NARENDER GOUD TIGULLA,HYDERABAD V. ITO., WARD-9(1), HYDERABAD

ITA 737/HYD/2024

AI Insights

The case involves Narender Goud Tigulla, who appealed against the penalty imposed by the Income Tax Officer under section 271D for contravening section 269SS of the Income Tax Act, 1961, during the assessment year 2017-18. The primary legal contention was whether the penalty could be levied without the Assessing Officer recording his satisfaction regarding the initiation of penalty proceedings. The Tribunal examined precedents from the Supreme Court and other High Courts, which emphasized the necessity of such satisfaction being recorded in the assessment order before initiating penalty proceedings. The Tribunal concluded that the absence of recorded satisfaction in Tigulla's case rendered the penalty invalid.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 46426 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2017-2018
• Other Referred Cases: Sultan begum vs. ACIT, Sh. Umakant Sharma vs. JCIT, CIT vs. Jai Lakshmi rice Mills, Sri Patwari vs. DCIT, Sreenivasa ready Reddeppagari vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R. KUMARAN
• Assessee Lawyers: MOHD. AFZAL
• Keywords: Set aside; Search and seizure; Competent authority; Initiation of penalty proceedings
• Section: 271(1)(c); 153A; 271D; 271E

Judgement Text

"आयकर अपीलीय अधिकरण, हैदराबाद पीठ में IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B”, HYDERABAD BEFORE SHRI MANJUNATHA G., ACCOUNTANT MEMBER & SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER आ.अपी.सं / ITA No.737/Hyd/2024 (धििाारण वर्ा / Assessment Year: 2017-18) Narender Goud Tigulla Hyderabad [PAN :ABSPT0432C] Vs. Income Tax Officer Ward-9(1) Hyderabad अपीलार्थी / Appellant प्रत्‍ यर्थी / Respondent धििााररती द्वारा/Assessee by: Mohd.Afzal, AR राजस्‍ व द्वारा/Revenue by: Shri R.Kumaran, DR सुिवाई की तारीख/Date of hearing: 16/12/2024 घोर्णा की तारीख/Pronouncement on: 10/01/2025 आदेश / ORDER PER K. NARASIMHA CHARY, J.M: Aggrieved by the order dated 28/06/2024 passed by the learned Commissioner of Income Tax (Appeals)- National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), in the case of Narender Goud Tigulla (“the assessee”) for the assessment year 2017-18, assessee preferred this appeal. 2. In this appeal the assessee is a challenging the legality and validity of the order passed under section 271D of the Income Tax Act, 1961 (for short “the Act”) on the ground that recording of satisfaction is a prerequisite condition for initiation of penalty under section 271D of the Act, but in this case no such satisfaction was recorded prior to the initiation of the penalty proceedings nor passing the penalty order. Assessee placed reliance on the decisions of the Tribunal in the case of Sultan begum vs. ACIT in ITA No. 514 /Hyd/ 2023 for the assessment year 2017-18 by order dated 18/12/2023 and Sh. Umakant Sharma vs. JCIT in ITA No. 364 to 366/IND/2022 by order dated 19/7/2023, which was rendered following the binding precedent of the Hon’ble Supreme Court in the case of CIT vs. Jai Lakshmi rice Mills 379 ITR 521. Learned AR also placed reliance on the decision of the jurisdictional High Court in the case of Sri and was ready read the Patwari vs. DCIT in WP No. 44285 of 2022, dated 26/12/2022. 3. Per contra, learned DR submitted that the penalty proceedings emanated from the fact of the assessee contravening the provisions under section 269SS of the Act, and as rightly observed by the learned CIT(A) in the penalty order the learned Assessing Officer, while passing the penalty order, recorded the satisfaction stating that “no evidence whatsoever was submitted to substantiate this claim by the appellant. In fact, the appellant also submitted a copy of agreement of sale executed on 18/3/2016, wherein it was mentioned that the vendor has accepted cash amounting to ₹ 5,01,000/-from the vendee on the date of agreement of sale. The fact of receipt of cash on 18/3/2016 is again mentioned in the sale deed executed subsequently. Hence the contention of the assessee’s AR that the cash was received prior to May, 2015 is not acceptable in the absence of any evidence to contradict what is stated in the agreement of sale and the sale deed”. Learned DR therefore submits that the decisions relied upon by the learned AR are not applicable to the facts of the case. 4. We have gone through the record in the light of the submissions made on either side. The jurisdictional High Court dealt with the issue in the case of Sreenivasa ready Reddeppagari (supra) and while following the binding precedent of the Hon’ble Apex Court in the case of Jai Lakshmi rice Mills (supra) Hon’ble High Court observed as under. For the sake of completeness, I deem it just and necessary to extract hereunder the relevant observations and findings of the Hon'ble High Court,- “14. Issue raised in the writ petition is whether without satisfaction being recorded in the assessment order, penalty can be levied by the Joint Commissioner under Section 271D of the Act ? 