9911796707
TMI Blog2013 (5) TMI 857X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals filed by the Revenue were earlier dismissed by this Tribunal by its common order dated 30-01-2009, which, on appeal by the Revenue, was set aside by the Hon'ble High Court vide its order dated 18-04-2011 in Tax Appeal No. 1379 and 1380 of 2009, with the following observations:- "As a final fact finding authority, Tribunal's factual conclusions hold immense importance in Tax Appeal carried before us. Being a specialized Tribunal, it's appreciation on legal questions also holds considerable importance to us. When a Tribunal's judgment is bereft of any discussion either on facts or in law, it besides being an unreasoned order of a quasi-judicial tribunal, also increases our burden to gather facts from other record and to verify whether the ultimate conclusion that the Tribunal arrived at, calls for any interference or not. In absence of any discussion on facts or on law by the Tribunal, we are left to imagine what must have weighed with the tribunal to arrive at a particular conclusion. ** ** &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Appreciating the fact that the actual quantification of undisclosed income is an impossible task, in view of what has been mentioned above, we are still not very comfortable in fully accepting the contention of the assessees that their total income for the block period is running in negative (on provisional basis and relying on the date to the extent available with them, as interpreted by the AO), so as to justify the returned income of Rs. Nil in both the cases. We are at the same time not in agreement with the view of CIT-DR that the order of the CIT(A) is required to be reveres in so far as he has deleted the additions made by the AO. In view of this, we deem it proper to restrict the overall total addition at Rs. 28,00,000/- in the case of Deepak Takwani and at Rs. 17,00,000/- in the case of Smt. Lata Takwani on lump sum basis, which work out to approximately 10% of the main addition sustained by CIT(A). We deleted all other additions made by the AO, referable to various grounds subject matter of these appeals. Regarding the other grounds taken by both the parties, who do not result in any addition per say, we do not find it necessary to separately adjudicate the same in vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO in this behalf, the then Joint Commissioner issued fresh show-cause notices for levy of impugned penalties. 03.09.2004: Appeal filed by the assessee against the aforesaid block assessment order was disposed off by the CIT(A). 30.03.2006: After hearing the assessee, orders were passed by the Additional Commissioner of Income-tax for levy of impugned penalties. 29.05.2006: The said order of block assessment dated 27.06.2001 was set aside by this Tribunal and the matter was restored to the file of the AO. 18.10.2006: Impugned penalties were cancelled by the CIT(A) on the ground that they were levied by the AO after expiry of limitation period as prescribed u/s 275(1)(c). 30.01.2009: Revenue's appeal against the order of the CIT(A) cancelling the impugned penalties was dismissed by this Tribunal. 18.04.2011: On further appeal by the Revenue, the aforesaid order passed by this Tribunal on 30.01.2009 was set aside by the Hon'ble High Court and the matter was restored to this Tribunal for passing a fresh order. 9. As regards the assessment of undisclosed income, the order passed by the CIT(A) on 3.9.2004 in quantum appeal was set aside by this Tribunal, vide its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A), and therefore the period of limitation for levying the impugned penalties would be governed by section 275(1)(a) and not section 275(1)(c). 11. Aggrieved by the penalty orders passed by the Additional Commissioner of Income-tax, the assessee carried the matter in appeal before the CIT(A). The ld. CIT(A) noted that the action for the imposition of impugned penalties was initiated in the block assessment order passed by the AO u/s 158BC and not in the course of assessment proceedings u/s 143(3). He, i.e., the CIT(A), accepted the plea of the assessee that the period of limitation as given in section 275(1)(a) would not apply to the impugned penalties for two reasons. One, the proceedings for the imposition of impugned penalties u/s 271D/271E were independent of assessment proceedings and therefore the period of limitation laid down in section 275(1)(a) would not apply to the penalties leviable u/s 271D/271E. Two, section 275(1)(a) does not cover block assessment order in which action for the imposition of penalty u/s 271D/271E could be initiated. According to him, section 275(1)(a) applies where the action for the imposition of penalty u/s 271D/271E has been initiated in the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the above section, and, because of this situation, an order passed u/s. 271E of the Act would fall under the category of 'any other case' not falling under clauses (a) and (b) of section 275(1) of the Act, i.e. to say, it would fall under clause (c) of section 275(1) of the Act. Besides, the proceedings initiated u/s. 271E of the Act have no relevance or dependent upon the outcome of the assessment order, therefore, the same would not fall under clause (a) of sub-sec.