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Judgment
PER MANISH AGARWAL, A.M.:
The captioned appeals are filed by assessee against the separate orders, both dated 29.12.2023 passed by Ld. Commissioner of Income Tax (A), Delhi-27 [“Ld. CIT(A)”] u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of different assessment orders dated 20.01.2023 and 19.01.2023 respectively, passed u/s 143(3) of the Act pertaining to Assessment Year 2021-22.
Both captioned appeals are having common issues, therefore, they are taken together and decided by a common order.
First we take appeal in the case of late Shri Samarjit Singh Malik in ITA No. 580/Del/2026 for Assessment Year 2021-22.
ITA No.580/Del/2026 [Assessment Year 2021-22]
Brief facts of the case are that a search & seizure operation was carried out u/s 132 at the business/residential premises of the assessee on 24.11.2021. thereafter, the assessment u/s 143(3) of the Act was completed vide order dated 20.01.2023 for the impugned assessment year wherein the assessee has admitted that the cash found during the course of search of INR 16,50,000/- represents the cash received from the sale of two properties situated at Plot No.171, Block-D, Sector-122, Noida and Flat No. T4/1104, 11th Floor, Tower-4, Sunworld Vanalika, Plot No. GH-01B, Sector-107, Noida which was over and above the sale consideration declared in the Sale Deeds and therefore, the said amount was offered for tax as part of sale consideration and due taxes were paid. Share of the assessee in the properties sold was 50%, therefore Rs. 8,25,000/- was offered by assessee and remaining 50% was offered by his wife Smt. Sumitra Malik, the other appellant before us. The AO in the assessment order has initiated the penalty proceedings u/s 271DA of the Act in terms of para 7 wherein the AO has made following observations:-
7.“Further, it is clear that the assessee has violated the provisions of section 269ST of the I.T. Act, 1961. Therefore, reference is being sent to Addl. CIT, Central Range-5, New Delhi for initiation of penalty proceedings u/s 271DA of the I.T. Act, 1961.”
Thereafter, Ld. JCIT, Central Range-5, Delhi in terms of order dated 27.03.2024 passed u/s 271DA of the Act has dropped the penalty proceedings so initiated for the violation of provisions of section 269ST of the Act by observing that the said penalty was inadvertently initiated u/s 271DA r.w.s 269ST of the Act therefore, the same is hereby, dropped and separate notice for penalty proceedings u/s 271D r.w.s. 269SS of the Act is being issued and accordingly issued the notice u/s 274 r.w.s 271D of the Act on the same date i.e. on 27.03.2024. Thereafter, Ld. JCIT, Central Range-5, Delhi levied the penalty in terms of order passed u/s 271D of the Act on 16.05.2024 of INR 7.50 Lakhs by holding that the assessee has received cash in violation to the provisions of section 269SS of the Act from the sale of above stated two properties and thus, liable for the penalty.
Aggrieved by the said order, the assessee is in appeal before Ld. CIT(A) who dismissed the appeal of the assessee therefore, the assessee preferred the present appeal before the Tribunal by taking following Grounds of appeal:-
“Ground No. 1.1. That the Ld. CIT(A) on facts and in law erred in upholding the levy of penalty u/s 271D amounting to Rs 7,50,000/- for alleged violation of Section 269SS read with Section 69A, in respect of cash found during Search, despite the same having been admitted by appellant, as ‘Undisclosed Income’ money received on sale of Immovable Property during the A.Y 2021-22, which was duly disclosed / tax paid thereon, in terms of return filed u/s 139(1) in compliance to Section 271AAB(1A) of the Act.
Ground No. 1.2. That the learned CIT(A) failed to consider and appreciate that in law, in the case of a Search, appellant having satisfied the conditions specified in Section 271AAB(1A) read with Explanation thereof, penalty provisions u/s 271D for violation of section 269SS / 269ST are inapplicable and no penalty thereof can be initiated OR levied under any other provision of the Act .
Ground No. 2. That without prejudice to the aforesaid ground of Appeal, the CIT(A) while confirming the penalty levied u/s271D failed to appreciate :- (i) That the AO in the assessment order recorded satisfaction for initiation of penalty u/s271DA for violation of Section 269ST, which proceedings were dropped by JCIT. (ii) That the JCIT, suo moto, initiated and issued show cause Notice dated 27.03.2024 to levy penalty u/s271D for violation of u/s269SS , even though no satisfaction was recorded by AO during assessment proceedings and accordingly initiation / issue of Notice and consequent levy of penalty is bad in law. (iii) That JCIT while issuing Notice u/s271D, without appropriate satisfaction by AO : imposing penalty thereof , has erroneously sought to justify her actions by relying on Section 292B of the Act, which is wholly misplaced, as issues of jurisdiction are incurable and not applicable for the present proceedings.
Ground No. 3. That, without prejudice to the above grounds, the CIT(A) erred in law and on facts in confirming the impugned penalty order which is barred by limitation in terms of Section 275(1)(c), for the reason that period commences from date of initiation of penalty by AO and not by JCIT , as held by various decisions of the jurisdictional High Court & Supreme court.
Ground No. 4. The appellant craves the right to add, amend OR modify any ground of appeal.”
In all the Grounds of appeal, the assessee has challenged the levy of penalty u/s 271D of the Act by contending that the satisfaction was recorded by the AO for initiation of penalty proceedings u/s 269ST r.w.s. 271DA of the Act and thereafter the ld. JCIT has dropped the same and reinitiate the present penalty proceedings u/s 271D r.w.s. 269SS of the Act which is invalid and barred by limitation. Therefore, all the Grounds of appeal are taken together for consideration.
Ld. AR for the assessee submits that in the instant case, satisfaction was recorded by the AO for initiation of penalty proceedings u/s 271DA for violation of provisions of section 269ST of the Act as could be seen from para 7 of the assessment order as reproduced herein above. Ld. AR submits that the JCIT, Central Range-5, Delhi had dropped the penalty proceedings so initiated and initiated fresh penalty proceedings u/s 271D for violation of section 269SS of the Act by issue of fresh notice dated 27.03.2024. Ld.AR submits that in the instant case, assessment order was passed on 20.01.2023 and therefore, in terms of provisions of section 275(1)(c) of the Act, the limitation period for imposing the penalty initiated under thee said order expired on 30.07.2023 and therefore, any order levying the penalty subsequent to such date is barred by limitation. For this, Ld. AR drew our attention to the CBDT Circular No.10/2016 dated 26.04.2016 wherein CBDT has accepted the judgment of Hon’ble Delhi High Court in the case of CIT vs Worldwide Township Projects Ltd. reported in 232 ITR 2014(Del) and directed the lower authorities to pass the order of imposing penalty u/s 271D and 271E of the Act in terms of the limitations provided in section 275(1)(c) of the Act as per which the penalty proceedings, should be completed before the expiry of the Financial Year in which such action for imposition for penalty has been initiated/completed or 06 months from the end of the month in which action for imposition of penalty is initiated whichever period expires later. In the instant case, since the assessment order was passed on 20.01.2023 initiating the penalty proceedings u/s 271DA of the Act, falling in AY 2022-23 and 06 (six) months from the end of January, 2023 expires on 31.07.2023 therefore, the period of limitation for imposing penalty u/s 271DA, if any, expires on 31.07.2023.
