2023 (8) TMI 688 - SCH - Income Tax

Supreme Court dismisses appeals on Income Tax Act penalty, sets precedent on penalty imposition for money transfers

COMMISSIONER OF INCOME TAX (CENTRAL), HYDERABAD Versus C. SWAPNA

The Supreme Court disposed of identical civil appeals concerning the penalty under Section 271D of the Income Tax Act. The Appeals were deemed infructuous ... Penalty u/s 271D - HELD THAT:- While the matters have proceeded upto this Court, in the interregnum acting on the order of the CIT (Appeals) who had remanded the matter back to the file of the AO a fresh order has been passed by the AO holding that the entries made by the assessee were only journal entries; therefore it did not call for imposition of any penalty. The aforesaid order passed by the AO on remand has not been assailed by the Revenue and has thus attained finality. Revenue submits that it is factually correct that on remand, the AO has reversed the imposition of penalty. Nonetheless the question, as to whether, penalty is leviable u/s 271D where transfer of money has taken place through journal entries is a live issue and is required to be adjudicated upon. We are of the view that the issue raised in these appeals have been rendered infructuous because of the subsequent turn of events. As a matter of fact, the same has become academic. Therefore, keeping the question of law open, we deem it appropriate to close the proceedings. Issues involved: Identical civil appeals, imposition of penalty under Section 271D of the Income Tax Act, 1961.Judgment Summary:The civil appeals were heard together as the issues involved were identical. The lead appeal arose from a judgment of the High Court related to an order by the Income Tax Appellate Tribunal for the assessment year 2007-2008. The High Court, based on a previous decision, dismissed the appeal which was then challenged before the Supreme Court through a special leave petition.During the hearing, the respondent's senior counsel raised a preliminary objection stating that the appeals had become infructuous due to subsequent events. The issue pertained to the imposition of penalty under Section 271D of the Income Tax Act. Following a remand by the Commissioner of Income Tax (Appeals), the Assessing Officer reversed the penalty imposition, concluding that the entries made by the assessee were only journal entries and did not warrant a penalty. This order on remand was not challenged by the Revenue and thus became final.The Revenue's counsel acknowledged the reversal of penalty imposition by the Assessing Officer but argued that the question of whether a penalty is leviable under Section 271D when money transfer occurs through journal entries remains a live issue requiring adjudication.After hearing the arguments, the Supreme Court found that the issues raised in the appeals had become infructuous due to subsequent developments and had turned academic. Therefore, while keeping the legal question open, the Court decided to close the proceedings and disposed of the civil appeals without any costs.