Wp/44285/2022 Of Srinivasa Reddy Reddeppagari v. Joint Commissioner Of Income Tax And Another

HIGH COURT FOR THE STATE AT HYDERABAD(Special Original Jurisdiction) IVIONDAY, THE TWENTY SIXTH DAY OF DECEMBERTWO THOUSAND AND TWENTYTWO PRESENT THE HONOURABLE THE CHIEF JUSTICE UJJAL ANDTHE HONOURABLE SRI JUSTICE C.V. BHASKAR WRIT PETITION NO: 44285 OF 2022 Between: Srinivasa Reddy Reddeppagari, S/o. R. [Rajagopal Reddy ][aged ]9p9qt- 94years, Fyo. D.N6.1/712, Dwaraka Nagar, Kadapa, Andhra Pradest [--516-001 ][.] ...PETITIONER AND '1 . Joint Commissioner of lncome Tax, Central Circle, Central Range - 2,Aayakar Bhawan, Opposite LB Stadium, [Basheer Bagh, ][Hyderabad,]Telangana - 500004.Aayakar Bhawan, Opposite LB Stadium, [Basheer Bagh, ][Hyderabad,]Telangana - 500004. 2. Assisilnt Commissionerof [lncome Tax, Central Circle, Central ][Circle - 2 ][(4), ][.]Aayakar Bhawan, Opposite LB Stadium, [Basheer Bagh, ][Hyderabad,]Telangana - 500004 Aayakar Bhawan, Opposite LB Stadium, [Basheer Bagh, ][Hyderabad,]Telangana - 500004 ...RE''.NDENTS Petition under Article 226 of the Constitution of [lndia ][praying ][that ][in ][the]circumstances stated in the affidavit [filed ][therewith, ][the ][High ][Court ][may ][be]pleased to issue a writ, direction or order more [particularly ]in the nature of [a ][writ of]mandamus declaring the impugned [penalty ]order [bearing ] [No.]lTBAtPNLlFl27lDl2022-2311047703496(1) dated [29-11-2022 ][passed ][under]Section 271D of the lncome Tax [Act, ][1961 ][for the ][Assessment ][Year ][2016-17 ][by]Respondent No.1 as being void, illegal, [arbitrary, without jurisdiction and contrary]to law arid violative of [provisions ][of ][the ][lncome Tax ][Act, ][1961 ][and ][consequently]set aside the same.A NO: 1 OF 2022 Petition under Section ['1 ]51 CPC [praying ]that in [the ][circumstances stated ][in]the affidavit filed in support of the [petition, ][the ][High Court may be ][pleased ][to stay]all further [proceedings ]with [respect ]to the [penalty ][order ][bearing ] [No.]ITBA/PNL/F/271D12O22-2311O47703496(1) dated [29-11-2022 ][passed ][under]Section 271D of the lncome [Tax ][Act, ][1961 ][for ][the ][Assessment ][Year ][2016-17 ][by]Respondent No.1 including stay of demand [notice ][bearing ] [No.]ITBtuCOM/F/1 7 12022- 2311047732455(1) [dated ][30-1 ][1 ][-2022 issued u/s. ][1 ][56 of ][the]Act. Counsel for the Petitioner: SRI [S.RAVI FOR SRI R.S.ASSOCIATES]Counsel for the Respondents: SRI B.NARASIMHA SARMA The Court made the following: ORDER TEIANDRIBYW.P.No'44285 [of ][2022] ORDER, [per * ][e ][Hon'bh ][the ][Chief ]lutte [Ujjal Bbryan)] Fleard lvlr. S.Ravi, [learned counsel ][for ][the petitioner ][and]Mr. Ajay Kumar [Kulkarni, ][leamed ][counsel ][rePresenting]ItAr. B.Narsimha [Sarma, ][leamed ][Sunding ][Counsel' ][Income]Tax Depanment [for ][the respondents'] 2. By filing [this ][petition under ][Article ][226 ][of ][rhe]Constitution of [India, ]Petitioner [seels ][quashing ][of ][the ][order]dated 29.11.2022 [passed ][by ][respondent ][No'1 ][under]Section 27lD [of ][the Income Tax ][Act, ][1961 ][(briefly'the ][Act']hereinafter) [imposing penalty ][of ][Rs'87,80,000'00 ][under]Section 27lD [of ][the ][Act ][on ][the ][petitioner']3. Petitioner [is an ][assessee ][under ][the ][Act ][having ][the ][status]of an individual. [For ][the ][assessment yeat ][2Ol6-L7' ][petitioner]was assessed by [respondent ][No2 ][being ][the ][assessing ][officer]uitle the assessment [order ][dated ][24'03'2022 ][under] ( Section 153A of the Act. Total income retumed by theperirioner i.e., Rs.80,84,180.00 was accepted as the assessedincome of the petitioner uide the aforesaid assessment order. ( Section 153A of the Act. Total income retumed by theperirioner i.e., Rs.80,84,180.00 was accepted as the assessedincome of the petitioner uide the aforesaid assessment order. 