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2014 (8) TMI 872 - AT - Income TaxLevy of penalty u/s 271D/E – Violation of provisions of section 269SS - Adjustments through journal entries - Business of land development and construction of real estate properties - Limitation of time – Time barred penalty order us/ 271(1)(c) - Held that:- Since penalty proceedings for default in not having transactions through the bank as required u/s 269SS and 269T are not related to the assessment proceedings but are independent of it, therefore, the completion of appellate proceedings arising out of the assessment proceedings or the other proceedings during which the penalty proceedings u/s 271D and 271E may have been initiated has no relevance for sustaining or not sustaining the penalty proceedings and clause (a) of sub-section (1) of section 275 cannot be attracted to such proceedings - penalty for not deducting tax at source while making payment to employees, or contractor, or for that matter not making payment through cheque or demand draft where it is so required to be made - Following the decision in ITO, Ward 24(1), New Delhi Versus Sh. Dinesh Jain [2014 (6) TMI 140 - ITAT DELHI] - it is the AO who applies mind during the assessment proceedings to the issues relating to the violation of section 269SS or 269T of the Act and therefore, the limitation should commence from the date of the Assessment Order. 'journal entries' are outside the scope of the relevant penal provisions - the provisions of clause (a) of section 275(1) of the Act would not apply and in alternative, the provisions of section 275(1)(c) only be attracted in the matters of penalties levied u/s 271D/271E of the Act - the limitation period would be counted from the date of assessment order with the AO’s decision to make referral to his Addl. CIT, who is authorized to impose penalty - The orders of the penalty of this kind have to be explained considering the provisions of clause (c) of section 275(1) of the Act - these preliminary acts constitute "action for the imposition of penalty" - An action for imposition of penalty is always anterior in time to the "actual" imposition of penalty – Decided in favour of Assessee. Applicability of provisions of section 273B - Reasonable Cause – Held that:- The journal entries are hit by the relevant provisions of section 269SS of the Act - completing the "empty formalities" of payments and repayments by issuing/receiving cheque to swap/squire up the transactions, is not the intention of the provisions of section 269SS of the Act, when the transactions are otherwise bonafide or genuine - Such reasons of the assessee constitute 'reasonable cause' within the meaning of section 273B of the Act - all the reasons are, prima facie, commercial in nature and they cannot be described as non-business by any means - journal entries should enjoy equal immunity on par with account payee cheques or bank drafts - the provisions of section 269SS and 269T of the Act shall not be attracted where there is no involvement of the 'money' - though the assessee has violated the provisions of Section 269SS / 269T of the Act in respect of journal entries, the assessee has shown reasonable cause and the penalty imposed u/s 271D/E of the Act are not sustainable – Decided in favour of Assessee.
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