AARE NAGARAJU,WEST GODAVARI V. INCOME TAX OFFICER, WARD-1, ELURU

ITA 178/VIZ/2025

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The case involves Aare Nagaraju, the appellant, who was penalized by the Income Tax Officer for repaying a vehicle loan in cash, which was deemed non-compliance with Section 269T of the Income Tax Act, 1961. The initial penalty was contested at various levels, including the Commissioner of Income Tax (Appeals), but was upheld until it reached the Income Tax Appellate Tribunal. The Tribunal's decision focused on the procedural validity of the penalty imposition, particularly the adherence to statutory time limits for penalty orders under the Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 360675 (ITAT-VISAKHAPATNAM)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2013-2014
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA VILLURI
• Assessee Lawyers: C. SUBRAHMANYAM
• Keywords: Reasonable cause
• Section: 143(3); 263; 246

Judgement Text

" आयकर अपीलीयअधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM “DIVN” BENCH, VISAKHAPATNAM श्री धिजय पाल राि, उपाध्यक्ष एिं श्री एस बालाकृष्णन, लेखा सदस्य के समक्ष BEFORE SHRI VIJAY PAL RAO, HON’BLE VICE PRESIDENT & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ I.T.A. No.178/Viz/2025 (धनिाारण िर्ा / Assessment Year: 2013-14) Aare Nagaraju, West Godavari District, Andhra Pradesh-534475. PAN: ARUPA1167B Vs. Income Tax Officer, Ward-1, Eluru. (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलार्थी की ओर से/ Assessee by : Shri C. Subrahmanyam, CA प्रत्यार्थी की ओर से / Revenue by : Dr. Aparna Villuri, Sr. AR सुनिाई की तारीख / Date of Hearing : 01/05/2025 घोर्णा की तारीख/Date of Pronouncement : 20/05/2025 O R D E R PER S. BALAKRISHNAN, AM: This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (“Ld. CIT(A)”) vide DIN & Order No. 2 ITBA/NFAC/S/250/2024-25/1072633632(1), dated 28/01/2025 for the AY 2013-14 arising out of the order passed U/s. 271E of the Income Tax Act, 1961 (“the Act”), dated 21/03/2022. 2. Brief facts of the case are that based on the information received from the director of Income Tax, Mumbai it was noticed that the assessee has repaid the vehicle loan for Rs. 3,43,470/- in cash to Mahindra & Mahindra Financial Services Pvt Ltd which has resulted in non-compliance of the provisions of section 269T of the Act. Accordingly, penalty U/s. 271E of the Act was initiated by issue of notice U/s. 274 r.w.s 271E of the Act dated 27/12/2019 and served on the assessee. Assessee has not responded to the said notice and therefore another notice was issued on 10/03/2021 and 26/03/2021. In response, the assessee vide submission dated 07/08/2021 has sought for adjournment. Then, a show cause notice was issued on 24/01/2022 for which the assessee replied on 31/01/2022. Considering the reply of the assessee, the Ld. AO held that the same is not acceptable because the assessee has failed to show any reasonable cause for repayment of vehicle loan of Rs. 3,43,470/- by way of cash. Hence, the Ld.AO proceeded to levy 3 penalty of Rs. 3,43,470/- U/s. 271E of the Act for violating the provisions of section 269T of the Act. Aggrieved by the order of the Ld. AO, the assessee is in appeal before the Ld. CIT(A). The Ld. CIT(A) considering submissions and the reply of the assessee, dismissed the appeal. On being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us by raising Five original Grounds of Appeal. Additionally, the assessee has filed an additional ground, which is legal in nature which is admitted as it goes to the root of the matter. The additional grounds are follows: “1. As there was no assessment made and no order passed Us/. 143(3) or 143(3) r.w.s 147 of the Act, the penalty imposed U/s. 271E of the Act lacks legal validity. 2. The subject order levying penalty U/s. 271E of the Act is barred by limitation, as per the provisions of section 275(1)(c) of the Act. Therefore, the impugned order lacks legal validity and should be quashed.” 3. The Learned Authorized Representative (“Ld. AR”) submitted that as per the provisions of section 275(1)(c) of the Act, the order for levy of penalty ought to have been passed within the period of six months from the end of the month in which the notice was issued to the assessee. The Ld. AR further submitted that considering the fact of extension of time till 31/06/2021 by TOLA, 4 the penalty order ought to have been passed on or before 31/12/2021 whereas it was passed on 21/03/2022. He therefore pleaded that the penalty order is void-ab-initio. 4. Per contra, the Learned Departmental Representative (“Ld. DR”) relied on the orders of the Ld. Revenue authorities. 5. We have heard both the sides and perused the material available on record. Section 275(1) of the Act is reproduced below for reference: “275. (1) No order imposing a penalty under this Chapter shall be passed after the expiry of six months from the end of the quarter in which,— (a) the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, if the relevant assessment or other order is not the subject matter of an appeal under section 246 or section 246A or section 253; (b) the order of revision under section 263 or section 264 is passed, if the relevant assessment or other order is the subject matter of revision under the said sections; (c) the order of appeal under section 246 or section 246A is received by the jurisdictional Principal Commissioner or Commissioner, if the relevant assessment or other order is the subject matter of an appeal under the said sections and no further appeal has been filed under section 253; (d) ….. (e) …..” 6. It is clear from the plain reading of the above section that the imposition of penalty should have been completed within six months from the end of the month in which action of imposition of 5 penalty is initiated. In the instant case, initially penalty action was initiated on 27/12/2019. Considering the period excluded by the decision of the Hon’ble Supreme Court on account of COVID Pandemic and considering the provisions of TOLA which extended the date upto 30/06/2021, the penalty order ought to have been passed on or before 31/12/2021. However, we noticed that the penalty order was passed on 21/03/2022. We find merit in the argument of the Ld. AR that the penalty order is barred by limitation and hence considered void-ab-initio. Thus, the legal ground raised by the assessee is allowed. 7. Since the legal ground raised by the assessee is allowed in favour of the assessee, the adjudication of the other grounds raised by the assessee on merits becomes merely an academic exercise. 8. In the result, appeal filed by the assessee is allowed. 6 Pronounced in the open Court on 20th May, 2025. Sd/- Sd/- (VIJAY PAL RAO) (S. BALAKRISHNAN) उपाध्यक्ष/VICE PRESIDENT लेखा सदस्य/ACCOUNTANT MEMBER Dated : 20/05/2025 OKK - SPS आदेश की प्रधतधलधप अग्रेधर्त/Copy of the order forwarded to:- 1. धनिााररती/ The Assessee – Aare Nagaraju, 4/183/1A, Near Library, Vijayarai Pedavegi Mandal, West Godavari District, Andhra Pradesh-534475. 2. राजस्ि/The Revenue – Income Tax Officer, Ward-1, Eluru, Andhra Pradesh-534475. 3. The Principal Commissioner of Income Tax, 4. आयकर आयुक्त (अपील)/ The Commissioner of Income Tax 5. धिभागीय प्रधतधनधि, आयकर अपीलीय अधिकरण, धिशाखापटणम/ DR, ITAT, Visakhapatnam 6. गार्ा फ़ाईल / Guard file आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam "