ACIT Vs Hari Mohan Dangayach (Supreme Court of India)
Summary: The Supreme Court dismissed, on the ground of delay as well as on merits, the Revenue’s special leave petition arising from the Rajasthan High Court decision concerning initiation of penalty proceedings under Sections 271D and 271E of the Income Tax Act, 1961. The connected writ petitions before the High Court involved the same issue, and the facts were taken for convenience from D.B. Civil Writ Petition No.1102/2025. Following a search, proceedings under Section 148 culminated in a reassessment order dated 12.03.2024 making additions of Rs.9,90,000/- and Rs.23,785/- under Sections 69A and 69C respectively. Although the reassessment order recorded satisfaction for proceedings under Section 271(1)(c), it did not record satisfaction for initiating penalty proceedings under Section 271D/271E. A notice dated 01.10.2024 was subsequently issued under Section 271E. The petitioner relied upon CIT Vs Jai Laxmi Rice Mills Ambala City, (2015) 379 ITR 521 (SC), to contend that penalty could not be initiated without satisfaction being recorded by the Assessing Officer in the assessment proceedings.
Read HC Judgment in this case: Section 271E Penalty Requires AO Satisfaction in Reassessment Order: Rajasthan HC
The High Court held that the DCIT’s reference to the ACIT dated 01.08.2024, made after completion of reassessment, did not improve the Department’s case and that satisfaction recorded by the ACIT on 24.09.2024 could not substitute the satisfaction required to be recorded by the concerned Assessing Officer during reassessment. Applying Jai Laxmi Rice Mills, the High Court quashed the notice under Section 271E and consequential proceedings and allowed the writ petitions. The Revenue challenged the decision before the Supreme Court. By order dated 31.08.2026, the Supreme Court dismissed the special leave petition both on delay and on merits and disposed of pending applications.
Cases Discussed
1. Commissioner of Income Tax Vs Jai Laxmi Rice Mills Ambala City (Supreme Court of India), Civil Appeal Nos. 1457 of 2008 and 3614 of 2012, decided on 20.11.2015, (2015) 379 ITR 521 (SC) — Relied upon for the requirement of satisfaction in the assessment order for initiation of penalty proceedings under Section 271D/271E; the High Court treated the issue before it as squarely covered by this decision.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. The special leave petition is dismissed on the ground of delay as well as on the merits.
2. Pending application(s), if any, shall stand disposed of.
