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Facts
The assessee filed an appeal against the order of the CIT(A) confirming a penalty of Rs. 60,000/- imposed under section 271E of the IT Act, 1961. The penalty was levied for the contravention of section 269T of the Act. The assessee contended that the penalty order was time-barred.
Held
The Tribunal held that the penalty order was passed beyond the limitation period prescribed under section 275 of the IT Act, 1961. The initiation of penalty proceedings was considered to be the date of the assessment order where the reference to the Joint Commissioner was made.
Key Issues
Whether the penalty order passed under section 271E of the IT Act, 1961, is barred by limitation.
Sections Cited
271E, 269T, 275, 153A, 143(3), 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JODHPUR BENCH, JODHPUR.
Before: DR. MITHA LAL MEENA & DR. S. SEETHALAKSHMI
This is an appeal filed by the assessee against the order of ld. CIT (Appeals), Udaipur-2 dated 21.06.2024 passed under section 250 of the I.T. Act, 1961, for the assessment year 2011-12. The assessee has raised the following grounds of appeal :-
Shri Manish Sharma, Kota. 1. Under the facts and circumstances of the case, the ld. CIT (A) has erred in not quashing the penalty order passed by ld. JCIT u/s 271E of the Income Tax Act, 1961. 2. Under the facts and circumstances of the case, the ld. CIT (A) has erred inconfirming the penalty of Rs. 60,000/- imposed by ld. JCIT u/s 271E of the Income Tax Act, 1961. 3. The appellant craves leave to add, amend, alter or delete the ground of appeal on or before date of hearing.
2. The brief facts of the case are that the assessee is an Individual and derives income from salary and income from other sources. The assessee filed his return of income for the year under consideration declaring total income of Rs. 2,02,660/- on 26.03.2012. A search and seizure operation under section 132(1) of the IT Act, 1961 was carried out on 02.07.2015 at various premises of M/s. Kota Dall Mill Group (Shri Rajendra Agarwal), Kota. The case of the assessee was also covered by the search action. Notice under section 153A was served on the assessee on 27.01.2016 and in compliance, the assessee filed his return of income on 12.03.2016 declaring total income of Rs. 2,03,260/-. Notice under section 143(2) was issued on 20.09.2016 which was duly served. Notice under section 142(1) along with questionnaire was issued on 20.09.2016. In compliance thereto, the assessee submitted relevant details/information which were considered. Upon consideration of the detailed information, the AO completed the assessment under Shri Manish Sharma, Kota. section 153A read with section 143(3) of the IT Act, 1961 vide his order dated 31.10.2017 at a total income of Rs. 2,45,270/- by making some additions. During the assessment proceedings, the AO noticed that during the F.Y. 2010-11, the assessee in violation of provisions of section 269T of the IT Act, 1961 has repaid in cash loan amounting to Rs. 60,000/- to Shri Sanjay Vyas.The explanation furnished by the assessee in this respect was considered by the AO but was not acceptable to him and hence he initiated penalty proceedings u/s 271E vide assessment orderpassed under section 153A read with section 143(3) of the IT Act, 1961 dated31.10.2017. Hence the matter was referred to Joint Commissioner for imposition of penalty under section 271E of the IT Act, 1961. The JCIT issued show cause notice under section 271E of the IT Act, 1961 dated 08.02.2018 to the assessee to show cause as to why penalty under section 271E of Rs. 60,000/- should not be imposed for contravention of provision of section 269T of the IT Act, 1961. Since the assessee has not replied to the show cause notice, the AO imposed penalty of Rs. 60,000/- under section 271E of the IT Act, observing that the assessee has violated the provisions of section 269T of the IT Act, 1961 vide his order dated 26.06.2018. Aggrieved by the order of the JCIT, the assessee preferred appeal before the ld. CIT (A), who after considering the detailed submissions of the assessee, dismissed the appeal of the assessee.
