2010 (2) TMI 1224 - AT - Income Tax

Summary

Issues involved: Appeal against penalty imposed u/s 269 T of the Income Tax Act, 1961 for the assessment year 2003-04.

Summary:

1. Issue 1: Legality of penalty imposed u/s 269 T and 271 E:
- The appellant contested the penalty of Rs. 11,02,600 imposed for contravention of section 269 T of the Act, making the assessee liable under section 271 E, deeming it illegal and wrong.
- The AO and Additional Commissioner of Income Tax failed to prove the alleged fault of the assessee, leading to the confirmation of the penalty by the CIT(A).
- The penalty was deemed to be based on technical considerations rather than valid legal grounds.

2. Issue 2: Timeliness of penalty imposition:
- The appellant argued that the penalty imposed was barred by time, raising concerns about the procedural aspects of the penalty proceedings.

3. Issue 3: Validity of penalty initiation and proceedings:
- The initiation of penalty proceedings against the assessee was challenged as illegal since the notice was issued without any pending proceedings before the AO.
- The initiation of penalty proceedings without a regular assessment was deemed improper, citing legal precedent "CIT v. Standard Brands Ltd."

4. Detailed Judgment:
- The appellant, Manohar Lal Thakral, was found to have made payments to M/s. Babylon Builders Pvt. Ltd. on behalf of his wife, Smt. Kusum Lata Thakral, leading to the penalty imposition under section 269 T.
- The penalty was imposed without a proper assessment or scrutiny of the assessee's case, solely based on findings related to the wife's transactions.
- The Tribunal found the penalty order to be incorrect and quashed it, as the penalty proceedings were initiated without a regular assessment and lacked proper legal basis.
- The appeal of the assessee was allowed, and the penalty order was overturned, with no further adjudication required.

Conclusion:
The Tribunal ruled in favor of the appellant, quashing the penalty imposed under section 269 T and 271 E, citing procedural irregularities and lack of legal basis for the penalty imposition.