Penalty u/s 271D/E barred if order passed beyond six months from reference or assessment

ORDER

Rathod Kamlesh Jayantbhai, Accountant Member.- These five appeals are filed by the revenue and are arising out of the order of Commissioner of Income Tax (Appeals), Jaipur-4 [for short CIT(A)] dated 21/05/2025 for Assessment Years 2012-13, 2016-17 & 2022-23 which in turn arise from the order dated 28.12.2024 & 23.01.2025 passed under section 271D & 271E of the Income Tax Act, 1961 [for short Act] by Addl./Jt. CIT, Central, Jaipur.

2. Since the issues involved in these appeals are almost identical on facts and are almost common, except the difference in figure of the penalty amount disputed. Thus, these appeals were heard together with the agreement of both the parties and are being disposed off by this consolidated order. As agreed between the parties matter in ITA No. 1057/JP/2025 taken as a lead case for discussions and the facts, arguments are taken from that folder.

3. Before moving towards the facts of the case we would like to mention that the revenue has assailed the appeal for assessment year 2012-13 in ITA No. 1057/JP/2025 on the following grounds;

“(1) Whether on the facts and in circumstances of the case, the Id. CIT(A) has erred in deleting levy of penalty by JCIT/AddL.CIT only on technical ground without giving any finding on the merits of levy of penalty?

(2) Whether on the facts and in circumstances of the case, the Id. CIT(A) has erred in holding that the relevant date for determining the limitation period for imposing penalty u/s 271D is the date when the assessment order was passed by the A.O and not the date when show cause notice was issued by the JCIT/AddI. CIT & ignoring the legal aspect that the A.O was not allowed to impose penalty u/s 271D and therefore passing of assessment order by A.O and reference by A.O has no bearing on deciding the limitation date for imposing penalty u/s 271D?

(3) Whether on the facts and in circumstances of the case, the Id. CIT(A) has erred in ignoring the decision of Hon’ble Kerla High Court in the case of Grihalaxmi Vision v Addl. Commissioner of Income Tax, Range-1, Kozhikode in ITA No 83 & 86 of 2014, wherein it was held that limitation of penalty proceeding u/s 271D and 271E start from the issue of show cause notice by the AddI.CIT?

(4) Whether on the facts and in circumstances of the case, Id. CIT(A) has erred in relying on the decision of Hon’ble Apex Court in the case of Hisariya Brothers without appreciating the fact that the facts of the case of Hisariya Brothers were different from the present case as in the case of Hisariya Brothers, the issue was regarding extension of limitation date for imposition of penalty u/s 271D on the ground of pendency of appeal against relevant assessment order but in present case, there is no such issue involved?

(5) The appellant craves leave or reserves right to amend, modify, alter or forego any grounds(s) of appeal at any time before or during the hearing of this appeal.

4. Succinctly, the facts as culled out from the records are that a reference was received from the ACIT, Central Circle-2, Jaipur vide letter no. 194 dated 18.06.2023 stating that Shri Ashwini Gupta has accepted cash loan aggregating to Rs. 3,73,57,124/- on various dates of F.Y. 201112 relevant to A.Y. 2012-13. The action of the assessee was in violation of the provision of section 269SS of the Act. It was also stated that the said assessee also made repayment of Rs. 3,81,68,450/- against the aforesaid carried forward cash loans and cash loans taken during the year, which is also in violation to the provisions of section 269T of the Act. The information was based on the material found during the course of Search and Seizure action conducted on 23.11.2021 by Investigation wing in the case of Radha Mohan Maheshwari (a finance broker) wherein the said information was found. The information so gathered in that search it was gathered that the assessee has made cash transition with Radha Mohan Maheshwari by accepting loan amount in cash and also repayment of the same.

Based on that information collected in search assessment/ reassessment was made in the assessee’s case. The issue on the merits of the case were discussed and part of the assessment order passed in the case of the assessee for the year under consideration.

Record reveals that while search in the case of Nirmal Kumar Bardiya Group on 23.11.2021. One of the assessee, Shri Radha Mohan Maheshwari [also known as Radha Mohan Totala/(RMT)] was also covered and in that search it was revealed that he is indulging in cash transactions on a large scale in Jaipur, who was also covered in the search. In that search voluminous electronic data comprising of excel sheets in the 7 pendrives were seized from the residence of Shri Arun Snehi, who considered to be a close friend, associate and confidant of Shri Radha Mohan Maheshwari, at House no. 8, Jai Kishan Colony, Near Mahesh Colony, Tonk Phatak, Jaipur. Shri RMT admitted the ownership of these pen drives and the data contained therein. These excel sheets were analyzed and it was observed that these excel sheets are ledgers comprising of the cash transactions between Shri Radha Mohan Maheshwari/Totla and others. Shri Arun Snehi narrated in his statements recorded on oath during search proceedings that the pen drives belonged to Shri Radha Mohan Maheshwari /Totla. Shri Radha Mohan was confronted about the same in a statement at his residence M-54, Mahesh Colony, Tonk Fatak, Jaipur, in statement he admitted that the seized pen drives and papers belonged to him and he had kept the same at the residence of Shri Arun Snehi. On further analyses of the data it was noted that excel sheet contains column headings in each excel sheet remain the same and he explained in detail how these entries were in each column was written and what does they mean for date, Descripition [c means cash, Int. means interest, com means component], Taken, Given means loan taken or given, Balance represent the balance of the said loan. The positive balance appearing in the column means the party has to pay to Shri Radha Mohan and a negative balance means Shri Radha Mohan has to pay to the party. Revenue from that information noted that information related to the assessee reads as under:

From that information revenue looked up in the i-search function in the portal and their mobile number was popped up was linked with PAN shows the name of the assessee Shri Ashwini Gupta and the name matches with the above information recorded in the excel sheet. Based on that the assessment proceeding were completed in the case of the assessee by the DCIT,CC-2,Jaipur.

