In a recent decision, the High Court of Rajasthan has held that recording of satisfaction by DCIT under Section 271E of the Income Tax Act is insufficient for the initiation and imposition of proceedings and penalty under Section 271D of the Income Tax Act by Assessing Officers (AO).
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. On 01.10.2024 notice was issued to the petitioner for imposition of penalty under Section 271E of the Act of 1961.
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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 (2015) to contend that there was no satisfaction recorded in the reassessment order for initiating the penalty proceedings under section 271E of the Income Tax Act.
The present writ petition was filed in response to rejection of the objections filed by the assessee.
The counsel for the petitioners submitted that the issue involving 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.
The counsel for the respondent-revenue submitted that reply filed in the present writ petition is adopted in all the connected matters, placing upon the annexures filed with the reply to the submit that the Deputy Commissioner of Income Tax (DCIT) and referred the matter to the ACIT for imposition of penalty under section 271E and the ACIT recorded the satisfaction.
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It was argued that there is no requirement under section 271E for AO to record the satisfaction. The reassessment order was finally passed and no satisfaction was recorded for initiating the penalty proceedings under Section 271E.
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.
The bench noted that “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.”
It was reiterated that, “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.”
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It was further noted by the bench of Justice Shubha Mehta and Justice Avneesh Jhingan that, “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 satisfaction recorded by the AO the penalty can not be imposed.”
In the present case before Rajasthan High Court, 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.
It was thus noted that the issue involved in the present writ petition is squarely covered by the decision of the Supreme Court in Jai Laxmi Rice Mills (supra) and the notice issued under Section 271E and the proceedings in pursuance thereto are quashed, thereby allowing the assessee’s writ petitions.
For the Petitioners, Mr.Siddharth Ranka, Adv. with Mr.Rohan Chatter, Adv. Ms.Satwika Jha, Adv., Ms.Apeksha Bapna, Adv., Mr.Muzaffar Iqbal, Adv. and MrSaurabh Harsh, Adv. appeared. whereas the Respondent(s) were represented by Mr.Siddharth Bapna, Adv., Mr.Sarvesh Jain, Adv., Mr.Meyhul Mittal, Adv. and Mr.Rahul Kumar, Adv.
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