आदेश/ORDER

PER PARTHA SARATHI CHAUDHURY, JM

The present appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)/NFAC, Delhi dated 05.02.2026 for the assessment year 2013-14 as per the grounds of appeal on record.

2. In this case, JCIT, Range-2, Raipur had levied penalty of Rs.36,25,000/- u/s.271D of the Income Tax Act, 1961 (for short ‘the Act’) without initiating penalty in the assessment order itself. In other words, there is no satisfaction emanated from the assessment order for initiating penalty u/s.271D of the Act. That in absence of such satisfaction, the A.O had separately issued show-cause notice to the assessee and thereafter, had passed penalty order u/s.271D of the Act, dated 28.12.2017 imposing penalty.

3. It is the contention of the Ld. Counsel for the assessee that without recording satisfaction for initiation of the penalty in the assessment order, there cannot be any penalty levied on the assessee. It was submitted by the Ld. Counsel that in the assessment order, there has been no addition on the quantum, therefore, there was no initiation of penalty.

4. Per contra, the Ld. Sr. DR submitted that even if there was no initiation of penalty u/s.271D of the Act, however, it was within the power of the A.O to issue show cause notice separately and pass penalty order u/s.271D of the Act. It was contended by the Ld. Sr. DR that even if there was no addition in the assessment order, therefore, there arose no opportunity for levy of penalty. However, subsequently if the A.O found that it is relevant to issue show cause notice and impose penalty, such process is valid.

5. Having heard the submissions of the parties herein, I find that the issue is no more “Res-integra”. The penalty sustains only if there is addition in the quantum. In the assessment order, there is no demand and the returned income has been accepted by the A.O, therefore, there does not arise any cause for satisfaction to initiate any penalty since quantum has already been accepted. That without any satisfaction for initiation of penalty itself in the assessment order, the law does not provide any power to the A.O to separately issue show cause notice and pass penalty order. If this is allowed, it would be double jeopardy to the assessee where in the return filed, on one hand, the A.O accepts the returned income and does not initiate penalty since quantum is accepted, on the other hand, he issues separate show cause notice and passes penalty order against the assessee. This double jeopardy through double adjudication of the returned income is not permissible within the parameters of the Act. It is settled principle that initiation of penalty depends on the quantum addition and in the assessment order after enquiries done by the A.O, if return is accepted and no addition is there on quantum, thus there does not arise in the assessment any occasion for order for satisfaction to initiate penalty.

6. The Hon’ble Supreme Court in the case of CIT, Panchkula Vs. Jai Laxmi Rice Mills Ambala City, (2025) 64 taxmann.com 75 (SC) on the aforesaid issue has held and observed as follows:

“3. After remand, the Assessing Officer passed fresh assessment order. In this assessment order, however, no satisfaction regarding initiation of penalty proceedings under Section 271E of the Act was recorded. It so happened that on the basis of the original assessment order dated 26.02.1996, show cause notice was given to the assessee and it resulted in passing the penalty order dated 23.09.1996. Thus, this penalty order was passed before the appeal of the assessee against the original assessment order was heard and allowed thereby setting aside the assessment order itself. It is in this backdrop, a question has arisen as to whether the penalty order, which was passed on the basis of original assessment order and when that assessment order had been set aside, could still survive.

4. The Tribunal as well as the High Court has held that it could not be so for the simple