Considering those records, it was noted that the assessee has taken cash amount of Rs. 3,73,44,474/- from Shri Radha Mohan Totla and repaid Rs. 3,81,68,450/- and the action of the assessee violates the provisions of section 269SS/T and therefore, penalty proceedings was initiated by issuing notice u/s. 274 r.w.s. 271D of the Act on 01.07.2024. Record reveals that this notice was issued by the Addl./Jt. Commissioner of Income Tax, Central, Jaipur upon a reference made by the ld. ACIT, Central Circle-2, vide letter dated 18.06.2023.

In the penalty proceeding order after a detailed discussion recorded there in after considering the contention of the assessee ld Addl./Jt. Commissioner of Income Tax, Central, Jaipur held that the assessee has accepted cash loan of Rs. 3,31,05,285/- from Shri Radha Mohan Totla which is in violation of provisions of section 269SS of the Act liable to penalty as per provisions of section 271D of the Act and accordingly it was order by Addl./Jt. Commissioner of Income Tax, Central, Jaipur that the assessee is liable for levy of penalty of Rs. 3,31,05,285/-.

5. Aggrieved by the order of Addl./Jt. Commissioner of Income Tax, Central, Jaipur, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below:

4.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

In this case it is noticed that the reference to the Addl./Jt. CIT, Central, Jaipur was made by the ACIT, Central Circle-2, Jaipur vide letter No. 194 dated 18.06.2023 wherein it stated that Sh. Ashwini Gupta has accepted cash loan aggregating to Rs. 3,73,57,124/- on various dates of FY 2011-12 relevant to AY 2012-13, which is in violation to the section 269SS of the Income Tax Act, 1961. Sh. Ashwini Gupta has also made repayment of Rs. 3,81,68,450/- against the aforesaid carried forward cash loans and cash loans taken during the year, which is also in violation to the provisions of section 269T of the I.T. Act, 1961. Also it is noted that assessment order in this case was passed on 23.03.2024. The Addi/Jt. CIT finally summarized in the penalty order that the assessee has taken a cash loan of Rs 3,31,05,285/- from Radha Mohan Totla which is in contravention of Section 269SS and therefore levied penalty of section 271D of the Act for Rs 3,31,05,285/-. In appeal the A/R of the appellant filed submission on merits as well as legality of the penalty order. On legality he argued that the penalty levied is barred by limitation and the issue is covered by decision of Hon’ble Supreme Court, Hon’ble Rajasthan High Court and Hon’ble Jurisdiction ITAT Jaipur

The legal ground of the assessee is taken first for discussion. The main issue in legal ground is whether the penalty imposed is barred by limitation or not?

In this connection, the provisions of reproduced as under: 271D read with section 275 is reproduced as under:-

271D. (1) If a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted.

(2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner

Provided that any penalty under sub-section (1), on or alter the 1st day of April, 2025, shall be imposed by the Assessing Officer.

275 Bar of limitation for imposing penalties (1) No order imposing a penalty under this Chapter shall be passed-

(a) in a case where the relevant assessment or other order is the subject matter of an appeal to the Joint Commissioner (Appeals) or to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the Joint Commissioner (Appeals) or the Commissioner (Appeals) or as the case may be, the Appellate Tribunal is received by the Principal Commissioner or Commissioner, whichever period expires later

Provided that in a case where the relevant assessment or other order is the subject-matter of an appeal to the Joint Commissioner (Appeals) or to the Commissioner (Appeals) under section 246 or section 246A, and the Joint Commissioner (Appeals) or the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Joint Commissioner (Appeals) or the Commissioner (Appeals) is received by the Principal Commissioner or Commissioner, whichever is later,

(b) in a case where the relevant assessment or other order is the subject matter of revision under section 263 or section 264, after the expiry of six months from the end of the month in which such order of revision is passed.

(c) in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later.

In this case the limitation period is governed by clause (c) of Section 275(1). As per this section, the penalty order is to be passed before the end of the F.Y. in which the proceeding in the cause of which the action for imposition of penalty has been initiated are completed or 6 months from the end of the month in which penalty is initiated, whichever expires later.

In this case, the reference for initiation of penalty proceedings was sent to Addl./Jt. CIT, Central, Jaipur on 18.06.2023 and assessment order was completed on 23.03.2024. Therefore, from a plain reading of the sections 271D & 275(1)(c), the penalty u/s 271D should have been imposed before March 31, 2024, if the initiation of penalty proceedings is treated from the date of reference to the Addi./Jt. CIT, Central, Jaipur. But if the date of limitation is to be calculated from the date of passing of the assessment order, then the penalty should have been imposed before 30.09.2024

Now the issue at hand is to determine the correct date of limitation of passing of the penalty order. There are various situations which can arise with respect to the passing of the penalty order, i.e. whether it is passed before the passing of the assessment order or after the passing of the assessment order. In this case under discussion the penalty has been levied after the passing of the assessment order From the perusal of the various cases laws relied upon by the assessee as well as other cases available in the legal domain, it is seen that the exact issue has been discussed in the following cases:-

Hon’ble Supreme Court in the case of Hissaria Brothers 386 ITR 719 held as under

“Penalty under ss 271D and 271E-Limitation under s. 275- Computation-Penalty orders under ss. 271D and 271E passed beyond six months from the end of the month in which the assessments were completed were barred by limitation-CIT v. Hissaria Bros (2007) 211 CTR (Raj) 156 affirmed.”

