Section 271E – Order passed u/s. 271E levying penalty for violation of provisions of section 269T was required to be passed within six months from the end of the month in which penalty proceedings were initiated.

The assessment of total income was completed vide order dated 28th December, 2007 passed u/s. 143(3) of the Act. In the assessment order, the Assessing Officer (AO) initiated penalty proceedings u/s. 271E of the Act. The assessee preferred an appeal against the order dated 28th December, 2007. Upon dismissal of the appeal by CIT(A), the AO referred the matter regarding penalty under section 271E to the Additional Commissioner of Income-tax who issued a show cause notice on 12th March, 2012.

Order levying penalty u/s. 271E was passed on 20th March, 2012. Aggrieved by the order levying penalty, the assessee preferred an appeal to the CIT(A) who allowed the appeal on the ground that the penalty order was time barred. Aggrieved, the assessee preferred an appeal to the Tribunal.

HELD

The Tribunal noted that the stand taken by the CIT(A) in holding that the impugned penalty order is time barred on the ground that section 275(1)(c) of the Act will apply in the cases of penalty for violation of section 269SS, has been approved by the Delhi High Court in the case of CIT vs. Worldwide Township Projects Ltd. [2014] 367 ITR 433 (Del). The Tribunal noted that the Delhi High Court had made a mention of the decision of the Rajasthan High Court in the case of CIT vs. Hissaria bros. [2007] 291 ITR 244 (Raj.) expressing a similar view. It noted the following observations of the Delhi High Court:

“We are, therefore, of the opinion that since penalty proceedings for default in not having transactions through the bank as required under sections 269SS and 269T are not related to the assessment proceeding but are independent of it, therefore, the completion of appellate proceedings arising out of the assessment proceedings or other proceedings during which the penalty proceedings under sections 271D and 271E may have been initiated has no relevance for sustaining or not sustaining the penalty proceedings and, therefore, clause (a) of sub-section (1) of section 275 cannot be attracted to such proceedings. If that were not so clause (c) of section 275(1) would be redundant because otherwise as a matter of fact every penalty proceeding is usually initiated when during some proceedings such default is noticed, though the final fact finding in this proceeding may not have any bearing on the issues relating to establishing default, e.g. penalty for not deducting tax at source while making payment to employees, or contractor, or for that matter not making payment through cheque or demand draft where it is so required to be made. Either of the contingencies does not affect the computation of taxable income and levy of correct tax on chargeable income; if clause (a) was to be invoked, no necessity of clause (c) would arise.”

The Tribunal, following the ratio of the decision of the jurisdictional High Court, held that the penalty order was barred by limitation as the penalty order was passed beyond six months from the end of the month in which penalty proceedings were initiated in the month of December 2007 and the penalty order was thus required to be passed before 30th June, 2008, the penalty order was in fact passed on 20th March, 2012. The date on which the CIT(A) has passed order in the quantum proceedings had no relevance as it did not have any bearing on the issue of penalty.

The appeal filed by the revenue was dismissed.