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TMI Blog2013 (5) TMI 857X X X X Extracts X X X X X X X X Extracts X X X X ..... MEMBER For the Petitioner : Ankur Garg For the Respondent : B.R. Popat ORDER D.K. Srivastava, Accountant Member - Appeal bearing IT(SS)A No.01/Rjt/2007 filed by the Revenue is directed against the order passed by the CIT(A) on 18-10-2006 cancelling the penalty amounting to ₹ 14,29,81,658/- levied by the AO u/s 271D while the other appeal bearing IT(SS) No.02/Rjt/2007 filed by the Revenue is directed against another order passed by the CIT(A) on 18-10-2006 cancelling the penalty amounting to ₹ 10,97,67,135/- levied by the AO u/s 271E of the Income-tax Act. Both the penalties have been cancelled by the CIT(A) on the ground that their imposition is time barred as per section 275(1)(c). The issues in both these appeals are common and therefore they are being disposed of by a consolidated order. 2. Both the aforesaid 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 factua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich led to recovery of incriminating materials. Block assessment u/s 158BC/143(3) was completed in June 2001 assessing the undisclosed income (being unexplained cash credits) of the assessee at ₹ 25,89,63,640/-. The aforesaid order of block assessment was challenged firstly before the CIT(A) and thereafter before this Tribunal. By its order dated 23-09-2010, this Tribunal has partly allowed the appeal filed by the assessee, with the following observations: "15. While appreciating about what has been mentioned above, we are still required to give justice to our role as the last fact finding authority wherein we have to try to impart justice on either sides. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al. It is therefore necessary to bring them out at the outset. They are as under: 08.06.1999: Search & Seizure operations u/s 132 were carried out at the premises of the assessee and incriminating materials seized. 27.06.2001: Block assessment order was passed u/s 158BC. Action for the imposition of impugned penalties was initiated, vide Para 19 of the said order. As evident from the directions given at the end of the assessment order, show-cause notices were directed to be issued for levy of penalty u/s 271D and 271E. 15.01.2002: Taking cognizance of the block assessment order in which action for the imposition of impugned penalties was initiated and the reference received from the 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of section 275. It was explained before the Additional Commissioner that the impugned penalties were not capable of being levied as the period of limitation laid down in section 275(1)(c) had already expired. The Additional Commissioner did not accept the aforesaid submission of the assessee and resultantly, in the absence of any reasonable cause shown by the assessee, levied the impugned penalties by his order dated 30.3.2006. He has given detailed reasons for rejecting the submissions of the assessee, which, in brief, are that the proceedings for levy of impugned penalties were initiated in the order of block assessment, which was also subject matter of appeal u/s 246A before the CIT(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( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 3/9/04, whereby the CIT(A) confirmed the order of the AO.S The impugned order in the case of the appellant was passed on 30/3/06, i.e. before the end of the financial year after the financial year in which the appellate order is received, the Addl. CIT's submission, therefore, is that the order passed u/s. 271E of the Act is not barred by limitation. 5.6 In my considered view, the proceedings u/s. 271E of the Act are independent of the assessment proceedings because an order u/s. 271E can also be passed prior to the assessment order and, therefore, the extended period available u/s. 275(1)(a) for passing the penalty order under chapter XXI of the Act are not available to the proceedings under 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tigation Circle, Jamnagar. June 2001 3 Initiation of the penalties, albeit without jurisdiction, by the DCIT, by issuing two separate notices under section 274 read with sections 271D & 271E DCIT, Investigation Circle, Jamnagar. June 2001 4 Issuance of two separate notices under section 274 read with sections 271D & 271E, initiating the penalties, subject matter of the present appeals JCIT, Range-1, Junagadh 15-01-02 5 Penalty order passed Addl. CIT, Range-3, Jamnagar 30-03-06 2.2 Specific attention is drawn to the provisions of section 275(1) of the Income-tax Act, prescribing limitation for imposing penalties. The relevant portion of the section is reproduced here below for the sake 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lying on the aforesaid Supreme Court judgment. Since the penalties subject matter of the present appeals are related to all such cash credits and corresponding debits, the same cannot be sustained, as these are clearly not the transactions of acceptance of loans or deposits or of repayment of the deposits. 