M/S KARIA BUILDERS ,PUNE V. ITO WARD 14(3), PUNE

ITA 2401/PUN/2024

AI Insights

The case involves M/s. Karia Builders, a firm engaged in the construction business, which faced a penalty under section 271D of the Income Tax Act for accepting a cash loan exceeding Rs. 20,000, in violation of section 269SS. The penalty was initially upheld by the CIT(A) / NFAC, but was contested before the Income Tax Appellate Tribunal. The Tribunal found procedural lapses in the imposition of the penalty, including the failure to adhere to the statutory time limit and the lack of proper authority in issuing the notice for reassessment under section 148. Consequently, the Tribunal quashed the penalty and the reassessment proceedings.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712075 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2017-2018
• Other Referred Cases: National Thermal Power Co. Ltd. v. CIT, Jute Corporation Of India Ltd vs Commissioner Of Income Tax And Anr, Bhagwan Sahai Sharma vs. DCIT & Anr., ITO vs. Rajaram Ramswarup Jaju, Dinesh Dilip Mehta vs. ITO, Satish Harnamdas Sethi vs. NFAC, Cipla Pharma & Life Sciences Ltd. Vs. DCIT & Ors., Mrs. Vasundhara Shailesh Joshi vs. DCIT, Subhash Chandra Dey vs. ACIT, B.R. Bamasi vs. CIT, P.V. Doshi vs. CIT, CIT v. Manoharlal Thakral, Ravi Nirman Nigam Ltd. v. ACIT, Vijayaben G. Zalavadia v. JCIT, Shri Umakant Sharma v. JCIT, CIT v. Standard Brands Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMNATH P MURKUNDE
• Assessee Lawyers: SANKET M JOSHI
• Keywords: Set aside; Opportunity of being heard; Reasonable cause; Reassessment proceedings; Depreciation; Period of limitation; Competent authority; Initiation of penalty proceedings; Validity of assessment
• Section: 147; 148

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND MS. ASTHA CHANDRA, JUDICIAL MEMBER ITA No.2401/PUN/2024 Assessment year : 2017-18 M/s. Karia Builders 402, Konark Indrayu, Kondhwa, Pune – 411048 Vs. ITO, Ward 14(3), Pune PAN: AADFK5220B (Appellant) (Respondent) Assessee by : Shri Sanket M Joshi Department by : Shri Ramnath P Murkunde Date of hearing : 17-07-2025 Date of pronouncement : 23-07-2025 O R D E R PER R.K. PANDA, VP: This appeal filed by the assessee is directed against the order dated 30.09.2024 of the Ld. CIT(A) / NFAC, relating to assessment year 2017-18. 2. Facts of the case, in brief, are that the assessee is a firm engaged in construction business. A notice u/s 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) was issued on 28.07.2022 on the ground that the assessee has availed loan of Rs.1 crore in cash from M/s. Niyati Builders Pvt. Ltd. which had not been shown in the books or return of income. According to the Assessing Officer the information was received during the course of survey action in the case of M/s. Niyati Builders Pvt. Ltd. and as per the admission to that effect by Shri Piyush D. Nyati, Director of M/s. Nayati Builders Pvt. Ltd. and Shri Kayyum Printed from counselvise.com 2 ITA No.2401/PUN/2024 Shaikh, Cashier. The assessee filed its return of income on 17.08.2022 declaring total loss of Rs.5,24,019/- which was the income declared in the original return for the impugned assessment year. Subsequently, during the pendency of the assessment proceedings, the Assessing Officer issued a show cause notice u/s 274 r.w.s. 269SS of the Act on 24.08.2022 asking the assessee to explain as to why the penalty u/s 271D of the Act should not be levied on account of violation of the provisions of section 269SS of the Act which prohibits the acceptance of any loan in cash if it exceeds Rs.20,000/-. Rejecting the various explanations given by the assessee and observing that the assessee has received cash loan of Rs.1 crore, the Assessing Officer levied penalty of Rs.1 crore u/s 271D of the Act. 3. In appeal, the Ld. CIT(A) / NFAC confirmed the penalty so levied by the Assessing Officer by observing as under: “6.Decision- I have gone through the impugned order of the AO, 'Statement of Facts', 'Grounds of Appeal’, and written submission of the appellant. In this case, the appellant failed to make compliance to provisions of section 269SS as he accepted cash loan in excess of 20,000/- rupees. The appellant has contested the impugned order inter-alia on the ground of being time-barred but it is noticed that the penalty order was passed well within 6 months from the date of issue of notice. With regard to the contention regarding not accepting the loan, it is noticed that the action was taken on the basis of impounded material. The provisions of section 296SS are enacted to ensure compliance from the assessees. Only exception is that the assesse should convince that there was a reasonable cause for not making compliance. In the present case, the appellant has failed to demonstrate before the AO as well as me that such reasonable cause existed in his case. Considering all this, penalty order passed by the AO is confirmed and the appeal is dismissed. 