IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD THE HON’BLE THE CHIEF JUSTICE SRI APARESH KUMAR SINGH AND THE HON’BLE SRI JUSTICE G.M.MOHIUDDIN WRIT PETITION No.24403 of 2025 Dated:05.03.2026 Between:

M/s.Meghana Avenues Private Limited, Rep. by its Director Sri B.Venkat Reddy …Petitioner and The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Income Tax Department, Delhi and four others …Respondents

ORDER:

Mr. B.Krishna Reddy, learned counsel for the petitioner.

Mr. K.Sudhakar Reddy, learned Senior Standing Counsel for the Income Tax Department for respondent Nos.1 to 4.

2. Whether penalty proceedings under Section 271D of the Income Tax Act, 1961 can be initiated on satisfaction being recorded by the Joint Commissioner on perusal of the assessment records instead of the assessing officer is the question involved in the present writ petition?

3. The order passed by the first respondent/National Faceless Appeal Centre (NFAC) dated 04.06.2025 for the assessment year 2017-18 upholding the order passed by the second respondent/National Faceless Assessment Centre dated 19.10.2022, whereby penalty of Rs.40,50,000/- was imposed upon the petitioner under Section 271D read with Section 274 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) is under challenge in the present writ petition.

4. The facts relevant for consideration of this issue are briefly stated as under:

(i) The petitioner/assessee had filed its return of income for the assessment year 2017-18 on 04.11.2017 declaring total income of Rs.8,60,800/-. The assessee had deposited Rs.14,38,000/- in his bank accounts during the period of demonetization. Accordingly, proceedings under Section 147 of the Act were initiated. Notice under Section 148 of the Act was issued on 31.03.2021 after approval of the competent authority. The assessment was completed on 15.03.2022.

(ii) The third respondent/Joint Commissioner of Income Tax issued notice under Section 274 read with Section 271D of the Act on 28.04.2022 on the basis of information available with the department that transactions carried out by the assessee were in contravention of provisions of Section 269SS of the Act. Accordingly, penalty of Rs.40,50,00,000/- was levied on the assessee. The petitioner challenged it in appeal before the first respondent. The said appeal was disposed of on 04.06.2025 confirming the penalty under Section 271D of the Act. The petitioner has assailed it on the ground that the penalty proceedings must be processed through the Faceless Penalty Scheme with effect from 12.01.2021. However, it was initiated by the Joint Commissioner of Income Tax, Range-5, Hyderabad on 28.04.2022 and concluded by the Faceless Penalty Unit on 19.10.2022. Learned counsel for the petitioner has relied upon the case of Srinivasa Reddy Reddeppagari vs. Joint Commissioner of Income Tax, Central Circle, Central Range-2 (W.P.No.44285 of 2022, dated 26.12.2022), Manu/TL/2245/2022 and submitted that the issue whether without satisfaction being recorded in the assessment order, penalty can be levied by the Joint Commissioner under Section 271D of the Act was decided in favour of the assessee by this Court. The petitioner has also relied upon the judgment of the Kerala High Court in Grihalakshmi Vision vs. Additional Commissioner of Income Tax, Range I, Kozhikode, [2015] 63 taxmann.com 196 (Kerala). The petitioner took a plea that pursuant to the said judgment, CBDT Circular No.9/DV/2016, dated 26.04.2016 was issued to the effect that the assessing officers, below the rank of Joint

Commissioner, may be advised to make a reference to the Range Head regarding any violation of the provisions of Section 269SS and Section 269T of the Act, as the case may be, in the course of the assessment proceedings. The petitioner submitted that in the reassessment order passed under Section 147 read with Section 144B of the Act on 15.03.2022, there is no reference to penalty. There is no mention of ref