3.2 The appellant submits that while the additions can be made on protective basis, there is no way a penalty can be levied protectively. It is for this reason that the statute has not prescribed any limitation for initiation of penalties under sections 271D & 271E, and has only provided that once initiated, the 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 applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose materials were examined in the course of block assessment proceedings u/s 158BC. Facts revealing violations u/s 269SS/269T were also scrutinised in the course of block assessment proceedings and a finding to that effect was recorded in the block assessment order. There is no material on record to indicate that the violations u/s 269SS and 269T for which impugned penalties have been levied were detected by the AO or the Additional Commissioner in any proceeding or order other than the block assessment proceedings/order or independently of block assessment proceedings/order. (ii) Action for the imposition of impugned 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 loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (a) of sub-section (1) of section 275 if the statutory conditions of that clause are fulfilled otherwise the case would fall under the residuary clause, i.e., clause (c) of sub-section (1) of section 275. Therefore, the applicability of clause (a) of sub-section (1) of section 275 to the matters under appeal needs to be examined. 20. Period of limitation for imposition of penalty as available under clause (a) of sub-section (1) of section 275 is generally longer than the one available under clause (c) thereof in that the period of limitation, which may otherwise expire earlier, gets extended under section 275(1)(a) till 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) is different in content and scope from the expression "in the course of which action for the imposition of penalty has been initiated" used in section 275(1)(a). The requirement of the AO being "satisfied" in terms of section 271 precedes the initiation of action for imposition under section 275(1)(a) of any of the penalties enumerated in "Chapter XXI-Penalties imposable" of the Income-tax Act. Initiation of action for the imposition of penalty under clause (a) of sub-section (1) of section 275 extends to all the penalties imposable under Chapter XXI of the Income-tax Act while "satisfaction" contemplated by section 271 extends to penalties imposable under section 271 alone. Therefore there is no warrant for 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 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the AO who is in possession of all relevant information the scrutiny of which may suggest violation of section 269SS/269T. The Joint Commissioner, on the other hand, may be completely unaware of those violations and resultantly may not be able to initiate proceedings for levy of penalty u/s 271D/271E unless reference is made by the AO to him. Recognising the aforesaid ground realities, section 275(1)(a) expressly authorises initiation of action for imposition of penalty in relevant assessment. It cannot therefore be held that that the AO has no power to refer the matter to the Joint Commissioner for levy of penalty u/s 271D/271E or action for imposition of any of the penalties enumerated in Chapter XXI of the Income-tax Act cannot be initiated in the "relevant assessment" u/s 275(1)(a). (iv) The requirement of "satisfaction" in section 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 comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 275. Clause (c) comes into play when a case does not fall under preceding two clauses. This position is self evident on bare reading of clause (c). No authority is needed in its support. However, if any authority is at all needed in its support, reference can be made, for example, to the judgment of the Hon'ble Karnataka High Court in Shanbhag Restaurant's case (supra) itself on which heavy reliance has been placed by the assessee in support of his case. In the said judgment, the Hon'ble High Court has held as under: "As it could be seen from clause (a) of section 275, the said provision provides for limitation in a case where the relevant assessment or other order is the subject matter of appeal before the higher authorities. Clause (b) of the said section provides for limitation for making an order imposing penalties in cases where the relevant assessment or other order is the 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 appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me assessed in the assessment order and therefore they are, for this reason also, independent of assessment proceedings. Prima facie, the aforesaid submissions look not only attractive but also quite convincing. As far as the measure of levy of penalty u/ss 271D and 271E is concerned, the learned counsel for the assessee is perfectly right in his submission that computation of penalty u/s 271D and section 271E is not dependent on the assessment of income. In that sense, measure for levy of penalty u/s 271D/271E is completely independent of the assessment of income. His further submission that penalties contemplated by section 271D/271E are independent of the assessment would generally apply to a large number of cases of penalty but that cannot be accepted as Euclid's formula (Euclid of Alexandria, was a Greek mathematician, often referred to as the "Father of Geometry") capable of being applied in all the circumstances. 