Devang Ajit Jhaveri Vs JCIT (ITAT Mumbai)
Limitation for 271D/271E penalties starts from the AO’s satisfaction recorded in assessment order, not from JCIT’s notice
Mumbai ITAT has delivered a significant ruling where it quashed penalty orders passed u/s 271D & 271E on the ground of limitation & also struck down a reassessment notice issued for AY 2016-17 as invalid for want of proper sanction under the amended regime of Section 151. Tribunal also dismissed a Revenue appeal on account of low tax effect, thereby providing clarity on three distinct issues relating to penalty, limitation, & reassessment jurisdiction.
Assessee was subjected to reassessment proceedings for AY 2011-12, where AO noticed cash loans accepted of ₹42.50 lakh & cash repayments of ₹34.50 lakh. This triggered penalty proceedings u/s 271D & 271E. JCIT ultimately levied penalties through orders dt 11.03.2020.Separately, Revenue appeals were filed against relief granted by NFAC, Delhi, in respect of AYs 2013-14 & 2016-17.
Issue 1: Penalties u/s 271D & 271E (AY 2011-12)
The assessment was completed u/s 143(3) r.w.s. 147 on 28.12.2018. AO recorded satisfaction regarding violation of Sections 269SS/269T & referred the matter to JCIT. JCIT issued notice on 26.09.2019 & levied penalty on 11.03.2020.
Tribunal’s Analysis
Section 275(1)(c) prescribes two possible limitation periods: (i) up to the end of the financial year in which the assessment proceedings are completed, or (ii) within six months from the end of the month in which penalty proceedings are initiated—whichever is later. In this case, penalty proceedings were initiated during assessment concluded on 28.12.2018. Hence, limitation expired on 30.06.2019. The penalty order dated 11.03.2020 was passed much beyond this period. Reliance was placed on Delhi High Court rulings in PCIT v. Rishikesh Buildcon (147 taxmann.com 220), PCIT v. Thapar Homes Ltd. (159 taxmann.com 450), & Calcutta High Court in CIT v. Narayani & Sons Pvt. Ltd. (73 taxmann.com 21). Tribunal held that Penalties u/s 271D & 271E were barred by limitation & stood quashed.