Shri Manish Sharma, Kota. Now the assessee, has come in appeal before the Tribunal on the grounds reproduced herein above. 3. Before us, the ld. A/R of the assessee reiterated the submissions as were made before the ld. CIT (A). He further submitted his ground-wise written submission as under :-
Ground 1. Under the facts and circumstances the ld. CIT (A) has erred in not quashing the penalty order passed by ld. JCIT u/s 271E of the Income Tax Act, 1961. Submission Assessee’s Held by ld. CIT Our submission before Hon’ble submission before Bench ld. CIT (A) Assessee submitted The ld. CIT (A) relied upon On perusal of judgment of Hon’ble that penalty order the judgment of Hon’ble High Court in case of Rishikesh u/s 271E passed by ITAT Chennai Bench in Buildcon (P) Ltd. (supra) the ld.JCIT is time case of Sri Sai Balaji Gas chronology of penalty proceeding barred by limitation. Cylinder (P) Ltd (2023) 155 u/s 271D is as under : Ld. JCIT passed taxmann.com 319 wherein penalty order the Hon’ble Bench has Particular Date 27.07.2018 as distinguished the case law Date of 17.12.2008 against maximum Rishikesh Buildcon (P) Ltd initiation of permissible time (supra) by holding that in penalty upto 30.06.2018 that judgment the Hon’ble proceeding from the end of the High Court had considered by AO month in which the issue in light of the facts Date of 18.03.2009 reference to ld. JCIT where there is huge gap of reference was made for nearly five years from the SCN Date 24.03.2009 initiation of penalty date, the AO sent a Date of 29.09.2009 proceeding u/s 271E proposal to the officer order passed of the Income Tax imposing penalty and the u/s 271D Act, 1961 i.e. notice issued by officer October 2017. In imposing penalty and under Therefore, there is no gap of five support of this, those facts, the Hon’ble year from the AO sent proposal to Shri Manish Sharma, Kota. assessee relied High Court came to the the officer imposing penalty and following judgments conclusion that the the notice issued by officer of Delhi High Court: limitation prescribed u/s imposing penalty. 275(1)(c) of the Act, runs PCIT vs. Rishikesh from the date the AO sent Buildcon (P) Ltd proposal for initiation of The facts of case of Sri Sai Balaji (2023) 147 penalty proceedings. Gas Cylinder (P) Ltd (supra) and taxmann.com 220, exactly same with the case of In this judgment the Mahesh Wood Products (P) Ltd PCIT vs. JKD Hon’ble Bench also (supra). The chronology of penalty Capital &Finlease distinguished the case of proceeding in both case is as under Ltd (2017) 81 PCIT vs. Mahesh Wood : taxmann.com 80. Products (P) Ltd (2017) 82 taxmann.com 39 and held Particular Sri Sai Mahesh case Wood that the facts of the case are Date of 24.07.2018 23.07.2012 entirely different to the reference facts of the present case, SCN Date 03.08.2018 28.08.2012 and thus, we are of the Date of 26.02.2019 26.02.2012 considered view that the order case laws relied upon by passed u/s 271D/271E the ld. Counsel for the Limitation 28.02.2019 31.01.2013 assessee is not applicable to date of the facts of the present case. penalty order as per judgment The assessee also relied upon the judgment of Hon’ble Delhi High Court in case of PCIT vs. JKD Capital &Finlease Ltd. (2017) 81 taxmann.com 80 wherein it was held that penalty order u/s 271E passed beyond six month from month in which direction to initiate penalty proceeding u/s 271E was issued by order dated 28.12.2007. This judgment was not discussed by the ld. CIT (A) in his order. The facts of the judgment are same with the assessee’s case as under : Particular Assessee’s JKD case case Date of 30.10.2017 28.12.2007 assessment order Date of 31.10.2017 28.12.2007 reference Date of 08.02.2018 12.03.2012 SCN Date of 26.06.2018 20.03.2012 penalty order u/s 271D/271E The judgment of JKD Capital &Finlease Ltd. has been further relied upon in recent case of CIT vs. Turner General Entertainment Networks India (P) Ltd. (2024) 168 taxmann.com 634 wherein it has been held that penalty proceeding is considered to be initiated on receipt of reference by JCIT from AO and not on issuance of show cause notice. In para 18 of the order, the Hon’ble High Court referred the para 10 of judgment of Hon’ble Supreme Court of India in case of Sh. Om Prakash Jaiswal vs. DK Mittal (2000) 3 SCC 171, wherein word “initiate is defined to mean an introductory step or action, a first move. In para 19, the Hon’ble High Court held that the expression ‘action for imposition of penalty is initiated” must, thus, clearly refers to the date on which the first introductory step for such action is taken, it must necessarily mean the start of such action. It must mean the commencement of action for imposition of action for imposition of penalty. As noted above, the AO had found that it was the admitted case that the assessee had defaulted in deduction of TDS, which it was obliged to do. It had, accordingly, made a reference to the ld. JCIT. This was obviously for the purposes of imposition of penalty. The reference, thus, clearly marked the first step for initiation of action for imposition of penalty. The show cause notice issued subsequently was to provide the assessee an opportunity to show cause why penalty should not be imposed.
