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2024 (3) TMI 879 - AT - Income TaxPenalty levied u/s 271D as well as section 271E - mandation to record satisfaction before initiating penalty under section 271D - case of the assessee was selected for scrutiny and the assessment was completed after making addition towards unexplained interest paid/unexplained cash expenses for which AO initiated penalty proceedings u/s 271(1) - allegation of receipts of loan by way of cash and payment of interest in cash - violation of section 269SS and section 269T - As per AO assessee had not explained the bonafide or genuineness of the cash transactions HELD THAT:- In this case, the assessment order was passed on 30.12.2017 and reference was made by the Assessing Officer to the Addl. CIT on 14.03.2021 to initiate penalty proceedings. There is a time gap of more than three years In the assessment order dated 30.12.2017, the Assessing Officer has noted that penalty proceedings u/s 271(1)(c) of the Act has to be initiated separately. However, the AO has made a reference to the Addl. CIT to initiate the proceedings u/s 271D of the Act for violation of section 269SS of the Act. Once the AO decided to initiate penalty u/s 271(1)(c) of the Act, subsequently, reference was made to Addl. CIT to initiate penalty proceedings u/s 271D of the Act, the AO ought to have been recorded his satisfaction. However, Ld. AO has failed to do so. The same is in violation of CBDT Circular no. 09/DV/2016 dated 26.04.2016 advising Assessing Officer to make a reference to the Range Head regarding violation of provisions of Sec.269SS and 269T during the course of assessment proceedings itself. Thus, the action of Ld. AO was in gross violation of departmental circular. Thus as following case of CIT v. Jai Laxmi Rice Mills [2015 (11) TMI 1453 - SUPREME COURT], Srinivasa Reddy Reddeppagari [2022 (12) TMI 1446 - TELANGANA HIGH COURT], T. Shiju v. JCIT (2019 (6) TMI 603 - ITAT CHENNAI], Smt. S.B. Patil [2016 (2) TMI 1206 - ITAT BANGALORE] and Anglican India Consultancy Pvt. Ltd. [2017 (12) TMI 1518 - ITAT DELHI] the ground raised by the Department is liable to be dismissed. Period of limitation - Penalty order has not been passed within the statutory time limit - CIT(A) has followed the judgement of Mahesh Wood Products P Ltd. [2017 (5) TMI 433 - DELHI HIGH COURT] and decided the additional legal ground in favour of the assessee. CIT(A) has correctly deleted the penalty levied under section 271D of the Act for both the assessment years 2015-16 and 2016-17. Since the Hon’ble Supreme Court in the case of Jai Laxmi Rice Mills Ambala City (supra) wherein it was clarified that provisions of Section 271E are in pari materia with the provisions of Section 271D of the Act, no separate adjudication for levy of penalty under section 271E of the Act is warranted. Accordingly, all the appeals filed by the Revenue are dismissed.
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