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Quashment of show cause notice on the grounds of being without jurisdiction and barred limitation : High Court of Madhya Pradesh

The question as to validity of quashing the show cause notice on grounds of being without jurisdiction was examined by THE HIGH COURT OF MADHYA PRADESH , consisting of Justice P.K Jaiswal in the matter of  Nitin Agrawal v. joint Commissioner Of Income Tax [Writ Petition No. 536 Of 2018] on 1. 03 .2018.

Nitin Agrawal vs Joint Commissioner Of Income Tax on 1 March, 2018The facts of the case were that the petitioner is an assessee of the respondent department and a search was conducted by the Income Tax Authority under Section 132 of the Income Tax Act, in the residential premises of the petitioner and after conclusion of search notice under Section 153A of the Income Tax Act, was served upon the petitioner on 28.9.2015, for the block assessment for the Assessment Years 2009-10 to 2014-15. After receiving the reply from the petitioner on 26.3.2016, the Income Tax Authority commenced the assessment proceedings by issuing notice dated 2.5.2016 under Section 143(2) of the Income Tax Act. The Assessing Officer thereafter, sought information by making assessment of the assessment year 2009-10 to 2015-16 and issued notice dated 5.5.2016 under Section 142 of the Income Tax Act in the form of questionnaire.

Section 275(1) (C) of the Income Tax Act, 1961 provides that penalty can be levied only before completion of financial year in which assessment order was passed or six months from the end of month in which penalty proceeding is initiated, which ever period expired later.

On the basis of seized documents and in totality of the facts Tally account in Lenovo Laptop having “XYZ 0809 2”, seized during the course of search and on the strength of show cause issued in case of PATH, it is clear that cash loan received by you is Rs.31,49,500/- from PATH show cause as to why penalty u/s 269SS shall not be attracted on this issue. Also  cash loan repaid by you to PATH is Rs.15,75,700/- show cause as to why penalty u/s 269T shall not be attracted on this issue. Further it is clear that  cash loan received by you is Rs.29,94,800/- from PATH show cause as to why penalty u/s 269SS shall not be attracted on this issue. Also  cash loan repaid by you to PATH is Rs.27,800/- show cause as to why penalty u/s 269T shall not be attracted on this issue.

The learned counsel for the petitioner contended  limitation for initiation of penalty proceeding for imposition of penalty under Section 271D, 271E of the Income Tax Act start from 20.12.2016 and under Section 275(1) (C), the limitation of six months start from 20.12.2016. The second notice issued on 22.9.2017 is barred by time and the learned Joint Commissioner of Income Tax had no jurisdiction to issue the same.

The High Court of Madhya Pradesh held that the first show cause notice without initiating proceedings for imposition of penalty under Section 271-D was issued on 22.9.2017. It is also well settled that a penalty under this provision is independent under assessment. The action inviting imposition of penalty is granting of loans above the prescribed limitation otherwise then through banking channels and as such infringement of Section 269-SS of the Income Tax Act is not related to the income that may be assessed or finally adjudicated. We find no force on the contention advanced by the learned Senior counsel for the petitioner. The writ petition has no merit and is, accordingly, dismissed.

By Reetasa Samal

 

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