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 sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mposition of penalty would be independent of the assessment of income in which case they would fall under clause (c) of sub-section (1) of section 275. But then, there could also be cases where the initiation as well as imposition of penalty is integrally related to the tax treatment of the transactions as given in the assessment order or depends upon the fate of assessment order. An order of assessment not only assesses the income of the assessee but also records finding on the tax treatment of various transactions, which are agitated in quantum appeal against the assessment order. Therefore there cannot be a universal formula that initiation and imposition of any penalty under Chapter XXI of the Income-tax Act is always dependent or independent of the assessment. Section 275(1)(a) applies to a case where initiation of action for imposition of penalty is integrally related to the assessment or, in other words, dependent upon the assessment which 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 th ..... 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. It all depends on the facts of the case. On the facts of the case, action for initiation of impugned penalties, vide Para 19 of the assessment order, is integrally linked with the finding recorded and the tax treatment given by the AO in this behalf in the assessment order and hence it cannot be said that action for imposition of impugned penalties was initiated independently of the assessment. 31. Another reason given by the CIT(A) for inapplicability of section 275(1)(a) to the cases under appeal is that the assessment contemplated by section 275(1)(a) is assessment u/s 143(3) and therefore action for imposition of penalty can be initiated only in the course of assessment u/s 143(3) and not in the course of block assessment u/s 158BC. Assessment is a term of wide import. 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 spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax as defined in section 2(28C). 32. The ld. Authorised Representative for the assessee has relied upon a long list of authorities, most of which are the decisions of this Tribunal, for the proposition that the proceedings for levy of penalty are independent of assessment proceedings and therefore the bar of limitation as contained in clause (c) of sub-section (1) of section 275 would apply and not the bar of limitation contained in section 275(1)(a). The general principle is that similar cases should be decided so as to give similar and predictable outcomes, and the principle of precedent is the mechanism by which that goal is attained. Judicial minimalists (i.e., judicial minimalism refers to a philosophy in the United States Constitutional law which promotes itself as a politically moderate viewpoint.) argue that obeying precedent makes decisions "predictable." Reliance upon precedent also promotes the expectation that the law is just. The idea that like cases should be treated alike is anchored 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edent 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. (ii) Every judgment must be read as applicable to the particular facts proved or assumed to be proved, since the generality of the expressions which are found there are not intended to be exposition of the whole law but governed and qualified by the particular facts of the case in which such expressions are found and a case is only an authority for what it actually decides. (iii) 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 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. 34. The aforesaid principles have been extracted from several judgments, some 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: &q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be read in the context in which they appear to have been stated. Judgments of Courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes." 35. In Padmasundara Rao v. State of Tamil Nadu [2002] 255 ITR 147 (SC), a Bench of 5 Judges of the Hon'ble Supreme Court has held as under: "Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case, said Lord Morris in Herrington v. British Railways Board (1972) 2 WLR 537. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sally applicable without having regard to the relevant and peculiar facts of a case. Those decisions will surely apply to cases where action for imposition of penalty is initiated outside the proceedings for assessment or independently of assessment or which is not subject matter of appeal u/s 246/246A. But they do not lay down any inflexible or universal proposition that all cases involving levy of penalty would always attract the bar of limitation laid down in section 275(1)(c) and not the one laid down in section 275(1)(a) even if they fall under section 275(1)(a). 