Penalty Order Quashed Due to Time Limit Breach Under Income Tax Act; Appeal Decided for Assessee.

The Tribunal determined that the penalty order dated 29/03/2022 was barred by limitation, as it was issued beyond the statutory time frame outlined in section 275(1)(c) of the Income Tax Act, 1961. Consequently, the orders under section 271D were quashed, and the appeal was allowed in favor of the assessee.

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Issues involved:
The main issue in this case is whether the penalty order under section 271D of the Income Tax Act, 1961 is barred by limitation.

Summary:

Issue 1 - Limitation for passing penalty order under section 271D of the Act:
The appellant argued that the penalty order is barred by limitation as per section 275(1)(c) of the Act, which states that no penalty order under Chapter-XXI, including under section 271D, could be passed after the expiry of the financial year in which the penalty proceedings were initiated. The notice under section 271D was issued on 16/03/2020, and the penalty order was passed on 15/03/2022, exceeding the time limit.

Issue 2 - Interpretation of limitation period:
The Revenue contended that the penalty order was within the limitation period, which they claimed to be one year from the end of the financial year in which the penalty proceedings were initiated. However, the appellant argued that the order was passed after more than two years from the initiation of penalty proceedings, thus exceeding the statutory time limit.

Issue 3 - Assessment year and penalty proceedings:
It was revealed during the scrutiny of the return for the assessment year 2017-18 that there was a violation of section 269SS of the Act related to the assessment year 2016-17. The assessment order for 2017-18 was issued on 04/12/2019, and the notice under section 271D was served on 16/03/2020, with the penalty order being passed on 15/03/2022.

Conclusion:
The Tribunal held that the penalty order dated 29/03/2022 was indeed barred by limitation as it was passed after the statutory time limit prescribed under section 275(1)(c) of the Act. Therefore, the impugned orders were quashed, and the appeal of the assessee was allowed.

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