DCIT Vs Jayapriya Company (ITAT Chennai)
Chennai Bench of the Income Tax Appellate Tribunal held that the penalty order issued under section 271D of the Income Tax Act, 1961 was barred by limitation as per section 275(1)(c). The assessee’s assessment order was passed on 30.12.2022, with prior approval of the Additional CIT, and contained specific satisfaction recorded by the Assessing Officer for alleged violation of section 269SS. Applying CBDT Circular No. 10/2016 dated 26.04.2016, the Tribunal observed that the period of limitation for imposing penalty must be reckoned from the date of recording of such satisfaction by the Assessing Officer, not from the date of notice issued by the Joint or Additional CIT. The penalty order dated 30.08.2023 was, therefore, passed beyond the permissible time limit of 30.06.2023 and hence was time-barred. The Tribunal clarified that recording of satisfaction by the Assessing Officer is a mandatory precondition for initiation of penalty proceedings, even though he is not the competent authority to impose the penalty. It further held that the Joint or Additional CIT cannot extend the limitation period by issuing notice at their convenience. Referring to the Supreme Court’s decision in CIT v. Jai Laxmi Rice Mills Ambala City and other precedents, the Tribunal ruled that the phrase “action for imposition of penalty is initiated” refers to the recording of satisfaction by the Assessing Officer. Consequently, the penalty was quashed, and the assessee’s cross-objection was allowed.
