Parin K. Rajwani vs. JCIT (ITAT Mumbai)

The real assessment order was passed on the November 30, 2010 on which date the Assessing officer proposed to begin penalty proceedings under section 271 D had been initiated. Income Tax (IT) Department may slap the tax payer with the penalty notice under section 271D of the Income Tax Act. The notice under section 271 D was also issued on November 30, 2010. The above said penalty order u/s 271D was passed on June 8, 2011.

Penalty u/s 271D is giving to the tax payer when there are possibilities of violation of provisions of section 269SS of the income tax Act i.e. any individual accepts deposits / loan from any other individual, in a way except account payee Cheques / demand drafts and where the money of deposit / loan borrowed or/and the accumulated money borrowed from the lender / depositor exceeds 20,000 Rs. Such penalty u/s 271 D is imposed upon the individual accepting / receiving or repaying deposits but not the depositor / lender.

The relevant financial year ends on March 31, 2011, at the same time on which the assessment order was completed. The period or duration of 6 months from the ending month in which the initiating the process of penalty proceedings ends/expires on May 30, 2011. The Hon’ble Rajasthan HC in the case of ‘CIT vs. Jitendra Singh Rathore (2013) 352 Income Tax Return 327 has also held that the 6 months period for the clause (c) of section 275(1) of the Income Tax Act is to be calculated from date of first show cause notice issued by the Assessing Officer and not from the issuance of first show cause notice by the (JC) Joint Commissioner. The order dated on June 8, 2011 is hit by the bar of limitation (prescribed in clause (c) of under section 275(1) of the Income Tax Act).

The assessee woman was engaged in the tailoring profession. She was having no intention to breach/contravene the provisions of the Income Tax Act. In fact, after receiving the amount of loan from her daughter-in-law (a very close relative), the amount was deposited by her in the bank. These two ladies were not aware about the provisions of Act in this respect. By Considering the fact that assessee is a small time tailor by profession, her gross Income only from tailoring and from interest income and it was found that the case is fit for levy of penalty under section 271D as there were no intention to breach/contravene the provisions of Act while receiving the loan of Rs. 40,000/- from her daughter-in-law.