2018 (3) TMI 437 - HC - Income Tax

Penalty u/s 271D / 271E - non-compliance of the provisions of Section 269-SS and 269-T - competent authority to levy the penalty - Held that - We are of the view that first show cause notice, without initiating proceedings for imposition of penalty under Section 271-D (was issued on 22.9.2017). It is also well settled that a penalty under this provision is independent under assessment. The action inviting imposition of penalty is granting of loans above the prescribed limitation otherwise then through banking channels and as such infringement of Section 269-SS is not related to the income that may be assessed or finally adjudicated. We find no force on the contention advanced by the learned Senior counsel for the petitioner. Writ petition has no merit and is, accordingly, dismissed.

Summary

Issues:
1. Jurisdiction and limitation period for penalty proceedings under Section 271-D and 271-E of the Income Tax Act.
2. Competency of the Deputy Commissioner of Income Tax in initiating penalty proceedings.
3. Authority to levy penalties under Section 271-D and 271-E.
4. Interpretation of legal provisions regarding initiation of penalty proceedings.
5. Comparison with relevant legal precedents.

Analysis:

Issue 1:
The petitioner sought to quash a show cause notice issued by the Joint Director of Income Tax under Section 271D/271E, citing lack of jurisdiction and limitation under Section 275(1)(C) of the Income Tax Act. The petitioner argued that the second notice, issued after six months from the initiation of proceedings, was time-barred.

Issue 2:
During the assessment proceedings, a show cause notice was issued by the Deputy Commissioner of Income Tax, which the respondent argued did not pertain to penalties under Section 271-D/271-E. The initiation of penalty proceedings was deemed to be from the notice issued by the Joint Director on 22.9.2017, not the earlier notice by the Deputy Commissioner.

Issue 3:
The authority to levy penalties under Section 271-D and 271-E lies with the Joint Commissioner of Income Tax, as per statutory provisions. The petitioner's attempt to establish the earlier show cause notice as a legal notice under these sections was deemed incorrect.

Issue 4:
The court clarified that penalties under Section 271-D and 271-E are independent of assessment proceedings and are related to violations of Section 269-SS and 269-T. The court rejected the petitioner's argument that the limitation period started from the earlier notice, emphasizing that only the Joint Commissioner can initiate penalty proceedings.

Issue 5:
Legal precedents, including judgments from various High Courts and the Supreme Court, were cited to support the interpretation of Section 271-D and 271-E. The court differentiated these provisions from Section 271(1)(C) and upheld the exclusive authority of the Joint Commissioner in initiating penalty proceedings.

In conclusion, the court dismissed the writ petition, stating that the show cause notice issued on 22.9.2017 was valid, and penalties under Section 271-D and 271-E were appropriately initiated. The judgment emphasized the independence of penalty proceedings from assessments and upheld the authority of the Joint Commissioner in levying penalties.