Case Law Details
Gayatri Villa Vs DCIT (ITAT Delhi)
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) allowed the assessee’s appeals for Assessment Years 2016-17 and 2017-18 by deleting penalties imposed under Section 271D of the Income-tax Act for the alleged violation of Section 269SS. The appeals challenged separate orders of the Commissioner of Income Tax (Appeals), who had upheld penalties of Rs. 93,80,000 for AY 2016-17 and Rs. 44,00,000 for AY 2017-18.
The case arose after a survey under Section 133A conducted on 26.09.2018 at the business premises of the partners of the assessee firm. During the survey, the partners were required to produce books of account for the current and earlier years along with supporting documents to verify the sale of flats, turnover declared, and expenses claimed. As the assessee could not produce the books of account, the trading results for AY 2015-16 remained unverified. Since the books and investments relating to the construction of 24 flats could not be fully verified, assessments for AYs 2015-16 to 2017-18 were reopened under Section 147 to examine the surrendered income, investments, and construction expenses.
Assessments under Sections 147/143(3) were completed on 27.12.2019 for AY 2016-17 and on 18.12.2019 for AY 2017-18. Subsequently, notices under Section 271D were issued on 30.03.2022, and penalties were imposed on 31.03.2022 after the Joint Commissioner rejected the assessee’s explanations. The Commissioner (Appeals) confirmed the penalties, leading to the present appeals before the Tribunal.
Before the Tribunal, the assessee contended that the penalties were invalid because the Assessing Officer had not recorded any satisfaction in the assessment orders regarding initiation of penalty proceedings under Section 271D. The assessee relied on the Supreme Court’s decision in Jai Laxmi Rice Mills and the Gujarat High Court’s decision in Parivar Television Pvt. Ltd. The Departmental Representative fairly admitted that no such satisfaction had been recorded in the assessment orders.
The Tribunal examined the assessment orders and found that while the Assessing Officer had recorded initiation of penalty proceedings under Section 271(1)(c), there was no satisfaction recorded for initiating penalty under Section 271D for violation of Section 269SS. Referring to the Supreme Court’s ruling in Jai Laxmi Rice Mills, as well as decisions of the ITAT Raipur Bench and ITAT Chennai Bench, the Tribunal held that recording satisfaction in the assessment order is a mandatory requirement before initiating penalty proceedings under Section 271D.
Since no such satisfaction was recorded in either assessment order, the Tribunal held that the Assessing Officer had failed to comply with the legal requirement. Respectfully following the ratio laid down by the Supreme Court, the Tribunal concluded that the penalties under Section 271D could not be sustained. Accordingly, the penalties for both assessment years were deleted, and both appeals were allowed.
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FULL TEXT OF THE ORDER OF ITAT DELHI
Both the above captioned appeals by the assessee are directed towards two separate orders of the CIT(A) – 3, Noida dated 13.12.2023 pertaining to A.Ys. 2016-17 and 2017-18.
2. These appeals pertaining to same assessee were heard together and are disposed of by this common order for the sake of convenience and brevity.
3. The sum and substance of the grievance of the assessee is against the levy of penalty u/s 271D of the Income-tax Act, 1961 [hereinafter referred to as ‘the Act’] amounting to Rs. 93,80,000/- in A.Y 2016-17 and Rs. 44,00,000/- in A.Y 2017-18 which is without authority of law as no valid satisfaction was recorded in the order passed u/s 147/143(3) of the Act qua the alleged violation u/s 269SS of the Act.
4. Briefly stated, the facts of the case are that a survey u/s 133A of the Act was conducted at the business premises of the partners of the assessee firm on 26.09.2018. During the course of survey, the partners of the assessee firm were required to produce books of accounts for the current and previous years with supporting documents to verify the sale of flats/turnover declared and expenses claimed in the previous years,
5. The assessee could not produce any books of account and therefore, the trading results for A.Y 2015-16 remained unverified.
6. Since no books of account could be produced nor the investment made could be completely verified, the case for A.Y 2015-16 to 201718 was taken up under scrutiny assessment u/s 147 of the Act to verify the surrendered income, investment made and expenses claimed regarding construction of 24 flats.
7. Assessment u/s 147/143(3) of the Act was completed on 27.12.2019 at Rs. 34,69,500/- for A.Y 2016-17 and Rs. 23,72,400 for A.Y 2017-18. Notice u/s 271D was issued to the assessee for both the A.Ys on 30.03.2022 to show cause why an order imposing penalty on him should not be made u/s 271D of the Act.
