2023 (5) TMI 360 - AT - Income Tax

Penalty u/s 271D - period of limitation u/s 275 - extended period of limitation of six months - HELD THAT - It cannot be said that the relevant assessment or other order was subjected to some appellate proceeding. Consequently, the extended period of limitation of 6 months from the availability of the appellate order, will not be available to the revenue. But otherwise also, the computation of the income has no bearing over the imposition or otherwise of the penalty provided u/s 271D and 271E of the Act. The issue involved in the present case is fully covered by the decision of HISSARIA BROTHERS, HANUMANGARH JN 2016 (8) TMI 1044 - SC ORDER - Penalty imposed u/s 271D, under challenge, is barred by limitation u/s 275(1)(c). Hence, the same is hereby quashed. The additional ground of appeal taken by the assessee is therefore, allowed.

Summary

Issues Involved:
1. Legality and jurisdiction of the penalty order under section 271D.
2. Merits of the penalty imposed under section 271D.
3. Adequacy of the opportunity to be heard provided by CIT (A).
4. Additional ground regarding the penalty order being barred by limitation under section 275(1)(c).

Summary:

1. Legality and Jurisdiction of the Penalty Order:
The assessee argued that the penalty order under section 271D dated 28.05.2019 is "bad in law and on facts" due to lack of jurisdiction and other reasons. The Tribunal reviewed the case and found that the penalty proceedings were not initiated by the Assessing Officer (AO) during the assessment process, which is a procedural lapse. The Joint Commissioner of Income Tax (JCIT) imposed the penalty without a proper reference from the AO, making the penalty order procedurally defective.

2. Merits of the Penalty Imposed:
The assessee contended that the penalty of Rs. 47,50,000/- imposed under section 271D was contrary to the provisions of law and facts. The Tribunal noted that the amount received in cash was for filing a tender for a liquor license and not as a loan or deposit. The Tribunal cited various case laws, including "Sunil Kumar Chirawa vs Addl. Commissioner of Income Tax" and "Commissioner of Income-tax v. Panchsheel Owners Associations," supporting the view that such capital contributions by members of an Association of Persons (AOP) do not fall under the ambit of loans or deposits as per section 269SS.

3. Adequacy of Opportunity to be Heard:
The assessee argued that the CIT (A) passed the impugned order in haste without providing adequate and reasonable opportunity to be heard, violating the principles of natural justice. The Tribunal found that the CIT (A) issued notices with very short deadlines and passed the order without proper consideration of the assessee's submissions. The Tribunal emphasized that the CIT (A) is required to pass a speaking order in writing, stating the points for determination and reasons for the decision, as per section 250(6).

4. Additional Ground - Penalty Barred by Limitation:
The assessee raised an additional ground that the penalty order dated 28.05.2019 was barred by limitation under section 275(1)(c). The Tribunal agreed, noting that the penalty proceedings should have been completed within six months from the end of the month in which the action for imposition of penalty was initiated. Since the assessment was completed on 28.12.2017, the penalty should have been imposed by 30.06.2018. The penalty imposed on 28.05.2019 was therefore barred by limitation, as supported by case laws "CIT vs. Hissaria Brothers" and "JCIT Vs. Jitendra Singh Rathore."

Conclusion:
The Tribunal quashed the penalty order under section 271D on the ground of limitation and did not adjudicate the other grounds on merits. The appeal of the assessee was allowed.