DCIT Vs C. Gangadhara Murthy (ITAT Bangalore)
Conclusion: Penalty proceedings under section 271D or 271E were independent proceedings and had nothing to do with assessment proceedings or its outcome. Therefore, CIT(A) was not justified in cancelling the orders imposing penalty on the ground that the assessment proceedings, during the course of which, penalty u/s.271D and 271E were initiated had been held to be invalid.
Held: AO noticed that assessee had taken cash loans in violation of the provisions of Sec.269SS and repaid cash loans in violation of the provisions of Sec.269T and hence penalty proceedings u/s. 271D and 271-E were initiated in the assessment orders for AY 2009-10, 2010-11 & 2011-12. Assessee in the appeals before CIT(A) contended that that the assessment orders in which the penalty proceedings u/s.271D and 271E were initiated were quashed and hence the orders imposing penalty u/s.271D and 271E should also be quashed. CIT(A) accepted the contention and quashed the orders imposing penalty. It was held that so far as imposition of penalty u/s.271D or 271E was concerned, those were independent proceedings and having nothing to do with assessment proceedings or its outcome. Therefore, CIT(A) was not justified in cancelling the orders imposing penalty on the ground that the assessment proceedings, during the course of which, penalty u/s.271D and 271E were initiated had been held to be invalid. Apart from the fact that the order holding the assessments to be invalid had not become final, CIT(A) ought not to have cancelled the orders imposing penalty on this ground. Since, CIT(A) had not adjudicated the matter on merits, the proper course would be to remit the question of imposition of penalty to the CIT(A) for fresh consideration, leaving all aspects open.