39. The issue as to whether action for imposition of penalty has been initiated in the order of assessment or any "other order", which is subject matter of appeal, is essentially a finding of fact. Similarly, the finding as to whether initiation of action for imposition of penalty in the order of assessment or any other order, which is subject matter of appeal, is integrally related to assessment or independent of the assessment proceedings is again a finding of fact. Once it is found as a matter of fact that initiation of action for imposition of penalty in the assessment order is integrally related to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble High Court. One, the question raised before the Hon'ble High Court was to be decided "on the facts and in the circumstances" of that case. Therefore, the decision rendered on the facts and in the circumstances of that case would apply in identical fact situation and not de hors the facts. Two, the issue before the Hon'ble High Court was not as to whether section 275(1)(a) was applicable on the facts of that case. The only issue before the High Court was whether the penalties levied by the DCIT were barred by limitation u/s 275(1)(c) on the facts and in the circumstances of that case. It was not even the submission of the Revenue that levy of penalty was covered by section 275(1)(a). Therefore the entire judgment revolves around the issue as to whether penalties were barred by limitation as laid down in section 275(1)(c). It is in this factual background that the Hon'ble High Court has held that the penalties levied by the DCIT were time barred under section 271(1)(c). There was no issue as to the applicability of clause (a) of sub-section (1) of section 275 before the Hon'ble High Court. Therefore the aforesaid judgment cannot be read as laying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings are initiated by the Jt. CIT whereas the issue in appeals under consideration is whether the action for the imposition of impugned penalties can be said, on the facts of the case, to have been initiated in the relevant assessment in terms of section 275(1)(a) and if so whether the impugned penalties initiated by the AO in the assessment order would fall under section 275(1)(a) or not. The factual matrix as well as the nature of issue in the present appeals is altogether different. After careful analysis of the facts as available on record, a finding of fact has been recorded earlier in this order that the initiation of action for levy of impugned penalties is integrally related to assessment and also dependent upon the fate of assessment and therefore the case falls under clause (a) of sub-section (1) of section 275 and not under section 275(1)(c). Surely, the judgment of the Special Bench would apply to cases which are not covered by section 275(1)(a). 44. The issue under appeal is covered against the assessee by the judgment of the Hon'ble Karnataka High Court in Shanbhag Restaurant (supra). As held by the Hon'ble High Court, 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 ..... t impugned loans/deposits have been treated as income of the assessee, being unexplained cash credits, by the AO and therefore impugned penalties cannot be levied. On perusal of the order passed by this Tribunal in quantum appeal, it is noticed that the addition made by the AO on account of unexplained cash credits has been reduced to ₹ 28 lakhs. There are several issues that need consideration for decision on merits. They are: one, whether the sum taxed by the AO as unexplained income of the assessee represent loans and deposits within the meaning of section 269SS/269T; two, whether the remaining sum (i.e., the sum taxed by the AO as unexplained cash credits being impugned loans/deposits as reduced by the addition confirmed by this Tribunal) represents loans and deposits within the meaning of section 269SS/269T; three, whether cash credits taxed by the AO are transactions of acceptance of loans or deposits or of repayment of the deposits; four, whether impugned penalties have been initiated/levied on protective basis and, if so, whether such course of action is permissible in law; and, five, whether penalty was imposable u/s 271E on repayment of deposits, and, if no, the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ony, the ld.DR appeared on behalf of the Revenue and pointed out that the case of the assessee is covered by the provisions of section 275(1)(a) and not by provision of section u/s 275(1)(c) of the Act as held by the ld. CIT(A) in the impugned orders. He further pointed out that in this case, the Block assessment order is dated 27.6.2001 which was a subject matter of appeal before the ld. CIT(A). The ld. CIT(A) vide order dated 3.9.2004 confirmed the order of the AO. Both the penalty orders passed u/s 271D and 271E were passed in this case on 30.6.2006 i.e. before the end of the Financial Year and after financial year in which the appellate orders were received, therefore, penalty orders passed u/s 271D and 271E are not barred by limitation. As against this, Shri B.R. Popat, the ld. Counsel appeared on behalf of the assessee vehemently supported the order passed by the ld. CIT(A). The ld. Counsel of the assessee pointed out that proceedings u/s 271D and 271E of the Act are independent of the assessment proceedings because the orders under these two sections can also be passed prior to the assessment order and therefore, the extended period available u/s 275(1) (a) for passing the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra) (v) Ramkishore Revaram Tada (supra) (vi) Dewan Chand Amrit Lal (supra) The