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ITAT: Limitation Period for Penalty Order does not apply to Penalty Proceeding u/s 271D & 271E

Judgment:-

The Banglore Bench of Income Tax Appellate Tribunal (ITAT) held that the limitation period for penalty order does not apply to penalty proceedings under sections 271D and 271E of the Income Tax Act.

Facts of the case:-

The Assessee in the course of assessment proceedings for AY 2009- 10 to 2011-12, AO noticed that the Assessee had repaid cash loans in violation of the provisions of Sec.269T, and hence penalty proceedings under section 271-E were initiated in the Assessment orders for AY 2009-10 dated 3.11.2014 and for AY 2010-11 and 2011- 12 by orders of assessments both dated 3.11.2014. By order dated 13.11.2014 for AY 2009-10 and orders dated 4.12.2015 for AY 2010-11 & 2011-12, orders imposing penalty were passed imposing penalty on the Assessee of a sum of Rs.7,26,00,000, 9,40,80,000 and 13,84,46,711/- respectively for AY 2009-10 to 2011-12.

Interpretation of law & Conclusion:-

The Coram of Vice President N.V. Vasudevan and Accountant member Chandra Poojari in so far as imposition of penalty under section 271D or 271E of the Act is concerned, those are independent proceedings and having nothing to do with assessment proceedings or its outcome. Therefore, the CIT(A) was not justified in canceling the orders imposing a penalty on the ground that the assessment proceedings, during the course of which penalties under section 271D and 271E of the Act were initiated, have been held to be invalid. Apart from the fact that the order holding the assessments to be invalid has not become final, the CIT(A) ought not to have canceled the orders imposing a penalty on this ground.

The ITAT found merit in these appeals by the Revenue. Since the CIT(A) has not adjudicated the matter on merits, the proper course would be to remit the question of imposition of a penalty to the CIT(A) for fresh consideration, leaving all aspects open. The counsel for the Assessee made a prayer that the issue may be set aside to the AO but such request was opposed by the learned DR. The matter has to be remanded only to CIT(A) because the AO has passed a speaking order on merits after considering the submissions of the Assessee.

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