Hon’ble Rajasthan High Court in the CIT v. Jitendra Singh Rathore  held as under

“Penalty under s 271D-Limitation under s. 275-Applicability of (a) or cl (c) of 5. 275(1)-Show-cause notice was served on the assessee by AO on 27th March, 2003-Thereafter, the matter was referred to the Jt. CIT on 22nd March, 2004-Penalty levied by Jt. CIT by order dt. 28th May, 2004 was clearly barred by limitation- Sec. 275(1)(c) was applicable to the case Even when the authority competent to impose penalty under s. 271D was the Jt. CIT, the period of limitation for the purpose of such penalty proceedings was not to be reckoned from the issue of show cause by the Jt. CIT, but the period of limitation was to be reckoned from the date of issue of first show cause for initiation of such penalty proceedings”

Hon’ble ITAT Jaipur Bench in the case of Jagdish Chandra Suwalka v. Joint Commissioner of Income-tax   (Jaipur – Trib.) held as under:-

“Thus, a penalty u/s 2710 could not be imposed after the expiry of the larger period of limitation. In this case, we find that the Id. JCIT in the impugned penalty order has clearly observed that the assessment for A.Y 2015-16 was completed by the AO (ACIT Tonk) vide assessment order dated 28-12-2017 u/s 147/143(3) of the Act. The Id. JCIT also referred to the observation made by the AO that the assessee had received cash payment of Rs. 47,50,000/- from various persons as per details given, which are in contravention of Sec. 269SS of the IT Act. Thus, the relevant proceedings were the assessment proceedings during the course of which, the default of accepting cash over the prescribed limit was noted by the AO and since the assessment proceedings were completed on 28-12-2017, the related financial year ended on 31-3-2018 Accordingly, the first time limit thus expired on 31-3-2018. For the second time limit, an action for imposition of penalty was taken on 28-12-2017 by the AO, when the assessment was completed and six months from end of that month expired on 30-6-2018 which time limit clearly expires later. Hence, the penalty u/s 271D could have been validly imposed only on before 30-6-2018 as against which, in this case, the impugned penalty was imposed much later on 28-5-2019 hence, the same is clearly barred by limitation. The Id. D/R however, contended that for this period of 6 months has to be reckoned from the date of issue of show cause notice by the Id. JCIT, who was the competent Authority to impose a penalty u/s 271D and since he issued the notice on dated 6-11-2018 and imposed the penalty on 28-5-2019 itself, which was well within the period of 6 month from the month in which 28-5-2018 action for imposition of penalty was taken. The Id. A/R however, strongly contended that for this purpose the observation made by the AO in the assessment order has to be considered and the date of the assessment order being 28-12-2017 was relevant and therefore, the period of 6 months has to be reckoned from that date. Consequently, the limitation from that date the limitation had already expired

7.2 After careful consideration, I find that the issue involved in the present case is fully covered by the decision of Hon’ble Jurisdictional High Court in the case of Hissaria Bros. (supra). The same has been affirmed by the Hon’ble Apex Court in the case of Hissaria Brothers   holding as under.

“Penalty under ss. 271D and 271E-Limitation under s 275- Computation-Penalty orders under ss. 271D and 271E passed beyond six months from the end of the month in which the assessments were completed were barred by limitation-CIT v. Hissaria Bros. (2007) 211 CTR (Raj) 156 affirmed.”

Similar view was taken again by the Hon’ble Rajasthan High Court in the CIT v Jitendra Singh Rathore   ITR 327 wherein it was held under:-

“Penalty under s. 271D-Limitation under s. 275-Applicability of (a) or cl. (c) of s. 275(1)-Show-cause notice was served on the assessee by AO on 27th March, 2003-Thereafter, the matter was referred to the Jt. CIT on 22nd March, 2004-Penalty levied by Jt. CIT by order dt. 28th May, 2004 was clearly barred by limitation- Sec. 275(1)(c) was applicable to the case Even when the authority competent to impose penalty under s. 2710 was the Jt. CIT. the period of limitation for the purpose of such penalty proceedings was not to be reckoned from the issue of show cause by the Jt. CIT, but the period of limitation was to be reckoned from the date of issue of first show cause for initiation of such penalty proceedings”

Since there is no dispute on the facts stated above, hence respectfully applying the binding judicial precedents, I hold that the penalty imposed u/s 271D, under challenge, is barred by limitation u/s 275(1)(c) of the Act. Hence, the same is hereby quashed. The additional ground of appeal taken by the assessee is therefore, allowed.

8. Since I have already quashed the penalty on the short ground of limitation, we do not propose to adjudicate the other grounds on merits.

Hon’ble Delhi High Court in the case of Principal Commissioner of Income-tax-5 v. JKD Capital & Finlease Ltd.   (Delhi)/[2015] 378 ITR 614 (Delhi) [13-10-2015] held as under:-

“10. considering that the subject matter of the quantum proceedings was the noncompliance with Section 269T of the Act, there was no need for the appeal against the said order in the quantum proceedings to be disposed of before the penalty proceedings could be initiated. In other words, the initiation of penalty proceedings did not hinge on the completion of the appellate quantum proceedings. This position has been made explicit in the decision in Worldwide Township Projects Ltd. (supra) in which the Court concurred with the view expressed in CIT v. Hissaria Bros.  (Raj.) in the following terms:

“The expression other relevant thing used in s. 275(1)(a) and cl. (b) of Sub-s. (1) of S. 275 is significantly missing from cl. (c) of s 275(1) to make out this distinction very clear. We are, therefore, of the opinion that since penalty proceedings for default in not having transactions through the bank as required under ss. 269SS and 269T are not related to the assessment proceeding 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 under ss. 271D and 271E may have been initiated has no relevance for sustaining or not sustaining the penalty proceedings and, therefore, cl. (a) of sub-s. (1) of s. 275 cannot be attracted to such proceedings. If that were not so cl. (c) of s. 275(1) would be redundant because otherwise as a matter of fact every penalty proceeding is usually initiated when during some proceedings such default is noticed, though the final fact finding in this proceeding may not have any bearing on the issues relating to establishing default e.g. 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. Either of the contingencies does not affect the computation of taxable income and levy of correct tax on chargeable income; if cl. (a) was to be invoked, no necessity of cl. (c) would arise.” (emphasis supplied)

