2023 (12) TMI 338 - AT - Income Tax

Penalty u/s 271E - repayment of loan made by bearer cheque and not through crossed cheque - contravention of the provisions of Section 269T in the preceding assessment year - initiation of penalty proceedings before the Ld. CIT(A) for A.Y. 2014-15 while framing assessment for A.Y 2015-16 - HELD THAT - It is an established fact that penalty under section 271E of Act for A.Y. 2014-15 in the case of the assessee has been initiated while completing assessment proceedings for A.Y. 2015-16. This, in our view, is not legally tenable. Penalty proceedings can be initiated at any time while the Ld. AO is in seisen of the assessment proceedings of the relevant A.Y. in which the default occurred and not afterwards. On facts similar to that of the assessee, as held in Mahonar Lal Thakral 2011 (1) TMI 538 - PUNJAB AND HARYANA HIGH COURT that it being a case of processing the return of income, there is no finding in the assessing officer's order with regard to the applicability or otherwise of section 269T of the Act to the assessee s case. It was within the purview of the AO to bring the assessee s case to scrutiny and to make regular assessment under section 143(3) of the Act. It was also within the power of the AO at the appropriate stage to initiate proceedings under section 147 of the Act against the assessee. No such action was taken. It is not in dispute that there were no proceedings pending before the Ld. AO qua the assessee for A.Y. 2014-15. We, therefore hold that initiation of penalty proceedings under section 271E of the Act on the basis of assessment order for A.Y. 2015-16 is bad in law and imposition of impugned penalty by Ld. JCIT and confirmation thereof by the Ld. CIT(A) is not sustainable. The plea of Ld. Sr. DR that penalty under section 271D and 271E can be initiated dehors any pending proceedings for relevant A.Y. is devoid of merit. Appeal of the assessee is allowed.

Summary

Issues Involved:
The judgment involves issues related to the imposition of penalty under section 271E of the Income Tax Act, 1961 for Assessment Year 2014-15, challenges to the order of the Ld. Commissioner of Income Tax (Appeals), and the legality of penalty proceedings initiated by the Ld. JCIT.

Grounds Challenged:
The assessee challenged the order of the Ld. CIT(A) on various grounds, including the legality of the penalty order, absence of cause of action for penalty proceedings, passing of order in the name of a deceased person, and requested to add, amend, or alter any grounds.

Facts and Submission:
During scrutiny, it was found that the assessee repaid an amount in contravention of the Act, leading to the imposition of penalty under section 271E. The assessee submitted that penalty initiation for AY 2014-15 was illegal, as no proceedings were pending, and relied on relevant case judgments. The Ld. JCIT imposed the penalty despite the assessee's submissions.

Appellate Proceedings:
The assessee appealed before the Ld. CIT(A) challenging the penalty order, but the appeal was dismissed citing certain decisions. The Ld. CIT(A) observed that the onus to establish a reasonable cause for the default lies with the defaulter.

Tribunal Decision:
The Tribunal considered the submissions and records, noting that penalty proceedings for AY 2014-15 were initiated during assessment proceedings for AY 2015-16, which was deemed legally untenable. The Tribunal held that the penalty imposition was unsustainable and not legally tenable, thus deleting the penalty.

Conclusion:
The Tribunal found that the penalty under section 271E was not legally sustainable and deleted the penalty. The decision was based on the initiation of penalty proceedings without a pending case for AY 2014-15 and the failure to address the grounds raised by the assessee. The appeal of the assessee was allowed, and the penalty was removed.