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Judgment
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :
These captioned two appeals have been filed by the assessee against the orders of the learned Commissioner of Income Tax (Appeals)–Delhi-26 [‘CIT(A)’ in short] dated 14.10.2025 and 08.10.2025 arising from the penalty order dated 30.08.2024, passed under Section 271D of the Income Tax Act, 1961 (‘the Act’) by the Addl. CIT, Central Range-4, New Delhi concerning Assessment Year (A.Y.) 2019-20.
Since the captioned appeals pertain to different assessee, for the sake of convenience and brevity they were heard together are disposed of by this common order.
ITA No. 7138/DEL/2025 [Navneet Gupta & Sons]
The grounds raised by the assessee are as under :
“1.On the facts and circumstances of the case, the order passed by the learned Commissioner Income Tax (Appeals) (hereinafter referred to as CIT(A)) is bad, both in the eye of law and on the facts.
2.On the facts and circumstances of the case, the learned CIT(A), has erred both on fact and in law, in confirming the penalty despite the fact that penalty order passed by the learned Additional commissioner of Income Tax (hereinafter referred to as "AO") under section 271D of the Income Tax Act, 1961 (hereinafter referred to as "the Act") is illegal, without jurisdiction and hence liable to be quashed.
3.On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the penalty of Rs.60,00,000/- levied by the AO under section 271D of the Act holding that the assessee has received cash of Rs.60,00,000/- in contravention of the provisions of section 269SS of the Income tax Act.
4.On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO despite the fact that the initiation of penalty proceedings and consequent penalty order passed under section 2710 of the Act is illegal, invalid, void ab initio and non-est as the initiation of the assessment proceedings as well as consequent assessment order passed by the AO under section 153C r.w.s 153A of the Act in which addition of alleged cash received has been made are illegal, invalid, non-est and liable to be quashed.
5.On the facts and circumstances of the case, the learned CIT(A) has erred both on fact and in law, in confirming the penalty despite the fact that the penalty proceedings have been initiated and penalty was levied by the AO without recording any valid satisfaction, in contravention of provisions of section 269SS of the Income Tax Act.
6.On the facts and circumstances of the case, the learned CIT(A) has erred both on fact and in law, in confirming the penalty despite the fact that the penalty proceedings have been initiated and penalty was levied by the AO without there being any contravention of provisions of section 269SS of the Act by the assessee and therefore penalty levied by the AO under section 271D is unsustainable.
7.On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the penalty levied by the AO rejecting the explanations and submissions and evidences brought on record by the assessee in support of its contention that no such cash has been received by the assessee.
8.On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the penalty levied by the AO on the addition which itself is unsustainable and liable to be deleted.
9.On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the penalty levied by the AO despite the fact that the same has been levied without bringing any conclusive evidence on record to prove that alleged cash has been received by the assessee.
10.(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the penalty despite the fact that the same has been levied by the AO by indulging in surmise without bringing on any direct evidence against the assessee, only on the basis of presumptions and assumptions.
(ii)That the above said penalty has been confirmed ignoring the settled position of law that the penalty cannot be levied on mere suspicion or conjectures.
11.The appellant craves leave to add, amend or alter any of the grounds ofappeal.”
The brief facts of the case is that a search and seizure operation under section 132 of the Act was initiated by the Investigation Wing, Delhi at the residential premises of Shri Dhiraj Dhar Gupta and Shri Shridhar Gupta, as part of Sushen Mohan Gupta and others (SMG Group) wherein certain incriminating documents were seized regarding property transaction of the assessee. It was found that the assessee, a HUF, had sold its share (12.5 % undivided share) in the property located in Bhagirath Palace situated in Chandini Chowk wherein the assessee had accepted cash exceeding Rs.20,000/- against the sale of immovable properties amounting to Rs.60,00,000/- during the year under consideration. An Assessment was completed under section 153C r.w.s 143(3) of the Act on 08.03.2024 for A.Y. 2019-20 at an assessed income of Rs.67,49,430/-. Further, a show-cause notice under section 271D r.w.s 274 of the Act was issued and served upon the assessee on 09.08.2024 regarding the cash receipts exceeding Rs.20,000/-considering the same as violation of the provision of section 269SS of the Act. The ACIT, Central Range-04, New Delhi initiated the penalty proceedings and imposed penalty of Rs.60,00,000/- under section 271D of the Act.
Aggrieved by the order of learned ACIT, assessee is before us.
At the outset, learned Counsel of the assessee stated that quantum addition made in the assessment order passed under section 153C of the Act, has been quashed by ITAT vide order dated 27.02.2026 in ITA Nos. 6516 & 6517/Del/2025 for A.Y. 2019-20. Learned Counsel has relied on the decision of the Hon’ble Supreme Court in the case of CIT vs. M/s. Jai Laxmi Rice Mills 2015(11) TMI 1453 dated 20.11.2015 for the proposition that penalty proceedings under section 271D of the Act are liable to be quashed in cases where the appeals against quantum addition, on the basis of which such penalty is imposed, are allowed. The assessee further relied on the following decision as under:
1.CIT, Panchkula vs. M/s. Jai Laxmi Rice Mills
2.Rudra Buildwell Projects P. Ltd. vs. DCIT, Central Circle, Noida
3.ACIT, Central Circle, Agra vs. Saurabh Gupta.
4.Ravi Nirman Nigam Ltd. vs. ACIT, Circle – 13(3)(1), Mumbai
5.The DCIT vs. M/s. Karan Empire Pvt. Ltd.
Per contra, learned DR stated that penalty proceedings under section 271D is an independent proceeding and therefore, the fact of quantum additions in the assessment order being quashed/deleted does not have any relevance to the penalty proceedings under section 271D of the Act.
We have heard the rival submissions and perused the material on record. In the instant case for AY 2019-20, we find that the Coordinate bench of Delhi ITAT has quashed the assessment order passed u/s 153C on account of vitiated assumption of jurisdiction u/s 153C. In such circumstances, we are of the considered view that once the assessment order u/s 153C, from which the penalty proceedings u/s 271D originated, has been quashed, the satisfaction for initiating penalty proceedings u/s 271D recorded therein, also cease to exist, rendering the penalty proceedings u/s 271D unstainable in the eyes of law as mandated by the Hon’ble Supreme Court in the case of CIT vs. Jai Laxmi Rice Mills 379 ITR 521 (SC). The hon’ble Court has held as under:
“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.”
In the factual matrix of the instant case and in the light of the decision of the hon’ble Supreme Court in CIT vs. Jai Laxmi Rice Mills (supra), we quash the penalty order u/s 271D. The ground of appeal is allowed in aforesaid terms.
The facts in ITA No. 7139/Del/2025 (Assessment Year : 2019-20), in the case of Rajan Gupta and Sons are identical hence the decision given above, apply mutatis mutandis in the facts of the instant case. The grounds are allowed.
12 In the result the appeal in ITA No. 7138/DEL/2025 [Navneet Gupta & Sons] and in ITA No. 7139/DEL/2025 [Rajan Gupta & Sons] are allowed.