11. In fact, when the AO recommended the initiation of penalty proceedings the AO appeared to be conscious of the fact that he did not have the power to issue notice as far as the penalty proceedings under Section 271-E was concerned. He, therefore, referred the matter concerning penalty proceedings under Section 271-E to the Additional CIT. For some reason, the Additional CIT did not issue a show cause notice to the Assessee under Section 271-E (1) till 20th March 2012. There is no explanation whatsoever for the delay of nearly five years after the assessment order in the Additional CIT issuing notice under Section 271-E of the Act. The Additional CIT ought to have been conscious of the limitation under Section 275 (1) (c), i.e., that no order of penalty could have been passed under Section 271-E after the expiry of the financial year in which the quantum proceedings were completed or beyond six months after the month in which they were initiated, whichever was later. In a case where the proceedings stood initiated with the order passed by the AO, by delaying the issuance of the notice under Section 271- E beyond 30th June 2008, the Additional CIT defeated the very object of Section 275 (1) (c).”

Hon’ble Delhi High Court in the case of Principal Commissioner of Income-tax (Central)-2 v. Mahesh Wood Products (P.) Ltd.   (Delhi)/[2017] 394 ITR 312 (Delhi) [05-05-2017] held as under.-

“9. However, this question came up for consideration in JKD Capital &Finlease Ltd. (supra). The date on which the AO recommended the initiation of penalty proceedings was taken to be the relevant date as far as Section 275(1)(c) was concerned. There was no explanation for the delay of nearly five years in the ACIT acting on the said recommendation. The Court held that the starting point would be the ‘initiation’ of penalty proceedings. Given the scheme of Section 275(1)(c) it would be the date on which the AO wrote a letter to the ACIT recommending the issuance of the SCN. While it is true that the ACIT had the discretion whether or not to issue the SCN, if he did decide to issue a SCN, the limitation would begin to run from the date of letter of the AO recommending ‘initiation’ of the penalty proceedings.

10. In the present case, the limitation in terms of Section 275 (1) (iii) of the Act began to run on 23rd July, 2012 and the last date for passing the penalty orders was 31st January, 2013. Therefore, the penalty orders issued on 26th February 2013 were clearly barred by limitation.”

In view of the ratio laid down by the Hon’ble Apex Court in the case of Hissaria Brothers, the relevant date for determining the limitation period is the date from the passing of the assessment order by the Id Assessing Officer. In this case since the assessment was passed by the assessing officer on 23.03.2024, hence the date of limitation for passing the penalty order u/s 271D is 30.09.2024 However, the penalty order has been passed on 28.12.2024 which is beyond the limitation date.

In view of the above, the penalty order is found to have been passed beyond the date of limitation and thus the same cannot be sustained and due to this factual position, the penalty levied is directed to be deleted.

Since the penalty has been directed to be deleted on the legal ground that the order is passed after the date of limitation, the ground of appeal on the merits of such penalty is rendered academic and does not require adjudication. Accordingly the Ground Nos. 1 to 4 of appeal are hereby treated as disposed off.

5. The last para of ground of appeal is as under:

The appellant craves leave to add, amend or withdraw any of the grounds of the appeal during the course appellate proceedings.

5.1 The appellant has not added or altered any of the above mentioned grounds of appeal. Accordingly such mention by the appellant in its ground is treated as general in nature, not needing any specific adjudication and is accordingly treated as disposed off.

6. In the result, the appeal of the appellant is allowed.

6. Feeeling dissatisfied with the above finding so recorded in the order of the ld. CIT(A), revenue preferred the present appeal before this tribunal on the grounds as reiterated herein above. Ld. DR vehemently argued that the ld. Addl./Jt. CIT considered the legal as well as the technical aspect raised by the assessee and a speaking order is passed considering both the aspect of the matter. Ld. DR thus submitted that ld. CIT(A) was erred in not dealing with the merits of the dispute and has considered only the technical aspect of the matter and thereby the revenue has challenged that action of the ld. CIT(A). The ld. DR also submitted that the relevant date for determining the limitation period for imposing penalty u/s. 271D of the Act is the date when the assessment order was passed by the ld. AO and not the date when show cause notice was issued by Addl./Jt. Commissioner of Income Tax, Central, Jaipur in this case. Therefore, action of the ld. CIT(A) in not considering that aspect of the argument the present is filed by the revenue. To support this contention ld. DR relied upon the decision of Grihalaxmi Vision v. Addl. CIT, Kozhikode [IT Appeal Nos. 83 & 86 of 2014, dated 7-8-2015] wherein it was held that limitation of penalty proceeding u/s. 271D/E shall start from the issue of notice by the Addl./Jt. Commissioner of Income Tax and not from the reference made.

7. Per contra, ld. AR of the assessee supported the order of the ld. CIT(A) and the decision of our Rajasthan High Court CIT v. Hissaria Bros.  (Rajasthan) which was followed by the ld. CIT(A) and as discussed in detailed in the order under challenged. Ld. AR of the assessee also submitted that the revenue challenged that order of Rajasthan High Court before the apex court and the SLP of the revenue against that finding was dismissed by the apex court. Therefore, that finding becomes final as given in the CIT v. Hissaria Brothers, Hanumangarh Jn.   (SC). The ld. AR of the assessee vehemently argued that when the penalty levied is time barred the order rightly quashed by the ld. CIT(A). As regards the merits of the case he also supported the submission made in the penalty proceeding.

8. We have heard the rival contentions and perused the material placed on record. Vide ground no. 1 revenue contend that the ld. CIT(A) has directed to delete the penalty in this case, only on technical ground and not decided the merits of the case. Vide Ground no. 2 the revenue challenges the limitation period & vide ground no. 3 relied on the decision in the case of Grihalaxmi Vsion (supra) and vide ground no. 4 revenue contend that the facts of Hisariay Brothers are different with the case of the assessee. Ground no. 5 being general does not require any finding.

