2015 (12) TMI 1363 - AT - Income Tax

Penalty order u/s 271D - Bar of limitation for imposing penalties - Held that - The original assessment order had been passed on 30.11.2010 on which date the AO proposed to initiate penalty proceedings u/s 271D had been initiated. The notice u/s 271(D) was also issued on the said date. The penalty order u/s 271D has been passed on 08.06.2011. The relevant financial year during which the assessment order was completed ends on 31.03.2011. The period of six months from the end of the month in which the action for initiation of penalty proceedings expires on 30.05. 2011. The Hon ble Rajasthan High Court in the case of CIT vs. Jitendra Singh rathore 2013 (3) TMI 222 - RAJASTHAN HIGH COURT has held that the six month period for the purpose of clause (c) of section 275(1) of the Act is to be computed from the date of issue of first show cause notice by the AO and not from the date of issue of first show cause notice issued by the Joint Commissioner. In the light of the above decision, the order dated 08.06.2011 is hit by the bar of limitation as prescribed in clause(c) of section 275(1) of the Act and the same is accordingly set aside. - Decided in favour of assessee Penalty u/s 271D - ₹ 40,000/- i.e. the amount equal to the amount of cash loan accepted by the assessee - Held that - The assessee has explained that the assessee lady has been engaged in the profession of tailoring. She had no intention to contravene the provisions of the Act. In fact, after receipt of loan from her daughter in law, a very close relative, she had deposited the amount in bank. Both the ladies were unaware of the provisions of law in this respect. Considering the status of the assessee being a small time tailor, her gross total Income mainly from tailoring and interest income for A.Y. 2008-09 only ₹ 158282/- , the total income in relation to which was returned and assessed at ₹ 150280/- and there being no intention to breach the provisions of law while accepting loan of ₹ 40,000/- from her daughter in law, we do not find it a fit case for levy of penalty u/s 271D of the Act. The same is accordingly ordered to be deleted.- Decided in favour of assessee

Summary

Issues Involved:
1. Bar of limitation for imposing penalties under section 271D of the Income Tax Act.
2. Merits of the penalty imposed under section 271D for receiving cash loan.

Issue 1: Bar of Limitation for Imposing Penalties under Section 271D:
In the case for A.Y. 2008-09, the appellant contended that the penalty order dated 08.06.2011 was barred by limitation as per section 275(1)(c) of the Income Tax Act. The original assessment order was passed on 30.11.2010, and the penalty proceedings were initiated on the same date. The penalty order was issued on 08.06.2011. The appellant relied on a decision by the Hon'ble Rajasthan High Court, which clarified that the six-month period for initiating penalty proceedings should be calculated from the date of the first show cause notice by the Assessing Officer. Consequently, the penalty order was found to be beyond the limitation period and was set aside, resulting in the appeal being allowed.

Issue 2: Merits of the Penalty Imposed under Section 271D for Receiving Cash Loan:
Regarding the penalty imposed for receiving a cash loan of Rs. 40,000 in the Financial Year 2006-07 relevant to AY 2007-08, the Assessing Officer initiated penalty proceedings under section 271D. The appellant, a tailor by profession, claimed ignorance of the law and explained that the loan was intended for depositing in the bank. The CIT(A) upheld the penalty, disagreeing with the appellant's contention. However, the appellant's representative argued that the appellant, being a small-time tailor with limited income, had no intention to violate the law and had promptly deposited the loan amount in the bank. Considering the circumstances and the appellant's lack of awareness of the legal provisions, the penalty under section 271D was deemed unjustified, leading to its deletion and allowing the appeal.

In conclusion, the appellate tribunal, in the cited judgment, addressed the issues of limitation for imposing penalties under section 271D and the merits of the penalty imposed for receiving a cash loan. The tribunal set aside the penalty order for being time-barred in one case and deleted the penalty in the other case due to the appellant's lack of intent to breach the law.