Penalty notice issued after completion of assessment proceedings illegal. Where no proceedings relevant to assessment year are pending penalty notice was issued is bad in law – ITAT
ABCAUS Case Law Citation:
ABCAUS 2043 (2017) (08) ITAT
The Revenue has filed an appeal against the Order passed by CIT(A) deleting the penalty u/s 271D of the Income Tax Act, 1961 (the Act) imposed by the Assessing Officer (AO).
Assessment Year : 2009-10
Brief Facts of the Case:
During the course of assessment proceedings, it was found that the assessee had received cash amounting to Rs. 20,00,000/- from his sister other than by way of account payee cheque/ draft in contravention of provisions of Section 269SS of the Act. Accordingly, he issued a show cause notice in this regard. In spite of opportunity given to the assessee to present his explanations, he did not attend nor submitted his reply.
Hence, the AO presumed that the assessee had no explanation to offer. Thus, he imposed penalty equal to the said amount of Rs. 20,00,000/- (Rupees Twenty Lacs Only) on the assessee vide order passed u/s 271D of the Act.
Against the aforesaid penalty order, the assessee appealed before the CIT(A), who vide his impugned order deleted the penalty in dispute and allowed the appeal of the assessee.
CIT(A) had elaborately discussed the issue in dispute.
Before him the assessee had raised the issue of non issuing of show cause notice during assessment proceedings. It had been contended that the 1st notice was issued by the AO on 05/07.05.2014 where as the assessment was completed on 30.11.2011. As such, the penalty notice should have been issued during the pendency of assessment proceedings.
The assessee pointed out that the ITAT Mumbai Bench had held as “Where no proceedings relevant to that assessment year is pending when penalty notice was issued, is bad in law”. Relying on the said decision, the assessee had prayed that the penalty notice issued after completion of assessment proceedings be held as illegal.
CIT(A) noted the contradiction of facts wherein at one place, the show cause notice was mentioned to be issued on 05/07.05.2014 and at other place it was mentioned to be issued on 28.04.2015.
Adjudicating on the above grounds raised by the assessee, the CIT(A) gave a finding that the assessment order in this case was passed on 30.11.2011. No notice u/s. 271 D was issued during the pendency of the proceedings. The show cause notice was issued only on 05/07.05.2014. Hence the CIT(A) held that the order was infructuous and accordingly he quashed the penalty order and allowed this ground of appeal.
Before the CIT(A) the assessee had also challenged the legality of order passed for imposition of penalty u/s 271D on the ground of it being time barred u/s 275(1)(c) as it was passed after 6 months from issue of 1st notice which was issued on 05/07.05.2014. The penalty order should have been passed within 6 months i.e. upto 30.11.2014 whereas it was passed on 28.04.2015, after 11 months. The assessee had relied on the judgment of the Hon’ble High Court of Rajasthan. However, in view of the penalty order having already been held illegal as above, the CIT(A) did not adjudicate this ground of appeal.
The last ground of appeal before the CIT(A) was that the appellant had received the said amount as Ammanat from his Sister which was duly accepted by her before the AO in her statement recorded by the AO during the course of assessment and was also duly explained in compliance to show cause notice issued u/s 271D & 271E by the AO. The amount was received as Ammanat and duly been given back to the Sister. It was contended that the amount received as Ammanat could not be treated as acceptance of loan in view of the judgment of the Hon’ble Punjab & Haryana High Court. However, in view of the penalty order having already been held illegal as above, the CIT(A) did not adjudicate this ground of appeal.
Observations made by the Tribunal:
The ITAT observed that the assessment order was passed on 30.11.2011 and the AO has not issued any notice to the assessee u/s 271D of the Act during the pendency of the assessment proceedings.
The show cause notice was issued only on 28.04.2015, therefore, the penalty in dispute was rightly quashed by the CIT(A) by respectfully following the order of the ITAT, Mumbai Bench wherein, it had been held that “Where no proceedings relevant to that assessment year is pending when penalty notice was issued, is bad in law.”
Thus, the ITAT upheld the decision of the CIT(A)
Since the ITAT upheld the action of the CIT(A) on quashing the penalty order, the penalty in dispute did not survive and the appeal filed by the Revenue was dismissed.