Shri Manish Sharma, Kota. In view of above, the judgement referred to above, the date of initiation of penalty is 31.10.2017 i.e. the date of passing of the assessment order and therefore, the penalty order passed on 27.06.2018 is beyond the time allowed upto 30.04.2018 under the provisions of section 271(1)(c). Accordingly, the impugned penalty order is barred by limitation and deserves to be quashed.”
On the other hand, the ld. Departmental Representative supported the orders of the revenue authorities.
Ground No. 1 relates to ld. CIT (A) has erred in not quashing the penalty order passed under section 271E of the IT Act, 1961.
We have heard the rival submissions, perused the material on record and gone through the orders of the lower authorities. We have also considered the case laws referred by both the sides. In this case the AO (JCIT) imposed the penalty under section 271E in contravention of provision of section 269T of the Income Tax Act, 1961. The penalty action was initiated vide assessment order passed under section 153A read with section 143(3) of the IT Act, 1961 on 31.10.2017 by making reference to Joint Commissioner for imposition of penalty under section 271E of the IT Act, 1961. Subsequently, the AO issued show cause notice under section 271E on 08.02.2018 to the assessee and thereafter the AO vide his penalty order under section 271E dated 26.06.2018 imposed the penalty of Rs. 60,000/- on the assessee. The contention of the assessee is that the penalty order under section Shri Manish Sharma, Kota. 271E passed by the JCIT is time barred by limitation and the same is liable to be quashed. The ld. A/R of the assessee has drawn our attention to the provisions of section 271E and section 275 by submitting as under :- “ 1. Order passed u/s 271E by ld. JCIT is time barred and hence bad in law. i. In this regard, we wish to reproduce the provision of section 275 of the Income Tax Act, 1961 which provides bar of limitation for imposing penalties under this Chapter XXI asunder :
Section 275: Bar of limitation for imposing penalties. (1) No order imposing penalty under this chapter shall be passed – (a) In a case where the relevant assessment or other order is the subject matter of appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to be Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever period expires later:
Provided that in a case where the relevant assessment or other order is the subject is subject matter of appeal to the Commissioner (Appeals) under section 246 or section 246A ……….
(b) In a case where the relevant assessment or other order is the subject matter of revision under section 263 or section 264, after the expiry of six month from the end of the month in which such order of revision is passed.
(c) In any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the 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, whichever period expires later. ii. Applicability of clause of sub-section (1) of section 275 in assessee’s case.
In this regard, we may submit as under :
S.No. Clause of sub- Our submission section(1) of section 275 1 (a) This clause is applicable only when the relevant assessment order or other order is the subject matter of appeal.
However, in the present case, the issue under consideration has arisen during the course of assessment proceeding u/s 143(3) r.w.s. 153A of the Income Tax Act, 1961 and the assessee has not filed appeal against the relevant assessment order or other order. Therefore, this clause is not applicable for calculating period of limitation for imposing penalty.
