2015 (9) TMI 111 - AT - Income Tax

Penalty u/s 271D - CIT(A) deleted the penalty as time barred - Held that - When we examine the objection raised by the assessee on the issue of limitation in view of the provisions laid down u/s 275 (1) (c) of the Act, we find that in the present case penalty order has been passed beyond 6 months from the end of the month in which assessment was completed. The assessment in the present case was completed on 30.12.2009 and the penalty order u/s 271D has been passed on 10.3.2012 which is undisputedly beyond the 6 months and if we compute the time limit from the show cause notice dated 7.3.2011 as referred in the penalty order, six months expires on 30.9.2011., hence the order of the penalty levied u/s 271D is barred by time limit. - Decided in favour of assessee.

Summary

Issues involved:
1. Validity of penalty imposed under section 271D of the Income Tax Act.
2. Interpretation of limitation provisions under section 275(1)(c) for penalty orders.

Detailed Analysis:

Issue 1: The first issue pertains to the validity of the penalty imposed under section 271D of the Income Tax Act. The Appellate Tribunal considered the case where the Assessing Officer (AO) initiated penalty proceedings against the assessee for a significant amount shown as sundry creditors in the balance sheet. The AO contended that the amount partook the nature of a loan and not a credit transaction, thus attracting penalty under section 271D. The Additional Commissioner upheld the penalty, but the Commissioner of Income Tax (Appeals) (CIT(A)) later deleted it on different grounds. However, a key contention was whether the penalty order was time-barred. The Tribunal examined the nature of the transaction and held that the penalty order was indeed time-barred under section 275(1)(c) of the Act, as it was passed beyond the prescribed time limit. The Tribunal referred to relevant case laws to support its decision.

Issue 2: The second issue revolved around the interpretation of the limitation provisions under section 275(1)(c) for penalty orders. The assessee argued that the penalty order was time-barred as it was initiated beyond the statutory time limit. The Authorized Representative (AR) contended that since the penalty under section 271D was independent of assessment or appellate proceedings, the limitation period should be calculated differently. The AR cited various decisions to support the argument that the penalty order in this case was indeed beyond the prescribed time limit. The Departmental Representative (DR) tried to justify the orders of the lower authorities, arguing that the case fell under clauses (a) and (b) of section 275(1) for computing the time limit. However, the Tribunal, after considering the arguments and case laws, concluded that the penalty order was time-barred under section 275(1)(c) and allowed the cross objection raised by the assessee.

In conclusion, the Appellate Tribunal upheld the cross objection raised by the assessee, finding the penalty order passed under section 271D to be time-barred. Consequently, the appeal filed by the revenue challenging the deletion of the penalty was dismissed as infructuous. The Tribunal pronounced the order accordingly on 31st October 2013.