2018 (6) TMI 1122 - AT - Income Tax

Levy of penalty u/s 271D - period of limitation - transaction between husband and wife - Held that - There is gap of more than four and half years from the date of completion of assessment order and initiation of penalty proceedings. Although there is no time limit prescribed for initiation of penalty proceedings under the said provisions, however the courts are invariably holding that such proceedings should be initiated within a reasonable time. Since in the instant case such penalty proceedings have been initiated after a gap of more than four and half years from the completion of assessment proceedings u/s 143(3) of the Act, therefore, initiation of penalty proceedings is barred by limitation Even otherwise also, the transaction is between husband and wife. Various benches of the Tribunal are holding that transaction of loan between husband and wife does not attract the provisions of section 269SS of the Act. Penalty levied u/s 271D of the Act in the instant case is not justified - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271D of the Income-tax Act, 1961.

Analysis:
The appeal challenged the penalty of ?4 lakhs imposed under section 271D of the Income-tax Act, 1961, by the JCIT, Range-24, New Delhi, which was upheld by the CIT(A) for the assessment year 2007-08. The assessee argued that the penalty proceedings were initiated after an unreasonable delay of over four years and eight months, questioning the need for penalty imposition. The assessee claimed that the cash loan was taken from a family member for acquiring properties for mutual benefit, emphasizing that no tax evasion was intended. However, the JCIT found the explanations unsatisfactory, highlighting discrepancies in the transactions and the need for cash dealings when bank transfers were feasible. The CIT(A) upheld the penalty, emphasizing the lack of proper explanation for the cash transactions and the source of funds, ultimately dismissing the appeal.

The Tribunal analyzed the case, noting the significant delay in initiating penalty proceedings after the assessment order. It highlighted that while there is no prescribed time limit for initiating penalties under section 271D, courts emphasize reasonable timeframes. The Tribunal also referenced precedents indicating that transactions between spouses do not necessarily fall under the purview of section 269SS, particularly when the transactions are not for commercial purposes but for the family's benefit. Citing a similar case, the Tribunal concluded that the penalty was unjustified in the present scenario, as the loan from the wife for property purchase was deemed a joint family venture. Consequently, the Tribunal directed the Assessing Officer to cancel the penalty, allowing the assessee's appeal.

Therefore, the Tribunal ruled in favor of the assessee, setting aside the CIT(A)'s decision and instructing the cancellation of the penalty imposed under section 271D of the Income-tax Act, 1961. The judgment emphasized the familial nature of the transaction and the absence of tax evasion motives, aligning with previous rulings on transactions between spouses not intended for commercial purposes.