We may also submit that penalty proceeding u/s 271D/E for contravention of provision of section 269SS and 269T are not related to assessment proceedings or other proceedings, during which penalty proceedings under sections 271D and 271E might have been initiated, has no relevance for sustaining or not sustaining penalty proceedings, and therefore, clause (a) of section 275(1) cannot be attracted to such proceedings. The position is also upheld by the Hon’ble High Court of Rajasthan in case of CIT vs. Hissaria Bros (2008) 169 Taxman 262 which was also subsequently upheld by Apex Court.
2 (b) This clause is applicable when relevant assessment or other order subject matter of revision under section 263 or section 264.
However, the present case is not subject to revisionary proceeding. Therefore, the clause is also not applicable for calculating period of limitation for imposing penalty.
3 (c) This clause is residuary clause and applicable when above both clause are not applicable.
Since the clauses (a) and (b) of sub-section (1)
Conclusion:
Period of limitation for imposing penalty shall be calculated in view of clause (c) of sub-section (1) of section 275 of Income Tax Act, 1961 in the present case. iii. As per the clause (c) of sub-section (1) of section 275, the order imposing penalty ought to have been passed as under, whichever period expires later :
Provision Our submission After the expiry of the financial The ld. AO initiated penalty u/s 271E year in which the proceedings, in vide assessment order u/s 153A r.w.s. the course of which action for the 143(3) dated 31.10.2017 (during the imposition of penalty has been FY 2017-18 by making reference to initiated, are completed. Joint Commissioner of Income Tax for imposition of penalty u/s 271E of Income Tax Act, 1961. Therefore penalty proceeding should have been completed on or before 31.03.2018 as per this clause. Six month from the end of the month in which action for 1. As stated above, the ld. AO imposition of penalty is initiated. initiated penalty proceeding u/s 271E on 31.10.2017 by making reference to the Joint
The six month expires from the date 31.10.2017 on 30.04.2018.
Therefore, order u/s 271E should have been passed on or before 30.04.2018 as per this clause.
Conclusion:
Since, in view of the above, the later period expires on 30.04.2018. Therefore, the penalty proceeding must have been completed till 30.04.2018. iv. Since in the present case penalty order u/s 271E is passed on 26.06.2018 i.e. after maximum limitation period ended on 30.04.2018. Therefore, penalty order passed u/s 271E is not valid and bad in law.
In support of his case, the ld. A/R also placed reliance on the judgment of Hon’ble Delhi High Court in the case of PCIT vs. M/s. Rishikesh Buildcon (P) Ltd. (2023) 147 taxmann.com 220 (Delhi) wherein it has been held that Quantum proceedings with respect to assessee was completed in December, 2008 - Further, penalty proceeding against assessee inter alia under section 271D for violating provision of section 269SS was also initiated by Assessing Officer at time of completion of said assessment – SCN under section 271D was issued by prescribed authority on 24.03.2009 – Further, penalty order was passed on 29.09.2009 – Whether where Assessing Officer had initiated penalty proceedings in his/her assessment order, said date was to Shri Manish Sharma, Kota. be taken as relevant date as far as section 271(1)(c) was concerned and not date on which SCN was issued – Held, yes – Whether, since Assessing Officer initiated penalty proceedings in December, 2008 and six months from end of month in which action of imposition of penalty was initiated expired on 30.06.2009, penalty order passed on 29.09.2009 was barred by limitation – Held, yes [para 12][in favour of assessee]. The ld. CIT (A) relied upon the judgment of coordinate bench of the ITAT Chennai Bench in the case of Sri Sai Balaji Gas Cylinder (P) Ltd. (2023) 155 taxmann.com 319 wherein the Coordinate Bench has distinguished the case law of Rishikesh Buildcon (P) Ltd. (supra) by holding that in that judgment the Hon’ble High Court had considered the issue in light of the facts where there is huge gap of nearly five years from the date, the AO sent a proposal to the officer imposing penalty and the notice issued by officer imposing penalty and under those facts, the Hon’ble High Court came to the conclusion that the limitation prescribed u/s 275(1)(c) of the Act, runs from the date the AO sent proposal for initiation of penalty proceedings. The ld. A/R of the assessee submitted that the case law relied upon by the ld. CIT (A) is not applicable in the instant case by stating as under :On perusal of judgment of Hon’ble High Court in case of Rishikesh Buildcon (P) Ltd (supra) the chronology of penalty proceeding u/s 271D is as under :