(1) of sec. 275 of the Act." 12. Aggrieved by the orders passed by the CIT(A) cancelling the impugned penalties on the ground that they were barred by limitation as laid down in section 275(1)(c), the Revenue filed the present appeals before this Tribunal. 13. In support of appeal, the ld. Departmental Representative took us through the penalty orders and the provisions of section 275 and submitted that the impugned penalties were initiated in the block assessment order, which was also subject matter of appeal u/s 246A before the CIT(A) and hence the period of limitation as laid down in section 275(1)(a) would apply. He submitted that the period of limitation as laid down in section 275(1)(c) would apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake of convenience. "Bar on limitation for imposing penalties. No order imposing a penalty under this chapter shall be passed- (a) to (c)** ** ** 2.3 The appellant submits that the initiation of penalties in respect of the so-called violation of sections 269SS & 269T is clearly independent of the assessment and its resultant litigation. The same is thus clearly covered by the provisions of section 275(1(c) of the Income-tax Act. Reliance is placed in this regard to a number of judgments of various High courts and Tribunals, a representative list is separately enclosed herewith, cumulatively marked as Annexure-1. 2.4 From the facts as mentioned above, the appellant submits that the penalties having been initiated by the competent authority in the month of January 2002, the same could not have been levied after 31st July, 2002, which was clearly the last date for levying these penalties under the limitation imposed under section 275(1)(c) of the Income-tax Act. Since the penalties have been levied as late as on 30th March 2006, i.e. after three full years and eight months of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same has to be disposed off within the prescribed time limit, as specified under section 275(1)(c). The representative list of the citations in this regard is enclosed herewith, marked as Annexure-1. 4. The appellant further submits that in so far as the penalty under section 271E is concerned, the same is referable to the violation of section 269T of the Income-tax Act. This penalty at the relevant point of time could have been levied only in respect of repayment of deposits otherwise than by crossed account payee cheque or bank draft and had thus clearly no application with regard to repayment of loan. Section 271E prescribing penalty in respect of repayment of any deposit was amended w.e.f. 01st June 2003, wherein even repayment of loan was covered. Since the penalty has been levied for the period much prior to the prospective amendment which was brought in the statute book, the penalty under section 271E could not have been levied in respect of repayment of loans, even if the same was made otherwise than by crossed Account Payee Cheque or Bank Draft." 15. In support of his submissions, he relied upon the following decisions which have also been referred to in the appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed penalties was initiated in the course of block assessment proceedings as evident from Para 19 of the block assessment order. Show-cause notices u/s 274 were issued after action for the imposition of impugned penalties had been initiated in the block assessment order. So much so that even a reference was made by the AO to the Additional/Joint Commissioner for levy of impugned penalties after action for their imposition was initiated vide Para 19 of the block assessment order. (iii) Perusal of the block assessment order dated 27.6.2001 shows that the impugned loans/deposits have been treated as unexplained and consequently treated as taxable income of the assessee. It is also the submission of the assessee himself that impugned loans/deposits have been assessed as income of the assessee by the AO and therefore penalties are not leviable. Treatment of loans/deposits taken or repaid in contravention of section 269SS/269T is, according to the assessee himself, inextricably interlinked with the assessment as it is in the assessment that such loans/deposits have been assessed as income of the assessee. The true character of impugned loans/deposits, i.e., whether they represent income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) 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." 