Penalty u/s 271 D of Income Tax Act Passed Beyond 6 Months is Barred by Limitation: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT) of Delhi bench has held that penalty under Section 271 D of the Income Tax Act, 1961 passed beyond 6 months from the end of the month in which the assessment was completed is barred by limitation.

Jagdish Chandra Suwalka,the assessee filed his return income of Rs.3,12,060/- and agriculture income of Rs. 75,200/- on 29 through E-filing which was processed under Section 143(1) at the returned income. Notice under sections 143(2) and 142 were issued on different dates and furnished details as required from time to time.

During the relevant period, the assessee was engaged in trading of Tudi le. wastage of the Sarson plant which is used as a fuel by the bio-bricks manufacturing units. The assessee had shown sales of Tudi amounting to Rs. 12,56,230/- on which a net profit of Rs. 54,970/-only was declared.

The Assessing Officer (AO) held that by applying provisions of section 44AD the net profit @8% l.e. Rs. 100,498/- should have been declared. There is a difference of Rs 45,528/- which the AO added to the income of the assessee and assessment was completed vide order dated 28.12.2017 under section 143(3) of the Act at the total income of Rs. 4,19, 430/-.After completion of the assessment proceeding, the JCIT issued a show cause notice dated 06.11.2018 under Section 271D of the Income Tax Act, 1961.

It was evident that the AO has initiated the penalty proceedings under Section 271D nor is there any reference in the impugned order of getting any reference or request from concerned jurisdictional offices. The AO observed that the assessee had received a cash payment of Rs.47,50,000/- from various persons as per the details given, which is in contravention of Section 2695S of the Income Tax Act. The CIT(A) has not decided the appeal on merits which is contradictory to the mandate of Section 250(6)of the Income Tax Act.

The default of accepting cash over the prescribed limit was noted by the AO and since the assessment proceedings were completed on 28.12.2017, the related financial year ended on 31.03.2018. The first time limit expired on 31.03.2018 and the second time limit, an action for imposition of penalty was taken on 28.12.2017 by the AO when the assessment was completed and six months from the end of that month expired on 30.06.2018 which time limit dearly expires later.

The penalty under section 271D could have been validly imposed only before 30.06.2018 against which, in this case, the impugned penalty was imposed much later 28.05.2019 hence, the same is barred by limitation.

The department contended that this period of 6 months must be reckoned from the date of issue of show cause notice by theJCIT, which was the competent Authority to impose a penalty under Section 271D and since he issued the notice on dated 06.11.2018 and imposed the penalty on 28.05.2019 itself, which was well within the period of 6 months from the month in whichaction for imposition of penalty was taken.

A two-member bench comprising Shri Sandeep Gosain, JM & Shri Rathod Kamlesh Jayantbhai, AM held that the penalty imposed under Section 271Disbarred by limitation under Section 275(1)(c) of the Act and quashed the same.

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Jagdish Chandra Suwalka vs The JCIT , 2023 TAXSCAN (ITAT) 1022 , Shri Mahendra Gargieya , Ms Monisha Choudhary