2015 (6) TMI 396 - AT - Income Tax

Penalty U/s 271D and 271E - period of limitation - violation of conditions of conditions of section 269SS - Cash receipts - Held that - For imposition penalty U/s 271D and 271E is covered U/s 275(1)(c) of the Act. As per Section 275(1)(c) of the Act, this order was to pass after the expiry of financial year, in which the proceeding, in the course of which action for imposition of penalty has been initiated, or completed, or within six months from the end of the month, in which action for imposition of penalty is initiated, whichever period expire later. The Assessing Officer initiated the penalty proceeding under both the Sections on 30/12/2009. As per this section, it had to complete by 30th September, 2010 whereas actual penalty orders were passed on 30/3/2012 which got barred by limitation. Accordingly, we delete the penalty imposed U/s 271D and 271E of the Act. On merit also, these cash receipts are not covered U/s 269SS of the Act as there was no loan or deposit envisaged U/s 269SS as these are the business transactions. The ld CIT(A) wrongly held on the basis of quantum appeal decided by the CIT(A) as well as the ITAT that these are the loan and deposit in cash as covered by Section 269SS of the Act. - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the penalty proceedings under Sections 271D and 271E of the Income Tax Act, 1961, are time-barred.
2. Whether the penalties under Sections 271D and 271E were correctly imposed on the assessee for accepting and repaying loans/deposits in cash exceeding Rs. 20,000 in violation of Sections 269SS and 269T.

Issue-Wise Detailed Analysis:

1. Time-Barred Penalty Proceedings:
The assessee argued that the penalty proceedings were time-barred as per Section 275(1)(c) of the Income Tax Act. The Assessing Officer (AO) issued the penalty notice on 30/12/2009, and the Joint Commissioner of Income Tax (JCIT) issued a show-cause notice on 24/02/2012, with the penalty order passed on 30/03/2012. The assessee relied on the judgments of the Hon'ble Rajasthan High Court in the cases of CIT vs. Jitendra Singh Rathore and CIT vs. Hissaria Brothers, which held that penalty proceedings under Sections 271D and 271E are covered by Section 275(1)(c). The Tribunal agreed with the assessee, stating that the penalty proceedings should have been completed by 30th September 2010, and since the actual penalty orders were passed on 30/03/2012, they were barred by limitation.

2. Imposition of Penalties under Sections 271D and 271E:
The penalties were imposed for accepting and repaying loans/deposits in cash exceeding Rs. 20,000, violating Sections 269SS and 269T. The assessee contended that these were business transactions and not loans or deposits. The AO made additions under Section 68 as unexplained credits and initiated penalty proceedings under Sections 271D and 271E. The JCIT imposed penalties, but the CIT(A) partly allowed the appeals, reducing the penalties. The Tribunal found that the transactions were business-related, involving advances for land purchases and share application money, not loans or deposits. The Tribunal noted that the CIT(A) and ITAT in quantum appeals had treated these transactions as business transactions. Therefore, the Tribunal held that the cash receipts were not covered under Sections 269SS and 269T, and the penalties were not warranted.

Conclusion:
The Tribunal allowed the assessee's appeals, deleted the penalties under Sections 271D and 271E, and dismissed the revenue's appeals. The penalties were found to be time-barred and not applicable to the business transactions in question.