ACIT, Central Circle 16, New Delhi vs Pacific Development Corporation Ltd.

PER S. RIFAUR RAHMAN, AM :

These appeals are filed by the Revenue against the order of the Ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)] dated 30.06.2025 for the Assessment Years 2021-22 & 2022-23

Since the issues are common and the appeals are connected, hence the same are heard together and being disposed off by this common order. For the sake of brevity, we are taking the facts from the Assessment Year 2021-22 as most of the grounds are common. The Revenue has taken the following grounds of appeal in AY 2021-22 :-

Brief facts of the case are, a search & seizure operation under section 132 of the Income Tax Act, 1961 (for short ‘the Act’) was conducted on 17.11.2021 and on subsequent dates on different business and residential premises of Pacific Group of cases. Various incriminating papers/documents were found and seized in the group cases. Assessment u/s 143(3) of the Act was completed at an assessed income of Rs.67,62,72,406/- on 04.02.2023 for A.Y. 2021-22. Penalty Order u/s 271D dated 20.03.2024 was passed by Addl. CIT, Central Range-4 levying penalty of Rs.4,51,19,039/- for violation of section 269SS of the Act.

In the appeal before the ld. CIT (A), ld. CIT (A) observed that perusal of the assessment order u/s 143(3) passed on 04.02.2023 in the case of the assessee showed that the contention of the assessee is correct. He further observed that satisfaction for initiation of penalty proceedings u/s 271D for violation of section 269SS of the Act has been recorded by the AO in the assessment order. He further observed that the issue of recording of satisfaction by the Assessing Officer for initiation of penalty proceedings u/s 271D of the Act has been adjudicated by the Hon'ble Supreme Court in the case of Commissioner of Income Tax Vs. Jai Laxmi Rice Mills and the Hon'ble Apex Court has affirmed the decision of Punjab & Haryana High Court that no penalty could be levied u/s 271D of the Act without the satisfaction recorded by the Assessing Officer. Accordingly, ld. CIT (A) on the facts of the case and the judicial pronouncement of the Hon'ble Apex Court held that the penalty imposed u/s 271D of the Act without recording of satisfaction by the Assessing Officer cannot be sustained and hence deleted the same.

Aggrieved against the aforesaid order, Revenue is in appeal before us.

At the time of hearing, ld. DR of the Revenue submitted that the ld. CIT (A) has erred in not appreciating that satisfaction of the Assessing Officer while making the reference is not contained in provisions of the Act i.e. has not been mandated by the parliament. He submitted that ld. CIT (A) has erred in not appreciating that the decision of Apex Court in Jai Laxmi Rice Mills was on peculiar facts of that case and is not applicable to the present case. Ld. CIT (A) erred in not appreciating that the Apex Court in the case of Jai Laxmi Rice Mills upheld the relief to the assessee by relying on the fact that the reference for penalty forming part of original assessment order and not forming part of assessment framed in set aside proceedings.

On the other hand, ld. AR of the assessee heavily relied on the findings of the ld. CIT (A) and submitted that the issue involved is squarely covered by the decision of Hon’ble Apex Court in Jai Laxmi Rice Mills (2015) 379 ITR 521 (SC)and the ld. CIT (A) has rightly deleted the addition by applying the ratio of the same. In addition to this, he relied on various decisions which are reproduced below :-

Considered the rival submissions and material placed on record. We observed that the penalty proceedings were initiated u/s 271D and also levied a penalty of Rs.4,51,19,039/-. We observed that penalty proceedings initiated u/s 271D also does not survive for the reason that there was no satisfaction recorded by the Assessing Officer at the time of initiation of penalty proceedings under section 271D of the Act. The same was reiterated in the decision of Hon’ble Supreme Court in the case of CIT vs. M/s. Jayalakshmi Rice Mills (supra) and accordingly, we are of the opinion that ld. CIT (A) has rightly deleted the addition relying on the aforesaid decision of Hon’ble Supreme Court. Hence, we are inclined not to disturb the findings of the ld. CIT (A) and the same is upheld.

In the result, the appeal filed by the Revenue for AY 2021-22 is dismissed.

Since the facts in AY 2021-22 are exactly similar to AY 2022-23, our above findings in AY 2021-22 are applicable mutatis mutandis in Assessment Year 2022-23. Accordingly, the appeal filed by the Revenue for AY 2021-22 is dismissed.

In the result, all the appeals filed by the Revenue are dismissed.