2004 (8) TMI 328 - AT - Income Tax

Summary

Issues:
- Appeal against deletion of penalty under section 271D of the IT Act, 1961 by the CIT(A).

Detailed Analysis:

Issue 1: Limitation period for penalty proceedings under section 271D
- The appeal was filed by the Revenue against the deletion of a penalty of Rs. 5.11 lakhs imposed by the AO under section 271D of the IT Act, 1961. The penalty was imposed due to the assessee accepting loans/deposits in cash in violation of section 269SS. The AO initiated penalty proceedings under sections 271D/269SS and imposed the penalty.
- The assessee argued that the penalty order was passed after more than six months from the initiation of penalty proceedings, making it barred by limitation. The CIT(A) agreed, citing that the penalty under section 271D could not be the subject of appeal as no addition could be made in quantum. The CIT(A) referred to decisions by Jaipur and Pune Benches supporting this view and canceled the penalty.

Issue 2: Interpretation of limitation provisions under section 275(1)
- The Revenue contended that the penalty order was within limitation as the assessee had appealed against the quantum assessment before the first appellate authority. The Revenue relied on section 275(1)(a) which states that no penalty order shall be passed if the relevant assessment order is under appeal, with a limitation period of six months from the end of the month in which the appeal order is received.
- The assessee argued that penalty proceedings under section 271D are distinct as no addition is made in quantum, hence not subject to appeal. The Tribunal found the assessee's argument valid, supported by decisions of Jaipur and Pune Benches, and upheld the CIT(A)'s decision to delete the penalty. The Tribunal rejected the Revenue's argument due to lack of supporting case law.

Conclusion:
- The Tribunal upheld the CIT(A)'s decision to delete the penalty imposed under section 271D, citing the inapplicability of section 275(1)(a) due to the unique nature of penalty proceedings under section 271D. The Tribunal found no fault in the CIT(A)'s order and dismissed the appeal, affirming the deletion of the penalty.