4. Flowever, respondent No.L issued show cause nodce tothe peririoner on 1,3.05.2022 under Section 274 r/wSection 271D of the Act. It was mentioned therein thatpetitioner had sold immovable properries for an amount ofRs.92,13,000.00, the details of r4rich were menrioned in theshow cause norice. Afrer noting that petitioner had admittedlong term capital gains in the retum of income, it wasmenrioned that petitioner had accepted cash to the tune ofRs.82,80,000.00. It was alleged that such a rrarsacdonotherwise than by an account pape cheque or use ofelectronic clearing s)6tem through a bank account etc., violatedSection 26955 of the Act which attracted levyof penaltyunderSection 271D of the Act. Accordingly, an opponuniry wasgranted to the petitioner to show cause as well as to availopportuniry of personal hearing. 5. Petitioner submitted [reply dated ][02.06'2022 ][to ][the]above show [cause ][notice. ][Amongst ][other ][things, ][it ][was]mentioned that for [the ]Pu{pose [of ][imposing ][penalty,]satisfaction should [be ][recorded ][bythe ][assessing ][officer ][in ][the]assessment order [as ][to ][imposition ][of penalry ][Non-recording]of sadsfaction [is ]fatal. [In ][this ][connection, ][reference was ][made]to a decision of [the ][Supreme ][C-ourt ][in ] [v' ]Jaya [Laxmi]Rice Mills Ambata [City1. ][It ][was ][further pointed ][out ][that ][in]the aforesaid [decision delivered ][by ][the ][Supreme ][C-ourt ][in ][the]context of initiation [of ][penaltyproceeding under ][Section ][271E]of the Act, it was [held ][that ][recording ][of ][satisfaction ][is]for initiation [of ][penalry ][proceedings ][under]mandatory Section 27lE o{ [the ][Act. ][Section ][27tE ][of ][the ][Act ][is]pai mateiato Section [27lD ][of ][the ][Act. ][Therefore, pru)€r ][was]made to drop the [proposal ][to ][impose ][penalry ][under ][Section]27lD of the Act.I t (2015) 64 Taxmann.com 75 (SC) \ 6. Flowever, respondent No.1 passed the impugned orderdarcd 29.11.2022 rqectng the reply of the petitioner andimposing the penalry. Aggrieved, the present writ petition hasbeen filed. 7.On 09.12.2A22, this C-ourt had passed the followingorder:order: Challenge made in this writ petition is to theorder dated 29.11.2022 passed by the assessingofficer under Section 27LD of the Income TaxAct., 1961 (briefly referred to hereina.fter as the'A.t). \Xlhen the amenrion of leamed SeniorCounsel was drawn to tle fact that impugnedorder is an appealable one and why petitionerhas not filed appeal, he submia that issueinvolved in the matter is squarely covered by adecision of the Supreme C-oun reponed inCommissioner of Income-tax, panchkula v.Jai [Laxmi ][Rice ][Mills ]Ambala City [(2015) 64taxmann.com 75 (SC)]. This aspect wasspecifically brought to the norice of the fintrespondent by making wrinen submission i i I JI on 02.06.2022. Flowever, ignoring the above,impugned order came to be passed. Issue shon notice to the respondents.Mr. B.Narasimha Samm", Ieamed StandingCounsel. Income Tax Depanment waives noticefor both the respondents. List this rutter on 23.12.2022 for admissionhearing high on boarC when an endeavour maybe made to hear the mamer. 8. On 23.12.2022, learned counsel for the respondentssought for time to obtain instructions. This is how, the matteris listed todav. 9. Learned Senior Counsel for the petitioner has drawn theattention of the Cout to the provisions of Section 271D aswell as Section2718 of the Act. He submits that not onlythetwo provisions are ln para mateia, rather Section 27LE cart besaid to be complimentaryto Section 27lD of the Act. \X&ilepenalry under Section 271D of the Act is imposable ona /person accepting loan or deposit in contravention ofthe provisions of Section 26955 of the Act, Secrion 27lE of the Act would be attracted or applicable on a person maki.gthe loan or deposit. List this rutter on 23.12.2022 for admissionhearing high on boarC when an endeavour maybe made to hear the mamer. 8. On 23.12.2022, learned counsel for the respondentssought for time to obtain instructions. This is how, the matteris listed todav. 