2016 (6) TMI 970 - AT - Income Tax

Penalty levied u/s 271D - violation of the provisions of sec. 269SS - period of limitation - Held that - We are of the view that the intimation given by the AO cannot be considered to be initiation of penalty proceeding u/s 271D of the Act. Further, as stated earlier, the penalty proceedings can be said to have been initiated only when the notice relating to the same are issued to the assessee. Accordingly we agree with the view of the tax authorities that the penalty was initiated in the instant case only on 11.06.2009. The time limit for completion of the penalty proceedings as per sec. 275(1)(c) shall be either 31.3.2010 or 31.12.2009, whichever expires later. Accordingly, in the instant case, the time limit shall expire on 31.3.2010. In the instant case, the penalty order has been passed on 21.10.2009 and hence we are of the view that the same is not barred by limitation. Section 273B provides that the penalty u/s 271D of the Act shall not be imposable if the assessee proves that there was reasonable cause for the said failure. Thus the penalty u/s 271D of the Act shall not be levieble, if the assessee shows that there was a reasonable cause for accepting the loan or deposit by way of cash. We notice that the assessee has only contended before the tax authorities that the impugned amount was received as advance towards sale of flat. Before us, the assessee has raised some more contentions, which were not examined by the tax authorities. With regard to the observation of the tax authorities that the assessee has shown the advance amount as Unsecured Loans in the Balance Sheet, the assessee has submitted that the assessee has maintained two separate accounts. This fact also requires examination by the tax authorities, since it is urged before us for the first time. In view of the fresh contentions raised before us and also in view of the fact that the accounts of the assessee require verification, in the interest of natural justice, we are of the view that this issue requires fresh examination. Accordingly, we set aside the order of Ld CIT(A) and restore the same to the file of the Addl. Commissioner with the direction to examine this issue afresh by considering various contentions that may be raised by the assessee. - Decided partly in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Limitation period for penalty proceedings under section 271D of the Act.
2. Merits of the penalty imposed under section 271D of the Act.

Issue 1: Limitation period for penalty proceedings under section 271D of the Act:
The appeal concerned a penalty imposed under section 271D of the Act for violation of the provisions of section 269SS. The assessing officer intimated the Addl. CIT about the violation on 31.12.2008, but the penalty proceedings were initiated by the Addl. CIT on 11.06.2009. The contention was whether the penalty proceedings were barred by limitation. The tribunal analyzed the provisions of section 275(1)(c) of the Act, which prescribe the time limit for completion of penalty proceedings. The tribunal held that the time limit should be computed from the date on which action for imposition of penalty was initiated. It was emphasized that the assessing officer's intimation did not constitute initiation of penalty proceedings, as the Addl. CIT is the competent authority for imposing penalties under section 271D. Therefore, the tribunal concluded that the penalty proceedings were not barred by limitation, as the penalty order was passed within the prescribed time limit.

Issue 2: Merits of the penalty imposed under section 271D of the Act:
Regarding the merits of the penalty, the appellant contended that the amount received was an advance towards the sale of a flat from a director, and the difference in selling rates in confirmation letters was due to additional amenities. The appellant argued that even if considered a deposit, it did not fall under the Companies (Acceptance of Deposits) Rules, 1975. The appellant also highlighted that the amount was used for labor payments and that the transactions' genuineness was not in doubt. Section 273B provides that the penalty under section 271D shall not apply if there was a reasonable cause for the failure. The tribunal noted that new contentions were raised before them, requiring further examination by the tax authorities for natural justice. Consequently, the tribunal set aside the order and directed the Addl. Commissioner to re-examine the issue, considering the fresh contentions raised by the appellant.

In conclusion, the tribunal partially allowed the appeal for statistical purposes, emphasizing the need for a fresh examination of the issue based on the additional contentions presented by the appellant.