7. In view of the above discussion, the appeal is dismissed.” Printed from counselvise.com 3 ITA No.2401/PUN/2024 4. Aggrieved with such order of the Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal by raising the following grounds: 1. In the assessment order passed u/s 147 r.w.s. 144B of the Income Tax Act, 1961 (the Act), the Ld. AO has not recorded any satisfaction for initiation of penalty proceedings u/s 271D of the Act and hence, the penalty levied of Rs.1,00,00,000 u/s 271D of the Act is not maintainable in law. 2. Ld CIT(A), NFAC has erred in confirming penalty levied u/s 271D of the Act without appreciating the fact that the penalty u/s 271D of the Act is invalid as it is time barred in view of the provisions of section 275(1) (c) of the Act. 3. Ld CIT (A) NFAC has erred in confirming penalty levied u/s 271D of the Act without appreciating that the completion of assessment proceedings u/s 147 by accepting returned income of the appellant is self-explanatory fact that the Ld AO has eventually accepted that the appellant has not received the alleged loan in cash of Rs.1,00,00,000/- 4. Ld CIT (A) NFAC has erred in confirming penalty levied u/s 271D of the Act without appreciating the fact that the Ld AO has proceeded to levy penalty merely relying upon the statement of third party whereas no incriminating material was brought on record by Ld AO during the assessment proceedings or penalty proceedings. Accordingly, the appellant prays before Your Honour that penalty levied u/s 271D of the Act kindly be deleted. 5. The appellant craves leave to add, amend, delete or substitute its grounds of appeal and lead evidence. 5. The assessee has also raised the following additional ground: 1] The assessee submits that the notice u/s 148 for A.Y 2017-18 was issued on 28.07.2022 by obtaining approval u/s 151 from Pr. CIT-4, Pune vide Reference No. PN/Pr.CIT-4/148/ Proposal / 2022-23/1272 who is not the Authority prescribed for obtaining sanction u/s 151 for issuing the present notice u/s 148 issued after lapse of three ears from end of A.Y.2017-18 and therefore, the proceedings u/s 147, in the course of which the impugned penalty proceedings u/s 271D, were initiated, itself are null and void in the eyes of law and therefore, the consequential penalty proceedings u/s 271D are also unsustainable in law. Printed from counselvise.com 4 ITA No.2401/PUN/2024 6. The Ld. Counsel for the assessee referring to the above additional ground submitted that the additional ground so raised is purely legal in nature which goes to the root of the matter and all necessary facts are already available on record. Referring to the decision of Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC) and in the case of Jute Corporation Of India Ltd vs Commissioner Of Income Tax And Anr (1991) 187 ITR 688 (SC) he submitted that the additional ground raised by the assessee should be admitted. 7. The Ld. DR on the other hand strongly objected to the admission of the additional ground raised by the assessee. 8. After hearing both the sides and considering the fact that the additional ground raised by the assessee is purely legal in nature and all the material facts are already available on record and no new facts are required to be investigated, therefore, in view of the decision of Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT (supra) and in the case of Jute Corporation Of India Ltd vs Commissioner Of Income Tax And Anr (supra), the additional ground raised by the assessee is admitted for adjudication. 9. The Ld. Counsel for the assessee at the outset submitted that the penalty order is barred by limitation in view of the provisions of section 275(1)(c) of the Printed from counselvise.com 5 ITA No.2401/PUN/2024 Act. Referring to the provisions of section 275(1)(c) of the Act, he drew the attention of the Bench to the same which read as under: “Bar of limitation for imposing penalties. 275. (1) No order imposing a penalty under this Chapter shall be passed- (a)….. (b)….. (c) in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later.” 10. Referring to the above, he submitted that the time limit for issuing a penalty order u/s 271D is after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. 11. Referring to the show cause notice for levy of penalty u/s 271D of the Act by the Assessing Officer is concerned, he submitted that the same is dated 13.02.2023. He submitted that the JCIT in the said penalty notice has also stated that the penalty proceedings are getting time barred by 28.02.2023. However, the penalty order has been passed on 29.03.2023 which is barred by limitation. Therefore, the penalty order which has not been passed within the statutory due date has to be quashed being void ab initio. 