2024 (1) TMI 364 - HC - Income Tax

Penalty proceedings u/s 271D, 271E and 271AAA - period of limitation - assessee had accepted monies from 29 parties, which led to addition u/s 69C and 68 - whether penalty was barred by the limitation? - HELD THAT - As in terms of the provisions of Section 275(1)(c), the penalty order could have been passed either before the expiry of the Financial Year FY in which proceedings in the course of which action for imposition of penalty was initiated is completed or within six months from the end of the month in which action for imposition of penalty was initiated, with the caveat that the appellant/revenue had the benefit of taking advantage of whichever period expired later. In the facts that obtain in the instant case, the FY in the course of which the quantum proceedings, in the course of which the penalty proceedings were initiated, concededly culminated on 31.03.2011. On the other hand, the period of six months from the end of the month in which action for imposition of penalty was initiated ended on 30.06.2011. Concededly, the penalty order was passed way beyond the later date i.e., 30.06.2011. The record discloses that the penalty order was passed on 30.12.2011. We may note that the very same issue stands concluded against the appellant/revenue via the decision rendered by this Court in Thapar Homes Limited 2023 (10) TMI 1321 - DELHI HIGH COURT appellant/ revenue, cannot extend the period of limitation by deciding at its whim and fancy when the notice has to be issued. The notice under Section 274 should have been issued before the period of limitation, as discussed above. Decided against revenue.

Summary

Issues:
The issues involved in this case are the penalty proceedings initiated against the respondent/assessee for violating the provisions of Section 271D of the Income Tax Act, 1961 and the applicability of the limitation period for passing the penalty order.

Penalty Proceedings under Section 271D:
The appellant/revenue initiated penalty proceedings against the respondent/assessee for accepting monies from 29 parties, resulting in the addition of Rs. 16,69,53,000/- under Section 69C and 68 of the Act. The Assessing Officer (AO) initiated penalty proceedings under Section 271D, 271E, and 271AAA. The CIT(A) ruled in favor of the respondent/assessee on the ground that the penalty order was barred by limitation, a view upheld by the Tribunal.

Applicability of Limitation Period:
The appellant argued that the penalty order was passed within the prescribed period of limitation, as it was issued on 30.12.2011, falling within the timeline specified in Section 275(1)(c) of the Act. However, the appellant's argument was refuted based on a previous judgment where it was concluded that the limitation period cannot be extended by deciding when to issue a notice. The Court held that the notice should have been issued before the expiration of the limitation period, which in this case was determined to have expired latest by 30.06.2011. Therefore, the impugned order was upheld, and the appeal was closed as no substantial question of law arose for consideration.