2018 (7) TMI 1251 - AT - Income Tax

Penalties u/s 271D and 271E - period of limitation - penalty imposed in a wrong assessment year - Held that - From the records it is undisputedly established that the Assessing officer was very well aware about the receipt of alleged loan in cash during the Assessment Years 2004-05 and 2002-03 and the repayment of the loan and but had wrongly initiated the earlier penalty proceedings for A.Y. 2005-06. The Assessment order was passed on 5.10.2007 and the penalties were initiated by the then Additional CIT on 15.11.2010 and the penalty orders were passed on 19.05.2011 and thus the imposition of the penalties in the first round was time-barred. The second round of penalty proceedings was initiated on 06/08/2014 after the dismissal of the department s appeals by the ITAT on the ground that the penalties had been imposed in a wrong assessment year. It is very much evident that the present penalty orders were passed beyond the period of limitation and as such the same are not sustainable. A perusal of the orders of the Ld. CIT (A) also shows that the Ld. CIT (A) has reached the conclusion after examining the entire factual matrix of the case and these findings of the CIT (A) remain unconverted. The Ld. Sr. Departmental Representative was also unable to point out any factual inaccuracy in the findings as recorded by the Ld. CIT (A) in the impugned orders. - Decided against revenue

Summary

Issues:
- Appeal against deletion of penalties under sections 271D and 271E of the Income Tax Act, 1961 for assessment year 2004-05.
- Interpretation of limitation for initiation of penalty proceedings under sections 271D and 271E.

Analysis:
1. The appeals were filed by the department against the deletion of penalties under sections 271D and 271E of the Income Tax Act, 1961 for assessment year 2004-05. The penalties were imposed for accepting loans in cash and repayment in cash, violating sections 269SS and 269T of the Act. The Assessing Officer (AO) had imposed penalties in the assessment year 2005-06 for transactions in other assessment years. The ITAT Delhi Bench previously dismissed the appeals, stating that penalties could not have been imposed in the wrong assessment year.

2. The department initiated penalty proceedings for assessment year 2004-05 after the ITAT's decision. The penalties were imposed for accepting and repaying loans in cash, violating sections 269SS and 269T. The CIT (A) deleted both penalties, citing limitations as a reason. The department then appealed to the ITAT, challenging the cancellation of penalties. The department argued that there is no restriction in the statute for initiating penalties only during assessment proceedings. They referred to a Special Bench order emphasizing the objective of countering black money circulation.

3. The Authorized Representative defended the CIT (A)'s decision, arguing that the penalties were rightly deleted. The ITAT reviewed the case records and found that the penalties were imposed beyond the limitation period. The AO was aware of the transactions in previous assessment years but initiated penalties in a later year. The ITAT upheld the CIT (A)'s findings, noting that penalties should relate to the year under consideration and cannot be imposed in a different assessment year. The ITAT dismissed the department's grounds, concluding that the penalties were time-barred and not sustainable.

4. Ultimately, the ITAT pronounced the dismissal of both department appeals, affirming the CIT (A)'s decision to delete the penalties. The ITAT's judgment was based on the factual matrix of the case, the limitations on penalty initiation, and the incorrect assessment year for penalty imposition. The department's arguments were not found to be valid, and the penalties were deemed unsustainable due to being beyond the limitation period.

In conclusion, the ITAT upheld the CIT (A)'s decision to delete the penalties under sections 271D and 271E for assessment year 2004-05, based on the limitations for initiating penalty proceedings and the incorrect assessment year for penalty imposition.