Section 271D Penalty Quashed Where AO Recorded No Section 269SS Satisfaction

Ramoji Rao and another Vs Additional Commissioner of Income Tax (Telangana High Court)

Promotion Cannot Carry Old Jurisdiction in the Officer’s Briefcase: Additional Commissioner Cannot Impose Penalty u/s 271D Without Specific Authorisation

Summary: A higher rank in the departmental hierarchy does not automatically confer every statutory power vested in a lower authority. Where section 271D specifically authorises the Joint Commissioner to impose penalty for violation of section 269SS, an Additional Commissioner cannot exercise that power merely because he is superior in rank. He must possess a valid appointment, direction or specific authorisation under the Income-tax Act. Further, penalty u/s 271D cannot be imposed when the assessment order contains no satisfaction or finding that section 269SS was violated.

The Telangana High Court decided a batch of five writ petitions concerning Ramoji Rao HUF, covering AYs 2001-02 to 2005-06. The HUF carried on several businesses, including Margadarsi Financiers.

The Department alleged that the petitioners had accepted deposits exceeding ₹20,000 in cash, thereby violating section 269SS. The said provision prohibits acceptance of loans, deposits or specified sums of ₹20,000 or more otherwise than through the prescribed banking channels. A violation attracts penalty u/s 271D, equal to the amount of the loan or deposit accepted.