2023 (8) TMI 820 - AT - Income Tax

Penalty u/s. 271D and 271E - period of limitation - mandation to dispose/complete the proceedings within the limitation prescribed u/s. 275(1)(c) - HELD THAT - We note that section 275 prescribes bar of limitation for imposing penalties. Sub-section (1) explains no order imposing a penalty under this chapter shall be passed. Clause (c) of sub-section (1) prescribes bar of limitation, in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed , which means, the Addl. CIT barred from initiating penalty proceedings after the expiry of the financial year in which assessment was completed. In the present case, the first para of the penalty order clearly shows the assessment was completed on 30-11-2007, thereby, the Addl. CIT cannot impose penalty after the financial year in which the assessment was completed i.e. the relevant financial year is F.Y. 2007 and end of such financial year is 31-03-2008, which means the Addl. CIT barred from imposing penalty after the end of financial year in which assessment was completed, i.e. admittedly after 31-03-2008. As it is evident from penalty order that the ACIT initiated penalty proceedings by issuing notice u/s. 274 r.w.s. 271D and 271E of the Act on 11-03-2010 and imposed penalty vide order dated 24-09-2010. It is clear from the above that the Addl. CIT initiated penalty proceedings on 11-03-2010 i.e. after the expiry of financial year in which the proceedings, in the course of which action for the imposition of penalty to be initiated, therefore, the very initiation is barred by limitation as the Addl. CIT did not initiate penalty proceedings in the course of assessment proceedings. Decided against revenue.

Summary

Issues Involved:
1. Justification of CIT(A) in canceling the penalty imposed u/s. 271D of the Act.
2. Applicability of provisions u/s. 275(1)(c) of the Act regarding the limitation period for initiating penalty proceedings.

Summary:

Issue 1: Justification of CIT(A) in Canceling Penalty Imposed u/s. 271D of the Act

The Revenue challenged the CIT(A)'s order canceling the penalty imposed by the Addl. CIT u/s. 271D of the Act. The Addl. CIT had initiated penalty proceedings based on the assessee taking a cash loan of Rs. 23,28,690/- and repaying it in cash, violating sections 269SS and 269T. The CIT(A) quashed the penalty proceedings, considering them barred by limitation, as per the Tribunal's earlier decision in the assessee's own case for penalty u/s. 271E of the Act. The Tribunal upheld the CIT(A)'s decision, noting that the penalty proceedings initiated on 11-03-2010 were beyond the limitation period, as the assessment was completed on 30-11-2007.

Issue 2: Applicability of Provisions u/s. 275(1)(c) of the Act Regarding Limitation Period

The Tribunal discussed the legislative history and provisions of section 275(1)(c) of the Act, which prescribes the bar of limitation for imposing penalties. It was noted that the Addl. CIT initiated penalty proceedings after the expiry of the financial year in which the assessment was completed, thus barred by limitation. The Tribunal referred to the decision of the Hon'ble High Court of Rajasthan in the case of Hissaria Bros., which was confirmed by the Supreme Court, and held that section 275(1)(c) applies to independent penalty proceedings not linked to assessment proceedings. The Tribunal found no merit in the Revenue's reliance on the Hissaria Bros. case and upheld the CIT(A)'s order, dismissing the Revenue's appeal.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision that the penalty proceedings initiated u/s. 271D of the Act were barred by limitation, as per section 275(1)(c) of the Act. The order was pronounced on 14th August 2023.