15. Insofar the present case is concerned, we find that in the assessment order dated 24.03.2022 passed under Section 153A of the Act, return of income filed by the petitioner was accepted by the assessing officer and accordingly, the total income was assessed. In the return of income, petitioner had admitted receiving total income of Rs.80,84,180.00 which was also accepted by the assessing officer. 16. Subsequently, respondent No.1 took the view that petitioner had sold immovable properties for a total sale consideration of Rs.92,13,000.00 out of which he had accepted cash to the tune of Rs.87,80,000.00 which was in violation of Section 269SS of the Act, attracting penalty under Section 271D of the Act. 17. Before we advert to the reply submitted by the petitioner, we may mention that under Section 269SS of the Act, no person shall take or accept from any other person (referred to as a depositor) any loan or deposit or any specified sum otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, if the amount of such loan or deposit or specified sum is twenty thousand rupees or more. However, as per the first proviso, the rigor of Section 269SS is not applicable to the Government, banking company, post office savings bank or cooperative bank etc. As per the second proviso, this provision would also not be applicable where both the depositor and the receiver are having agricultural income and neither of them has any income chargeable to tax under the Act. 18. Section 271D of the Act deals with penalty for failure to comply with the provisions of Section 269SS of the Act. Section 271D of the Act being relevant is extracted hereunder: Penalty for failure to comply with the provisions of section 269SS. 271D. (1) If a person takes or accepts any loan or deposit [or specified sum] in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit [or specified sum] so taken or accepted.] [(2) Any penalty imposable under sub- section (1) shall be imposed by the [Joint] Commissioner.] 19. Thus, what sub-section (1) of Section 271D provides for is that if a person takes or accepts any loan or deposit or specified amount in contravention of the provisions of Section 269SS, he shall be liable to pay by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted. Sub-section (2) clarifies that any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner. 20. It would be useful to refer to Section 271E of the Act also at this stage which deals with penalty for failure to comply with the provisions of Section 269T of the Act. Be it stated that Section 269T of the Act provides that no branch of a banking company or a cooperative bank and no other company or cooperative society and no firm or other person shall repay any loan or deposit made with it or any specified advance received by it otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who had made the loan or deposit or who had paid the specified advance or by use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, if such an amount is twenty thousand rupees or more. As in the case of Section 269SS, Section 269T of the Act also does not apply to the Government, banking company, post office savings bank etc. Section 271E of the Act reads as under: Penalty for failure to comply with the provisions of section 269T. 271E. [(1)] If a person repays any [loan or] deposit [or specified advance] referred to in section 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the [loan or] deposit [or specified advance] so repaid.] [(2) Any penalty imposable under sub-section (1) shall be imposed by the [Joint] Commissioner.] 21. Thus, sub-section (1) of Section 271E of the Act provides that if a person repays any loan or deposit or specified advance referred to in Section 269T of the Act otherwise than in accordance with the provisions of that section, he shall be liable to pay by way of penalty a sum equal to the amount of the loan or deposit or specified advance so repaid. Sub-section (2) clarifies that any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner. 22. From an analysis of Sections 271D and 271E of the Act, it is seen that both the provisions are pari materia to each other. While Section 271D of the Act would be attracted on a person accepting loan or deposit or specified sum in contravention of Section 269SS of the Act, penalty under Section 271E of the Act would be imposable on a person who makes or repays the loan or deposit or specified advance in contravention of Section 269T. Therefore, in a way, the two provisions are complimentary to each other. 23. In Jai Laxmi Rice Mills Ambala City (supra), Supreme Court considered the question as to whether penalty proceedings under Section 271D of the Act is independent of the assessment proceeding ? In the facts of that case, it was found that the penalty order was issued following the assessment order. However in appeal, Commissioner of Income Tax (Appeals) had set aside the original assessment order with a direction to frame assessment de novo. In the fresh assessment order, no satisfaction was recorded by the assessing officer regarding initiation of penalty proceedings under Section 271E of the Act. It was noticed that the penalty order was passed before the appeal of the assessee was allowed by the Commissioner of Income Tax (Appeals). It was in that context that Supreme Court held as follows: The Tribunal as well as the High Court has held that it could not be so for the simple reason that when the original assessment order itself was set aside, the satisfaction recorded therein for the purpose of initiation of the penalty proceeding under Section 271E would also not survive. This according to us is the correct proposition of law stated by the High Court in the impugned order. As pointed out above, insofar as, fresh assessment order is concerned, there was no satisfaction recorded regarding penalty proceeding under Section 271E 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 271E is concerned, it was without any satisfaction and, therefore, no such penalty could be levied. These appeals are, accordingly, dismissed. 