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Facts
The assessee, proprietor of M/s New Chunni Lal & Sons, repaid a loan of Rs. 30,00,000 in cash during FY 2016-17 (AY 2017-18), violating Section 269T of the Income Tax Act. The Assessing Officer levied a penalty under Section 271E, which was upheld by the CIT(A). The assessee appealed, primarily contending that the penalty order was time-barred.
Held
The Income Tax Appellate Tribunal found that the assessment was completed on 30.12.2019, and the six-month limitation period for initiating penalty action ended on 30.06.2020. Since the impugned penalty order was passed on 10.02.2022, it was beyond the statutory limitation period as per Section 271(1)(c) of the Act, rendering it nonest. Therefore, the penalty order was quashed.
Key Issues
Whether the penalty order passed under Section 271E for violation of Section 269T was within the statutory limitation period as prescribed by Section 271(1)(c) of the Income Tax Act.
Sections Cited
271E, 269T, 271(1)(c)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCHES: E : NEW DELHI
Before: SHRI S. RIFAUR RAHMAN & SHRI ANUBHAV SHARMA
Assessment Year: 2017-18 Manoj Kumar Katyal, Vs ITO, 9611, Motia Khan, Ward-63(4), Sadar Thana Road, Delhi. Pahar Ganj, Pahar Ganj SO, Delhi – 110 055. PAN: AHIPK3469L (Appellant) (Respondent) Assessee by : Shri Tapas Ram Misra, Advocate Revenue by : Shri Dheeraj Kumar Jain, Sr. DR Date of Hearing : 17.07.2025 Date of Pronouncement : 31.07.2025 ORDER
PER ANUBHAV SHARMA, JM:
This appeal is preferred by the assessee against the order dated 23.10.2024 of the Commissioner of Income-tax (Appeals), NFAC, Delhi (hereinafter referred to as the Ld. First Appellate Authority or ‘the Ld. FAA’, for short) in Appeal No.NFAC/2016-17/10100487 arising out of the appeal before it against the order dated 10.02.2022 passed u/s 271E of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the National Faceless Assessment Centre, Delhi, New Delhi (hereinafter referred to as the Ld. AO).
On hearing both the sides, we find that primarily on behalf of the assessee the penalty order has been challenged on legal as well as on factual grounds and, for convenience, the grounds are reproduced below:- “1. On the facts and circumstances of the case, the learned CIT(A) NFAC erred on facts and in law in confirming the levy of the penalty of Rs. 30,00,000 under section 271E of the Income-tax Act, 1961 (“the Act”). 2. That the learned CIT(A) NFAC erred on facts and in law in not deleting the penalty on the ground that the order levying the penalty was not passed by the Joint Commissioner and that was in contravention of section 271 E(2) of the Act.
That the learned CIT(A) NFAC erred on facts and in law in confirming the levy of penalty on the erroneous basis that the appellant had repaid a loan in cash, ignoring the fact that the loan was settled from the proceeds of sales duly recorded and not disputed by the revenue.
4. That the learned CIT(A) NFAC erred on facts and in law in completely ignoring all the judicial precedents cited and relied upon by the appellant. The Appellant craves leave to add to, alter, amend or vary from the aforesaid grounds at or before the time of hearing.” 3. It comes up that the assessee is an individual and during the FY 2016-17 relevant to the AY 2017-18 the assessee repaid loan amount of Rs.30,00,000/- in cash thereby violating the provisions of section 269T of the Act. Therefore, the ld. AO levied the penalty of Rs.30,00,000/- u/s 271E of the Act on 10.02.2022 for violation of provisions of section 269T of the Act.
The ld.CIT(A) has sustained this addition and the relevant findings of the ld.CIT(A) are reproduced below:- “5.3. The appellant was proprietor of M/s New CHunni Lai & Sons engaged in the footwear business. During the appellate proceedings, the appellant claimed that he received sale of footwear in cash and the same 2
was utilized for repayment of loan after declaration of demonetization. It is to be noted here that the assessee was a businessman and regular filer of income tax return. Although demonetization of currency was declared, the assessee was having enough time from 08/11/2016 to 31/12/2016 for depositing the old currency in his bank account. The assessee ought to have deposited cash from sale of footwear in his bank account and then repay the loan amount to his creditors. However without any reasonable cause, the assessee repaid loan amount of Rs.30,00,000/- in cash to his creditors thereby violating provisions of section 269T of the Act. Thus the appellant repaid the amounts in cash without any reasonable cause. Therefore I do not find any excuse to take a divergent view from the view of the AO. Hence I uphold the order of the AO wherein the penalty u/s 271E of the Act for an amount of Rs.30,00,000/- was levied. Accordingly, all the grounds of appeal are dismissed.”
5. After giving thoughtful consideration to the contentions, we find that the assessee has not pressed the ground of impugned order not being passed within the period of limitation before the ld.CIT(A) and that is the foundation of contention of the ld. DR before us also. In this context, we are of the considered view that the question of limitation is a mixed question of law and facts, but, the facts primarily relevant for determination of a question of limitation are the one which are available in the assessment records. The order passed beyond the limitation is nonest ab initio and even if an assessee does not press the same, it is incumbent on the ld.CIT(A), having powers of first appellate authority to ensure that the impugned order has been passed as per law, which includeds material question as to if same is passed, within the period of limitation and in accordance with the law. Thus, on that account, the order of the ld.CIT(A) is erroneous.
6. In this context, we find that the assessment was completed on 30.12.2019 and satisfaction to initiate penalty proceedings was initiated on the same day. Subsequently, notices were issued by jurisdictional Jt. Commissioner and the assessee responded to the same on 10.03.2020. Later, NFAC issued another notice on 08.12.2021 to which the assessee responded on 09.12.2021. The impugned penalty order was passed on 10.02.2022. Now, as per section 271(1)(c) of the Act, the limitation for levy of penalty in cases of section 271E is end of the financial year in which the assessment was completed or six months from the end of the month in which action of levy of penalty is initiated, whichever is later. In the case in hand, the relevant financial year in which the assessment was to be completed ended on 31.03.2020 and the six months period from the end of the month in which penalty action was initiated ended on 30.06.2020. Thus, the impugned order passed on 10.02.2022 is beyond the limitation period and that made the impugned penalty order nonest. Thus, we are inclined to sustain the ground No.1. The appeal of the assessee is allowed. The impugned penalty order is quashed.