12. In his another plank of argument, he submitted that the notice u/s 148 of the Act for the impugned assessment year i.e. assessment year 2017-18 was issued on Printed from counselvise.com 6 ITA No.2401/PUN/2024 28.07.2022 after obtaining the approval u/s 151 of the Act from the PCIT-4, Pune. He submitted that since the present notice u/s 148 of the Act was issued after a lapse of three years from the end of the assessment year 2017-18, therefore, the competent authority for granting approval is the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. 13. However, in the instant case the approval has been granted by the Principal Commissioner of Income Tax. Therefore, such approval being not in accordance with law, the entire assessment proceedings have to be quashed. For the above proposition, he relied on the following decisions: i) Bhagwan Sahai Sharma vs. DCIT & Anr. vide WP No.3220 of 2023, order dated 14.05.2025 ii) ITO vs. Rajaram Ramswarup Jaju vide ITA No.1882/PUN/2024 for assessment year 2016-17, order dated 07.03.2025 iii) Dinesh Dilip Mehta vs. ITO vide ITA No.2048/PUN/2024 for assessment year 2017-18, order dated 30.04.2025 iv) Satish Harnamdas Sethi vs. NFAC vide ITA No.3091/MUM/2024 for assessment year 2017-18, order dated 24.12.2024 v) Cipla Pharma & Life Sciences Ltd. Vs. DCIT & Ors. vide WP No.149 of 2023, order dated 02.07.2024 14. Referring to the following decisions, he submitted that the assessee can always challenge the validity of assessment proceedings during the penalty proceedings: i) Mrs. Vasundhara Shailesh Joshi vs. DCIT vide ITA Nos.95 & 96/PUN/2016, for assessment years 2009-10 & 2010-11, order dated 27.03.2018 Printed from counselvise.com 7 ITA No.2401/PUN/2024 ii) Subhash Chandra Dey vs. ACIT (2022) 220 TTJ 625 (Gauj) iii) B.R. Bamasi vs. CIT (1972) 83 ITR 223 (Bom) iv) P.V. Doshi vs. CIT (1978) 113 ITR 22 (Guj) 15. He submitted that once such assessment is considered as invalid, then the penalty proceedings u/s 271D of the Act cannot be sustained. For the above proposition, he relied on the following decisions: i) CIT v. Manoharlal Thakral [(2018) 93 taxmann.com 156 (P&H HC)] ii) Ravi Nirman Nigam Ltd. v. ACIT [ITA No. 4140/Mumbai/2023] dated 28.06.2024 iii) Vijayaben G. Zalavadia v. JCIT [ITA No.458 463/Ahd/2020] dated 11.05.2022 iv) Pravin Nilkanth Barode v. ΙΠΟ [ΙΤΑ No. 371/Nagpur/2024] dated 20.12.2024 v) Shri Umakant Sharma v. JCIT [ITA No. 364/Indore/2022] dated 19.07.2023 vi) CIT v. Standard Brands Ltd. [285 ITR 295 (Del HC)] 16. He accordingly submitted that since the penalty is barred by limitation, the same is not sustainable. Even otherwise also, since the assessment proceedings have to be quashed on account of non-obtaining the approval from the prescribed competent authority, such assessment is a nullity and once the assessment order is invalid, the penalty proceedings u/s 271D are also invalid. 17. The Ld. DR on the other hand supported the orders of the Assessing Officer and the Ld. CIT(A) / NFAC. Printed from counselvise.com 8 ITA No.2401/PUN/2024 18. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant case the Assessing Officer passed the order u/s 147 r.w.s. 144B of the Act on 16.05.2023. Before completion of the assessment, a notice u/s 274 r.w.s. 271D of the Act was issued to the assessee on 17.08.2022 which reads as under: Printed from counselvise.com 9 ITA No.2401/PUN/2024 19. Thus, the penalty proceedings were initiated on 17.08.2022. We find the JCIT in the show cause notice for penalty u/s 271D of the Act issued on 13.02.2023 has also mentioned the time barring date i.e. 28.02.2023 for levy of penalty. The Annexure to the notice dated 13.02.2023 reads as under: 20. The provisions of section 275(1)(c) of the Act have already been reproduced in the preceding paragraphs. As per the said provisions the last date for levy of Printed from counselvise.com 10 ITA No.2401/PUN/2024 penalty u/s 271D is 28.02.2023. Even the Annexure to the notice dated 13.02.2023 also clearly and unequivocally states the last date for levy of penalty as 28.02.2023, however, such penalty u/s 271D has been levied by the Assessing Officer on 29.03.2023. Therefore, the same is clearly beyond the prescribed due date. Since the penalty order has not been passed within the statutory period i.e. on or before 28.02.2023 but has been passed on 29.03.2023, therefore, such penalty order being barred by limitation, is not in accordance with law and has to be quashed. We, therefore, quash the penalty levied u/s 271D of the Act by