Ld.AR alternatively submits that in the instant case, satisfaction for initiation of penalty proceedings u/s 271DA was recorded by the AO which was dropped by Ld. JCIT in terms of the order dated 27.03.2024 and thereafter, fresh proceedings were initiated for levy of penalty u/s 271D of the Act for violation of provision of section 269SS of the Act. It was submitted by ld. AR that no satisfaction was recorded by the AO during the pendency of assessment proceedings therefore, initiation of penalty proceedings u/s 271D of the Act by Ld. JCIT is contrary to the provisions of the Act and thus bad in law and accordingly, the consequent order passed deserves to be held as invalid and be quashed. For this, Ld.AR placed reliance on the judgement of Hon’ble Supreme Court in the case of JCIT vs Grandhi Sri Venkata Amarendra reported in [2026] 183 taxmann.com 545 (SC) wherein Hon’ble Supreme Court has confirmed the order of Hon’ble Andhra Pradesh High Court in [2026] 183 taxmann.com 323. Further reliance was placed on the judgement of Hon’ble Gujarat High Court in the case of PCIT vs Parivar Television (P.) Ltd. reported in [2025] 180 taxmann.com 109 and Hon’ble Rajasthan High Court in the case of Sunil Agarwal vs ACIT reported in [2025] 172 taxmann.com 54 wherein Hon’ble High Court has held that reference made by the DCIT to Adl. CIT cannot enhance the case of the Department as reference was made after the conclusion of re-assessment proceedings by DCIT and therefore, the satisfaction recorded by DCIT could not be equated with the satisfaction to be recorded in re-assessment proceedings. Ld. AR, therefore, prayed that even otherwise, in the instant case, the satisfaction for imposition of penalty u/s 271D of the Act for violation of provision of section 269SS has been recorded by JCIT when no proceedings were pending before the AO and no satisfaction was recorded by the AO therefore, the penalty levied u/s 271D of the Act is without jurisdiction and be deleted.
Per contra, Ld. Sr. DR for the Revenue vehemently supported the orders of the lower authorities and submits that the satisfaction was recorded by the AO that assessee has received a sum in violation of section 269SS of the Act however, inadvertently he has initiated the proceedings u/s 271DA of the Act for violation of provision of section 269ST of the Act and therefore, the penalty so levied by JCIT after by making correction is deserves to be uphold. He prayed accordingly.
Heard the contentions of both the parties at length and perused the material available on record. At the outset, it is observed that the AO in terms of the assessment order passed u/s 143(3) dated 20.02.2023 has recorded the satisfaction for the initiation of penalty proceedings u/s 271DA for violation of provisions of section 269ST of the Act. Thereafter, ld. JCIT in terms of the order passed u/s 27.03.2024 has dropped the penalty proceedings so initiated for levy of penalty u/s 271DA of the Act and subsequently initiated fresh penalty proceedings u/s 271D r.w.s 269SS of the Act after recording the satisfaction for the same.
“Section 271D, read with section 269SS, of the Income-tax Act, 1961 Penalty For failure to comply with section 269SS (Condition precedent) - Assessment year 2017-18 High Court held that where Assessing Officer did not record any finding that there had been any violation of section 269SS by assessee, nor was any satisfaction recorded to effect that alleged transaction of acceptance of loan in cash would attract penal consequences, there would not be any occasion to Joint Commissioner to exercise his jurisdiction to levy penalty under section 271D - Whether there was gross delay of 350 days in filing SLP which had not been satisfactorily explained, even otherwise, court found no good reason to interfere with impugned order passed by High Court and, thus, SLP was to be dismissed - Held, yes [Paras 1 to 3] [In favour of assessee].”
Here it is important to note that no satisfaction was recorded by the AO for initiation of penalty proceedings u/s 271D of the Act which is a primary condition. The Hon’ble Supreme Court in the case of JCIT vs Grandhi Sri Venkata Amarendra (supra) has held as under:-
Similar view was expressed by Hon’ble Supreme Court in the case of CIT vs Jai Laxmi Rice Mills Ambala City reported in [2015] 64 taxmann.com 75 wherein Hon’ble Supreme Cout has observed as under:-
1.“In these appeals, we are concerned with the question as to whether penalty proceeding under Section 271D of the Income Tax Act (hereinafter referred to as “the Act”) is independent of the assessment proceeding and this question arises for consideration in respect of Assessment Years 1991-1992 and 1992-1993 under the following circumstances:
In respect of Assessment Year 1992-1993, assessment order was passed on 26.02.1996 on the basis of CIB information informing the Department that the assessee is engaged in large scale purchase and sale of wheat, but it is not filing income tax resulted in the aforesaid order, as per which net taxable income of the assessee was assessed at Rs. 18,34,584/-. While framing the assessment, the Assessing Officer also observed that the assessee had contravened the provisions of Section 269SS of the Act and because of this the Assessing Officer was satisfied that penalty proceedings under Section 271E of the Act were to be initiated.
