2016 (4) TMI 128 - AT - Income Tax

Tribunal Upholds Section 271D Penalty, Nullifies Section 271E Penalty in Tax Case

The Tribunal held that the penalty order under Section 271D of the Income-tax Act was not time-barred as it was within the prescribed limit. The penalty ... Penalty levied u/s 271D - whether the order is time barred - Held that:- The last date before which the penalty order u/s 271D could have been passed by the Revenue was 31.03.2014 and the date of passing the order u/s 271D of the Act is 28.03.2014, which is well within the time limit prescribed under the provisions of Section 275(1)(a) of the Act. We are, therefore, of the view that the order u/s 271D is not time-barred and is valid. We, therefore, dismiss first ground of the appeal of the assessee. Section 269SS of the Act are squarely applicable on the cash loan transactions made by the assessee by way of taking cash loans from his brother’s proprietary concern M/.s Karamyog Commercial Corporation. Further, the learned Authorized Representative’s contention that the assessee should be given immunity from the harsh provisions of Section 271D by covering him u/s 273B of the Act as the assessee has reasonable cause for the said failure. We cannot agree with this contention because the assessee and his brother, both are having their bank accounts in Surat City and both of them are not agriculturists. They are regularly filing their return of income. Therefore, there cannot be any reasonable cause for such failure. In these circumstances, there do not seem to be any way out for the assessee to get away from the penalty u/s 271D and therefore, we do not find any reason to interfere with the order of the learned CIT(A) - Decided against assessee Penalty u/s 271E - Held that:- From going through the above provisions of Section 269T, we find that this section is applicable only on repayment of any loan or deposit taken by the assessee and looking to the facts of the case, we find that at the time of repayment in cash there was no unsecured loan standing in the books of assessee for which repayment have been made; rather the balance of ledger account of M/s. Karmayog Commercial Corporation was already standing as debit balance and even all through the period when cash payment of ₹ 5,13,440/- was made, the account of M/s. Karmayog Commercial Corporation never came under the unsecured loan category. We are, therefore, of the view that in such situation the assessee should not be visited with penalty u/s 271E of the Act, because the assessee has not made any contravention to the provision of Section 269T of the Act. - Decided in favour of assessee Issues Involved:1. Whether the initiation of penalty proceedings under Section 271D of the Income-tax Act was time-barred.2. Whether the penalty levied under Section 271D of the Income-tax Act was justified.3. Whether the initiation of penalty proceedings under Section 271E of the Income-tax Act was time-barred.4. Whether the penalty levied under Section 271E of the Income-tax Act was justified.Issue-wise Detailed Analysis:1. Whether the initiation of penalty proceedings under Section 271D of the Income-tax Act was time-barred:The assessee argued that the penalty order under Section 271D was time-barred as per Section 275(1)(c) of the Act, which mandates that no penalty order shall be passed after the expiry of the financial year in which the proceedings are completed, or six months from the end of the month in which the action for imposition of penalty is initiated, whichever is later. The penalty order was passed on 28.03.2014, while the assessee contended it should have been passed on or before 30.09.2013. However, the Tribunal found that the penalty order dated 28.03.2014 was within the time limit prescribed under Section 275(1)(a), as the last date for passing the order was 31.03.2014. Thus, the order was not time-barred and was valid.2. Whether the penalty levied under Section 271D of the Income-tax Act was justified:The assessee received cash loans aggregating to Rs. 7,50,000 from his brother's proprietary concern, which was used for repaying personal loans. The CIT(A) confirmed the penalty under Section 271D for contravention of Section 269SS, which prohibits accepting loans exceeding Rs. 20,000 in cash. The Tribunal upheld the penalty, noting that the assessee and his brother had bank accounts and there was no reasonable cause for accepting cash loans. The Tribunal emphasized that the provisions of Section 269SS are to regulate transactions and not merely to counteract tax evasion. The assessee's failure to provide a reasonable cause for accepting cash loans meant the penalty under Section 271D was justified.3. Whether the initiation of penalty proceedings under Section 271E of the Income-tax Act was time-barred:The Tribunal applied the same reasoning as in the case of Section 271D to conclude that the penalty order under Section 271E was not time-barred. The initiation of penalty proceedings and the subsequent order were within the permissible time limits as prescribed by Section 275(1)(a).4. Whether the penalty levied under Section 271E of the Income-tax Act was justified:The penalty under Section 271E was imposed for repaying loans in cash aggregating to Rs. 5,13,440 to M/s. Karmayog Commercial Corporation. The Tribunal found that the repayments were made when the account of M/s. Karmayog Commercial Corporation was in debit balance, not under the unsecured loan category. Therefore, the provisions of Section 269T, which apply to the repayment of loans or deposits, were not applicable. Consequently, the penalty under Section 271E was not justified, and the Tribunal allowed this ground of appeal.Conclusion:The appeal regarding the penalty under Section 271D was dismissed, affirming the penalty. The appeal concerning the penalty under Section 271E was partly allowed, nullifying the penalty. The Tribunal's decision was pronounced on 1st April 2016 at Ahmedabad.