9. Learned Senior Counsel for the petitioner has drawn theattention of the Cout to the provisions of Section 271D aswell as Section2718 of the Act. He submits that not onlythetwo provisions are ln para mateia, rather Section 27LE cart besaid to be complimentaryto Section 27lD of the Act. \X&ilepenalry under Section 271D of the Act is imposable ona /person accepting loan or deposit in contravention ofthe provisions of Section 26955 of the Act, Secrion 27lE of the Act would be attracted or applicable on a person maki.gthe loan or deposit. 10. Referring to the decision of the Supreme C-ourt in JaiLaxmi Rice Mills Ambala Ciry (1 supra), leamed SeniorCounsel for the petitioner submits that in the facs of thatcase, order of penalty was passed under Section 27lE basedonthe original assessment ordeq however, the originalassessment order was set aside in appeal; therefore, thesatisfaction recorded in the original assessment order nolonger survived; h the absence of such satisfaction, penalryproceedings under Section 27lE of the Act would also notsurvive; the view taken by the F[gh Coun was accordinglyupheld whereafter, it was clarified that penaity underSection 27lE of the Act without any recorded satisfactioncannot be levied. 1,1. Referring to the impugned order, leamed SeniorCounsel for the petitioner submits that respondent No.1 \ evaded the point raised by the petitioner that no penalty couldbe levied under Section 271D of the Act without anyrecorded satisfaction basing on the decision of the SupremeC-ourt in Jai Laxmi Rice Mills Ambala City (1 supra).Instead, respondent No.1 referred to earlier decision of theKerala FIgh Court in Grihalaxmi Vision v. Addl.Commissioner of lncome T axz in support of his decision. 12. On the other hand, learned counsel for the respondentssubmits that evidentlythere was violation of Section 26955 ofthe Act, which attracted penalry under Section 27lD of theActrespondent No.1 had rightly imposed the penalrynocase for interference is made out. 13. \(/e have considered the rival submissions made at thebar 1.4. Issue raised in the writ petition is whether withoutsatisfaction being recorded in the assessment order, penalty 2 Order dated 08,07.2015 passed by the Kerala High Court in ITA.Nos.S3 & 86 of 2014 can be levied by the Joint Commissioner under Section 271Dof the Act ? 15. Insofar the present case is concemed, we find that in theassessment order dated 24.A3.2022 passed under Section 153Aof the Act, retum of income filed by the petitioner wasaccepted by the assessing officer and accordingly, the totalincome was assessed. In the retum of income, petitioner hadadmitted receivhg total income of Rs.80,84,180.00 which wasalso accepted bythe assessing officer. 16. Subsequendy respondent No.1 took the view thatpetitioner had sold immovable properties for a total saleconsideration of Rs.92,13,000.00 out of which he had acceptedcash to the tune of Rs.82,80,000.00 v4rich was in violation ofSection 26955 of the Act, attracting penalty underSection 271D of the Act. 17. Before we advert to the reply submitted by thepetitioner, we may mention that under Section 26955 of the 'It a 15. Insofar the present case is concemed, we find that in theassessment order dated 24.A3.2022 passed under Section 153Aof the Act, retum of income filed by the petitioner wasaccepted by the assessing officer and accordingly, the totalincome was assessed. In the retum of income, petitioner hadadmitted receivhg total income of Rs.80,84,180.00 which wasalso accepted bythe assessing officer. 