19. As evident from the marginal note, section 275 creates bar of limitation for imposition of penalties. Sub-section (1) of section 275 divides cases of penalties in three distinct categories. None of the categories overlaps with the other. The distinction created by three clauses of sub-section (1) of section 275 is absolute and clear. First Category, i.e., clause (a) of sub-section (1) of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Quite often, assessment orders passed by the AO and the findings recorded in them are modified or vacated or set aside by the CIT(A) and the ITAT. The Legislature therefore thought it appropriate to link the period of limitation in such penalty cases with the disposal of quantum appeal by the CIT(A)/ITAT else it would lead to multiplicity of proceedings and avoidable litigation even while the findings recorded in the assessment order on the basis of which penalties could be levied were still under consideration before the CIT(A)/ITAT. The policy seems to be that it is better to wait till the disposal of appeal by the CIT(A)/ITAT against the assessment order and the findings recorded therein instead of hurrying up the disposal of penalty in cases where those findings in the assessment order which gave rise to penalty were yet to disposed off by the CIT(A)/ITAT. For the reasons as aforesaid, longer period of limitation has been deliberately provided under clause (a) of sub-section (1) of section 275. The ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the proposition that section 275(1)(a) applies to those penalties alone which are specified in section 271. There are five principal reasons for coming to the aforesaid conclusion: (i) Clause (a) of sub-section (1) of section 275 deals with a very important procedural aspect before levy of penalty, i.e., it lays down the mechanism for initiation of action for levy of penalty. There is no other provision in the IT Act, except section 275(1), which deals with initiation of penalty. Section 271 deals with satisfaction and not with initiation of penalty. Satisfaction for initiation of proceedings for levy of penalty is not the same thing as initiation of penalty. Bar of limitation can be computed only when there is initiation of action for imposition of penalty. It is for this purpose that clause (a) sub-section (1) of section 275 contains the mechanism for initiation of action for imposition of penalty in cases falling under it. It authorises initiation of action for imposition of penalty in "relevant assessment or other order". Section 275(1)(a) expressly provides for initiation of action for imposition of penalty in "relevant assessment" or "other order". "Penalty" in the expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 271 is a step earlier than the initiation of action for levy of penalty u/s 275(1)(a). Satisfaction that the stipulated default in terms of section 271 has taken place precedes initiation of action for imposition of penalty u/s 275(1)(a). It is the initiation of action for levy of penalty which is the starting point for computation of limitation and not satisfaction. Therefore, section 271 does not control or otherwise restricts the scope of section 275(1)(a). (v) Though clause (c) of sub-section (1) of section 275 also authorizes initiation of action for imposition of penalty but such initiation is limited to cases falling under that clause. It does not mean that the AO cannot initiate action for imposition of penalty in cases falling under clause (a) of sub-section (1) of section 275. 22. In view of the foregoing analysis, it is held that (i) the scope of section 275(1)(a) is neither limited to nor otherwise linked with the penalties imposable under section 271 alone; "Penalty" in section 275(1)(a) does not mean those penalties alone which are imposable u/s 271; (ii) the scope of section 275(1)(a) extends to all the penalties imposable under Chapter XXI of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subject matter of revision. However, clause (c) of the said sub-section provides for contingencies in cases other than those which fall under clauses (a) and (b) of section 275(1) of the Act." 24. It is therefore quite clear that clause (c) of sub-section (1) of section 275 applies to a case which does not fall under clause (a) or (b) of section 275(1). Once a case is found to fall under clause (a), the question of invoking clause (c) does not arise at all. The judgment of the Hon'ble High Court is equally emphatic in its observation that clause (a) of section 275(1) applies where the "relevant assessment or other order" is subject matter of appeal before the higher authorities while there is no such requirement for the applicability of clause (c) of sub-section (1) of section 275. 25. In CIT v. M.A. Presstressed Works [1996] 220 ITR 226 (Raj.), assessment of the assessee-firm was completed on 30.7.1983. In the course of assessment proceedings, notice for levy of penalties under various sections, e.g., section 273(b), was issued. The appeal filed by the assessee challenging the assessment was dismissed on 24.2.1984. Thereafter, the registration of the firm was cancelled by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There can be no hard and fast rule that action for imposition of penalty u/s 271D/271E cannot be initiated either in the relevant assessment or independently of the assessment. There can be a situation where relevant details suggesting violation of section 269SS/269T are readily available on the surface with the concerned officer and he, on that basis, decides to proceed with the levy of penalty. He is free to do so. In such a situation, the action for imposition of penalty u/s 271D/271E need not be initiated in the course of assessment and therefore the bar of limitation as prescribed in section 275(1)(a) would not apply but the bar of limitation as laid down in section 275(1)(c) would apply. There can be another situation where section 275(1)(a) would not apply, i.e., in a case where action for imposition of penalty is initiated in the relevant assessment but the assessment is not challenged in appeal, as in the case of Shanbhag Restaurant (supra), in which case the bar of limitation as per section 275(1)(c) would apply. There can be third category of cases where action for imposition of penalty is initiated but the said action is not integrally related to assessment in which ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich obviously includes not only the assessment of income but also the finding and tax treatment given in the assessment order to the transactions giving rise to penalties. 28. Turning to the facts of the case under appeal, it is clear that the block assessment order in which the action for imposition of penalty was initiated was passed on 27.06.2001, which was subjected to appeal u/s 246A before the CIT(A) and the appeal was disposed of by him on 03.09.2004. It is in the course of block assessment proceedings and the order passed in pursuance thereof that it was found by the AO that the assessee has brought himself within the mischief of the penalty proceedings. The finding recorded by the AO and the tax treatment given by him in the assessment order to the transactions in this behalf are inextricably interlinked with the impugned penalties and therefore initiation of action for levy of penalties is not independent of assessment. This finding is confirmed by the assessee's own submission that impugned loans/deposits have been assessed as income of the assessee by the AO and therefore penalties are not leviable. The true character of impugned loans/deposits, i.e., whether they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort. It includes computation of income and tax thereon. It includes not only regular assessment but also summary assessment, best judgment assessment, re-assessment and block assessment. While assessment is genus, its various forms are its species. In section 143, the expression "assessment" signifies mere computation of income. In section 147, it signifies computation of escaped income. In section 158BC, it signifies computation of undisclosed income. An assessment is called block assessment for the reason that it seeks computation of undisclosed income for the block period. Simply because it seeks to compute the undisclosed income of the block period instead of total income of the previous year, it does not cease to be "assessment" as contemplated by section 275(1)(a). Besides, the expression used in section 275(1)(a) is "relevant assessment" and not assessment. Relevant assessment means an assessment by which income of the assessee and tax thereon is determined by the AO in accordance with the provisions of the IT Act. The language of section 275(1)(a) shows nothing to warrant that the term "relevant assessment" used therein refers to assessment u/s 143(3). In this view of the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the assumption that one person is the legal equal of any other. Thus, persons in similar situations should not be treated differently except for legally relevant and clearly justifiable reasons. Precedent promotes judicial restraint and limits a judge's ability to determine the outcome of a case in a way that he or she might choose if there were no precedent. This function of precedent gives it its moral force. Precedent also enhances efficiency. Reliance on the accumulation of legal rules helps guide judges in their resolution of legal disputes. If judges had to begin the law anew in each case, they would add more time to the adjudicative process and would duplicate their efforts. The use of precedent has resulted in the publication of law reports that contain case decisions. Lawyers and judges conduct legal research in these reports seeking precedents. They try to determine whether the facts of the present case precisely match previous cases. If so, the application of legal precedent may be clear. If, however, the facts are not exact, prior cases may be distinguished and their precedents discounted. It therefore follows that a decision operates as binding precedent only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of which are being referred to here. In Government of Karnataka v. Gowramma AIR 2008 SC 863, the Hon'ble Supreme Court has observed as under: "Reliance on the decision without looking into the factual background of the case before it is clearly impermissible. A decision is a precedent on its own facts. Each case presents its own features. It is not everything said by a Judge while giving a judgment that constitutes a precedent. The only thing in a Judge's decision binding a party is the principle upon which the case is decided and for this reason it is important to analyse a decision and isolate from it the ratio decidendi. According to the well-settled theory of precedents, every decision contains three basic postulates (i) findings of material facts, direct and inferential. An inferential finding of facts is the inference which the Judge draws from the direct, or perceptible facts; (ii) statements of the principles of law applicable to the legal problems disclosed by the facts; and (iii) judgment based on the combined effect of the above. A decision is an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lways Board (1972) 2 WLR 537. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases." 36. The following words of Lord Denning in the matter of applying precedents have become locus classicus. They have often been quoted with approval in several judgments of the Hon'ble Supreme Court some of which are (i) Gowramma (supra) and (ii) Bihar School Examination Board v. Suresh Prasad Sinha [2009] 8 SCC 483. "Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases. One should avoid the temptation to decide cases (as said by Cardozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive. Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat initiation of action for imposition of penalty in the assessment order is integrally related to the assessment or other order, which was subsequently subjected to appeal u/s 246/246A before the CIT(A), the bar of limitation as contained in section 275(1)(a) would automatically apply. On plain reading of section 275(1), such cases would be clearly covered by section 275(1)(a) and not by section 275(1)(c). On the facts available on record, it is quite clear that the matters under appeal are squarely covered by section 275(1)(a) and therefore the question of applying the bar of limitation as contained in section 275(1)(c) does not arise. The decisions referred to by the ld. Authorised Representative for the assessee are inapplicable to the facts of the case before us. 40. At the time of hearing, the learned counsel for the assessee has heavily relied upon two decisions, namely, the judgment of the Hon'ble Karnataka High Court in Shanbhag Restaurant (supra) and decision of a Special Bench of this Tribunal in Dewan Chand Amrit Lal (supra). 41. In Shanbhag Restaurant (supra), the Assessing Officer, on verification of accounts, held in the assessment order dated 25th February 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble High Court. Therefore the aforesaid judgment cannot be read as laying down a proposition that the bar of limitation as contained in clause (c) of sub-section (1) of section 275 would apply even to penalties falling under clause (a) or (b) of sub-section (1) of section 275. The fact that clause (c) of sub-section (1) of section 275 does not apply to cases falling under clauses (a) and (b) of sub-section (1) of section 275 is evident from the observations extracted from the said judgment and reproduced earlier in this order. 42. Decision of a Special Bench of this Tribunal in Dewan Chand Amrit Lal's case (supra) was cited in support of the proposition that the AO has no power to initiate action for imposition of penalty u/s 271D and 271E in the assessment order and that the bar of limitation as contained in section 275(1)(c) would always apply to penalties imposable under sections 271D and 271E. In order to appreciate the decision, it is necessary to bring out the issue that was referred to the Special Bench for its consideration. In Para 2 of the order of the Special Bench, the position is stated as under: "2. The main ground raised by the assessee against the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld by the Hon'ble High Court, clause (a) of sub-section (1) of section 275 provides for "limitation in case where the relevant assessment or other order is the subject matter of appeal before the higher authorities." The said judgment also says that clause (c) of the said sub-section provides for contingencies in cases other than those which fall under clauses (a) and (b) of section 275(1) of the Act. In the matters under appeal, the action for imposition of impugned penalties was initiated in the block assessment, which was subject matter of appeal before the CIT(A). The fact that the impugned penalties are inextricably interlinked with quantum appeal is evident from the very submission of the assessee that impugned loans/deposits represented undisclosed income taxed by the AO. The issue of penalties cannot be divorced from the finding in the assessment order and its ultimate treatment in the quantum appeal. Initiation of impugned penalties is not only integrally related to assessment but their imposition is dependent on the outcome in quantum appeal. The case of the assessee squarely falls under clause (a) of sub-section (1) of section 275. As held by the Hon'ble Karnata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able u/s 271E on repayment of deposits, and, if no, the amount of repayment of deposit on which penalty