2.The assessee carried out this order in appeal. The Commissioner of Income Tax (Appeals) allowed the appeal and set aside the assessment order with a direction to frame the assessment de novo after affording adequate opportunity to the assessee.
3.After remand, the Assessing Officer passed fresh assessment order. In this assessment order, however, no satisfaction regarding initiation of penalty proceedings under Section 271E of the Act was recorded. It so happened that on the basis of the original assessment order dated 26.02.1996, show cause notice was given to the assessee and it resulted in passing the penalty order dated 23.09.1996. Thus, this penalty order was passed before the appeal of the assessee against the original assessment order was heard and allowed thereby setting aside the assessment order itself. It is in this backdrop, a question has arisen as to whether the penalty order, which was passed on the basis of original assessment order and when that assessment order had been set aside, could still survive.
4.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.
5.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.”
By following the aforesaid judgments of the Hon’ble Supreme Court in the case of Jai Laxmi Rice Mills Ambala City (supra), the Hon’ble Gujarat High Court in the case of Pariwar Television Ltd. (supra) has held the penalty proceedings initiated u/s 271D without any satisfaction recorded by the AO as invalid. Similar view is expressed by the Hon’ble Rajasthan High Court in the case of Sunil Agarwal (supra). Thus, by respectfully following the aforesaid judgements of Hon’ble Supreme Court, of various Hon’ble High Courts, we are of the considered view that the penalty proceedings initiated u/s 271D for violation of provision of section 269SS of the Act by JCIT, Central Range-5, Delhi is without jurisdiction as no satisfaction was recorded by the AO during the pendency of assessment proceedings and therefore, the penalty so levied u/s 271D of the Act without recording satisfaction by the AO which is sine qua non compulsory therefore, the penalty levied u/s 271D is hereby, deleted.
Even on the issue of limitation, the assessment order wherein satisfaction for initiation of penalty proceedings u/s 271DA of the Act were recorded, was passed on 20.01.2023 and in terms of the CBDT Circular No. 10/2016 dated 26.04.2016 for the purpose of levy of penalty u/s 271D and section 271E of the Act, the time limit provided u/s 271(1)(c) of the Act should be adhered to, according to which the limitation period in the instant case expired on 31.07.2023 and therefore, the order of JCIT dropping the penalty proceedings u/s 271DA so initiated by the AO and further re-initiation of the proceedings u/s 271D of the Act are barred by limitation and thus, the assessee succeeds on this score also. With these observations, all the Grounds of appeal raised by the assessee are allowed.
In the result, the captioned appeal of the assessee is allowed.
Now we take appeal in ITA No.583/Del/2026 for Assessment Year 2021-22 in the case of Smt. Sumitra Malik.
ITA No.583/Del/2026 [Assessment Year 2021-22]
The present appeal is filed by the assessee against the levy of penalty u/s 271D for the violation of provisions of section 269SS of the Act. In the preceding paras, we have allowed the appeal in the case of deceased husband of the assessee late Shri Samarjit Singh Malik in ITA No. 580/Del/2026 for Assessment Year 2021-22 by holding the initiation of penalty proceedings u/s 271D of the Act by JCIT is invalid without recording any satisfaction by the AO during the pendency of assessment proceedings. Before us, both the parties fairly admitted that the facts in the instant appeal are identical to the facts in ITA No.580/Del/2026 for AY 2021-22, thus, by following the aforesaid observations in ITA No.580/Del/2026 for AY 2021-22 which are Mutatis Mutandis applicable to the facts of this appeal of the assessee, the consequent penalty order passed is hereby, quashed. In view of the above, all Grounds of appeal raised by the assessee in this appeal are allowed.
In the result, the captioned appeal of the assessee is allowed.
In the final result, both captioned appeals of the assessee in ITA No.580 & 583/Del/2026 for Assessment Year 2021-22, are allowed.