16. Subsequendy respondent No.1 took the view thatpetitioner had sold immovable properties for a total saleconsideration of Rs.92,13,000.00 out of which he had acceptedcash to the tune of Rs.82,80,000.00 v4rich was in violation ofSection 26955 of the Act, attracting penalty underSection 271D of the Act. 17. Before we advert to the reply submitted by thepetitioner, we may mention that under Section 26955 of the 'It a Act, no person shail take or accept from any other person(referred to as a depositor) any loan or deposit or any specifiedsum otherwise than by an account payee cheque or accountpayee bank draft or use of electronic clearing s)6tem through abank account or through such other eiectronic mode as [may]be prescribed, if the amount of such loan or deposit orspecified sum is twenty thouand nrpees or more. However,as per the first proviso, the rigor of Section 26955 is notapplicable to the Govemment, banking company, post officesavings bank or cooperative bank etc. As per the secondproviso, this provision would also not be applicable whereboth the depositor and the receiver are having agriculturalincome and neither of them has any income Ehargeable to taxunder the Act. 18. Section 27lD of the Act deals wih penalryfor failure to comply with the provisions of Section 26955 of the Act.Section 271D of the Act being relevant is extracted hereunder:I It \ Penalty for failure to comply urith theprovisions of section 26955. 271D. (l) If a person takes or accepts any loanor deposit [or specified sum] in contravention ofthe provisions of section 26955, he shall beIiable to pay, by way of penalry a sum equal tothe amount of tle loan or deposit [or specifiedsum] so talen or accepted.] t@) [a"y ][penaby ][imposable ][under ][sub-]section (1) shall be imposed by the [Joint]C-ommissioner.] 19. Thus, what sub-section (1) of Section 271D provides foris that if a person takes or accepts any loan or deposit orspecified amount in contravention of the provisions ofSection 26955, he shall be liable to pay by way of penalry, asum equal to the amount of the loan or deposit or specifiedsum so mken or accepted. Sub-section (2) clarifies that arypenalty imposable under sub-section (1) shail be imposed bythe Joint Commissioner. III 20. It would be useful to refer to Section 27lE of the Actalso at this stage which deals with penalty for failure to complywith the provisions of Section 269T of the Act. Be it statedthat Section 269T of the Act provides that no branch of [a]banking company or a coopeftttive bank and no [other]company or cooperative society and [no ]firm or [other ]Personshall repay any loan or deposit made with it or any [specified]advance received by it otherwise than by an account [payee]cheque or account pape bank draft drawn [in ][the ][name ][of ][the]person r4ro had made the loan or deposit or who [had ][paid the]specified advance or by use of electronic clearing [s).ttem]through a bank account or through such other [electronic]mode as may be prescribed, if such an amount is twentythousand rupees or more. As in the case of Section 26955,Section 269T of the Act also does not apply to theGovemment, banking company, [post ][office ][savings ][bar,k ][etc.]Section 27lE [o{ ][the ][Act ][reads ][as ][under:] { Penalty for failure to comply with theprovisions of section 269T.2718. l(l)) If a penon repa)s any [loan or]deposit [or specified advance] referred to insection 269T other-wise than in accordance withthe provisions of that section, he shall be liableto pay, by way of penalry a sum equal to theamount of the floan or] deposit [or specifiedadvancel so repaid.] { Penalty for failure to comply with theprovisions of section 269T.2718. l(l)) If a penon repa)s any [loan or]deposit [or specified advance] referred to insection 269T other-wise than in accordance withthe provisions of that section, he shall be liableto pay, by way of penalry a sum equal to theamount of the floan or] deposit [or specifiedadvancel so repaid.] [(2) [Any ][penahy ][impos ][able ][under ][sub-section ][(1)]shall be imposed bythe [Joint] C-ommissioner.l 21. Thus, sub-section (1) of Section 27lE of the Actprovides that if a percon repa)6 any loan or deposit orspecified advance referred to in Section 269T of the Actotherwise than in accordance with the provisions of thatsection, he shall be liable to payby way of penalry a sum equalto the amount of the loan or deposit or specified advance sorepaid. Sub-section (2) clarifies that any penalry imposableunder sub-section (1) shall be imposed by the JointC-ommissioner. { 22. From an analpis of Sections [271D ][and2TlE ][of ][the Act,]it is seen that both the provisions are pai materia to each other.