2024 (9) TMI 1564 - AT - Income Tax

Penalty imposed u/s 271D r.w.s. 269SS - period of limitation - whether penalty orders were time-barred? - HELD THAT - In the present case, admittedly, the recommendation has been made by the A.O. for initiation of penalty was on 08/12/2017. As per the first condition of Section 275(1)(c) i.e. expiry of the Financial Year in which the proceedings, in the course of which action for imposition of penalty has been initiated and completed on 31/03/2018. As per second condition of Section 275(1)(c) i.e. six months from the end of month in which action for imposition of penalty has been initiated will be expired on 30/06/2018. Additional CIT(A) has initiated penalty on 07/07/2018 whereas the same has been referred to him on 08/12/2017 itself, thus, in our considered opinion, the same is barred by limitation as per provision of Section 275(1)(c) of the Act. Thus, we have no hesitation to delete the orders of penalty - Decided against revenue.

Summary

Issues:
Appeals filed by Revenue challenging deletion of penalties under Section 271D and Section 271E by CIT(A) for Assessment Years 2008-09 to 2012-13.

Detailed Analysis:
1. Background: The appeals were filed by the Revenue against the CIT(A)'s orders deleting penalties imposed under Section 271D and Section 271E of the Income Tax Act for the Assessment Years 2008-09 to 2012-13.

2. Violation of Provisions: The Assessing Officer (A.O.) observed that the assessee received loans/deposits in cash exceeding Rs. 20,000, violating Section 269SS, and made cash repayments exceeding Rs. 20,000, violating Section 269T. The A.O. recommended penalties under Section 271D and Section 271E to the Joint Commissioner of Income Tax, leading to penalty orders dated 24/09/2018.

3. Grounds of Appeal: The Revenue contended that the CIT(A) erred in deleting the penalties, as the assessee clearly breached Sections 269SS and 269T, and argued against the limitation defense raised by the assessee.

4. Limitation Defense: The assessee raised a limitation defense under Section 275(1)(c) before ITAT, asserting that the penalty orders were time-barred. The ITAT allowed the assessee to argue on limitation, citing a High Court judgment granting additional rights to respondents.

5. Legal Provisions: Section 275(1)(c) sets the limitation for imposing penalties under Section 271D and Section 271E, based on the completion of proceedings or initiation of penalty action. The CBDT Circular No. 10/2016 clarified the limitation period for penalties.

6. Judicial Precedent: The Delhi High Court's ruling in Principal CIT v. Mahesh Wood Product Pvt. Ltd. established that the initiation of penalty proceedings starts from the date of the A.O.'s recommendation, not the actual issuance of the show cause notice.

7. Conclusion: Considering the timeline of events and the provisions of Section 275(1)(c), ITAT found the penalty orders to be time-barred. As the penalties were imposed beyond the limitation period, the ITAT upheld the CIT(A)'s decision to delete the penalties and dismissed the Revenue's appeals.

In conclusion, the ITAT ruled in favor of the assessee, upholding the deletion of penalties under Section 271D and Section 271E by the CIT(A) for the mentioned Assessment Years, based on the limitation defense raised and the legal provisions governing penalty imposition timelines.