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2014 (6) TMI 47 - HC - Income TaxValidity of order of Penalty u/s 271D of the Act Bar of limitation as provided in Section 275(1)(c) of the Act Violation of section 269SS of the Act - Held that - The ambit of the Section 269SS is clearly restricted to transaction involving acceptance of money and not intended to affect cases where a debt or a liability arises on account of book entries. - passing book entries does not involve acceptance of any loan or deposit of money. Applicability of provisions of section 275(1) - Held that - The penalty sought to be imposed on the assessee is for alleged violation of Section 269SS of the Act - a penalty under the provision is independent of the assessment - The action inviting imposition of penalty is granting of loans above the prescribed limit otherwise than through banking channels and as such infringement of Section 269SS of the Act is not related to the income that may be assessed or finally adjudicated - Section 275(1)(a) of the Act would not be applicable and the provisions of Section 275(1)(c) would be attracted Relying upon The Rajasthan High Court in the case of Commissioner of Income-Tax v. Hissaria Bros. 2006 (7) TMI 163 - RAJASTHAN High Court - Decided against Revenue.
Issues Involved:
1. Applicability of Section 275(1)(a) vs. Section 275(1)(c) of the Income Tax Act, 1961. 2. Validity of the penalty order under Section 271D of the Act. 3. Interpretation of Section 269SS of the Act. 4. Timeliness of the penalty order. Detailed Analysis: 1. Applicability of Section 275(1)(a) vs. Section 275(1)(c) of the Income Tax Act, 1961: The core issue was whether the penalty order under Section 271D was governed by Section 275(1)(a) or Section 275(1)(c) of the Act. The Revenue argued that Section 275(1)(a) was applicable, which allows a penalty order to be passed within one year after the end of the financial year in which the order of the CIT (Appeals) was received. Conversely, the assessee contended that Section 275(1)(c) was applicable, limiting the time to pass the penalty order to within six months from the initiation of penalty proceedings or within the financial year in which such proceedings were initiated, whichever is later. The court sided with the assessee, holding that Section 275(1)(c) applied since the penalty proceedings were independent of the assessment order. 2. Validity of the Penalty Order under Section 271D of the Act: The penalty order dated 10.03.2012 was challenged on the grounds of being time-barred. The ITAT found that the penalty order was indeed beyond the prescribed period under Section 275(1)(c). The court upheld this view, stating that the penalty proceedings initiated in the assessment order dated 30.12.2009 should have been completed by 31.03.2010, making the order dated 10.03.2012 invalid. 3. Interpretation of Section 269SS of the Act: Section 269SS proscribes accepting any loan or deposit exceeding Rs. 20,000 otherwise than by an account payee cheque or demand draft. The Assessing Officer had concluded that the transaction between the assessee and M/s PACL India Ltd. violated this provision. However, the court clarified that Section 269SS is applicable only to transactions involving the acceptance of money and not to book entries. Since the payments were made through banking channels and recorded as book entries, no violation of Section 269SS occurred. The court referenced the case of Noida Toll Bridge Co. Ltd., which had similar facts and where it was held that journal entries do not constitute a violation of Section 269SS. 4. Timeliness of the Penalty Order: The penalty order was also scrutinized for timeliness. The Revenue argued that the order was within the period prescribed under Section 275(1)(a), but the court found that the correct provision was Section 275(1)(c), which limited the time to six months from the initiation of penalty proceedings. The court concluded that since the proceedings were initiated in the assessment order dated 30.12.2009, the penalty order dated 10.03.2012 was beyond the permissible period, thus invalid. Conclusion: The court dismissed the appeal, affirming that the penalty order under Section 271D was time-barred and that no violation of Section 269SS occurred as the transactions were through banking channels and recorded as book entries. The judgment reinforced the interpretation that penalty proceedings for defaults under Sections 269SS and 269T are independent of assessment proceedings and must adhere to the specific timelines prescribed under Section 275(1)(c).
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