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Facts
The assessee repaid a vehicle loan of Rs. 3,43,470/- in cash, violating Section 269T of the Income Tax Act. A penalty under Section 271E was levied by the Assessing Officer, which was upheld by the Ld. CIT(A). The assessee appealed further, raising an additional legal ground regarding the limitation period for passing the penalty order.
Held
The Tribunal found that the penalty order, initiated on 27/12/2019, was passed on 21/03/2022. Considering the extended period due to the COVID-19 pandemic and TOLA, the order should have been passed by 31/12/2021. Therefore, the penalty order was barred by limitation and deemed void-ab-initio, making it unnecessary to address other grounds.
Key Issues
Whether the penalty order under Section 271E of the Income Tax Act was barred by limitation as per Section 275(1)(c).
Sections Cited
269T, 271E, 274, 275(1), 275(1)(c), 143(3), 147, 246, 246A, 253, 263, 264
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, VISAKHAPATNAM “DIVN” BENCH, VISAKHAPATNAM
Before: SHRI VIJAY PAL RAO, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (“Ld. CIT(A)”) vide DIN & Order No.
ITBA/NFAC/S/250/2024-25/1072633632(1), dated 28/01/2025 for the AY 2013-14 arising out of the order passed U/s. 271E of the Income Tax Act, 1961 (“the Act”), dated 21/03/2022.
Brief facts of the case are that based on the information received from the director of Income Tax, Mumbai it was noticed that the assessee has repaid the vehicle loan for Rs. 3,43,470/- in cash to Mahindra & Mahindra Financial Services Pvt Ltd which has resulted in non-compliance of the provisions of section 269T of the Act. Accordingly, penalty U/s. 271E of the Act was initiated by issue of notice U/s. 274 r.w.s 271E of the Act dated 27/12/2019 and served on the assessee. Assessee has not responded to the said notice and therefore another notice was issued on 10/03/2021 and 26/03/2021. In response, the assessee vide submission dated 07/08/2021 has sought for adjournment. Then, a show cause notice was issued on 24/01/2022 for which the assessee replied on 31/01/2022. Considering the reply of the assessee, the Ld. AO held that the same is not acceptable because the assessee has failed to show any reasonable cause for repayment of vehicle loan of Rs. 3,43,470/- by way of cash. Hence, the Ld.AO proceeded to levy penalty of Rs. 3,43,470/- U/s. 271E of the Act for violating the provisions of section 269T of the Act. Aggrieved by the order of the Ld. AO, the assessee is in appeal before the Ld. CIT(A). The Ld. CIT(A) considering submissions and the reply of the assessee, dismissed the appeal. On being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us by raising Five original Grounds of Appeal
. Additionally, the assessee has filed an additional ground, which is legal in nature which is admitted as it goes to the root of the matter. The additional grounds are follows: “1. As there was no assessment made and no order passed Us/. 143(3) or 143(3) r.w.s 147 of the Act, the penalty imposed U/s. 271E of the Act lacks legal validity.
2. The subject order levying penalty U/s. 271E of the Act is barred by limitation, as per the provisions of section 275(1)(c) of the Act. Therefore, the impugned order lacks legal validity and should be quashed.”
3. The Learned Authorized Representative (“Ld. AR”) submitted that as per the provisions of section 275(1)(c) of the Act, the order for levy of penalty ought to have been passed within the period of six months from the end of the month in which the notice was issued to the assessee. The Ld. AR further submitted that considering the fact of extension of time till 31/06/2021 by TOLA, the penalty order ought to have been passed on or before 31/12/2021 whereas it was passed on 21/03/2022. He therefore pleaded that the penalty order is void-ab-initio.
Per contra, the Learned Departmental Representative (“Ld. DR”) relied on the orders of the Ld. Revenue authorities.
We have heard both the sides and perused the material available on record. Section 275(1) of the Act is reproduced below for reference: “275. (1) No order imposing a penalty under this Chapter shall be passed after the expiry of six months from the end of the quarter in which,— (a) the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, if the relevant assessment or other order is not the subject matter of an appeal under section 246 or section 246A or section 253; (b) the order of revision under section 263 or section 264 is passed, if the relevant assessment or other order is the subject matter of revision under the said sections; (c) the order of appeal under section 246 or section 246A is received by the jurisdictional Principal Commissioner or Commissioner, if the relevant assessment or other order is the subject matter of an appeal under the said sections and no further appeal has been filed under section 253; (d) ….. (e) …..”
It is clear from the plain reading of the above section that the imposition of penalty should have been completed within six months from the end of the month in which action of imposition of penalty is initiated. In the instant case, initially penalty action was initiated on 27/12/2019. Considering the period excluded by the decision of the Hon’ble Supreme Court on account of COVID Pandemic and considering the provisions of TOLA which extended the date upto 30/06/2021, the penalty order ought to have been passed on or before 31/12/2021. However, we noticed that the penalty order was passed on 21/03/2022. We find merit in the argument of the Ld. AR that the penalty order is barred by limitation and hence considered void-ab-initio. Thus, the legal ground raised by the assessee is allowed.
Since the legal ground raised by the assessee is allowed in favour of the assessee, the adjudication of the other grounds raised by the assessee on merits becomes merely an academic exercise.
In the result, appeal filed by the assessee is allowed.
Pronounced in the open Court on 20th May, 2025.