TaxTMI 
TaxTMI 
2025 (12) TMI 1901
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....als were discovered, which according to the Revenue revealed that assessee had received cash loan of Rs.15,50,000/-, Rs.1,50,00,000/- and Rs.1,22,23,000/- for AYs 2016-17, 2017-18 & 2019-20 respectively from Shri Kalyanasundaram, which was admitted by the searched person in his sworn statement recorded u/s.132(4) of the Act. Based on the aforesaid facts, the AO initiated penalty proceedings u/s 271D against the assessee for accepting cash in violation of Section 269SS of the Act, but didn't pass any assessment order against assess for those AY's. Pursuant to the AO's letter to Addl./Joint Commissioner of Income Tax dated 21.04.2022 in this regard for penalty, the Addl/JCIT in-turn by letter dated 29.04.2022, forwarded the same to the 'Faceless Unit' which gave notice of penalty u/s.271D on 10.06.2022; and thereafter, the Income Tax Authority acknowledges that assessee replied by letter dated 29.08.2022, wherein he denied receiving any loan in cash from Shri Kalyanasundaram. Not satisfied with the reply of assessee, and holding the denial of assessee to have received cash loan from searched person to be self serving, the Income Tax Authority finally levied penalty u/s.271D of the Ac....
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....t. The letter stated that despite evidence from the seized material, the appellant didn't admit to it during the Kalyana Sundaram assessment. However, the DCIT did not specify the nature of this evidence in the letter. The assessee understands this evidence to be a sworn statement from the person searched and seized under Section 132 on March 6, 2019, and some loose sheets recovered during that operation. There is no other evidence known to the assessee in this context. d) The Penalty Levied by the CIT(A) u/s.271 Dis. bad in law. As per Section 271D (1) If a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted (2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner. In the present case, the impugned penalty order has been passed by Assessing Officer (AO) which is confirmed by CIT(A), who is not empowered under the Act to initiate or impose penalty under section 271D. The AO does not have the statutory jurisdiction to levy this penalty. Hence, t....
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....ound (q) and (r)supra, on question of law challenging the validity of the penalty order passed u/s 271Dof the Act for the subject AY for the first time before Your Authority. The Hon'ble Supreme Court in the case of National Thermal Power Co. Lid. v. CIT [1998] 97 Тахmaп 358/229 ITR 383 had very clearly held that legal grounds can be raised at any time, including proceedings before the appellate authorities. 6. At the time of hearing, it was brought to our notice that, the assessee raised a legal issue in additional Ground No. 'r' challenging the validity of the penalty order on the ground of being barred by limitation and contented that if this legal issue is found to be valid, it goes to the root of the jurisdiction to levy the impugned penalty. Hence, we take it up first for adjudication. 7. The Ld.AR Shri Shrenik Chordia, CA appearing for the assessee assailed the action of the Income Tax Authority (Faceless Income Tax Unit) levying penalty on 31.08.2023, submitted that the time-limit for levying penalty u/s 271D of the Act is governed by Section 275(1)(c) of the Act, which reads as under:- "275(1) No order imposing a penalty under thi....
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.... and reported judicial decisions. In the opinion of the Ld. AR, generally the date on which 'action for imposition of penalty is considered as initiated' is to be reckoned is with reference to the date on which the AO recorded his satisfaction in the assessment order for initiation of penalty u/s 271D of the Act (in the present case, it is absent as noted supra). Further, he submitted that, in order to levy penalty, the Constitutional Courts have consistently held that, there has to be a satisfaction recorded by the AO in the assessment order for the Jt/Addl. CIT to levy penalty u/s.271D of the Act and in absence of the same, any show cause issued or order passed by the Jt/Addl.CIT is void in the eyes of law, which is his alternate plea. In such factual background, the date on which the penalty is initiated is the date on which the AO records his satisfaction in the assessment order. In support of his contention, the Ld. AR relied on a series of decisions as under:- - CIT v. Jai Laxmi Rice Mills Ambala City [2015] 64 taxmann.com 75 (SC) - Grandhi Sri Venkata Amarendra v. JCIT [2024] 167 taxmann.com 352 (Andhra Pradesh) - Sunil Agarwal v. ACIT [2025] 172 t....
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....gal issue. 11. Heard both the parties. In order to adjudicate this legal issue, it is first relevant to cull out the legal provisions and relevant jurisprudence governing the law of limitation in the cases of penalty u/s 271D / 271E of the Act. It is observed that, the time limit for levying penalty u/s 271D/271E is governed by section 275 of the Act which provides the period by which the order imposing the penalty is required to be passed. Clause (a) of sub-section (1) deals with limitation in case of penalties initiated in the assessment or other orders based on quantum of additions made in such orders. Clause (b) covers penalties initiated in the assessment or other orders which are the subject matter of revision u/s 263 or 264. Clause (c) covers other cases viz., penalty proceedings in other cases. It is seen that, the CBDT in their Circular No. 10/2016 (supra) has clarified that, the time limits laid down in Section 275(1)(c) would apply for levying penalty under section 271D / 271E of the Act. The relevant portion of the Circular (supra) is reproduced as under: "The issue whether the limitation for imposition of penalty under sections 271D and 271E of the Income-t....
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....gs is initiated and (b) six months from the end of the month in which the penalty is initiated, whichever is later. Hence, the crucial aspect which is to be examined is which date is to be considered as the date on which 'action for imposition of penalty is considered as initiated'. According to the Ld. AR, in the present case, since there is no assessment framed in the hands of the assessee, the first limb of Section 275(1)(c) of the Act is not applicable. In this regard, we note that there was no proceeding in the course of which action for initiation of penalty u/s.271D of the Act was undertaken by the AO. In other words, there was no assessment proceeding in the course of which action for initiation of penalty u/s.271D of the Act was undertaken by the AO. Hence, the time-limit prescribed in the first limb is not applicable in the facts of these cases. Having held so, we note that the AO made reference to the Addl./JCIT on 21.04.2022, who in turn had intimated the "Faceless Penalty Unit" to proceed further vide letter dated 29.04.2022; and pursuant to it, they issued notice dated 10.06.2022 and then levied penalty in the month of December, 2022. According to the Ld.DR, since the....