\X/trile Section 271D of the Act would [be ][attracted ][on ][a ][person]accepting loan or deposit or specified sum [in ][contravention ][of]Section 26955 of the Act, penalry [under ][Section ][27lE of ][the]Act vrould be imposable on a person [u,&o makes ][or ][repa)6 ][the]loan or deposit or specified advance in contravention ofSection 269T. Therefore, in a [way, ]the two [provisions ][are]complimentaryto each other. 23. In Jai Laxmi Rice Mills Ambala City [(supra),]Supreme Court considered the question as to whether [penalty]proceedings under Section 271D of the Act [is independent ]ofthe assessment proceeding ? In the [facts ]of that case, it [was]found that the penalty order was [issued ]following [the]assessment order. However in [appeal, ][C-ommissioner ][of]Income Tax (Appeals) had set [aside ]the original assessmentorder with a direction to [frume ][assessme ][nt ][de ][noao. ][In ][the]fresh assessment order, no [satisfaction was recorded ]by the\ assessing officer regarding initiation of penalty proceedingsunder Section 27lE of the Act. It was noticed that the penaityorder was passed before the appeal of the assessee wasallowed by the C-ommissioner of Income Tax (Appeals). Itwas in that context that Supreme Court held as follows: The Tribunal as well as the High Court hasheld that it could not be so for dre simplereason that when the original assessment orderitself was set aside, the satisfaction recordedtherein for the purpose of initiation of thepenalty proceeding under Section 27lE woridalso not survive. This according to us is thecorrect proposition of law stated by the FIghC-oun in the impugned order. As pointed out above, insofar as, freshassessment order is concemed, there was nosatisfaction recorded regarding penabyproceeding under Section 27lE of the Act,though in that order the Assessing Officerwanted penaky proceeding to be initiated underSection Z7l(L)(c) of the Act. Thurs, insofar aspenalty under Section 2718 ts concemed, ir waswithout any satisfaction and, therefore, no such ", ) ::15:: peralry could be levied. These appeals are,accordingly, dismissed.accordingly, dismissed. As pointed out above, insofar as, freshassessment order is concemed, there was nosatisfaction recorded regarding penabyproceeding under Section 27lE of the Act,though in that order the Assessing Officerwanted penaky proceeding to be initiated underSection Z7l(L)(c) of the Act. Thurs, insofar aspenalty under Section 2718 ts concemed, ir waswithout any satisfaction and, therefore, no such ", ) ::15:: peralry could be levied. These appeals are,accordingly, dismissed.accordingly, dismissed. 24. Reverting back to the facs of the present case, we findthat petitioner had submitted reply to the show cause noriceon OZ.O6.2OZZ. In his reply, petirioner mentioned that nosatisfaction was recorded by the assessing officer in theassessment order as to infraction of Section 259SS of the Act.Therefore, no penalty could be levied under Section 27lD ofthe Act without recorded satisfacdon. In this corulection,reference was made to the decision of the Supreme Court inJai [Laxmi ][Rice ][Mills ][Ambala ][Ciry ][(1 supra) ]wherein it wasclarified that provisions of Section 271E are inpai nateia uiththe provisions of Section 27lD of the Act. However, thisaspect of the matter was not considered by respondent No.1while passing the impugned order. Respondent No.1 relyingupon the Kerala F[gh C-ourt decision in GrihalaxmiYision (2 supra) noted that comperent authority to levy [n]penalry is the Joint C-ommissioner. FIe has also referred to an earlier decision of the Supreme C-oun in CIT V. Mac [Data]Ltd.3 wherein it was observed that