RAJES KUMAR,J. - (1.) THIS is an appeal under Section 260A of the Income -tax Act (hereinafter referred to as the 'Act') for the assessment year 2001 -02. The appeal has been admitted on the following two questions: 1. Whether the learned Income -tax Appellate Tribunal was justified in law in coming to the conclusion that the penalty was time barred ignoring the fact that the initiation of penalty proceedings has to be construed with reference to the steps taken by the Joint Commissioner of Income -tax which started on 3 -9 -2003 and not by the Income -tax Officer's notice dated 1 -8 -2003 since as enjoined by Section 271E(2), Joint Commissioner of Income -tax is the only competent authority to levy penalty under Section 271E of the Income -tax Act, 1961.
(2.) WHETHER the learned Income -tax Appellate Tribunal was justified in quashing the penalty after arriving at the conclusion there was no passing of money while ignoring the entries made by the assessee in his books of account indicating the reduction in the balance amount payable to the creditor. 2. The brief facts of the case are that there was a deposit of Rs. 4,89,450 in the name of Sri Daya Shankar with the assessee -firm. The bearer cheques were issued in the name of Sri Daya Shankar for Rs. 2,89,450 in the year under consideration. As per provisions of Section 269T of the Act, the repayment should be made through account payee cheque or account payee draft, which was not done. For the alleged default of Section 269T of the Act the Income -tax Officer, the assessing authority issued the notice on 1 -8 -2003 under Section 271E of the Act. Thereafter, the Income -tax Officer, Raebareli on 19 -8 -2003 referred the matter to the Joint Commissioner, Income -tax, Sultanpur. The Joint Commissioner, Income -tax, Sultanpur issued a notice dated 3 -9 -2003 to the assessee fixing the date of hearing on 11 -9 -2003. The assessee filed the reply which had not been accepted by the Joint Commissioner, Income -tax and vide order dated 29 -3 -2004 a sum of Rs. 4,89,450 was imposed towards penalty under Section 271E of the Act. The assessee filed the appeal before the Commissioner of Income -tax (Appeals) Lucknow which was dismissed vide order dated 28 -2 -2005. Being aggrieved by the order of Commissioner of Income -tax (Appeals), the assessee filed the appeal before the Income -tax Appellate Tribunal, Allahabad Bench, Allahabad. The Tribunal by the impugned order dated 24 -8 -2005 allowed the appeal. The Tribunal held as follows: Hence after having heard both the parties A.R. and having considered the material on record and the order of the Income -tax Appellate Tribunal, and having considered the arguments, I hold that no penalty in the facts and circumstances of the case is leviable, since it is a time barring matter and there is no passing of the money. Heard Sri D.D. Chopra, learned Senior Standing Counsel and Sri Ratnesh Chandra, learned Counsel for the assessee. For the convenience it is useful to refer Sections 271E, 273B and 275(1)(c). 271E. Penalty for failure to comply with the provisions of Section 269T. -(1) If a person repays any loan or deposit referred to in Section 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so repaid. (2) Any penalty imposable under Sub -section (1) shall be imposed by the Joint Commissioner. 273B. Penalty not to be imposed in certain cases. -Notwithstanding anything contained in the provisions of Clause (b) of Sub -section (1) of Section 271, Section 271A, Section 271AA, Section 271B, Section 271BA, Section 271BB, Section 271C, Section 271CA, Section 271D, Section 271E, Section 271F, Section 271 FA, Section 271FB, Section 271G, Clause (c) or Clause (d) of Sub -section (1) or Sub -section (2) of Section 272A, Sub -section (1) of Section 272AA or Section 272B or Sub -section (1) or Sub -section (1A) of Section 272BB or Sub -section (1) of Section 272BBB or Clause (b) of Sub -section (1) or Clause (b) or Clause (c) of Sub -section (2) of Section 273, no penalty shall be imposable on the person or the assessee as the case may be, for any, failure referred to in the said provisions if he proves that there was reasonable cause for the said failure. 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 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 Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief 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 Commissioner (Appeals) under Section 246 or Section 246A, and 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 Commissioner (Appeals) is received by the Chief Commissioner or Commissioner, whichever is later;(b) ** ** ** (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.
(3.) LEARNED Standing Counsel submitted that the order of the Tribunal in holding that the penalty order passed was barred by limitation is patently illegal. He submitted that as per the provisions of Section 275(1)(c), the limitation to pass the penalty order was up to the end of the financial year in which penalty proceeding was initiated or six months from the end of the month in which the action for imposition of penalty is initiated whichever period expires later. In the present case the assessing authority issued the notice on 1 -8 -2003 and the Joint Commissioner of Income -tax on 3 -9 -2003, therefore, the penalty could be levied by 31 -3 -2004. He submitted that six months period is to be calculated from the date of the notice issued by the Joint Commissioner of Income -tax who was competent to levy the penalty under Section 271E of the Act and such period expires on 1 -4 -2004 while penalty order was passed on 29 -3 -2004 well within time. He further submitted that the Tribunal has not examined the matter on merit properly and, therefore, to decide the matter afresh on merit, the matter should be sent back to the Tribunal.;