Having gone through the grievance of the revenue we would like to take up all grounds together. As is evident that the dispute relates to the assessment year 2012-13 and the brief facts related to the dispute are that there was a reference from the ACIT, Central Circle-2, Jaipur vide letter no. 194 dated 18.06.2023 stating that Shri Ashwini Gupta, assessee has accepted cash loan aggregating to Rs. 3,73,57,124/- on various dates of F.Y. 2011-12. The action of the assessee was in violation of the provision of section 269SS of the Act.

Record also reveals that the said assessee also made repayment of cash loan of Rs. 3,81,68,450/- against the aforesaid carried forward cash loans and cash loans taken during the year. That action of the assessee was in violation to the provisions of section 269T of the Act.

The above facts were came to revenue’s possession while Search and Seizure action conducted on 23.11.2021 by Investigation wing in the case of Radha Mohan Maheshwari (a finance broker). Based on that information collected in search assessment/ re-assessment was made in the assessee’s case. The issue on the merits of the case was discussed and part of the assessment order passed in the case of the assessee for the year under consideration. The premises of the RMT was covered as there was also search in the case of Nirmal Kumar Bardiya Group on 23.11.2021 as RMT was indulged in cash transactions on a large scale in Jaipur. While searching the premises of RMT voluminous electronic data comprising of excel sheets in the 7 pen-drives were seized from the residence of Shri Arun Snehi, who considered to be a close friend, associate and confidant of Shri Radha Mohan Maheshwari, at House no. 8, Jai Kishan Colony, Near Mahesh Colony, Tonk Phatak, Jaipur. Shri RMT admitted the ownership of these pen drives and the data contained therein. These excel sheets were analyzed and it was observed that these excel sheets are ledgers comprising of the cash transactions between Shri Radha Mohan Maheshwari/Totla and others. Shri Arun Snehi narrated in his statements recorded on oath during search proceedings that the pen drives belonged to Shri Radha Mohan Maheshwari /Totla. Shri Radha Mohan was confronted about the same in a statement at his residence M-54, Mahesh Colony, Tonk Fatak, Jaipur, in his statement he admitted that the seized pen drives and papers belonged to him and he had kept the same at the residence of Shri Arun Snehi. On further analysis of the data it was noted that excel sheet contains column headings in each excel sheet remain the same and he explained in detail how these entries were in each column was written and what does they mean for date, Description [c means cash, Int. means interest, com means component], Taken, Given means loan taken or given, Balance represent the balance of the said loan. The positive balance appearing in the column means the party has to pay to Shri Radha Mohan and a negative balance means Shri Radha Mohan has to pay to the party. From the electronic data provided by RMT at Sr no. 79 name of the assessee along with the mobile number was found recorded. From that information revenue looked up in the i-search function in the portal and their mobile number was popped up was linked with PAN shows the name of the assessee Shri Ashwini Gupta and the name matches with the above information recorded in the excel sheet. Based on that the assessment proceeding was completed in the case of the assessee by the DCIT, Central Circle-2,Jaipur.

Ld. AO having noted that transaction cash loan taken amounting to Rs. 3,73,44,474/- from Shri Radha Mohan Totla and repaid Rs. 3,81,68,450/- and the action of the assessee violates the provisions of section 269SS/T and therefore, penalty proceedings was initiated by issuing notice u/s. 274 r.w.s. 271D of the Act on 01.07.2024. Record reveals that this notice was issued by the Addl./Jt. Commissioner of Income Tax, Central, Jaipur upon a reference made by the ld. ACIT, Central Circle-2, vide letter dated 18.06.2023. In the penalty proceeding order after a detailed discussion recorded there in and after considering the contention of the assessee ld. Addl./Jt. Commissioner of Income Tax, Central, Jaipur held that the assessee has accepted cash loan of Rs. 3,31,05,285/- from Shri Radha Mohan Totla in violation of provisions of section 269SS of the Act and thereby liable to penalty as per provisions of section 271D of the Act and accordingly it was ordered by Addl./Jt. Commissioner of Income Tax, Central, Jaipur that the assessee is liable for levy of penalty of Rs. 3,31,05,285/-.

When the matter challenged before the ld. CIT(A) he has allowed the plea of the assessee that the order passed by the ld. Addl.Jt. CIT barred by limitation.

The facts related to that dispute are that a reference to the Addl./Jt. CIT, Central, Jaipur was made by the ACIT, Central Circle-2, Jaipur vide letter No. 194 dated 18.06.2023 wherein it stated that Shri Ashwini Gupta has accepted cash loan aggregating to Rs. 3,73,57,124/- on various dates of FY 2011-12 relevant to AY 2012-13, which was in violation to the section 269SS of the Income Tax Act, 1961. The levy of penalty was challenged on the legal ground stating that the order passed was time barred. Before we deal with that aspect of the matter legally, we would like to reproduced the provision of section 271D read with section 275 of the Act.

271D. (1) If a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted.

(2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner

Provided that any penalty under sub-section (1), on or alter the 1st day of April, 2025, shall be imposed by the Assessing Officer.

Provision of section 275 reads as follows;

Bar of limitation for imposing penalties. 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,-

(2) The order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty may be revised on the basis of assessment as revised by giving effect to the order passed under section 246 or section 246A or section 253 or section 260A or section 261 or revision under section 263 or section 264, where the relevant assessment or other order is the subject matter of an appeal or a revision under the said sections.