the Assessing Officer and sustained by the Ld. CIT(A) / NFAC. 21. Even otherwise also, a perusal of the notice u/s 148 of the Act dated 28.07.2022 issued for the assessment year 2017-18 shows that the same has been approved by the PCIT-4, Pune vide letter dated 27.07.2022 which is mentioned at page 2 of the notice u/s 148 and which reads as under: INCOME TAX DEPARTMENT OFFICE OF INCOME TAX OFFICER, WARD 14(3) Room no.430, 4th floor, Aayakar Sadan, Bodhi Tower, 548/28, Salisbury Park, Gultekdi, Atur Sangtani Park, Lane No.1, Pane 411037 Email: [e-mail] Phone: [phone] To Karia Builders, 402, 3rd Floor, Konark Indrayu, Kondhwa Khurd, Pune 411001 Printed from counselvise.com 11 ITA No.2401/PUN/2024 PAN: AADFK5220B A.Y. 2017-18 Dated: 28/07/2022 DIN & Notice No. Notice under section 148 of the Income tax Act, 1961 Sir / Madam / M/s 1…… 2. I, therefore, propose to assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for the Assessment Year 2017-18 and I, hereby, require you to furnish, within 30 days from the service of this notice, a return in the prescribed form for Assessment Year. 3. This notice is being issued after obtaining the prior approval of the Pr.CIT- 4, Pune accorded on date : 27/07/2022 vide Reference No.PN/Pr.CIT4/148/Proposal/2022-23/1272. Sd/- (Ritesh Kumar) ITO Ward-14(3), Pune” 22. Even the Assessing Officer at page 4 of the assessment order has also mentioned as under: “The assessee replied during the proceedings, but the Jurisdictional Officer was not satisfied with his reply and therefore, the JAO concluded the following in his order U/s 148 A(d) of the IT Act dated 28.07.2022: 06. In view of the above facts, the information in my possession as mentioned above suggests that by not showing cash loan of Rs.1,00,00,000/-, the assessee has not shown its correct income. Therefore, assets to the tune of Rs.1,00,00,000/- has escaped assessment. Therefore this is a fit case for issue of notice u/s 148. 07. This order is passed with prior approval of Pr.CIT-4, Pune vide Letter No.PN/PCIT-4/Proposal/2022-23/1272 dated 27/07/2022.” 23. Provisions of section 151 as it stood at the relevant time read as under: “Sanction for issue of notice. 151. Specified authority for the purposes of section 148 and section 148A shall be,— Printed from counselvise.com 12 ITA No.2401/PUN/2024 (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year; (ii) Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year:] [Provided that the period of three years for the purposes of clause (i) shall be computed after taking into account the period of limitation as excluded by the third or fourth or fifth provisos or extended by the sixth proviso to sub-section (1) of section 149.] 24. Since the notice has been issued beyond the period of three years from the end of the relevant assessment year, therefore, in view of the provisions of section 151, the competent authority for granting the approval for issue of notice u/s 148 of the Act is the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. Since the approval in the instant case has been granted by the PCIT instead of any of the above authorities, therefore, such approval being not in accordance with law, the re-assessment proceedings are invalid. For the above proposition, we rely on the decision of the Hon’ble Delhi High Court in the case of Bhagwan Sahai Sharma vs. DCIT (supra) where it has been held that section 151 mandates that where more than three years have elapsed from end of relevant assessment year, notice under section 148 requires prior approval of the Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General. The Hon’ble High Court further held that TOLA would have no relevance for determining the specified authority whose approval was mandatory under section 151 for issuance of a notice under section Printed from counselvise.com 13 ITA No.2401/PUN/2024 148 and the bifurcation of those powers would continue unaltered and unaffected by TOLA. 25. We find the Hon’ble Bombay High Court in the case of Cipla Pharma and Life Sciences Ltd. vs. DCIT (supra) has held as under: “8. On a plain reading of Section 148A it is clear that the Assessing officer before issuing any notice under section 148 is required to follow the procedure as set out in clauses (a) to (d) of Section 148A. One of the pre-conditions as ordained by clause (d) of Section 148A is that an order under such provision can be passed by the Assessing Officer only with the approval of \"Specified Authority\". Thus, necessarily when clause (d) of Section 148A provides for prior approval of specified authority, it relates to the provisions of Section 151 of the Act providing for 'Specified authority for the purposes of Section 148 and Section 148A of the Act'. In the present case, Section 151 as amended by the Finance Act, 2021 and Section 148A as also introduced by Finance Act, 2021 have become applicable, as although the assessment year in question is 2016-17 in respect of which the assessment is sought to be reopened by issuance of notice under section 148, which is dated 30 July, 2022. Such amended provision would squarely become applicable the date of notice under section 148 itself being 30 July, 2022. 