Penalty proceedings u/s 271D & 271E held invalid as no proceedings pending.ITAT

Facts in brief:

1. On appeal Before CIT(A) , it held,

(a) Penalty proceedings u/s 271D are independent from assessment order.

(b) That even if assessment order is quashed, the penalty order will not be affected passed on the basis of such assessment order.

(c) Penalty proceedings u/s 271D did not arise from assessment order ignoring the fact section 269SS and section 271D are part and parcel making the penalty order invalid.

(d) That there was no reasonable cause for making the payment in cash on the ground of non-furnishing of evidence.

On appeal ITAT held,

2. We find that the same is on the basis of fresh assessment order passed by the Assessing Officer u/s 144/263 on 28/12/2011, which does not survive because the order of learned CIT u/s 263 was set aside by the Tribunal and therefore, the consequential order of the Assessing Officer u/s 144/263 does not survive.

3. It is also seen that the notice u/s 271D was issued on 11/05/2012 and 12/10/2012 and the order u/s 271D was passed on 27/11/2012. After noting these facts, we now examine the applicability of the Tribunal order rendered in the case of Baldev Singh (supra).

4. The issue before the Tribunal in that case was as to whether, where no proceedings were initiated or pending in respect of the captioned assessment year, penalty proceedings u/s 271D or 271E can be initiated.

5. It was held by the Tribunal in this case that the penalty proceedings in assessment year 2005-06 u/s 271D and 271E were initiated while completing the assessment relating to assessment year 2007-08 and therefore, there is no merit in the said initiation of penalty proceedings u/s 271D and 271E of the Act relating to assessment year 2005-06.

6. The Tribunal has referred to a judgment of Hon'ble Punjab & Haryana High Court rendered in the case of CIT vs. Manohar Lal Thakral in I.T.A. No.812 of 2010 dated 14/01/2011.

7. In this case, the question before Hon'ble High Court was as to whether the initiation of proceedings u/.s 271E were legal or illegal as no proceedings were pending before the Assessing Officer and Hon'ble High Court upheld the finding recorded by the Tribunal as per which it was held by the Tribunal that the grievance of the assessee is correct because the penalty proceedings were initiated by the Assessing Officer on the basis of finding in the case of assessee's wife.

8. The Tribunal held that there is no merit in initiation of penalty proceedings u/s 271D and 271E because no proceedings for the relevant year were pending at the relevant point of time. In the present case also, when proceedings were initiated u/s 271D on 01/05/2012, no proceedings were pending in respect of the present assessment year.

9. In fact, the original assessment order was passed by the Assessing Officer u/s 143(3) on 08/10/2009 and subsequent assessment year u/s 144/263 was also already passed on 28/12/2011 and this is admitted position that in course of original assessment proceedings completed on 08/10/2009, there was no whisper about initiation of proceedings u/s 271D of the Act.

10. In our considered opinion, under the facts of the present case, this Tribunal order rendered in the case of Baldev Singh (supra) and also the judgment of Hon'ble Punjab & Haryana High Court rendered in the case of Manohar Lal (Supra) are squarely applicable and hence, respectfully following these judgments, we hold that the penalty imposed by the Assessing Officer in the present case is not valid because the initiation of penalty proceedings is not valid in the eyes of law. We, therefore, delete the penalty.

11. In the result, the appeal of the assessee stands allowed.

Case Reference - Income Tax Appellate Tribunal - Lucknow Kirti Kumar, Lucknow vs Assessee.