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TMI Blog2008 (4) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... sequent events do not govern the applicability of s. 269SS. Thus, on the date of acceptance of loan, if both the persons, namely, lender and borrower are having agricultural income and do not have income chargeable to tax under the IT Act, s. 269SS is not applicable. There is logic behind this. Penalty under s. 271D is attracted under IT Act for alleged violation of certain provision contained in IT Act. According to s. 2(7), assessee means a person by whom any tax or any other sum of money is payable under this Act. Thus, if no tax is payable by a person, he cannot be treated as an assessee so as to subject him to the rigors of ss. 269SS and 271D. Admittedly, in the present case, the lender, namely, Shri Rodhu Singh, grandfather of appellants herein, has only income from agricultural operations. All the three assessees prior to taking up of the loan did not have any income chargeable to tax under this Act. Only after the loan was received and invested in a partnership firm, income in the form of remuneration and interest accrued to them. However, before setting up of said business and on date of taking the loan, they did not have any other income. We accordingly hold that as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ms. Anusha Khurana ORDER DEEPAK R. SHAH (ACCOUNTANT MEMBER). 1. All these appeals by the assessees are directed against the order of the learned Commissioner of Income-tax (Appeals), Muzaffarnagar dated January 5, 2006, in an appeal against order levying penalty under section 271D of the Income-tax Act, 1961 ( the Act ). In all these appeals, the assessees challenges levy of penalty under section 271D of the Act. Since all these assessees are related to each other and facts in all the cases are identical, these appeals were heard together and are disposed of by a common order. 2. The three assessees became partners of a partnership firm M/s. Jai Laxmi Cane Crusher at Village Kukavi, Distt. Saharanpur, UP. Each of these partners introduced capital of Rs. 1,50,000 in the books of firm. The capital introduced was received by them from their grandfather Shri Rodhu Singh through cheque drawn on the District Co-operative Bank. 3. The Assessing Officer issued notice under section 148 requiring the assessee to file return of income. The assessee filed the return of income declaring income in the form of salary and interest from the above referred firm. In the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be imposed by the Income-tax Officer. The same can be imposed only by the Joint Commissioner of Income-tax/Assistant Commissioner of Income-tax. Thereafter, the Income-tax Officer referred this case for imposition of penalty and a showcause notice has been issued only on October 8, 2003. Therefore, the penalty will be time barred only on April 30, 2004. The Assessing Officer, being the Additional Commissioner of Income-tax levying the penalty held that the assessee has deposited Rs. 1,50,000 in the books of the firm by raising a loan from his grandfather through a bearer cheque in his own name and after withdrawing cash himself therefrom. Thus, the provisions of section 269SS is violated as the loan is otherwise than by account payee cheque. Since the provisions of section 269SS is violated, penalty under section 271D is attracted. 5. Before the learned Commissioner of Income-tax (Appeals), the assessee reiterated the submissions made before the Additional Commissioner of Income-tax. It was further submitted that Shri Rodhu Singh and the assessee both are having agricultural income and neither of them has any income chargeable to tax and hence, no penalty should be imposed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial help from the grandfather to run the factory. As regards limitation, Shri Malik submitted that as per section 275(1)(c), no order imposing a penalty under Chapter XXI shall be passed after 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 six months from the end of the month in which action for imposition of penalty is initiated, whichever is later. As per the assessment order itself, the action for imposition of penalty has been initiated by issue of notice dated January 10, 2003. It may be a different fact that the penalty can be levied only by the Joint Commissioner of Income-tax/Additional Commissioner of Income-tax but the limitation will always expire as per provisions of section 275(1)(c). For this purpose, reliance was placed on the decision of the Income-tax Appellate Tribunal, Jodhpur Bench, in the case of Hissaria Bros. [2001] 73 TTJ 1. As approved by the hon'ble Rajasthan High Court in the case of CIT v. Hissaria Bros. [2007] 291 ITR 244. Reliance is also placed on the decision of the hon'ble Bombay High Court in the case of CIT v. Chhajer Packaging and Plastics ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 1984 take or accept from any other person any loan or deposit otherwise than by account payee cheque or account payee bank draft if the amount of such loan on the date of taking or accepting such loan is Rs. 20,000 or more. The first proviso to section 269SS prescribes that section 269SS shall not apply to any loan or deposit taken or accepted by certain class of persons. The second proviso to section 269SS which is relevant for our discussion is extracted herein : Provided further that the provisions of this section shall not apply to any loan or deposit where the person from whom the loan or deposit is taken or accepted and the person by whom the loan or deposit is taken or accepted are both having agricultural income and neither of them has any income chargeable to tax under this Act. 11. Reading the aforesaid proviso, it is clear that if the person from whom the loan is taken or accepted and the person by whom the loan is taken or accepted are both having agricultural income and neither of them has any income chargeable to tax under this Act, section 269SS do not apply to them. Section 269SS is a transaction specific and not related to any assessment year. Thus, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. 13. As per the above provision, it is clear that no order imposing penalty under section 271D shall be passed after certain limitation. The limitation commences from the date the action for imposition of penalty has been initiated. Thus, it will be relevant to find out the date on which the action for imposition of penalty has been initiated. In the assessment order dated January 27, 2003, the Income-tax Officer has clearly recorded a finding that since the assessee has violated the provisions of section 269SS of the Act for which a separate show-cause notice has been issued vide notice dated January 10, 2003, penalty proceedings are being initiated for committing the default for accepting loan in cash, i.e., through bearer cheque . This conclusively proves that the action for imposition of penalty has been initiated on January 10, 2003, as recorded in the assessment order dated January 27, 2003. It is a different fact that the Income-tax Officer, who has so initiated the penalty is not competent to levy penalty under section 271D. However, it cannot be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment of income of the assessee for the financial year 1995-96 (the assessment year 1996-97). It has come in the order of the Commissioner of Income-tax (Appeals) that the assessment order was dated March 30, 1999. Thus, the assessment proceedings are concluded on March 30, 1999 i.e. within the financial year 1998-99, corresponding assessment year being 1999-2000. Consequently, penalty could have been imposed latest by March 31, 1999 since the assessment proceedings out of which penalty proceedings took birth, were completed on March 30, 1999. So far as the second mode of computation of limitation is concerned, the later half of clause (c) of section 275(1) of the Act is not that difficult to be understood. The penalty proceedings in the present matter were initiated by notice dated April 6, 1999 and the period of limitation of six months is to be computed from the last date of the month in which the penalty proceedings were initiated. Thus, April 30, 1999 would be the starting point of limitation of six months and consequently, October 29, 1999 would be the last date of the period of limitation, computed in accordance with the second half of clause (c) of section 275(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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