2017 (10) TMI 1617 - AT - Income Tax

Penalty imposed u/s 271D - starting point for initiation of penalty proceedings - period of limitation - whether the limitation period has to be calculated from the date on which the penalty proceedings were first initiated, that is the date of the assessment order or from the date on which the show cause notices under section 271D were issued, that is March 2009? - HELD THAT - Limitation period was to be calculated from the date on which a reference was made by the AO to the ACIT and not from the date on which the show cause notice was issued. In the present appeals before us, the penalty proceedings were initiated in the assessment orders itself and, therefore, the limitation period will begin to run from December 2008 itself and not from March 2009 when the penalty notices were issued. Respectfully following the ratio laid down by JKD CAPITAL FINLEASE LTD. 2015 (10) TMI 1281 - DELHI HIGH COURT , MAHESH WOOD PRODUCTS PVT. LTD., 2017 (5) TMI 433 - DELHI HIGH COURT we have no hesitation in holding that all the three penalty orders were barred by limitation and were void ab initio. Accordingly, without going into the merits of the cases, we dismiss all the three appeals of the Department as the penalty orders itself were void ab initio being barred by limitation. Decided in favour of assessee.

Summary

Issues:
Challenging deletion of penalty under section 271D of the Income Tax Act, 1961 due to cash receipts exceeding Rs. 20,000, initiation of penalty proceedings, calculation of limitation period, and validity of penalty orders.

Detailed Analysis:

1. Challenging Deletion of Penalty under Section 271D:
- Three appeals filed by the Department challenging the deletion of penalty under section 271D.
- Assessments completed in December 2008 with penalties initiated.
- Penalties imposed for violations of section 269SS for cash receipts exceeding Rs. 20,000.
- Ld. CIT (Appeals) deleted penalties on merits.
- Department challenged deletions before ITAT.

2. Initiation of Penalty Proceedings and Calculation of Limitation Period:
- Notices under section 271D issued on 24th March 2009.
- Argument raised by Ld. AR that penalty orders were barred by limitation.
- Ld. AR contended two distinct limitation periods under section 275 of the Act.
- Department argued limitation should be from the date of notice issuance.
- Ld. AR relied on judgments regarding limitation beginning from the initiation of penalty proceedings.

3. Validity of Penalty Orders:
- Disputed point was whether limitation period starts from the assessment order or the date of notice issuance.
- Citing judgments, ITAT held limitation starts from the initiation of penalty proceedings.
- ITAT concluded penalty orders were void ab initio due to being beyond the limitation period.
- Decision based on the interpretation of limitation provisions and relevant case laws.

4. Final Decision:
- ITAT dismissed all three appeals of the Department due to penalty orders being void ab initio.
- Decision based on the calculation of the limitation period starting from the initiation of penalty proceedings.
- No discussion on the merits of the penalty cases as they were dismissed solely on the basis of being time-barred.

This judgment highlights the importance of adhering to limitation periods in penalty proceedings under the Income Tax Act, emphasizing that penalty orders issued beyond the prescribed time limits are void ab initio. The analysis focused on the interpretation of the starting point for calculating the limitation period, as established by relevant case laws and legal provisions.