The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) held that a penalty can’t be imposed under Section 271D of the Income Tax Act, 1961 if there is no satisfaction in the assessment order.
The Assessee, Sri Raja Reddy Nalla Warangal is an individual and derives income from business or profession and income from other sources.
A search & seizure operation under Section 132 of the Income Tax Act was conducted. The assessee filed his return of income for the assessment year under consideration on 14.02.2020 admitting a total income of Rs.1,46,37,210/- and agriculture income of Rs.12,05,000/-.
Statutory notices under Section 143(2) & 142(1) of the Income Tax Act were issued and served on the assessee to which the Authorized representative (AR) of the assessee appeared before the Assessing Officer (AO) from time to time and furnished the requisite details.
During the course of the search operation cash of Rs. 2,00,00,000/- was noted to have been received by Sri J. Sampath Rao on behalf of 5 sellers of immovable property. A Sworn statement of Sri J. Sampath Rao was recorded during the course of search and he had stated to have received cash of Rs. 2,00,00,000/- on behalf of 5 sellers including the assessee.
Subsequently, the assessee agreed to have received cash of Rs. 40,00,000/- as his share with respect to the sale of immovable property, which was more than the specified limit of Rs. 20.000/- as per Section 296SS of the Income Tax Act.
The penalty proceedings under Section 271D of Income Tax Act were initiated for the violation. The Commissioner of Income-tax (Appeals) [CIT (A)] confirmed the penalty levied by the Assessing Officer (AO) under Section 271D of the Income Tax Act.
The Counsel for the assessee submitted that the additional ground raised by the assessee is purely legal ground and goes to the root of the matter. In view of the decision of the Supreme Court in the case of NTPC Ltd reported in 229 ITR 383 and Jute Corporation of India Ltd reported in 187 ITR 688, submitted that the additional ground raised by the assessee should be admitted for adjudication.
Departmental Representative (DR) strongly opposed the admission of the additional ground and submitted that the assessee at this juncture should not be allowed to raise the additional ground. He submitted that he may be granted time to go through the same and obtain a report from the Assessing Officer (AO).
The two-bench member comprising of R.K. Panda (Accountant member) and Laliet Kumar (Judicial member) held that since there is no recording of satisfaction by the Assessing Officer (AO) in the body of the assessment order for initiating penalty proceedings under Section 271D of the Income Tax Act. In reference to the decision of the jurisdictional High Court in the case of Srinivas Reddy Reddeppagari vs. Jt. CIT the penalty levied by the Assessing Officer (AO) and sustained by the Commissioner of Income-tax (Appeals) [CIT (A)] is liable to be quashed.
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