(3) No order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty under sub-section (2) shall be passed-

(4) The provisions of sub-section (2) of section 274 shall apply to the order imposing or enhancing or reducing penalty under sub-section (2). (5) In computing the period of limitation for the purposes of this section, the following period shall be excluded:-

Co joint reading of the provision of the law we note that the limitation period is governed by clause (c) of Section 275(1). As per this section, the penalty order is to be passed before the end of the F.Y. in which the proceeding in the cause of which the action for imposition of penalty has been initiated are completed or 6 months from the end of the month in which penalty is initiated, whichever expires later. As is evident from the record that in this case, the reference for initiation of penalty proceedings was sent to Addl./Jt. CIT, Central, Jaipur on 18.06.2023 and assessment order was completed on 23.03.2024. Therefore, from a plain reading of the sections 271D r.w.s. 275(1)(c), the penalty levied u/s 271D should have been imposed before March 31, 2024, if the initiation of penalty proceedings is treated from the date of reference to the Addi./Jt. CIT, Central, Jaipur. But if the date of limitation is to be calculated from the date of passing of the assessment order, then the penalty should have been imposed on or before 30.09.2024 but the same was passed on 28.12.2024. Thus, it is clear that the order is barred by limitation as given in section 275 of the Act. A similar issue has been decided by this co-ordinate bench in the case of Dy. CIT v. Kiran Fine Jewellers (P.) Ltd.  (Jaipur – Trib.)/ITA no. 268/JP/2024 wherein the bench held as under :

Page 18 onwards of the said decision

The assessee alternatively also stated that the penalty proceedings are barred by limitation as the same have not been passed after expiry of financial year in which the quantum proceedings were completed. The assessee has also cited certain case-laws to support this contention. The ld. Addl./Jt. CIT having considered the submissions, records and the contentions raised he contended in his order that the Assessing Officer had only sent a proposal/reference for initiating proceedings u/s 271E in this case to the Additional Commissioner. The Assessing Officer is not empowered to initiate the penalty proceedings u/s 271E. In fact, the penalty proceedings u/s 271E were initiated by him only on 24/02/2022 by issuance of show-cause notice. Thus, the penalty proceedings were concluded within six months from the Initiation of proceedings and, therefore, the plea taken regarding limitation was not tenable. As regards the merits of the contention he stated that the assessee had only debited the loan account of M/s Mohit Jewellers by passing journal entry of Rs.9,36,57,733/ for the outstanding amount due from the said concern on account of sales, it is to be stated that such repayment is in clear contravention of the provisions of Section 269 T of the Act. Therefore, considering that provision of the section the contention of the assessee that the repayment of loan by way of adjustment through journal entries would not come within the ambit of Section 269T and the said contention was not acceptable as per his contention. As Section 269T requires the entities specified therein not to make repayment of loan/deposit together with interest, if any, otherwise than by, an account payee cheque/bank draft if the amount of loan/deposit with interest, if any, exceeds the limits prescribed therein. Therefore, the contention of the assessee that there is no violation of the loan has been repaid by debiting the account through journal entries was not considered as tenable. For that contention he placed reliance on the decision of the Hon’ble Bombay High Court in the case of CIT v. Triumph International Finance (I) Ltd ITA No.5746/2010 (Bom), wherein the Hon’ble High Court held that where the loan/deposit has been repaid by debiting the account through journal entries, it must be held that the assessee has contravened the provisions of Section 269T of the Income Tax Act, 1961. Further, the assessee has not cited any reasonable cause for violation of the provisions of section 269T of the Act. In view of these facts, it is a case where the assessee, without any reasonable cause, has contravened the provisions of section 269T of the Act. Therefore, ld. AO holds that the assessee has violated the provisions of section 269T of the Act, which puts an embargo on re-payment of loans except by the modes specified therein and, therefore, penalty u/s 271E is clearly exigible and consequently, he ordered to levy penalty of Rs. 9,36,57,733/- i.e., equal to the amount of repayment of loan other than account payee cheque, is imposed on the assessee in terms of section 271E of the Act.

When the matter carried before the ld. CIT(A), considered the binding precedent of our Rajasthan High Court in the case of CIT v. Hissaria Bros [2008] CIT v. Hissaria Bros.  (Rajasthan). The said decision has been affirmed by the Hon’ble Apex Court in the case of Hissaria Brothers wherein our High Court held that “”Penalty under ss. 271D and 271E-Limitation under s. 275-Computation-Penalty orders under ss. 271D and 271E passed beyond six months from the end of the month in which the assessments were completed were barred by limitation. Therefore, based on that binding precedent he held that the relevant date for determining the limitation period is the date when the reference was made by the Id. AO to the Id. Joint Commissioner / Addl. Commissioner and not the date when the show cause notice was issued by the Id. Addl. Commissioner. He thereby noted that in the present case the reference was made by the Id. AO to the Id. Addl. Commissioner on the date of 20.01.2020. Accordingly considering the period provided under section 275 of the Act, the penalty order should have been passed on or before 31.07. 2020. However, the order has been passed on 30.08.2022 and therefore, the penalty order is found to have been passed beyond the date of limitation and thus the same cannot be sustained and due to this position, he directed that the penalty levied is to be deleted.

Before us ld. DR relied upon the decision of Hon’ble Kerla High Court in the case of Grihalaxmi Vision v Addl.Commissioner of Income Tax, Range-1, Kozhikode’ and submitted that the ld. CIT(A) has erred in directing to delete the penalty merely on the technical ground and thus as held Grihalaxmi Vision’s case (supra) he should not only decide the technical ground in revenue’s favour but would have decided the merits also. The bench noted that the ld. DR relied on the decision in the case of Grihalaxmi Vision’s case (supra) wherein the Hon’ble Kerala High Court held that

“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 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 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 Section 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.”

Whereas in the case of theCIT v. Hissaria Bros.   (Rajasthan) has decided this issue thread bear and confirmed that the initiation of penalty has linked with the assessment proceeding and thereby the detailed finding of our Hon’ble High Court reads as under :

12. In the facts and circumstances noticed above, the Tribunal has held the penalty orders to be barred by time in terms of section 275(1)(c).

