits/ loan received by the assessee in cash in excess of Rs. 20,000/-, during the relevant financial year. The Additional Commissioner of Income Tax levied penalty under Section 271D vide his order dated 20/06/2005. On further appeal before the ld. CIT(A), the order of penalty under section 271D was upheld vide order dated 24.03.2006. however, on further appeal before Tribunal in ITA No. 124/Ahd/2006, vide order dated 29.02.2012, the matter was restored back to the file of ld CIT(A) to examine certain evidence in the form of bank statement and to decide the issues afresh. The ld CIT(A) in his fresh order dated 30.03.2016 granted partial relief to the assessee. Further aggrieved, the assessee has filed present appeal before the Tribunal.
8. We have heard the submissions of the ld. AR for the assessee and the ld CIT-DR for the revenue and have gone through the orders of the lower authorities carefully. The ld. AR of the assessee on his second additional ground of appeal submits that the Assessing Officer while passing the assessment order on 31/12/2003 has not recorded any satisfaction about initiation of penalty under Section 271D of the Act. The ld. AR of the assessee carried us through the contents of assessment order and would submit that there is no whisper about the initiation of penalty under Section 271D or any whisper for making any reference for initiation of penalty under Section 271D of the Act. The ld. AR for the assessee submits that the Hon’ble Apex Court in the case of CIT Vs Jai Laxmi Rice Mills (2015) 64 taxmann.com75 (SC) held that wherein no satisfaction was recorded for initiating penalty proceedings under Section 271E, the impugned penalty order passed under said Section deserve to be set aside. The ld. AR submits that Section 271E and 271D are having similar criteria, one penalty relates to making payment and the other relates to taking or accepting loan in cash in excess of Rs. 20,000/- in cash in contravention of Section 269SS. The ld. AR further submits that the Coordinate Bench of Surat Tribunal while following the order of Hon’ble Apex Court in Jai Laxmi Rice Mills (supra), deleted the similar penalty under Section 271D.
9. The ld. AR further submits that he has already filed his submission on first additional ground of appeal which relates to time limit for passing the penalty order as prescribed under Section 275, as well as he has also filed his written submission on merit on the case. The ld. AR for the assessee submits that in case, the second additional ground of appeal is allowed, the other contention raised by assessee would become academic.
10. On the other hand, the ld. CIT-DR for the revenue submits that language of Section 271D or 274 nowhere prescribed for recording satisfaction for initiation of proceedings. Rather Section 274 speaks about providing reasonable opportunity before levying penalty. The assessee was given full opportunity before levying such penalty under section 271D. The ld AR for assessee failed to demonstrate the prejudice caused to the assessee in not recording about initiation of penalty at the time of passing the assessment. Not making or recording satisfaction about the initiation of penalty under section 271D is merely a curable defect. The assessee has nowhere raised such objection either at the time of penalty proceedings of at first appellate stage.
11. We have considered the submissions of both the parties and have gone through the assessment order dated 31/12/2003. On careful perusal of the assessment order, we find that there is no whisper or reference in the assessment order about initiation of penalty under Section 271D. We further find that there is no whisper about making a reference to the Joint Commissioner or Additional commissioner for levying such penalty. We find that the Hon’ble Apex Court in CIT Vs Jai Laxmi Rice Mills (supra), while considering the similar questions of law held that when no satisfaction recording regarding penalty proceedings under Section 271E, in the assessment order was recorded while passing the assessment order, no penalty could be levied. We further find that by following the order of Hon’ble Apex Court in CIT Vs Jai Laxmi Rice Mills (supra), the Coordinate Bench of Tribunal in The Nizar Taluka Sahkari Kharid Vechan Sangh Ltd. Vs JCIT in ITA No. 3157/Ahd/2015 dated 13/12/2019 also held that when no satisfaction has been recorded by the Assessing Officer before initiating penalty, no penalty under Section 271D could be levied. The order of Hon’ble Supreme Court, which is binding precedent by virtue of Article 141 of the Constitution of India and respectfully following the same the penalty order under section 27D dated 20/06/2005 is set aside/quashed.
12. So far as submissions of ld CIT-DR for the revenue that non recording satisfaction of initiation is merely a curable defect, we are not convinced with such submission after clear cut finding of the Hon’ble Apex Court in CIT Vs Jai Laxmi Rice Mills (supra). In the result, the second additional ground of appeal is allowed.
13. Considering the fact that we have allowed the second additional ground of appeal, therefore, adjudication of other grounds of appeal either on primary grounds of appeal or additional ground of appeal have become academic.
14. In the result, this appeal of assessee is allowed.
Order pronounced in the open court on 03rd January, 2023.
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