2018 (5) TMI 1593 - AT - Income Tax

Penalty levied u/s 271E - Genuineness of the loan transactions - period of limitation - last date for imposition of penalty - Held that - The order of reassessment was not subject matter of revision proceedings u/s 263 or 264 of the Act. Hence the assessee s case squarely falls under clause (c ) of section 275(1). In this case, penalty could be imposed on or before 30.11.2011 or on or before 31.3.2012 whichever is later. The later period is 31.3.2012. Hence the last date for imposition of penalty u/s 275(1)(c ) of the Act is 31.3.2012. In the instant case, even the first show cause notice (ie wrong notice u/s 271D of the Act ) was issued on 5.12.2012 which itself is barred by limitation. Hence we hold that the CIT-A had rightly deleted the penalty u/s 271E of the Act as barred by limitation. See CIT vs Narayani and Sons (P) Ltd - 2016 (9) TMI 449 (Calcutta High Court) - Decided in favour of assessee

Issues Involved:
1. Delay in filing of the appeal by the revenue.
2. Justification of deleting the penalty levied under section 271E of the Income-tax Act, 1961.
3. Validity of initiation and imposition of penalty proceedings under section 271E.
4. Time-barred nature of penalty notices under section 271E.

Detailed Analysis:

1. Delay in Filing of the Appeal:
The revenue filed the appeal with a delay of 3 days, supported by a condonation petition. The tribunal condoned the delay after reviewing the reasons provided, thereby admitting the appeal for adjudication.

2. Justification of Deleting the Penalty Levied under Section 271E:
The primary issue was whether the Commissioner of Income Tax (Appeals) [CITA] was justified in deleting the penalty levied under section 271E of the Income-tax Act, 1961. The penalty was initially levied by the Joint Commissioner of Income Tax (JCIT) for the alleged violation of section 269T concerning the repayment of loans in cash by the assessee firm to its partner.

3. Validity of Initiation and Imposition of Penalty Proceedings under Section 271E:
The assessee firm had repaid loans amounting to ?11,39,932/- to its partner, out of which ?5,10,000/- was repaid by account payee cheques, leaving ?6,29,932/- in cash repayments. The reassessment was completed on 16.5.2011, and penalty proceedings were initially initiated under section 271D, later rectified to section 271E by the JCIT. The assessee contested the initiation of proceedings under section 148 and the subsequent penalty proceedings as being bad in law and barred by limitation.

4. Time-Barred Nature of Penalty Notices under Section 271E:
The CITA deleted the penalty on the grounds that the penalty notices were time-barred. The reassessment was completed on 16.5.2011, and the first show cause notice under section 271D was issued on 5.12.2012, followed by a notice under section 271E on 16.1.2013. According to section 275(1)(c) of the Act, the penalty should have been imposed by 31.3.2012. Both notices were issued beyond this period, rendering them time-barred.

The tribunal upheld the CITA’s decision, referencing the jurisdictional High Court's ruling in CIT vs Narayani and Sons (P) Ltd, which established that the limitation period for imposing penalties should be reckoned from the date of the first show cause notice, not from the date of the JCIT’s initiation.

Conclusion:
The tribunal dismissed the revenue's appeal, affirming that the penalty imposed under section 271E was barred by limitation and thus, rightly deleted by the CITA. The tribunal did not need to address the genuineness of the loan transactions further, as the time-barred nature of the penalty notices was sufficient to resolve the appeal. The order was pronounced in the court on 23.05.2018.

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