2006 (2) TMI 135 - HC - Income Tax

Penalty proceedings under section 271D - Whether the Tribunal was justified in holding that the impugned penalty imposed under section 271D is barred by limitation as provided in section 275(1)(c)? - Tribunal did not commit any error in holding that the penalty order passed under section 271D ibid for the alleged contravention of section 26955 ibid is bad in law being passed in contravention of section 275 (l)(c) ibid, i.e., barred by limitation prescribed under section 275(1)(c)

Summary

Issues:
1. Interpretation of penalty proceedings under section 271D as independent of assessment proceedings.
2. Whether the penalty imposed under section 271D is barred by limitation as provided in section 275(1)(c) of the Income-tax Act, 1961.

Analysis:
1. The High Court considered the appeal filed by the Revenue against the order passed by the Income-tax Appellate Tribunal. The main substantial question of law was whether penalty proceedings under section 271D are independent of assessment proceedings. The Court focused on whether the penalty imposed by the Assessing Officer under section 271D is justified, specifically in relation to limitation under section 275(1)(c) of the Act. The Tribunal had set aside the penalty order on grounds of being barred by limitation, leading to the appeal by the Revenue.

2. The case pertained to the assessment year 1990-91 where the assessee received loans in cash from multiple parties, contravening the provisions of the Act. The penalty proceedings were initiated by the Assessing Officer under section 271D, with a notice issued in 1993 and the penalty order passed in 1997. The Tribunal held that the penalty order was beyond the prescribed limitation period under section 275(1)(c), leading to its setting aside. The Court examined the language of the section, emphasizing the completion of proceedings within the specified timeframe. It noted that the penalty order was passed after the expiration of the prescribed period, thus being in contravention of the Act.

3. The Court upheld the Tribunal's decision, stating that the penalty order under section 271D was indeed barred by limitation as per section 275(1)(c) of the Act. It concluded that the penalty order was passed beyond the timeframe allowed, rendering it invalid in law. The Court dismissed the appeal, agreeing with the Tribunal's interpretation and finding no error in its decision. As a result, the appeal was rejected, and no costs were awarded in the case.