u/s 271E was levied would need to be excluded from the overall penalty which has been levied u/s 271E for repayment of both loans and deposits. All these matters need proper consideration after bringing the relevant materials on record. Reasonableness of explanation offered by the assessee, if any, in the matter also needs to be considered and adjudicated upon by the CIT(A). The CIT(A) has not adjudicated upon the correctness of levy of impugned penalties on merits as he has quashed both the orders of penalty on the ground that they were hit by the bar of limitation contained in section 275(1)(c). None of the issues raised by the assessee before the CIT(A) on the leviability of penalties on merits can be disposed of by this Tribunal firstly for want of relevant materials on record and decision thereon by the CIT(A) and secondly for want of any ground of appeal in that behalf before this Tribunal. In this view of the matter, the ld. CIT(A) is directed to decide the issue of levy of penalty on merits after giving reasonable opportunity of hearing to both the parties. For this limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extended period available u/s 275(1) (a) for passing the penalty order under Chapter XXI of the Act is not available to the proceedings under the above two sections, and, because of this situation, the order passed u/s 271D and 271E of the Act would fall under the category of 'any other case' not falling under clauses (a) and (b) of section 275(1) of the Act, i.e. to say it would fall under clause (c) of Section 275(1)(c) of Act. The ld. Counsel for the assessee further pointed out that the proceedings initiated u/s 271D and 271E have no relevance or dependent upon the outcome of the assessment order, therefore, the same would not fall under clause (a) of sub-section (1) of section 275 of the Act. 4. The second contention raised by the ld. DR is that the assessment framed under Chapter XIV B of the Act is also a regular assessment, therefore, the penalty u/s 271D or 271E of the Act can also be levied in case of assessment is framed u/s 158BC of the Act. 5. On the other hand, Shri B.R. Popat, the ld. Counsel appeared on behalf of the assessee vehemently supported the order passed by the ld. CIT(A). He pointed out that proceedings u/s 271D and 271E of the Act are independe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01 3 Initiation of the penalties, albeit without jurisdiction, by the DCIT, by issuing two separate notices under section 271D & 271E DCIT, Investigation circle, Jamnagar June 2001 4 Issuance of two separate notices u/s 274 read with sections 271D and 271E, initiating the penalties, subject matter of the present appeals DCIT, Investigation circle, Jamnagar 15.1.2002 5 Penalty order Addl. CIT,Range-3, Jamnagar 30.3.2006 The ld. Counsel of the assessee also drew our attention to Specific provisions of section 275(1) of the Income Tax Act, prescribing limitation for imposing penalties. Bar on limitation for imposing penalties. No order imposing a penalty under this chapter shall be passed. 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 Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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." 6. After referring to the aforesaid chart, and provisions of section 275(1) of the Act, the counsel for the assessee pointed out that in this case the block assessment was completed in June 2001 by the DCIT who also issued two separate notices u/s 274 r.w.s. 271D and 271E of the Act. Further notices were also issued u/s 274 r.w. section 271D and 271E by JCIT, Range-(1), Junagadh. The penalty orders under both the sections were passed on 30.3.2006 by Additional CIT, Junagadh. The penalty orders passed by the Add. CIT, Range-1, Junagadh are barred by limitation as per the provisions of section 275(1)(c) of the Act from the first penalty notice issued in June 2001 by DCIT (Inv), Junagadh as well as penalty notices issued by JCIT Range (1), Junagadh. 7. Without prejudice to the above and assuming though not admitting about that both the penalties under both these sections were levied within the period of limitation, the ld. Counsel of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder, the ld. CIT(A) has not adjudicated upon the penalty on merits, therefore, it may be held that the penalty order passed within the limitation provided u/s 275(1)(a) of the Act and therefore, the ld. CIT(A) be directed to decide both the appeals of the assessee on merits after giving opportunity of being heard to both the sides. 