assessing officer has tosatisfy himself as to whether penalry proceedings should beinitiated or not. Assessing officer is not required to record [his]satisfaction in a particular manner or reduce it into writing.Therefore, respondent No.1 imposed the penalry underSection 271D o{ the Act. 25. We are a{raid respondent No.1 had completelyoverlooked the decision of the Supreme Court in Jai LaxmiRice Mills Ambala Ciry (1 supra). In the said decision asextracted above, Supreme C-ourt had concurred with the viewtaken by the F[gh C-ourt holding that satisfaction must berecorded in the original assessment order for the purpose ofinitiation of penalty proceedings under Section 271F. of theAct. We have already discussed above that provisions ofSection 277E and2TlD of the Act are rnpai materia. Wherrthere is a decision of the Supreme C-ourt, it is the bounden3 (2013) 352 ITR 1 duryof an adjudicating [authoriry ][be ][it ][an ][income ][tax ][authoriry]or anyother civil authorityor [for ][that nlatter ][anycourt ][in ][the]country to complywith the decision [of ][the ][Supreme C-ourt'] 26. Article 141 of the C-onstitution [of ][India ][is ][clear ][that ][law]declared by the Supreme Court [shall ][be ][binding ][on ][all ][courts]within the territory of India. This [is ][further ][clarified ][in]Article 144, v4rich sap that all authorities, [civil ][and ][judicial, ][in]the territory of India shall act in [aid ]of [the ][Supreme ][C-oun.]\(e are therefore, of the unhesitant [viewthat ][respondent ][No.1.]overlooked the relevant considerations [w&ile ][passing ][the]impugned order dated.29.11.2022. 27. F:llther, issue in the present writ petition is not thecompetence of the Joint C-ommissioner in issuing the order ofpenalty. Therefore, reference to Grihalaxmi Vision [(2 ]supra)was wholly unnecessary. \\ / 28. Consequently, we set aside the [impugned ][order]dated 29.1.L.2022 and remand the [matter ][back ]to [the ][file ][of]respondent No.1 to pass a fresh order in accordance [with ][law]after giving a reasonable opportuniry of [hearing ]to [the]Petrtloner. 29. Writ Petition is accordinglyaliowed. [No ][costs.] As a sequel, miscellaneous petitions, pending iI [any,] stand c.los.d sor-n).PnasroASSISTANT]RFGISTRARsec?roff3-rrrcen //TRUE One Fair Copy [to ][The Hon'ble ] ' lFor . l'tis Lordship-s Kind Perusal)ANDOne Fair Copy [to ][The ][Hon'ble ][Sri ][Justice ][C'V'BHASKAR ] ' lfor Xis LordshiPs Kind Perusal) \\ / 28. Consequently, we set aside the [impugned ][order]dated 29.1.L.2022 and remand the [matter ][back ]to [the ][file ][of]respondent No.1 to pass a fresh order in accordance [with ][law]after giving a reasonable opportuniry of [hearing ]to [the]Petrtloner. 29. Writ Petition is accordinglyaliowed. [No ][costs.] As a sequel, miscellaneous petitions, pending iI [any,] stand c.los.d sor-n).PnasroASSISTANT]RFGISTRARsec?roff3-rrrcen //TRUE One Fair Copy [to ][The Hon'ble ] ' lFor . l'tis Lordship-s Kind Perusal)ANDOne Fair Copy [to ][The ][Hon'ble ][Sri ][Justice ][C'V'BHASKAR ] ' lfor Xis LordshiPs Kind Perusal) To1. The Joint [Commissioner ][of ][lncome ][Tax' ][Central Circle' Central ][Range - ][2']Aavakar Bhawan, [oppotii"'i-a ][SiioiJm' ][easr'eer ][Bagh' Hyderabad']Te[anoana [- ]500004.2. ;;;i:t"r;itoil]iLiion"' [of lncome ][Tax' ][c-entral ][circle' ][Central ][circle ][- ][2 ][(4)']Aavakar Bhawan, [opposite'LB ][SiiaiJni, ][easneer Bagh' ][Hyderabad']Telangana [- ][500004.]3. 11 LR [CoPies.]i. ff"l" [UnOdr. ][Secretary, Union of lndia Ministry of Law' Justice ][and ][Company] Affairs, New [Delhi.] Affairs, New 5. The Secretary, [Telangana Advocates Association Library, High Court]Buildings, [HYderabad]6. &;CE [to ][Snin.s.nssoclATES,ndvocale ][tg-Pu-ci-. ]^-i. il; dc i; [5Ri e.r'rniinsrr,ruA ][sAnun' ][Advocate ][[oPUC]]8. Two [CoPies] PSK. rGJP A/-.^ HIGH COURT DATED:2611212022 ORDER WP.No.44285 of 2022 ALLOWING THE WRIT PETITIONWITHOUT GOSTS. CL)@c6?'6ffi"N\,&- p,'tsTAl.t4;IIr-jx [1 i[il ][?[?3]*