TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 1792
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....Section 271D of the Income-tax Act, 1961 ('the Act'), without appreciating that the said amount was already assessed as unexplained cash credit under Section 68 of the Act, thereby losing its character as a 'loan' or 'deposit' within the meaning of Section 269SS, making the imposition of penalty under Section 271D legally unsustainable. 2. That the learned CIT (A) has failed to appreciate that once the amount in question has been treated as the appellant's own income under Section 68 of the Act, it ceases to be a 'loan' or 'deposit' received from a third party, thereby rendering Section 269SS inapplicable, as upheld by various judicial precedents. 3. That the learned CIT (A) has erred in law and on facts in confirming the penalty under Section 271D without considering that the learned Assessing Officer ('AO') has also initiated penalty proceedings under Section 271(1)(c) of the Act for alleged concealment of income on the same amount, thereby subjecting the appellant to double jeopardy, which is contrary to settled legal principles and in gross violation of the principles of natural justice. 4. That the learned CIT (A) has failed to appreciate that the ca....
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....s erred in law and on facts in failing to appreciate that even assuming without admitting that the transactions in question fall within the purview of Section 269SS, the levy of penalty under Section 271D is discretionary and not automatic, and considering the peculiar facts and circumstances of the case, the imposition of penalty was wholly unjustified. 11. That the learned CIT (A) has failed to appreciate that the appellant had a reasonable cause under Section 273B of the Act for accepting cash transactions, as the real estate business inherently involves immediate cash dealings due to market practices and lack of access to institutional financing, and therefore, no penalty under Section 271D ought to have been levied. 12. That without prejudice to the foregoing grounds, the penalty of Rs.43,69,500/- imposed under Section 271D is excessive, arbitrary, and highly disproportionate, and therefore, liable to be reduced in the interest of justice. 13. That the appellant craves leave to amend or alter any ground or add a new ground which may be necessary. Prayer The appellant, therefore, prays that the Hon'ble Tribunal may kindly: a. Delete the penal....
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....sed. 6. Aggrieved with the order of Ld. CIT(A), the assessee is now in appeal before us. The Ld. AR began by challenging the penalty order on the ground of limitation prescribed under section 275(1)(c) of the Act. He submitted that as per the said provision, no order imposing a penalty shall be passed after the expiry of the financial year in which the proceedings, in the course of which the penalty action was initiated, are completed, or six months from the end of the month in which the action for imposition of penalty is initiated, whichever period expires later. He further submitted that, in the present case, the penalty proceedings were initiated by the Learned Assessing Officer ("Ld. AO") on 18.01.2017. Therefore, the last date for passing the penalty order would be 31.07.2017, being six months from the end of the month in which penalty proceedings were initiated. Since the order was passed on 31.08.2017, it is barred by limitation and liable to be quashed. 7. Per contra, the Learned Departmental Representative ("Ld. DR") submitted that under section 271D of the Act, only the Joint Commissioner (including the Ld. Addl. CIT) is empowered to impose a penalty, and therefore....
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.... Revenue that the initiation of penalty should be reckoned from the date of show cause notice issued by the Ld. Addl. CIT, i.e., 14.02.2017, is incorrect. He relied heavily on the decision of the Hon'ble Karnataka High Court in the case of PCIT vs. K. Umesh Shetty [170 taxmann.com 748], wherein, after considering the decision of Hon'ble Kerala High Court in Grihalakshmi Vision vs. Addl. CIT and CBDT Circular No. 09/DV/2016 dated 26.04.2016, it was held that the reference by the Ld. AO to the Ld. Addl. CIT would be the triggering point for initiation of penalty proceedings. He further argued that, this judgment of the Hon'ble Karnataka High Court, being later in time (dated 17.01.2025) and after the CBDT circular, should prevail in the present case. Accordingly, the Ld. AR submitted that, the order passed by the Ld. Addl. CIT is barred by limitation and liable to be quashed. 10. Further, as regards the Revenue's alternate contention of exclusion of certain time periods under Explanation (i) to section 275 of the Act, the Ld. AR argued that such exclusion is permissible only when there is a specific request from the assessee to the succeeding officer for rehearing in accordan....
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....pect of any proceeding under this Act an income-tax authority ceases to exercise jurisdiction and is succeeded by another who has and exercises jurisdiction, the income-tax authority so succeeding may continue the proceeding from the stage at which the proceeding was left by his predecessor: Provided that the assessee concerned may demand that before the proceeding is so continued the previous proceeding or any part thereof be reopened or that before any order of assessment is passed against him, he be reheard." 12. On perusal of above, it is abundantly clear that, where there is a change of incumbent, the succeeding officer shall give the assessee an opportunity of being reheard, and if such an opportunity is demanded by the assessee, the time so taken shall be excluded in computing the limitation. In the present case, the Revenue has not been able to produce any evidence to demonstrate that the assessee had specifically requested for rehearing under section 129 of the Act. The exclusion contemplated in the Explanation (i) to section 275 of the Act applies only when there is such a request. In this regard, we have gone through the decision of the Hon'ble Patna High Cou....
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....h Court has dealt with the issue, which is to the following effect : "6.7 In the facts of this case, these twin purposes can be achieved by treating the reference by the ITO to the Additional Commissioner as the triggering point or initiation of penalty proceedings. The ITO vide letter dated 16.11.2016 had admittedly made the reference. The Additional Commissioner of Income Tax issued the Show Cause Notice only on 10.11.2017 (nearly a year later) proposing the levy of penalty u/s 271D of the Act. The Penalty Order was made on 22.02.2018. If the reckoning point is 16.11.2016, it is clear that the proceedings were completed beyond the period of limitation, as rightly contended by the learned counsel appearing for the Assessee. Even otherwise, the concept of delay & latches would crop in; no explanation whatsoever has been offered by the Revenue for the laxity shown in belatedly issuing the show cause notice / proposition notice which they claim, amounted to initiation of penalty proceedings. This view has animated the reasoning of the impugned order of the Tribunal, may be a bit inarticulately. 6.8. The reliance of Panel Counsel for the Revenue on the Coordinate Ben....
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....is and foundation of the proceedings for levy of penalty". 6.9 The reliance of the Panel Counsel on CBDT Circular No. 9/DV/2016 dated 26.04.2016 has been issued in terms of GRIHALAKSHMI supra. Para 4 of the Circular states: The above judgment reflects the "Departmental View". However, para 5 in a way suggests to follow the decision of a High Court, within whose territorial jurisdictional limits the penalty proceedings are taken up. The same reads as under: "Where any High Court decides this issue contrary to the "Departmental View", the "Departmental View" thereon shall not be operative in the area falling in the jurisdiction of the relevant High Court. However, the CCIT concerned should immediately bring the judgment to the notice of the Central Technical Committee. The CTC shall examine the said judgment on priority to decide as to whether filing of SLP to the Supreme Court will be adequate response for the time being or some legislative amendment is called for." " 15. On perusal of above we found that, the Hon'ble Karnataka High Court in PCIT vs. K. Umesh Shetty (supra), after considering the decision of Hon'ble Kerala High Court as well as the CBDT Cir....