The Delhi High Court quashed penalty under Section 271D of the Income Tax Act, 1961 on the ground that there was lapse of six months on penalty proceedings on violation of cash transactions under Section 269SS of the Income Tax Act.
The Respondent- Assessee, Rupa Promoters Pvt Ltd is engaged in the business of carrying out land development work and had filed its Return of Income, declaring a loss of Rupees sixty-six thousand. The Assessee’s case was selected for scrutiny through CASS and Notice was issued under Section 143(2) of the Income Tax Act.
During the assessment proceedings, the Assessing Officer (AO) observed that the assessee had received cash aggregating to Rupees five crores from three companies. The AO then passed the assessment order holding that the assessee has violated the provisions of Section 269SS of the Income Tax Act, and consequently, proceeded to initiate penalty proceedings, under Section 271D of the Income Tax Act.
The Income Tax Appellate Tribunal (ITAT) concluded that since the penalty proceedings were initiated in the assessment order itself, therefore, the limitation period will begin to run from end of the month that is the date on which the SCNs under Section 271D of the Income Tax Act were issued.
In the case of JKD Capital and Finlease Ltd, it was held that where the AO has initiated the penalty proceedings in his/her assessment order, the said date is to be taken as the relevant date as far as the Section 275(1)(c) of the Income Tax Act is concerned
A Bench comprising of Justice Manmohan and Justice Manmeet Pritam Singh Arora observed that “The ITAT was correct in law in deleting the penalty imposed by the Additional Commissioner of Income Tax, under Section 271D of the Income Tax Act, on the ground that the penalty order, was passed beyond the time period prescribed by Section 275(1)(c) of the Income Tax Act, the same having been passed after the lapse of six months from the end of the month in which the penalty proceedings were initiated by the AO.”
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