| Question And Answer | |
|---|---|
| Subject: | Penalty U/Sec. 271E on the basis of noting on seized papers |
| Category: | Income-Tax |
| Querist: | manali |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | penalty, seized papers |
| Date: | March 22, 2023 |
The assessee is a company wherein in the assessment completed u/s 143(3) of the Act for A.Y 2021-22, addition of Rs. 70,00,000/- was made u/s 68 of the Act on account of unaccounted cash loan repayments on the basis of noting on seize papers found during the course of search conducted in the year 2021-2022.
The director of the company has accepted the above referred seize paper noting in his personal capacity.
However, AO has made an addition of Rs. 70,00,000/- as undisclosed income in the hands of assessee company and similar addition has been made on the protective basis in the hands of the director of the company.
The assessee company has received notice u/s 271E for alleged repayment of loans of Rs. 70,00,000/-.
Issues :
- whether penalty U/Sec. 271E can be levied on the basis of noting on seized papers found during search.?
- Whether the action of the AO of initiating penalty proceedings u/s 271E is justified in law even though there is no mention of such initiation in the assessment order.
- when addition of same amount is made as undisclosed income, whether again penalty U/Sec. 271E can be levied.
- Can assessee take a stand , provisions of sec. 269SS and 269T are not applicable for the unrecorded transactions found during the course of search action.
- Any other remedy available to the assessee.
pl. guide
The facts of the case and the orders on record have to be studied to give a concrete answer. As we understand, a penalty under section 271E of the Income-tax Act, 1961 (Act) can be levied on the basis of evidence found during a search action.
There is no requirement for initiation of penalty under section 271E of the Act in the assessment Order. The Hon’ble Kerala High Court in the case of Grihalaxmi Vision v. ACIT, [2015] 63 taxmann.com 196 (Kerala) observed that the Question to be considered is whether proceedings for levy of penalty, are initiated with the passing of the order of assessment by the Assessing Officer or whether such proceedings have commenced with the issuance of the notice issued by the Joint Commissioner. From the statutory provision, it is clear that the competent authority to levy penalty being the Joint Commissioner. Therefore, only the Joint Commissioner can initiate proceedings for the levy of penalty. Such initiation of proceedings could not have been done by the Assessing Officer. The statement in the assessment order that the proceedings under sections 271D and E are initiated is inconsequential. On the other hand, if the assessment order is taken as the initiation of penalty proceedings, such initiation is by an authority who is incompetent and the proceedings thereafter would be proceedings without jurisdiction. If that be so, the initiation of the penalty proceedings is only with the issuance of the notice issued by the Joint Commissioner to the assessee to which he has filed his reply.
The assessment and penalty proceedings are independent. The Hon’ble ITAT Jaipur Bench in the case of MANOHARLAL v. DCIT [1995] 83 Taxman 255 (Jaipur) held that initiation of penalty proceedings under sections 271D and 271E of the Act is independent of assessment proceedings.
No, rather, if the transaction was in cash and recorded in the books, the penalty might not have been levied. [Refer to the case of Dimple Yadav 379 ITR 177 (All)(HC)]
The facts of the case would have to be studied before giving any other opinion. Hope the same clarifies.