JCIT Vs Grandhi Sri Venkata Amarendra (Supreme Court of India)
The matter arose from penalty proceedings initiated under Section 271D of the Income Tax Act, 1961. The Assessing Officer had completed assessment proceedings under Section 143(3) read with Section 153C pursuant to a search and seizure operation under Section 132 in the case of M/s Usha Bala Group and V.V. Balakrishna Rao. Certain documents relating to the assessee were found. Notices were issued under Sections 143(2) and 142(1), and the assessee consistently denied having accepted any cash loans, stating that all loans were through banking channels. The Assessing Officer relied on a letter dated 02.06.2014 allegedly acknowledging receipt of Rs.6 crores and tabulated 17 transactions, concluding that the assessee had accepted Rs.1,50,00,000/- as loan and made excess repayments. An addition under Section 69A was made. Thereafter, the matter was referred to the Joint Commissioner, who levied penalty under Section 271D.
Read HC Judgment in this case: Section 271D Penalty Quashed Due to Failure to Record Section 269SS Satisfaction
Before the High Court, the assessee contended that no satisfaction regarding violation of Section 269SS was recorded in the assessment order as a precondition for initiating penalty under Section 271D. The High Court examined the record and found that the Assessing Officer did not record any finding that the assessee had violated Section 269SS, nor any satisfaction that acceptance of loan in cash attracted penal consequences. The Court observed that absence of such finding indicated acceptance of the assessee’s explanation denying receipt of cash loans. It held that recording of satisfaction by the Assessing Officer during assessment is necessary, particularly since penalty under Section 271D is imposed by the Joint Commissioner and not by the Assessing Officer. Without such satisfaction, the Joint Commissioner could not assume jurisdiction to levy penalty. Relying on the Supreme Court’s decision in CIT vs. Jai Laxmi Rice Mills, the High Court set aside the penalty order dated 23.11.2023 and allowed the writ petition.
