2019 (3) TMI 220 - AT - Income Tax

Penalty u/s. 271D - From which date counting of limitation start - Reference of matter by AO or notice by Joint CIT - order passed by the authority beyond the period of limitation - HELD THAT - Initiation of penalty u/s.271D would only commence when the officer is empowered to levy penalty applies his mind and thereafter issue the notice. But in the absence of availability of any decision contrary to the judgment in PCIT v. Mahesh Wood Products P. Ltd 2017 (5) TMI 433 - DELHI HIGH COURT we are afraid that though the contention of the Revenue seems to be plausible. However, being the sub-ordinate tribunal, we are bound to follow the decision of the Hon ble Delhi High Court. Since we are holding that the order passed by the authority is beyond the period of limitation, hence the orders passed by lower authorities were lacking jurisdiction, being passed beyond statutory period, null and void. therefore, we are not adjudicating any other ground on merit. - Decided in favour of assessee.

Issues:
1. Confirmation of penalty u/s. 271D of the Act by the CIT (A)
2. Proper opportunity for the appellant to prove residency of persons advancing money
3. Levying penalty u/s. 271D despite loans being accepted as genuine
4. Barred by limitation for passing the order u/s. 271D

Analysis:

Issue 1: Confirmation of penalty u/s. 271D by CIT (A)
The appeal was filed against the order of the CIT (A) confirming the penalty u/s. 271D of the Act to the extent of ?3,50,000. The Ld. AR contended that the penalty was confirmed without proper opportunity to prove the residency of persons advancing money for shares. The Ld. AR also argued that the loans were accepted as genuine by the assessing officer under section 143(3) of the Act. The tribunal considered these arguments and ultimately allowed the appeal of the assessee, holding that the order passed by the authority was beyond the period of limitation, rendering the orders passed by lower authorities null and void.

Issue 2: Proper opportunity to prove residency of persons advancing money
The appellant raised the issue of not being given a proper opportunity to prove that the persons advancing money for share allotment resided in areas lacking proper banking facilities. This issue was considered in conjunction with the overall appeal against the penalty imposed under section 271D. The tribunal's decision to allow the appeal was based on the finding that the order passed by the authority was beyond the statutory period of limitation, thereby lacking jurisdiction.

Issue 3: Levying penalty u/s. 271D despite loans being accepted as genuine
Despite the loans being accepted as genuine by the assessing officer under section 143(3) of the Act, the CIT (A) confirmed the penalty under section 271D. The tribunal, after considering the arguments presented by the Ld. AR, held that the order passed by the authority was beyond the period of limitation prescribed under section 275(1)(c) of the Act. This led to the tribunal allowing the appeal of the assessee and declaring the orders passed by lower authorities null and void.

Issue 4: Barred by limitation for passing the order u/s. 271D
The additional ground raised by the appellant highlighted that the order passed under section 271D was barred by limitation as it was issued beyond the statutory period of six months. The tribunal admitted the additional ground and ultimately allowed the appeal, citing the judgment of the Hon'ble Delhi High Court and the Supreme Court in support of their decision to quash the proceedings due to being beyond the period of limitation.

In conclusion, the ITAT Bangalore allowed the appeal of the assessee, emphasizing the importance of adhering to statutory limitations in penalty proceedings and nullifying the orders passed by lower authorities due to being beyond the prescribed period.

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