SAMEER NOORULLAH KHAN,MUMBAI vs. COMMISSIONER OF INCOME TAX (A), MUMBAI

National Faceless Appeal Centre, Delhi [The learned Commissioner of Income-tax (Appeals) [CIT (A)]] under Section 250 of the Income-tax Act, 1961 (The Act), dated 29th December, 2021 for A.Y. 2015-16, wherein the penalty levied under Section 271D of the Act by The Joint Commissioner of Income Tax, Range-20(3), Mumbai (The learned JCIT ) of ₹18 lacs was confirmed.

The learned Addl. CIT considered the explanation of the assessee but stated that assessee is liable for penalty under Section 271D of the Act of the sum equal to the amount of loan accepted and as assessee’s case does not fall within the ‘reasonable clause’ as per Provision of Section 273B of the Act, he levied the penalty of ₹18 lacs as per order dated 7th December, 2018.

Assessee preferred the appeal before the National Faceless Appeal Centre, Delhi and reiterated the reasonable cause of housing loan and financial crisis. The learned CIT (A) issued several notice to the assessee but same remained un-complied with and therefore, on the merits found that there is no need to interfere with the levy of penalty under Section 271D of the Act. Accordingly, the penalty levied of ₹18 lacs under Section 271D of the Act was confirmed by order dated 29th December, 2021. Thus, assessee is aggrieved with the order and preferred the appeal before us.

The learned Authorized Representative submitted a paper book containing 83 pages and also submitted written submission of 11 pages. In the return submission, it was stated that assessee has reasonable cause for accepting the cash loan. The assessee has purchased an immovable

He also submitted that in this case, the assessment order was passed on 14th December, 2017, wherein the order passed levying penalty under Section 271D of the Act was passed on 7th December, 2018 and therefore, it is barred by limitations. According to him, such order should have been passed on or before 30th June 2018 . he referred to provision of section 275 (1) © of the act and submitted that limitation would begin to run from date on which the Assessing Officer recommended for issuance of show cause notice for initiating penalty proceedings. He further referred to the Provisions of Section 275 of the Act, the penalty should have been completed on or before 30th June , 2018 . 010. The learned Departmental Representative vehemently supported the order of the lower authorities. He submitted that there is no reasonable cause shows by the assessee for accepting the cash loan. He submitted that if the assessee has had obligation for clearance to cheque issue, assessee could not obtain loan from the parties by NEFT or other banking mode. Therefore, assessee has clearly violated the Provisions of Section 269SS of the Act and penalty is rightly levied. On the issue of passing of the order, he submitted that the order passed by the Addl. CIT on 7th December, 2018, wherein the learned Assessing Officer brought to the notice of the Addl. CIT vide letter

We have carefully considered the rival contentions and perused the orders of the lower authorities. In the present case, the assessment order under Section 143(3) of the Act was passed by the learned Assessing Officer on 14th December, 2017, wherein the learned Assessing Officer has categorically mentioned that the penalty proceedings under Section 271D read with section 269SS of the Act is initiated for accepting the loans of ₹18 lacs in cash.

According to the provisions of Section 275(1)(c) of the Act, no order for imposing the penalty shall be passed after the expiry of the financial year in which the proceedings and in case of which action for imposition of penalty has been initiated are completed, or six months from the end of the month in which action for imposition of penalty is initiated, which ever expires later. Therefore, there are two specific period of limitation for passing a penalty order that expires later should be the outward limit of time by which the penalty orders should have been passed. In the present case, the penalty proceedings are initiated as per order dated 14th December, 2017, therefore, according to that, the penalty order could not have been passed later than 31st March, 2018. Second Possible time limit is expiry of six months from the month in which the penalty proceedings were initiated. The penalty proceedings have been initiated by the learned

Accordingly, we quash the penalty proceedings levied under Section 271D of the Act of ₹18 lacs.

In the result, appeal by the assessee is allowed. Order pronounced in the open court on 16.08.2022.