Case Law Details
Sunil Agrawal Son Of Ghanshyam Agarwal Vs ACIT (Rajasthan High Court)
Rajasthan High Court addressed multiple writ petitions filed by Sunil Agrawal and others challenging penalty notices issued under Sections 271D and 271E of the Income Tax Act, 1961. The case primarily involved a reassessment order dated March 12, 2024, which added amounts under Sections 69A and 69C based on search proceedings. Subsequent penalty notices under Section 271E were issued, leading the petitioner to argue that such penalties were invalid as the assessing officer (AO) failed to record satisfaction for initiating penalty proceedings in the reassessment order. Relying on the Supreme Court’s decision in CIT Vs. Jai Laxmi Rice Mills, the petitioner contended that the absence of recorded satisfaction made the penalty proceedings unsustainable.
The court found merit in the petitioner’s argument, emphasizing that satisfaction for penalty proceedings under Sections 271D and 271E must be explicitly recorded during the reassessment stage. It noted that the Deputy Commissioner of Income Tax’s later referral to the Additional Commissioner and the latter’s satisfaction recording on September 24, 2024, could not substitute the AO’s obligation during reassessment. The court held that the issues were analogous to the precedent set in Jai Laxmi Rice Mills and quashed the penalty proceedings under Section 271E, allowing the petitions in favor of the petitioner.
Petitioner was represented by Advocate Siddharth Ranka
FULL TEXT OF THE JUDGMENT/ORDER OF RAJASTHAN HIGH COURT
1. These writ petitions are being decided by this order as the facts and issues involved are same. Though in some of the cases penalty under Section 271D and in others under Section 271E of the Income Tax Act, 1961 (hereafter ‘the Act of 1961’) was imposed. The language of Section 271D and Section 271E are analogous. For the sake of convenience, the facts are being taken from B. Civil Writ Petition No.1102/2025.
2. This petition is filed seeking quashing of notices dated 01.10.2024, 03.01.2025, 13.01.2025 issued under Section 271E of the Act of 1961, for Assessment Year 2012-2013.
3. The brief facts are that search was conducted on the premises of the petitioner. The proceedings initiated under Section 148 of the Act of 1961 culminated in re-assessment order dated 12.03.2024 resulting in additions of Rs.9,90,000/- and Rs.23,785/- under Sections 69A and 69C of the Act of 1961 respectively. The order was passed after approval from the Additional Commissioner of the Income Tax (hereinafter ‘ACIT’). On 01.10.2024 notice was issued to the petitioner for imposition of penalty under Section 271E of the Act of 1961. In the response dated 16.10.2024 the petitioner relied upon the decision of the Supreme Court in Commissioner of Income Tax Vs. Jai Laxmi Rice Mills reported in [(2015) 379 ITR 521 (SC)] to contend that there was no satisfaction recorded in the reassessment order for initiating the penalty proceedings under section 271E of the Act of 1961. The objections filed were rejected and a notice dated 03.01.2025 was issued. Hence, the present writ petition.
4. Learned counsel for the petitioners submitted that the issue involved that penalty under section 271D cannot be imposed if there was intent of AO to do so, is covered by decision of the Supreme Court in Jai Laxmi Rice Mills (supra).
5. Learned counsel for the respondent submitted that reply filed in the present writ petition is adopted in all the connected matters. Reliance is placed upon the annexures filed with the reply to the submit that the Deputy Commissioner of Income Tax (hereafter ‘DCIT’) vide communication dated 01.08.2024 referred the matter to the ACIT for imposition of penalty under section 271E and the ACIT on 24.09.2024 recorded the satisfaction. It is argued that there is no requirement under section 271E for assessing officer (hereinafter ‘AO’) to record the satisfaction. The counsel is not able to distinguish the citation relied upon by counsel for the petitioner.
6. The reassessment order was passed on 12.03.2024 and no satisfaction was recorded for initiating the penalty proceedings under Section 271E.
7. The reliance on the reference made by the DCIT to ACIT on 01.08.2024 shall not enhance case of the department as the reference was after the conclusion of reassessment proceedings by the DCIT.
8. The satisfaction dated 24.09.2024 recorded by the ACIT cannot be equated with the satisfaction to be recorded in the reassessment proceedings by the concerned AO.
9. In Jai Laxmi Rice Mills (supra) the Supreme Court was dealing with the issue as to whether the penalty proceedings under section 271D are independent of the assessment proceedings. In that case, in the assessment order passed in pursuance to the remand no satisfaction was recorded for initiating the proceedings under section 271E. Though the AO stated for initiation of proceedings under section 271(1)(c). The penalty proceeding was quashed on the ground that in absence of s1atisfaction recorded by the AO the penalty can not be imposed.
11. In the case in hand the DCIT had only recorded satisfaction for proceedings under Section 271(1)(c) of the Act of 1961 and no satisfaction was recorded to initiate penalty proceedings under Section 271D.
12. The issue involved in the present writ petition is squarely covered by the decision of the Supreme Court in Jai Laxmi Rice Mills (supra). The notice issued under Section 271E and the proceedings in pursuance thereto are quashed.
13. The writ petitions are allowed.
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