2015 (10) TMI 1484 - AT - Income Tax

Penalty under section 271E - CIT(A) held that the penalty order passed by the Assessing Officer was barred by limitation - Held that - CIT(A) rightly held that the penalty order passed by the Assessing Officer was barred by limitation as the penalty order was passed beyond six months from the end of the month in which penalty proceedings were initiated, while penalty proceedings were initiated in the month of December 2007 and the penalty order was thus required to be passed before 30th June, 2008, the penalty order was in fact passed on 20th March, 2012. In view of the settled legal position, as set out in CIT vs. Worldwide Township Projects Ltd (2014 (6) TMI 47 - DELHI HIGH COURT ) the date on which CIT(A) had passed order in the quantum proceedings had no relevance as it did not have any bearing on the issue of penalty. Learned CIT(A) was thus quite justified in his conclusions. As for the ground taken in respect of violation of Rule 46-A, we have noticed that learned CIT(A) has not decided any factual aspects on merits nor has he admitted any additional evidence. In any event, no specific arguments were advanced in support of this grievance. - Decided in favour of assessee.

Summary

Issues:
- Challenge to correctness of ld. CIT(A)'s order on penalty under section 271E of the Income Tax Act, 1961 for the assessment year 2005-06.
- Acceptance of additional evidence under rule 46A by the ld. CIT(A).
- Conclusion on the limitation period for passing the penalty order.
- Treatment of repayment as share capital instead of loans.
- Error in the order of the ld. CIT(A).

Issue 1: Acceptance of Additional Evidence under Rule 46A:
The Assessing Officer challenged the acceptance of additional evidence under Rule 46A by the ld. CIT(A), questioning the need for it when adequate opportunities were already provided during the penalty proceedings. However, the judgment did not provide any specific arguments in support of this grievance. The ld. CIT(A) did not decide any factual aspects on merits or admit any additional evidence, indicating that the decision was based on a purely legal issue. Since no specific arguments were advanced against this decision, the ITAT upheld the stand of the ld. CIT(A) and declined to interfere in the matter.

Issue 2: Conclusion on Limitation Period for Passing Penalty Order:
The main contention revolved around the limitation period for passing the penalty order under section 271E of the Act. The ld. CIT(A) quashed the penalty order, deeming it time-barred as it was passed on 20th March, 2012, while the penalty proceedings were initiated on 28th December, 2007. The judgment cited the legal position established by the Hon'ble jurisdictional High Court, emphasizing that penalty proceedings for violations of section 269SS are independent of assessment proceedings. The High Court's decision clarified that Section 275(1)(c) would be applicable in such cases, rendering the penalty order beyond the prescribed period. The ITAT concurred with this legal interpretation and upheld the ld. CIT(A)'s decision to quash the penalty order on grounds of being time-barred.

Issue 3: Treatment of Repayment as Share Capital Instead of Loans:
Another issue raised was the treatment of repayment as share capital instead of loans, a decision made by the ld. CIT(A). The Assessing Officer disagreed with this treatment, asserting that the repayment should have been classified as loans, as initially held by the AO and confirmed by the ld. CIT(A) in the Quantum appeal. However, the judgment did not delve into the specifics of this treatment, focusing instead on the time-barred penalty order issue. As a result, no detailed analysis or resolution was provided regarding the treatment of repayment in this judgment.

Issue 4: Error in the Order of the ld. CIT(A):
The Assessing Officer contended that the ld. CIT(A)'s order was erroneous and untenable on both factual and legal grounds. However, the judgment did not elaborate on the specific errors alleged in the ld. CIT(A)'s order. Instead, the focus remained on the time-barred nature of the penalty order and the legal interpretation regarding penalty proceedings for violations of section 269SS. As a result, no detailed analysis or resolution was provided regarding the alleged errors in the ld. CIT(A)'s order.

In conclusion, the ITAT dismissed the appeal, upholding the ld. CIT(A)'s decision to quash the penalty order on the grounds of being time-barred. The judgment emphasized the legal position established by the Hon'ble jurisdictional High Court regarding penalty proceedings for violations of section 269SS, affirming that the penalty order exceeded the prescribed period. The ITAT's decision was based on the legal interpretation provided by the High Court, and no interference was made in the matter, thereby affirming the ld. CIT(A)'s conclusion.