2025 (7) TMI 1506 - AT - Income Tax

Levy of penalty u/s 271DA - requirement of recording satisfaction - whether non-recording of satisfaction in the quantum assessment order would be fatal to the levy of penalty u/s 271DA? HELD THAT - Hon ble Supreme Court in the case of CIT vs Jai Laxmi Rice Mills 2015 (11) TMI 1453 - SUPREME COURT wherein it was held as fresh assessment order is concerned there was no satisfaction recorded regarding penalty proceeding u/s 271E of the Act though in that order the AO wanted penalty proceeding to be initiated u/s 271(1)(c) - insofar as penalty u/s 271E is concerned it was without any satisfaction and therefore no such penalty could be levied. Though the aforesaid decision was rendered in the context of penalty provisions under section 271E of the Act which is leviable for violation of provisions of section 269T of the Act the same analogy could be drawn to the facts of the present case levying penalty under section 271DA of the Act. Respectfully following the aforesaid decision we direct to cancel the levy of penalty under section 271DA - Assessee appeal allowed.

Summary

ISSUES:

Whether the levy of penalty under section 271DA of the Income-tax Act, 1961 is justified without recording the satisfaction of the Assessing Officer in the quantum assessment order regarding violation of section 269ST of the Act.Whether the requirement of recording satisfaction is a mandatory condition precedent for initiating penalty proceedings under section 271DA of the Act.Whether penalty under section 271DA can be levied automatically irrespective of any additions in the quantum assessment or even in absence of assessment proceedings.Whether the burden lies on the assessee to prove "good and sufficient reasons" for non-levy of penalty under section 271DA of the Act.

RULINGS / HOLDINGS:

The court held that the non-recording of satisfaction by the Assessing Officer in the quantum assessment order is fatal to the levy of penalty under section 271DA of the Act, thus penalty cannot be levied without such satisfaction being recorded.It was ruled that unlike section 271(1)(c) of the Act, section 271DA does not expressly dispense with the need for recording satisfaction; however, by analogy to Supreme Court precedent, recording of satisfaction is a mandatory prerequisite for penalty imposition.The court rejected the submission that penalty under section 271DA is "objective, automatic and mechanical in nature" and can be levied without assessment proceedings or recording of satisfaction.The court directed cancellation of penalty under section 271DA for the relevant assessment years due to absence of recorded satisfaction by the Assessing Officer, thereby allowing the appeals.

RATIONALE:

The court relied on the legal framework established by the Income-tax Act, 1961, specifically sections 269ST and 271DA, and the proviso to section 271DA which requires the assessee to prove "good and sufficient reasons" for non-levy of penalty.The court applied the Supreme Court's decision in CIT vs Jai Laxmi Rice Mills, which held that penalty cannot be levied without recording satisfaction by the Assessing Officer, even though that decision concerned section 271E and section 269T, the court found the analogy applicable to section 271DA and section 269ST violations.The court rejected the Revenue's argument that penalty under section 271DA is automatic and does not require assessment proceedings or recorded satisfaction, emphasizing the necessity of procedural safeguards before penalty imposition.No dissent or doctrinal shift was noted; the judgment adhered to established precedent requiring satisfaction recording as a condition precedent to penalty levy under analogous provisions.