9. The record clearly indicates that the sanction in the present case was issued by the Principal Commissioner which can only be in respect of cases if three years or less than three years have elapsed from the end of the relevant assessment year, as would fall under the provisions of clause (i) of Section 151 of the Act. As in the present case the assessment year in question is 2016-17 and the impugned notice itself has been issued on 30 July, 2022, it is issued after a period more than 3 years having elapsed from the end of the said assessment year, hence, clause (ii) of Section 151 of the Act was applicable, which required the sanction to be issued by either Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General for issuance of notice under Section 148 of the Act. 10. As rightly pointed out at the bar, such issue fell for consideration of the Division Bench of this Court in Siemens Financial Services Pvt. Ltd. (supra), wherein the Division Bench considered the provisions of Section 151 of the Act read with the provisions of Section 148A(b), the latter provision clearly providing that prior to issuance of any notice under Section 148 of the Act, the assessing officer shall provide an opportunity of being heard to the assesse only after considering the cumulative effect of Section 148A(b) read with Section 151 of the Act and as provided under sub-clause (d), the assessing officer shall decide on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under Section 148 by passing an order, with the Printed from counselvise.com 14 ITA No.2401/PUN/2024 prior approval of specified authority within one month from the end of the month in which the reply is received. It is held that the sanction of the specified authority has to be obtained in accordance with the law existing when the sanction is obtained and, therefore, the sanction is required to be obtained by applying the amended section 151(ii) of the Act and since the sanction has been obtained in terms of section 151(i) of the Act, the impugned order and impugned notice are bad in law and should be quashed and set aside. 11. Insofar as the respondent's case based on the notification dated 31 March, 2020 issued under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (for short, 'TOLA') was concerned, the Court held that such notification was a subordinate legislation and it could not override the statute enacted by the Parliament and in that regard, the position in law was discussed by the Division Bench in paragraph 27 of the said decision. 12. In the present case, it is not in dispute that an appropriate sanction of the specified authority as per the provisions of Section 151(ii) of the Act was not obtained and for such reason, certainly, as held by this Court in Siemens Financial Services Pvt. Ltd. (supra), the impugned notices would be rendered bad and illegal. The petition accordingly needs to succeed on such ground of the Court requiring to delve on such issues of challenge as raised by the petitioner as also prior procedure adopted in that regard. 13. In the light of the above discussion, the petition needs to succeed. It is accordingly allowed by the following order:- Order i. The impugned notice dt. 30th July, 2022 issued under s. 148 of the Act is quashed and set aside, as also the impugned order dt. 30th July, 2022 passed by the AC under s. 148A(d) of the Act is quashed and set aside. ii. Rule is made absolute in the aforesaid terms. iii. Since we have disposed of the petition on the limited ground, we have no considered the other grounds. iv. Disposed of. No costs.” 26. The various other decisions relied on by the Ld. Counsel for the assessee also supports his case to the proposition that the improper approval obtained u/s 151 of the Act vitiates the entire reopening proceedings. We, therefore, hold that the re-assessment proceedings being not in accordance with law, have to be quashed. Printed from counselvise.com 15 ITA No.2401/PUN/2024 27. Once it is held that there is no valid assessment order / valid assessment proceedings, then the penalty proceedings u/s 271D of the Act are not sustainable. We find the Hon’ble Delhi High Court in the case of CIT vs. Standard Brands Ltd. (supra) has held that once the assessment is not sustained, penalty action is not permissible. 