24. Reverting back to the facts of the present case, we find that petitioner had submitted reply to the show cause notice on 02.06.2022. In his reply, petitioner mentioned that no satisfaction was recorded by the assessing officer in the assessment order as to infraction of Section 269SS of the Act. Therefore, no penalty could be levied under Section 271D of the Act without recorded satisfaction. In this connection, reference was made to the decision of the Supreme Court in Jai Laxmi Rice Mills Ambala City (1 supra) wherein it was clarified that provisions of Section 271E are in pari materia with the provisions of Section 271D of the Act. However, this aspect of the matter was not considered by respondent No.1 while passing the impugned order. Respondent No.1 relying upon the Kerala High Court decision in Grihalaxmi Vision (2 supra) noted that competent authority to levy penalty is the Joint Commissioner. He has also referred to an earlier decision of the Supreme Court in CIT V. Mac Data Ltd.3 wherein it was observed that assessing officer has to satisfy himself as to whether penalty proceedings should be initiated or not. Assessing officer is not required to record his satisfaction in a particular manner or reduce it into writing. Therefore, respondent No.1 imposed the penalty under Section 271D of the Act. 25. We are afraid respondent No.1 had completely overlooked the decision of the Supreme Court in Jai Laxmi Rice Mills Ambala City (1 supra). In the said decision as extracted above, Supreme Court had concurred with the view taken by the High Court holding that satisfaction must be recorded in the original assessment order for the purpose of initiation of penalty proceedings under Section 271E of the Act. We have already discussed above that provisions of Section 271E and 271D of the Act are in pari materia. When there is a decision of the Supreme Court, it is the bounden duty of an adjudicating authority, be it an income tax authority or any other civil authority or for that matter any court in the country, to comply with the decision of the Supreme Court. 26. Article 141 of the Constitution of India is clear that law declared by the Supreme Court shall be binding on all courts within the territory of India. This is further clarified in Article 144, which says that all authorities, civil and judicial, in the territory of India shall act in aid of the Supreme Court. We are therefore, of the unhesitant view that respondent No.1 overlooked the relevant considerations while passing the impugned order dated.29.11.2022. 27. Further, issue in the present writ petition is not the competence of the Joint Commissioner in issuing the order of penalty. Therefore, reference to Grihalaxmi Vision (2 supra) was wholly unnecessary. 28.Consequently, we set aside the impugned order dated 29.11.2022 and remand the matter back to the file of respondent No.1 to pass a fresh order in accordance with law after giving a reasonable opportunity of hearing to the petitioner.” 5. The observations of the learned Assessing Officer referred to by the learned CIT(A) in his order to hold that there was proper satisfaction recorded by the learned Assessing Officer, on the observations in the penalty order, but not the satisfaction forming foundation to initiate the penalty proceedings. Requirement of law, as observed by the Hon’ble Apex Court in the case of Jai Lakshmi rice Mills (supra) and the Hon’ble jurisdictional High Court in the case of Sreenivasa ready Reddeppagari (supra), is that prior to the initiation of the penalty proceedings the learned Assessing Officer shall record his satisfaction to initiate the penalty proceedings, which is admittedly absent in this case. Respectfully following the binding precedent of the apex court and also the jurisdictional High Court as stated above, we hold the issue in favour of the assessee and direct the learned Assessing Officer to delete the penalty. Grounds are answered accordingly. 6. In the result, appeal of the assessee is allowed. Order pronounced in the open court on this the 10th January, 2025. Sd/- Sd/- (MANJUNATHA G.) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated: 10/01/2025 L.Rama, SPS Copy forwarded to: 1. Shri Narender Goud Tigulla, H.No.16-11-20-13/1, Flat No.301, Sri Sai Sadan Apartments, Saleemnagar Colony, Moosarmbagh, Malakpet, Hyderabad 2. The Income Tax Officer, Ward-9(1), Hyderabad 3. The Pr.CIT, Hyderabad 4. The DR, ITAT, Hyderabad. 5. GUARD FILE TRUE COPY ASSISTANT REGISTRAR ITAT, HYDERABAD "