2024 (1) TMI 55 - AT - Income Tax

Penalty u/s 271D - period of limitation - receipt of sale consideration in cash exceeding Rs. 20,000/- - HELD THAT - Under section 275(1)(c) no order imposing penalty under Chapter-XXI, in which section 271D of the Act falls, shall be passed after the expiry of financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month, in which action for imposition of penalty is initiated, whichever period expires later. It is, therefore, clear that under section 275(1)(c) two dates are relevant. First one is that the last date of the financial year in which proceedings, in the course of which action for imposition of penalty has been initiated. Second one is the date on which six months from the end of the month in which action for imposition of penalty was initiated. As there is no assessment for the assessment year 2016-17. It is only during the assessment proceedings for the assessment year 2017-18 the violation of section 269SS of the Act noticed. The date of assessment order for the assessment year 2017-18 is 04/12/2019. The date of notice under section 271D of the Act was issued by the Additional/Joint CIT is 16/03/2020. The financial year in which the notice was issued is 31/03/2020. At the same time, six months from the end of the month in which the proceedings u/s 271D of the Act expires by 31/06/2020. However, order under section 271D of the Act levying penalty was passed on 15/03/2022. It clearly shows that the order levying penalty under section 271D of the Act was passed after more than two years from the date of disposal of the assessment proceedings for the assessment year 2017-18, and far beyond the expiry of the financial year, namely, more than two years from the date of initiation of penalty proceedings under section 271D of the Act. CIT(A) took the date on which the one year period from the end of the financial year in which the notice was issued as 31/03/2022. We are unable to understand where from this date has come. Expiry of one year is not relatable to this date either from the date of the assessment order for the assessment year 2017-18 or from the date of issuance of notice u/s 271D of the Act, initiating the proceedings. It seems to be a factual mistake. Appeal of the assessee is allowed.

Summary

Issues involved:
The main issue in this case is whether the penalty order under section 271D of the Income Tax Act, 1961 is barred by limitation.

Summary:

Issue 1 - Limitation for passing penalty order under section 271D of the Act:
The appellant argued that the penalty order is barred by limitation as per section 275(1)(c) of the Act, which states that no penalty order under Chapter-XXI, including under section 271D, could be passed after the expiry of the financial year in which the penalty proceedings were initiated. The notice under section 271D was issued on 16/03/2020, and the penalty order was passed on 15/03/2022, exceeding the time limit.

Issue 2 - Interpretation of limitation period:
The Revenue contended that the penalty order was within the limitation period, which they claimed to be one year from the end of the financial year in which the penalty proceedings were initiated. However, the appellant argued that the order was passed after more than two years from the initiation of penalty proceedings, thus exceeding the statutory time limit.

Issue 3 - Assessment year and penalty proceedings:
It was revealed during the scrutiny of the return for the assessment year 2017-18 that there was a violation of section 269SS of the Act related to the assessment year 2016-17. The assessment order for 2017-18 was issued on 04/12/2019, and the notice under section 271D was served on 16/03/2020, with the penalty order being passed on 15/03/2022.

Conclusion:
The Tribunal held that the penalty order dated 29/03/2022 was indeed barred by limitation as it was passed after the statutory time limit prescribed under section 275(1)(c) of the Act. Therefore, the impugned orders were quashed, and the appeal of the assessee was allowed.