2018 (3) TMI 1205 - AT - Income Tax

Penalty u/s 271D for violation of provisions of section 269SS - notice barred by limitation - Held that - There is no material on record to show that the assessing officer has issued any notice u/s 271D of the Act. Even if it is assumed that the assessing officer has issued a notice u/s 271D on the date of assessment order, i.e., on 31-12-2008, the same would become time barred by 30-06-2009, i.e., within six months from the end of the month in which action for imposition of penalty is initiated, for the reason that the penalty proceedings u/s 271D of the Act cannot be considered to be an action initiated during the course of assessment proceedings. The penalty order passed by Addl. Commissioner of Income tax on 30-03-2010 is barred by limitation. - Decided in favour of assessee.

Summary

Issues:
Validity of penalty order under section 271D of the Income Tax Act for violation of section 269SS - Barred by limitation.

Analysis:
1. The appellant challenged the penalty order of ?6,45,000 imposed by the Addl. Commissioner of Income Tax under section 271D of the Income Tax Act for violating section 269SS. The appellant contended that the penalty order was barred by limitation as it was passed on 30.03.2010, beyond the permissible time limit of 31.12.2009 from the initiation of penalty proceedings on 25.06.2009.

2. The assessing officer initiated the penalty proceedings separately, despite lacking the authority to impose penalties under section 271D. The penalty under section 271D(1) can only be imposed by the Joint Commissioner, not by an Assistant Commissioner like the assessing officer in this case. Moreover, there was no evidence that the assessing officer issued any notice under section 271D to the appellant.

3. The penalty proceedings were initiated by the Addl. Commissioner of Income Tax on 25.06.2009, and as per section 275(1)(c) of the Act, the penalty order should have been passed by 31.12.2009. Since the penalty was imposed on 30.03.2010, it was deemed to be time-barred. The absence of any notice under section 271D from the assessing officer further supported the argument that the penalty order was beyond the statutory time limit.

4. Referring to a relevant decision by the Hon'ble Rajasthan High Court, it was established that penalty proceedings under sections 271D and 271E are independent of assessment proceedings. The court held that the completion of appellate proceedings arising from assessment proceedings does not impact penalty proceedings under sections 271D and 271E. This interpretation reinforced the argument that the penalty order in this case was indeed barred by limitation.

5. Consequently, the Tribunal held that the penalty order passed by the Addl. Commissioner of Income Tax on 30.03.2010 was time-barred and, therefore, set aside the order passed by the Ld.CIT(A) and quashed the penalty imposed on the appellant. As a result, the appeal filed by the assessee was allowed, and the penalty order was annulled.