10. The sole issue involved in these two appeals is to decide whether the case of the assessee falls under clause (a) or clause (c) of section 275(1). At the time of hearing, both sides admitted that only High Court judgment on this issue available is the judgment of the Hon'ble High Court of Karnataka in the case of Shanbhag Restaurant (supra). The Hon'ble High Court in this case has under as under : "Penalty under SS 271D and 271E- - limitation u/ s 275(1)(c)- Order passed after the expiry of six months from the end of the month in which proceedings were initiated-As per section 275(1)(c), out of two periods, whichever period expires later would ensure to the benefit of the Revenue-Financial year in the first part of section 275(1)(c) must be understood as the financial year in which the assessment order is made in the course of which proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of penalty was initiated by issue of notices dated 8th June, 1994, by the Dy. Commissioner. In that event, the orders imposing the penalty should have been passed before 31st Dec.1994, as the six months' period from end of June, 1994 expired on 31st Dec 1994. Therefore, as notices earlier, the conclusion reached by the Commissioner (Appeals) that the order passed imposing penalty was barred by limitation is correct. The contrary view taken by the Tribunal in the impugned order is erroneous and totally unsustainable in law. In the light of the above conclusion, the order passed by the Tribunal was liable to be set aside. Proceedings for penalty having been initiated by issue of notice dated 8th June, 1994, the order was required to be passed within six months from the end of June, 1994, i.e. before 31st Dec, 1994, and, therefore, the orders imposing penalty passed only on 28th March, 1995 were barred by limitation u/s 275(1)( c), the case being covered by second part of the said section." 11. The block assessment, in the case before us, was passed in the month of June 2001. The JCIT-Range-1, Junagadh issued notices dated 15.1.2001 to the assessee to show cause as to why pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. It is well settled law that while addition can be made on protective basis, but penalty under sections 271D and 271E of the Act cannot be levied on protective basis. Therefore, on merits penalty under both these sections are deserves to be cancelled. 15. In view of the aforesaid discussion, in my opinion: (i) there is no error in the finding recoded by the ld. CIT(A) that the penalties levied u/s 271D and 271E of the Act are barred by limitation as provided under section 275(1)(c) of the Act. Even on merits also, penalty under these sections is not sustainable for the following reasons : (a) the income in respect of cash credits is finally assessed by ITAT which is highest fact finding body as income of Rs. 28,00,000/- in the case of Shree Deepak Takwani and Rs. 17,00,000/- in the case of Lata Takwani on lump sum basis and not as loan or deposits accepted or repaid in contravention of Section 269SS and 269 of the Act. (b) when assessment is framed u/s 158BC, only penalty leviable in respect of block assessment framed u/s 158BFA as contained in Chapter XIVB of the Act and no penalty u/s 271D or 271E of the Act. 16. Consequently, both the appeals of the revenue are dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absence of relevant materials on record? 8. Whether, on the facts and in the circumstances of the case, the issue of levy of penalty on merits requires to be considered by the Commissioner (Appeals) and therefore matter is required to be restored to the file of the Commissioner (Appeals) for decision on merits? Reference under section 255(4) of the Income Tax Act, 1961 There is a difference of opinion between the Members who constituted the Bench. On account of this, the following points of difference is placed before the Honble President, ITAT for action u/s 255(4) of the Income-tax Act, 1961. "Whether on the facts and circumstances of the case, the ld. JM is correct in upholding the order of ld CIT(A) cancelling the penalty levied u/s 271D of Rs. 14,29,81,658/- and u/s 271E of Rs. 10,97,67,135/- or the ld. AM in restoring both the appeals to the file of the ld. CIT(A) for examining the character of loan/deposits in the light of material available on record and thereafter decode the issue of levy of penalty on merits." THIRD MEMBER ORDER G.C. Gupta, Vice-President (AZ) (As a Third Member) - On account of difference in opinion between the learned Judicial Member and learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of penalty has been initiated in the relevant assessment, which is subsequently subject matter of appeal before the CIT(A) or the Appellate Tribunal? 6. Whether the Id. Commissioner (Appeals) is justified, on the facts and in the circumstances of the case, in applying the bar of limitation contained in section 275(1)(c) and thereby holding the levy of impugned penalties as time barred without first examining the applicability of section 275(1)(a)? 7. Whether the correctness of levy of penalty can be adjudicated by this Tribunal on merits in the absence of any ground of appeal in that behalf and adjudication by the first appellate authority, i.e., CIT(A) and also In the absence of relevant materials on record? 8. Whether, on the facts and in the circumstances of the case, the issue of levy of penalty on merits requires to be considered by the CIT(A) and therefore matter is required to be restored to the file of the CIT(A) for decision on merits ?" 