13. The revenue contends that the provisions of section 275(1)(a) are attracted so far as limitation in the present case is concerned and if section 275(1)(a) is applicable, the limitation for completing the penalty proceedings is extended up to six months from the date of expiry of the month in which the order has been passed in appeal or other proceedings arising out of the assessment in the course of which penalty proceedings have been initiated and the order imposing penalties under sections 271D and 271E had been passed within such extended period from the date of the appellate decision against the assessment order for the assessment year during which notice under sections 271D and 271E was issued.

14. It would be apposite here to refer to section 275 in its fullness :

“275. Bar of limitation for imposing penalties.—(1) No order imposing a penalty under this Chapter shall be passed—

(2) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any action initiated for the imposition of penalty on or before the 31st day of March, 1989.

Explanation.—In computing the period of limitation for the purposes of this section,—

15. It would not be out of place to consider the relevant legislative history of the provision in question for the present purposes.

16. Under the Income-tax Act, 1961, as originally enacted, no limitation was prescribed for completion of the penalty proceedings. However, considering that there should not be any inordinate delay in imposing penalty and to streamline the levy of penalty within reasonable time in the Act of 1961, section 275 was enacted as a new provision for regularising imposition of penalty. It is pertinent to notice that if at the relevant time when the scheme for levy of penalty was enacted in the 1961 Act, the case in which the penalty was envisaged under Chapter XXI, the penalty proceedings were required to be initiated during the course of relevant assessment proceedings or its appellate proceedings by the appellate authority. Attention may be invited to the provisions contained in sections 271 and 273 which were the principal provisions for imposing penalty. The simple provision which was enacted was that no order in this chapter shall be passed after the expiration of two years from the completion of proceedings, in the course of which the proceedings for imposition of penalty have been commenced. Thus, the limitation for imposing penalty under section 275 as originally enacted was directly linked with the completion of proceedings in the course of which the penalty proceedings were initiated in terms of section 271 or section 273 which were the principal provisions for imposing penalty under Chapter XXI. Since the initiation of penalty proceedings was linked with assessment proceedings and the orders in such assessments were subject to appeal, the findings in such proceedings ordinarily became the foundation for initiating proceedings for penalty and remained relevant evidence to reach a final conclusion in penalty proceedings which were otherwise independent. Where assessment proceedings in the course of which penalty proceedings were initiated became the subject-matter of appeal and there was modification or reversal of findings, it affected final result of penalty proceedings also.

17. Section 275 was substituted by the Taxation Laws (Amendment) Act, 1970, which came into effect from 1-4-1971. The change was explained by the Board vide Circular No. 56, dated 19-3-1971. Significantly, it postulated that section 275 of the Income-tax Act which specified the time-limit for completion of penalty proceedings has been substituted by a new section. Under the existing section, penalty proceedings for concealment of income or defaults in furnishing the return or accounts called for by notice or failure to pay advance tax on the taxpayer’s own estimate, etc., are required to be completed within two years from the date of completion of the proceedings in the course of which the penalty proceedings were commenced. The operation of this time-limit has resulted in practical difficulties in cases where the AAC remands the appeal against the assessment for further enquiry by the ITO or deletes or reduces the addition made on account of concealed income and the Department takes up the matter in further appeal before the Tribunal. Sometimes, a final decision on the quantum of the concealed income becomes available only after the expiry of the two years time-limit.

18. Section 275 as substituted aims at obviating difficulties in such cases, reducing avoidable work and avoiding hardship to the assessees. It provides that the time-limit for making an order imposing a penalty under the provisions of Chapter XXI of the Income-tax Act will, ordinarily, be two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed. However, in a case where the relevant assessment or other order is the subject-matter of an appeal to the AAC or an appeal by the ITO to the Tribunal, the time-limit for completing the penalty proceedings will be either the two years’ period as stated above or a period of six months from the end of the month in which the order of the AAC or, as the case may be, of the Tribunal is received by the CIT, whichever period expires later. It may be noted that the two years period will henceforth expire at the end of a financial year, instead of on different dates during the financial year, and the six months period will expire at the end of a calendar month. This facilitates the exercise of vigilance by the tax administration on the expiry of the limitation period and ensures that penalty proceedings are completed in all cases in time.

19. Secondly, the Direct Tax Laws (Amendment) Act, 1987, which came into effect from 1-4-1989, section 275 was amended. Vide amendment, the time-limit for completion of penalty proceedings which was generally two years from the end of financial year in which such proceedings were completed or six months from the end of the month in which action for imposition for penalty was initiated, whichever period expires later.

20. By these amendments, the three categories were made for applying limitation for completing the penalty proceedings taking into consideration the various penalty proceedings for default of certain provisions of the Income-tax Act which are not necessarily linked with proceedings for any particular assessment year in the course of which only penalty proceedings were required to be initiated. Such consequences of default were not linked with the principal assessment proceedings for any specific assessment year but were independent of it.

21. By substituting section 275(1), which became operative from 1-4-1989, the provision of divided cases for the purpose of prescribing limitation for completing penalty proceedings into three categories :

By dividing into three categories the period of limitation for cases falling under category (i), i.e., clause (1)(a) is the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed or six months from the end of the month in which the order of the Dy. CIT(A) or the CIT(A) or, as the case may be, the Tribunal is received by the Chief CIT or CIT, whichever period expires later.

22. The period of limitation for the cases falling under category II is six months from the end of the month in which such order on revision is passed and the period of limitation for the cases falling under the above category III is the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. In the last category, filing of appeal in respect of order passed in proceedings during which penalty proceedings were initiated is not relevant.

To this effect, a Circular No. 551, dated 23-1-1990 [(1990) 82 CTR (St.) 325] and another Circular No. 554, dated 13-2-1990 [(1990) 82 CTR (St.) 280] were issued by the CBDT.