Particular Date Date of initiation of penalty 17.12.2008 proceeding by AO Date of reference 18.03.2009 SCN Date 24.03.2009 Date of order passed u/s 29.09.2009 271D Therefore, there is no gap of five year from the AO sent proposal to the officer imposing penalty and the notice issued by officer imposing penalty. The ld. A/R further placed reliance on the judgment of Hon’ble Delhi High Court in the case of PCIT vs. JKD Capital &Finlease Ltd. (2017) 81 taxmann.com 80 (Delhi) wherein it has been held that “ in terms of the provision of section 275(1)(c), there are two distinct periods of limitation for passing a penalty order, and one that expires later will apply. One is the end of the Shri Manish Sharma, Kota. financial year in which the quantum proceedings are completed in the first instance. In the present case, at the level of the Assessing Officer, the quantum proceedings were completed on 28.12.2007. Going by this date, the penalty order could not have been passed later than 31.03.2008. The second possible date is the expiry of six months from the month in which the penalty proceedings were initiated. With the Assessing Officer having initiated the penalty proceedings in December, 2007, the last date by which the penalty order could have been passed as 30.06.2008. The later of the two dates was 30.06.2008. Thus, impugned penalty order was barred by limitation.” In the instant case, at the level of the Assessing Officer, the quantum proceedings were completed on 31.10.2017. Going by this date, the penalty order could not have been passed later than 31.03.2018. The second possible date is the expiry of six months from the month in which the penalty proceedings were initiated. With the Assessing Officer having initiated the penalty proceedings on 31.10.2017, the last date by which the penalty order could have been passed as 30.04.2018. The later of the two dates was 30.04.2018. Thus, impugned penalty order passed on 26.06.2018 was barred by limitation. The ld. AR of the assessee further placed reliance on the judgment of the Hon’ble Delhi High Court in the case of CIT (TDS) vs. Turner General Entertainment Networks India (P) Ltd., (2024) 168 taxmann.com 634 (Delhi) wherein the Hon’ble High Court has held as under :- In the given context, this was in the beginning of the action for imposition of penalty. The same had commenced earlier with the Assessing Officer determining that there was a cause for such imposition [Para 20] The expression ‘action for imposition of penalty is initiated’ must, thus, clearly refers to the date on which the first introductory step for such action is taken, it must necessarily mean the start of such action. It must mean the commencement of action for imposition of penalty. As noted Shri Manish Sharma, Kota. above, the Assessing Officer had found that it was the admitted case that the assessee had defaulted in deduction of TDS, which it was obliged to do. It had, accordingly, made a reference to the Jt. Commissioner. This was obviously for the purpose of imposition of penalty. The reference, thus clearly marked the first step for initiation of action for imposition of penalty. The show cause notice issued subsequently was to provide the assessee an opportunity to show cause why penalty not be imposed [Para 19]. In the case of Om Prakash Jaiswal v. D.K. Mittal (2000) 3 SCC 171, the Supreme Court had considered the meaning of the expression ‘initiate any proceedings for contempt’ by referring to the dictionary meaning of the said word. [Para 18].
In view of the above facts and respectfully following the judicial precedents narrated herein above, we are of the view that the penalty order passed is barred by limitation and the same is quashed. Thus, we set aside the order of the ld. CIT (A). The ground no.1 of the appeal of the assessee is allowed.
Since we have allowed ground no. 1 by quashing the penalty order, ground no. 2 has become academic in nature, and the same needs no adjudication.
In the result, appeal of the assessee is allowed. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board.