2. I have carefully considered the above points of difference drawn by the learned Members of the Rajkot Bench, and have perused the proposed orders of the learned JM and the learned AM. I have heard the learned CIT-DR and the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal in Dewan Chand Amrit Lal (supra) supports the case of assessee and both were relied at the time of hearing before the Tribunal. The learned counsel for the assessee has relied on the following decisions: (i) Shanbhag Restaurant (supra) (ii) Ramkishroe Reawaram Tada (supra) (iii) Dewan Chand Amrit Lal (supra) (iv) Dillu Cine Enterprises (P.) Ltd. (supra) (v) Hissaria Brothers (supra) (vi) Manoharlal (supra) (vii) Straptex (India) (P.) Ltd. (supra) (viii) Shree Nivas Chemicals (supra) (ix) Farrukhabad Investment (I) Ltd. (supra) (x) Ramnivas Agrawal (supra) (xi) Swagat Motors & General Finance Co. (supra) (xii) Chhajer Packaging & Plastics (P.) Ltd. (supra) (xiii) Bajrang Textiles (supra) (xiv) Ikea Trading Hong Kong Ltd. (supra) (xv) Subodh Kumar Bhragava (supra) (xvi) Jai Bharat Fruit Co. Ltd. (supra) (xvii) Chhajer Packaging & Plastics (P.) Ltd. (supra) (xviii) Hissaria Bros., (supra) (xix) CIT v. Smt. Rosar/Prem [IT Appeal No.86 of 2010] (xx) CIT v. Jitendra Singh Rathore [2013] 352 ITR 327/31 taxmann.com 52 (Raj.) He submitted that the provision of Sections 275(1)(a)/ 275(1)(c) of the Act mention the words "during the course of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. Once it is found that the case of the assessee falls under the provision of section 275(1)(c), then admittedly the penalty order in this case was barred by limitation. The opening words of provision of Section 275(1)(a) provides "in a case where the relevant assessment or other order is the subject matter of an appeal...", The provision of section 275(1)(c) provides that "in any other case" for the purpose of determining the limitation period of assessee. The penalty under Sections 271D/271E has been imposed on the assessee for violation of sections 269SS and 269T of the Act for accepting the loans and advances and repaying the same in cash. I find that, with latest decision of the Hon'ble Rajasthan High Court in the case of Jitendra Singh Rathore (supra), the issue has to be decided in favour of the assessee. The Hon'ble High Court after considering the relevant provisions of the Act has concluded that the order imposing penalty was hit by the limitation prescribed under the Act under Section 275(1)(c), and confirmed the orders of the CIT(A) and the Tribunal in setting aside the order of the penalty. The Hon'ble Court has followed view taken by the Hon'ble Raj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt to which reference has been made in the order of the Accountant Member. The order as proposed by the Accountant Member was dissented from by the Judicial Member. In terms of section 255(4), the points of difference as emerging from their respective orders were referred separately by both the Members to the Hon'ble President of this Tribunal for reference to the Hon'ble Third Member for his opinion. The Hon'ble Vice President (Ahmedabad Zone) of this Tribunal was appointed as Third Member by the Hon'ble President. The opinion of Third Member has since been received in which the points of difference as referred by both the Members to the Hon'ble President have been reproduced. They are therefore not being reproduced here. 2. On receipt of opinion of the Third Member, the matter was listed for hearing for passing consequential order u/s 254(1). While the assessee did not enter appearance, the Revenue was represented by the ld. Departmental Representative. 3. At the time of hearing, the ld. Departmental Representative submitted that the Hon'ble Third Member has not expressed any opinion on any of the points of difference referred by the Accountant Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been passed. It was clearly pointed out that both the orders were inter-linked and inseparable from each other. The order u/s 271D was required to be passed only after the order of CIT(A) against the assessment. Therefore, the case of the present assessee was distinguishable from the case of Jitendra Singh Rathore in IT Appeal No. 90 of 2007 and in view of the facts and circumstances the penalty order u/s 271 would be covered u/s 275(1)(a) and not 275(1)(c). The Third Member has passed an order without considering the arguments made by me. This submission is made in respect of the proceedings by the Hon'ble ITAT giving effect to the order of the Hon'ble Third Member." 4. All the facts are available on record. Relevant issues/points of difference framed by both the members have already been reproduced in the order passed by the Hon'ble Third Member. This matter has seen two rounds of litigation before this Tribunal and one round of litigation before the Hon'ble High Court. Be that as it may, the Hon'ble Third Member has agreed with the opinion expressed by the Judicial Member that the impugned penalty should be deleted. In this view of the matter, the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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