8. In response, the assessee filed reply which was not found tenable by the JCIT who imposed penalty of Rs. 93,80,000/- in A.Y 2016-17 and Rs. 44,00,000/- in A.Y 2017-18 u/s 271D of the Act.
9. Aggrieved, the assessee went in appeal before the ld. CIT(A) who sustained the penalty levied by the Assessing Officer.
10. Aggrieved further, the assessee is in appeal before the Tribunal.
11. Before us, at the very outset, the ld. counsel for the assessee vehemently relied upon the decision of the Hon’ble Apex Court in the case of Jai Laxmi Rice Mills 379 ITR 521 [SC] and the decision of the Hon’ble High Court of Gujarat in the case of PCIT Vs. Parivar Television Pvt Ltd Tax Appeal No. 674/2023 order dated 09.10.2023.
12. The ld. counsel for the assessee argued that there was no valid satisfaction recorded by the Assessing Officer in his order u/s 143(3) for initiating penalty u/s 271D of the Act. The ld. counsel for the assessee submitted that unless the Assessing Officer initiates proceedings and records satisfaction in the body of the assessment order u/s 143(3), no penalty u/s 271D of the Act can be levied.
13. Per contra, the ld. DR fairly admitted that there was no satisfaction recorded in the assessment order.
14. We have heard the rival submissions and have perused the relevant material on record. On careful perusal of the assessment order, we find no satisfaction recorded by the Assessing Officer in his assessment order for initiating penalty u/s 271D of the Act. The Hon’ble Supreme Court in the case of Jai Laxmi Rice Mills [supra] has held as under:
“In the fresh assessment order, there was no satisfaction recorded regarding penalty proceeding under Section 271D of the Act, though in that order the Assessing Officer wanted penalty proceeding to be initiated under Section 271(1)(c) of the Act. Thus, insofar as penalty under Section 271D is concerned, it was without any satisfaction and, therefore, no such penalty could be levied.”
15. A similar issue came up before the ITAT, Raipur Bench in the case of Shri Bhowmick Raj Singh in ITA No. 128/RPR/2016 dated 02.01.2024 wherein it was held as under:
“Considering the fact that the issue before us is no more res integra in light of the judgment of the Hon’ble Supreme Court in the. Jai Laxmi Rice Mills Ambala City (supra), therefore, in the backdrop of our aforesaid deliberations, the penalty imposed by the Jt.CIT u/s. 271D of the Act cannot be sustained and is liable to be struck down for want of valid assumption of jurisdiction.”
16. Similar decision was taken by the ITAT Chennai Bench in the case of Subramanium Thanu ITA No. 785/Chny/2023 dated 13.03.2024.
17. We have considered the judicial pronouncement and the legal dictum established by the Hon’ble Supreme Court from which it emerges that the Assessing Officer has to record his satisfaction in the assessment order u/s 143(3) of the Act for initiating penalty proceedings u/s 271D of the Act for violation of provisions of section 269SS of the Act. In this case, assessment order u/s 143(3) r.w.s 147 of the Act was passed on 27.12.2019 for A.Y 2016-17 and on 18.12.2019 for A.Y 2017-18. The JCIT issued notice u/s 271D of the Act on 30.03.2022 for both the A.Ys and levied penalty u/s 271D of the Act on 31.03.2022.
18. The Assessing Officer, in his order u/s 143(3)/147 of the Act for both the A.Ys has recorded penalty proceedings u/s 271(1)(c) of the Act to be initiated separately. The Assessing Officer, however, has not recorded any satisfaction to initiate penalty u/s 271D of the Act for either of the A.Ys and thereby failed to adhere to the mandate of law as laid down by the Hon’ble Supreme Court in the case of Jai Laxmi Rice Mills [supra].
19. Considering the facts of the case in totality and respectfully following the ratio laid down by the Hon’ble Supreme Court [supra], we do not find these to be fit case for levy of penalty u/s 271D of the Act. We accordingly, delete the penalty so levied u/s 271D of the Act in both the A.Ys and allow both the appeals.
20. In the result, both the appeals of the assessee in ITA Nos. 615/DEL/2024 and 616/DEL/2024 are allowed.
The order is pronounced in the open court on 31.05.2024.
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