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Judgment
PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
This appeal arises from order u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), dated 28.10.2025, passed by Ld. CIT(A)-NFAC, Delhi. In this case, the single point of contention is the levy of penalty u/s 271D of the Act for alleged default u/s 269SS of the Act.
The facts in brief are that some information was received by the Ld. AO that the assessee had accepted cash in excess of Rs.20,000/-, in connection with sale of an immovable property. Thereafter, the impugned penalty was levied on the basis of sale deed dated 13.04.2016 executed by the assessee in favour of one Shri Rajat Sherawat. Thereafter, the Ld. AO levied the penalty through order dated 31.07.2019. Importantly this penalty was levied without there being any assessment order whatsoever. The assessee had challenged this action before the Ld. CIT(A) where he could not succeed.
The aggrieved assessee has approached the ITAT with four grounds of appeal challenging the impugned action.
Before us the Ld. AR pointed out the facts of the case and took the initial plea that in the absence of any satisfaction for levy of penalty as would be evident from an assessment order, no penalty was leviable since there was absence of an assessment order. The Ld.AR relied on the case of Umakant Sharma [ITA No.364 to 366/Ind./2022, order dated 19.07.2023].
The Ld. DR relied on the orders of the authorities below.
We have carefully considered the rival submissions and have gone through the records before us. It is seen that indeed there is no assessment order through which any finding regarding the said default u/s 269SS of the Act could be visible. In this regard, we are amply fortified by the order of Umakant Sharma (supra). The operational portion of the same is as under: -
“10.Thus, the Hon’ble Supreme Court has affirmed the view of the Hon’ble High Court that in absence of satisfaction recorded regarding the penalty proceedings u/s 271E of the Act the order of levy of penalty is not valid. The Ahmedabad Bench of the Tribunal in case of Vijayaben G. Zalavadia vs. JCIT (supra) has considered an identical issue as under:
“6.We have heard the respective parties and also perused the relevant materials available on record.
7.We find that on the identical set of facts the Punjab and Haryana High Court was pleased observe the following while upholding quashing of penalty by the Tribunal:
“3.We have heard learned counsel for the appellant.
4.The only point for consideration in this appeal is whether the assessee had contravened the provisions of Section 269T of the Act by making repayment of loan/deposits of Smt. Kusum Lata Thakral, through account payee cheque or account payee drafts to M/s. Babyloan Builders Pvt. Ltd., Gurgaon and, therefore, penalty under Section 271E was leviable.
5.The Assessing Officer had levied the penalty amounting to Rs. 11,02,6107- which has been deleted by the Tribunal. The Tribunal while deleting the penalty recorded that the return of the assessee was processed as on 31.12.2003 and the notice u/s. 274 read with section 271E of the Act was issued on 12.06.2007. Such notice was issued when there was no proceedings pending before the Assessing Officer. Relying upon Delhi High Court judgment in CIT v. Standard Brands Ltd. [20061 285 ITR 295/155 Taxman 383, the Tribunal further observed that action for penalty may be permissible only after regular assessment has been framed and since no regular assessment order had been passed in this case, the recourse to penalty proceedings under Section 27IE were not justified. The findings recorded by the Tribunal read thus:-
"Having heard the parties and having perused the material on record, we find the grievance of the assessee to be correct. In this case, the return of the assessee was processed u/s. 143(l)(a) of the Income-tax Act, on 31.12.2003. Notice u/s. 274 read with 271E of the Act was issued to the assessee on 12.06,2007. It being a case of processing the return of income, there is no finding in the AO's order with regard to the applicability or otherwise of section 269T of the IT Act to the assessee's case. It was within the purview of the AO to bring the assessee's case to scrutiny and to make regular assessment u/s. 143(3) of the Act. It was also within the power of the AO at the appropriate stage to initiate proceedings u/s. 147 of the Act against the assessee. No such action was taken. Rather, the penalty was imposed on the basis of the finding in the case of assessee's wife."
6.No error or perversity could be shown in the aforesaid findings recorded by the Tribunal. Moreover, the assessee had taken a plea before the Assessing Officer that there was a reasonable cause for the assessee to have made direct payment of Rs.14,02,600/- to M/s. Babyloan Builders Private Ltd., Gurgaon. It was pleaded that some of the repayments made by the assessee were inter-company transfer for group housing and purchase of flat and at times payments were made after closure of banking hours. It was further submitted that the payments made were genuine and no tax evasion was involved and the default, if any, was of technical nature. The explanation being plausible one, it cannot be said that there was no reasonable cause within the meaning of Section 273B of the Act. No substantial question of law arises in this appeal.
8.We find substances in the submissions made by the Ld. A.R. particularly after considering the order passed by the Hon’ble Punjab and Haryana High Court as cited hereinabove. In fact, on the identical set of facts the penalty under Section 271E was deleted by the Tribunal and further upheld by the Hon’ble High Court. 9. Having regard to the facts and circumstances of the case and the ratio laid down in the order passed by the Punjab and Haryana High Court we do not hesitate to hold that the impugned penalty under Section 271E is not permissible in the absence of regular assessment framed against the assessee by the Revenue. Hence, the same is not found to be sustainable in the eye of law and, thus, quashed. The appeal preferred by the assessee is, therefore, allowed.”
11.Therefore, it is pre-requisite condition that the initiation of penalty 271D/271E of the Act, there must be assessment proceedings or proceedings arising from assessment order are pending in the case of the assessee. Accordingly in the facts and circumstances of the case and following the judgment of Hon’ble Supreme Court as well as Coordinate Bench of the Tribunal in case of Vijayaben G. Zalavadia vs. JCIT (supra), we hold that the penalty levied u/s 271D of the Act without any ITA No.364 to 366/Ind/2022 Umakant Sharma Page 9 of 9 Page 9 of 9 assessment proceedings in the case of the assessee is not valid and liable to be quashed. We order accordingly.”
Considering that there is no assessment order through which any finding regarding the default u/s 269SS could be understood and, therefore, there being an absence of satisfaction prior to initiation of penalty proceedings, the impugned penalty cannot be legally sustained. The same is directed to be deleted.
In the result, appeal is allowed.