28. We find an identical issue had come up before the Mumbai Bench of the Tribunal in the case of Ravi Nirman Nigam Ltd. vs. ACIT (supra) where the Tribunal has held that the penalty proceedings initiated u/s 271D of the Act do not survive once the assessment is held to be invalid. The relevant observations of the Tribunal from para 9 to 10.1 read as under: “9. We have heard the rival contentions and perused the material on record. Admittedly, it is a fact on record that the reassessment proceedings, u/s. 147 of the Act in the course of which penalty proceedings u/s. 271D and 271E were initiated have been quashed as void ab initio by the Co-ordinate Bench. This fact was put forth before the ld. CIT(A) by the assessee but has been negated to upheld the penalty imposed by the ld. Assessing Officer. Based on these facts, we have perused the order of the Hon’ble Apex Court in the case of Jayalakshmi Rice Mills (supra), and find that it clearly applies in the present case to hold that with the quashing/annulling of the reassessment order passed in the case of the assessee by the ITAT, the penalty initiated there in u/s. 271D did not survive. 10. We also take note of the distinguishing facts brought before us in respect of the judicial precedents relied upon by the ld. Sr. DR and we agree with the same. We also note that the contentions put forth by the ld. Sr. DR have been dealt with by the Co-ordinate Bench of ITAT in the case of Karan Empire Pvt. Ltd. (supra) in paragraph 9, wherein it is noted as under: “ though undeniably, there is a difference in the facts of both the cases as in the case before the Hon’ble Apex Court, the assessment had been set aside with the direction to frame a fresh assessment. While in the present case before us, the assessment order passed has been held to be invalid, the proposition laid by the Hon’ble Apex Court Hon’ble Apex Court still Printed from counselvise.com 16 ITA No.2401/PUN/2024 applies since the ultimate effect of the facts in both the cases still results in the original assessment order, not surviving, as also the satisfaction recorded therein for the purpose of initiation of penalty proceedings under section 271E/271D of the Act.” 10.1. Considering the facts on record and the judicial precedents dealt in above, more importantly, by placing reliance on the decision of the Hon’ble Supreme Court, in the case of Jayalakshmi Rice Mills (supra), and the decision of the Co- ordinate Bench of ITAT, Chandigarh in the case of Karan Empire Pvt. Ltd. (supra), which has dealt with the decision of Hon’ble Supreme Court as well as similar contentions put forth by ld. Sr. DR, we delete the levy of penalty u/s. 271E of the Act amounting to ₹11,40,000/-. Accordingly, ground No.1 taken by the assessee is allowed. All other grounds taken by the assessee are thus, rendered academic in nature.” 29. Since the assessee can always challenge the validity of assessment proceedings during the penalty proceedings as per the decision of Hon’ble Bombay High Court in the case of B.R. Bamasi vs. CIT (supra) and the decision of the Hon’ble Gujarat High Court in the case of P.V. Doshi vs. CIT (supra) and the various other decisions relied on by the Ld. Counsel for the assessee in the paper book and since we have already held that the re-assessment proceedings are not in accordance with law on account of not obtaining the approval from the competent authority as per the provisions of section 151 of the Act, therefore, the penalty proceedings initiated u/s 271D of the Act do not survive. In view of the above discussion, the penalty proceedings initiated by the Assessing Officer and sustained by the Ld. CIT(A) / NFAC are not in accordance with law and are liable to be quashed. We, therefore, hold that the penalty levied by the Assessing Officer and sustained by the Ld. CIT(A) / NFAC being not in accordance with law is liable to be deleted. We accordingly direct the Assessing Officer to cancel the penalty Printed from counselvise.com 17 ITA No.2401/PUN/2024 levied u/s 271D of the Act. The original grounds and the additional grounds raised by the assessee are accordingly allowed. 30. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 23rd July, 2025. Sd/- Sd/- (ASTHA CHANDRA) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 23rd July, 2025 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपीलार्थी / The Appellant; 2. प्रत्यर्थी / The Respondent 3. 4. The concerned Pr.CIT, Pune DR, ITAT, ‘A’ Bench, Pune 5. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune S.No. Details Date Initials Designation 1 Draft dictated on 17.07.2025 Sr. PS/PS 2 Draft placed before author 22.07.2025 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order Printed from counselvise.com "