2015 (9) TMI 111

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....ted the first appellate order on the basis that on the facts and circumstances of the case and in law the Ld. CIT(A) has erred in holding that penalty of Rs. 14,25,74,302/- levied u/s 271D by the AO was not barred by limitation on the basis of his decision that provisions of section 275(1)(a) would apply and not the provisions of section 275 (1)(C) of the Act. 3. Since the issue raised in the cross objection is legal in nature and goes to the root of the matter, we prefer to adjudicate upon this issue first. 4. The facts in brief are that assessee is engaged in development of real estate. During the course of assessment proceedings the AO noted that the assesee has shown purchase of land worth Rs. 14.22 crores in its profit and loss a....

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....ure. AO further observed that although the loan is not directly given to the assesee it has been given on behalf of the assessee to some parties and the assesee has to refund the amount to PACL India Ltd. The AO accordingly held that the same partakes the nature of loan and is not a credit transaction. The AO noted that the said loan has not been given by account payee cheque or account payee bank draft but has been transferred to the loan account of the assessee by adjustment of general entries only on the basis of the loan transactions as per balance sheet of the assessee there are no bank transactions, the provisions of section 269SS/269T are applicable. He accordingly initiated the penalty proceedings u/s 271D of the Act. In the order p....

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...., the financial year in which proceedings for imposing penalty are initiated expires on 30.3.2010, the first notice for levying penalty was issued on 12.5.2010 ( there is no reference of these date in the assessment order) ; counting from this, 6 months will expire on 30.11.2010 ; the first reference to show cause notice given by the AO in the penalty order is 7.3.2011 ; 6 months from this date will expire on 30.9.2011; and the date of the penalty order is 10.3.2012. Referring the provision laid down u/s 275 of the Act, the Ld. AR submitted that the penalty can be imposed before the expiry of the financial year in which the proceedings, in the course of which action for the imposing of penalty has been initiated, are completed, or six month....

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....imit for passing the penalty order. 7. Having gone through the orders of the authorities below, material available on record and the decisions relied upon, we find that the Hon'ble Rajasthan High Court in the case of CIT vs. Hissaria Bros (supra) on an identical issue has been pleased to hold that since penalty proceedings for the default of not having a transaction through the bank as required under sections 269SS and 269T are not related to the assessment proceedings but are independent thereof, the completion of appellate proceedings arising out of the assessment proceedings or other proceedings during which the penalty proceedings u/s 271D and 271E may have been initiated, has no relevance for sustaining or not sustaining the penalty....

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....ty should have been passed within six months from the end of the month in which the assessment was completed. Respectfully following this decision of Hon'ble Rajasthan High Court the Delhi Bench of the Tribunal in the case of Ashwani Kumar vs. ITO (supra) has held the penalty levied u/s 271 (1) of the Act as time barred within the provisions of clause (c) of section 275 (1) of the Act. In that case the action for imposition of penalty was initiated on 10.1.2003 and the order was passed u/s 271D by the Additional Commissioner on 29.12.2003 / 15.1.2004 which was held beyond the period of limitation prescribed u/s 275(1)(c) of the Act. Respectfully following the above cited decisions we hold that the provisions under clause (c) of section 275 ....