23. A close scrutiny of section 275 which is reproduced hereinabove shows that clause (1)(a) covers those cases where the penalty proceedings are in respect of a default related to principal assessment for a particular assessment year and the penalty proceedings are required to be initiated in the course of that proceedings only. In such cases where the relevant assessment order or other orders are the subject-matter of an appeal to the CIT(A) under section 246 or an appeal to the Tribunal under section 253, after the expiry of the financial year in which the proceedings in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of CIT(A) or, as the case may be, of the Tribunal is received by the Chief CIT or CIT, whichever period expires later.

Apparently, clause (a) governs the categories which are integrally related to the assessment proceedings and are not independent of it.

24. We have also noticed that this provision was brought into effect in 1970 with effect from 1-4-1971, so that proceedings may not require rectification or modification depending on the outcome of the appeal against the orders passed in the relevant assessment proceedings or the other proceedings in the course of which the penalty proceedings are required to be initiated.

25. We have also noticed that sections 271 and 273 were the two original penalty provisions, which require the penalty proceedings to be initiated during the course of relevant assessment proceedings or the other relevant proceedings, as the case may be. The penalty proceedings could also be initiated during the appellate proceedings arising out of the relevant assessment proceedings. It is only where the assessment proceedings are independent and not directly linked to the assessment proceedings that the result of such proceedings in the course of which the penalty proceedings were initiated does not affect the levy of penalty. On such penalty proceedings, independent of the assessment proceedings, clause (c) has been made applicable. In this category, the period of limitation for completing the penalty proceedings is linked with the initiation of the penalty proceedings itself.

In such cases, the penalty proceedings can be initiated independent of any proceedings but obviously, the penalty proceedings can be initiated only when the default is brought to the notice of the concerned authority which may be during the course of any proceedings and, therefore, for this type of cases where the penalty proceedings have been initiated in connection with the defaults for which no statutory mandate is there about any particular proceedings during the course of which only such penalty proceedings can be initiated, a different period of limitation has been prescribed under clause (c) as a separate category. In cases falling under clause (c), penalty proceedings are to be completed within six months from the end of the month in which the proceedings during which the action for imposition of penalty is initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. There is no provision under clause (c) for the extended period of limitation commensurating with completion of the appellate proceedings, if any, arising from the proceedings during the course of which such penalty proceedings are initiated as in the case where the penalty proceedings are linked with the assessment proceedings or the other relevant proceedings.

26. The expression ‘other relevant thing’ used in section 275(1)(a) and clause (b) of sub-section (1) of section 275 is significantly missing from clause (c) of section 275(1) to make out this distinction very clear.

27. We are, therefore, of the opinion that since penalty proceedings for default in not having transactions through the bank as required under sections 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 under sections 271D and 271E may have been initiated has no relevance for sustaining or not sustaining the penalty proceedings and, therefore, clause (a) of sub-section (1) of section 275 cannot be attracted to such proceedings. If that were not so, clause (c) of section 275(1) would be redundant because otherwise, as a matter of fact every penalty proceeding is usually initiated when during some proceedings such default is noticed, though the final fact finding in this proceeding may not have any bearing on the issues relating to establishing default, e.g., 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. Either of the contingencies does not affect the computation of taxable income and levy of correct tax on chargeable income; if clause (a) was to be invoked, no necessity of clause (c) would arise.

28. Thus, both on the ground that the transaction in question of retention of sale price by the Kachcha Arhatiya did not amount to deposit and its utilisation and dealing with it at the instance of farmer constituents did not amount to repayment of loan or deposits within the meaning of section 269SS or section 269T, and on the ground that limitation under section 275(1)(c) applies to such proceedings, we hold in favour of the respondent.

29. Accordingly, these appeals fail and are hereby dismissed. No order as to costs.

Since, we have binding precedent over the other High Court decision cited by the revenue and we are also of the considered view that our High Court view is further confirmed by the apex court and even the revenue has accepted this fact has changed the provision in the Act w.e.f. 01.04.2025 wherein the power to levy this penalty has been given to the assessing officer, the relevant amended provision reads as under:

Penalty for failure to comply with the provisions of section 269SS.

271D. (1) If a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted.

(2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner:

^14-18[Providedthat any penalty under sub-section (1), on or after the 1st day of April, 2025, shall be imposed by the Assessing Officer.]

Thus, the reading of the amended provision of the law and the view of our High Court in the case of Hissaria Bros supra we are of the considered view that there is no infirmity in the finding of the ld. CIT(A) and thereby ground no. 2 & 3 raised by the revenue stands dismissed.

Since we have confirmed the view of the ld. CIT(A) on technical grounds we are of the considered view that the ld. CIT(A) has rightly not decided the merits of the dispute as the proceeding were barred by limitation and therefore, ground no. 1 raised by the revenue stands dismissed.

On being consistent to the finding so recorded herein above wherein all the contention of the revenue that has been raised has already been deal with and therefore, we see no infirmity in the finding of the ld. CIT(A) in following the binding precedent of our Rajasthan High Court in the case of Hissaria Brothers (supra).

In terms of these observations, the appeal of the revenue in ITA no.

1057/JP/2025 stands dismissed.

9. The facts of the case in ITA Nos. 1058 to 1061/JP/2025 are similar to the facts of the case in ITA No. 1057/JP/2025 and we have heard both the parties and perused the materials placed on record. The bench has noticed that the issues raised by the revenue in this appeal Nos. ITA Nos. 1058 to 1061/JP/2025 are equally similar on set of facts and grounds as that of 1057/JP/2025. Therefore, it is not imperative to repeat the facts and various grounds raised by the revenue and the decision taken by us in ITA No. 1057/JP/2025 for Assessment Year 2012-13 shall apply mutatis mutandis in the case of Sh. Ashwani Gupta in ITA Nos. 1058 to 1061/JP/2025 for the Assessment Years 2012-13, 2016-17 & 2022-23.

In the result, all the appeals of the revenue are dismissed.