Penalty orders under section 271D for cash loan violations quashed as time-barred beyond six-month statutory limit

ITAT Delhi held that penalty orders u/s 271D for violation of sec 269SS regarding cash receipt of loans were barred by limitation. The tribunal determined that the six-month time limit under sec 275(1)(c) must be calculated from when the AO initiated proceedings by recommending to JCIT on 25/03/2017, making the deadline 30/09/2017. Since penalty orders were passed on 29/11/2017, they exceeded the statutory time limit and were quashed as time-barred.

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Issues:
Appeals challenging penalty orders under section 271D of the Income Tax Act, 1961 for Assessment Years 2009-10 & 2010-11.

Detailed Analysis:

1. Background:
The appeals filed by the Assessee challenge penalty orders under section 271D of the Income Tax Act, 1961 for AY 2009-10 & 2010-11. The penalty orders were passed by the Joint Commissioner of Income Tax, Central Range, Meerut, against cash receipts of loans from a specific individual.

2. Legal Provision and Timeline:
The issue revolves around the timeliness of the penalty order under section 271D. The relevant provision, section 275(1)(c), sets a time limit for passing penalty orders. In this case, the penalty order was passed on 29/11/2017, and the critical date for determining timeliness was 30/09/2017, six months from the initiation of penalty proceedings by the Assessing Officer.

3. Interpretation of Timeliness:
The Tribunal emphasized that the time limit for penalty proceedings starts from the initiation by the Assessing Officer, not from the date of the first notice by the Joint Commissioner. The penalty order dated 29/11/2017 was found to be beyond the statutory time limit of 30/09/2017, rendering it barred by limitation under section 275(1)(c) of the Act.

4. Precedent and Judicial Interpretation:
The Tribunal cited a case where the High Court held that the initiation of penalty proceedings by the Assessing Officer is the relevant starting point for determining the time limit. The Court clarified that the date of the Assessing Officer's recommendation for penalty proceedings triggers the limitation period, not the date of the Joint Commissioner's notice.

5. Conclusion and Decision:
Relying on the legal principle established by the High Court precedent, the Tribunal concluded that the penalty orders dated 29/11/2017 for both assessment years were barred by limitation and, therefore, liable to be quashed. The Tribunal allowed the appeals of the Assessee based on the limitation issue, without giving an opinion on the merits of the penalty.

6. Final Outcome:
Both appeals of the Assessee were allowed, and the penalty orders were quashed on the grounds of being time-barred. The decision was pronounced in the open court on 24th November 2023.

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