2025 (7) TMI 1227 - AT - Income Tax

Penalty u/s 271DA - violation of the provisions of section 269ST - default of receiving cash exceeding Rs. 2, 00, 000/- as per the provisions of section 269ST - HELD THAT - Assessee was required to furnish the reply to the notices issued for imposition of penalty which had been initiated and had to be disposed of within the limitation provided under the act. We find that before the AO also proper representation was not made on behalf of the assessee Since the CIT(A) has not disposed of the appeal on merits the Bench was of the view that the delay in filing the appeal before the CIT(A) is to be condoned and another opportunity may be provided to the assessee to represent his case before the CIT(A) as the assessee being imprisoned could not furnish the required response. Therefore we deem it appropriate in the interest of justice and fair play that another opportunity needs to be provided to the assessee to represent his case properly before the CIT(A). We therefore set aside the order of the Ld. CIT(A) and remit the appeal to him to be decided afresh who shall allow an opportunity of being heard to the assessee and also grant an opportunity to the Ld. AO for representing the case and be heard as per rule 46A of the Income Tax Rules 1962 if required and thereafter pass an order in accordance with law.

Summary

ISSUES:

Whether penalty under Section 271DA can be imposed and confirmed while the quantum appeal against the assessment order is still pending.Whether the rejection of condonation of delay in filing appeal against penalty order without providing an opportunity of being heard violates principles of natural justice.Whether penalty proceedings under Section 271DA should be kept in abeyance pending disposal of the main quantum appeal.Whether the best judgment assessment pending revision under amended Finance Act provisions affects the validity of penalty imposed under Section 271DA.Whether delay in filing appeal against penalty order caused due to imprisonment of the assessee and difficulty in accessing electronic communication constitutes sufficient cause under Section 249(3) of the Income Tax Act.

RULINGS / HOLDINGS:

The penalty under Section 271DA for violation of Section 269ST is independent of the assessment of income and can be imposed notwithstanding the pendency of the quantum appeal against the assessment order.The rejection of condonation of delay without providing the appellant an opportunity of being heard is not justified and violates principles of natural justice.The penalty proceedings under Section 271DA are not barred by limitation but the assessee is entitled to furnish reply and proper representation; however, penalty proceedings need not be kept in abeyance merely because the quantum appeal is pending.The existence of best judgment assessment pending revision under amended Finance Act provisions does not automatically invalidate penalty proceedings under Section 271DA.The delay in filing appeal caused by the assessee's imprisonment and consequent difficulty in accessing email and documents constitutes "sufficient cause" within the meaning of Section 249(3), warranting condonation of delay and fresh opportunity to represent the case.

RATIONALE:

The Court applied the provisions of the Income Tax Act, 1961, particularly Sections 269ST (prohibition on receipt of cash exceeding Rs. 2,00,000), 271DA (penalty for contravention of Section 269ST), and 249(3) (condonation of delay in filing appeal before CIT(A)).The Court recognized that penalty under Section 271DA is a separate and independent proceeding from the assessment order and is not contingent on the outcome of the quantum appeal.Principles of natural justice require that an opportunity of being heard must be given before rejecting condonation of delay, especially where the delay is due to exceptional circumstances such as imprisonment.The Court relied on the factual finding that the assessee's imprisonment and consequent inability of his representative to access emails and documents constituted sufficient cause for delay, justifying a fresh hearing.The Court remitted the matter to the Commissioner of Income Tax (Appeals) for fresh adjudication after condoning the delay, directing that both the assessee and the Assessing Officer be given opportunity to be heard as per Rule 46A of the Income Tax Rules, 1962.