ld. Counsel of the assessee pointed out that in the aforesaid cases, it has been held that having regard to provisions of Section 271D and 271E, the period of limitation for the purpose of Section of 275 is to reckon from the date when penalty proceedings are initiated by Dy. CIT (Joint CIT) and not from the date on which assessment proceedings are completed. In support of this ld. Counsel of the assessee finally relied on the decision of the Hon'ble Karnataka High Court in the case of Shanbhag Restaurant (supra), wherein it has been held that for the purpose of counting limitation u/s 275(1) in respect of penalty order u/s 271D and 271E, clause (c) of section 275(1) is relevant and not clause (a) of Section 275(1) of the Act. The ld. Counsel of the assessee also drew our attention to this sequence of events which are relevant in the present appeals are as under : S. No. Event AO Date/ month 1 Search action by the department DCIT,(Inv) June 1999 2 Completion of the block assessment DCIT, Investigation circle, Jamnagar June 2001 3 Initiation of the penalties, albeit without jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act can be levied protectively. For this reasons, the Income Tax Act has not prescribed any limitation for initiation of penalty, u/s 271D and 271E, and has only provided that once initiated, same has to be disposed of within the prescribed time limit as specified u/s 275(1)( c ) of the Act. On the strength of this argument, the ld. Counsel submitted that on merits also penalty levied under these two sections be cancelled. 8. In rejoinder, the ld. DR pointed out that in quantum proceedings the ld. CIT(A) passed the odder on 3.9.2004, penalty orders were passed on 30.3.2006, therefore, as per the provisions of section 275(1)( a), penalty levied u/s 271D and 271E of the Act are within the limitation period as in case of this assessee section 275 (1)(a) of the Act is applicable. To the query whether any High Court on this issue has taken a contrary view to the view taken by the Hon'ble Karnataka High Court (supra). The ld. DR fairly stated that no contrary judgment is available. 9. The ld. DR further pointed out that in the impugned order, the ld. CIT(A) has not adjudicated upon the penalty on merits, therefore, it may be held that the penalty order passed within the limitat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the course of which action for imposition of penalty has been initiated is required to be understood as the proceedings relating to the assessment year. The financial year in which the proceedings, in the course of which action for imposition for penalty had been initiated, could be understood as the proceedings relating to imposition of penalty. The financial year in the first part of section 275(1)(c) must be understood as the financial year where the assessment order was made in the course of which proceedings for penalty could be initiated. In the present case, the assessment order was made on 25th February, 1994. The financial year in respect of assessment order, as rightly found by the Commissioner (Appeals), had expired on 31st March, 1994. In cases where the proceedings initiated falls under second part of section 275(1)(c) of the Act, the order imposing the penalty is required to be passed within six months from the end of the month in which action for imposition of penalty is initiated. In the instant case, the action for imposition of penalty was initiated by issue of notices dated 8th June, 1994, by the Dy. Commissioner. In that event, the orders imposing the penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IVB of the Act. In other words, the order u/s 271D or 271E is relevant only when assessment is framed u/s 143(3) of the Act and not for block assessment framed u/s 158BC of the Act. For these reasons, the order of penalty u/s 271D and 271E is also not sustainable. 14. Even on merits also I find considerable force in the contention of the ld. Counsel for the assessee that whom the credit are considered as income in the assessment framed u/s 158BC of the Act and in subsequent development also the Tribunal directed to recalculate undisclosed income, by taking into account the ratio of the Hon'ble Supreme Court in the case of Anantharam Veerasinghaiah & Co. (supra). On this basis, the cash credits were finally considered as income even by the Tribunal, albeit subject to quantification based on principle of telescopy, relying on the aforesaid judgment, therefore, on this ground also penalty levied are unsustainable as these are not transaction of acceptance of loans or deposits or of repayment of the deposits within the meaning of section 269SS and 269T of the Act. It is well settled law that while addition can be made on protective basis, but penalty under sections 271D and 271E o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (1) of section 275 of the Income-tax Act for its applicability are satisfied on the facts and in the circumstances of the case under appeal and, if so, whether the case falls under that clause for the purpose of limitation? 5. Whether clause (c) of sub-section (1) of section 275 can be invoked in those cases also in which action for imposition of penalty has been initiated in the relevant assessment, which is subsequently subject matter of appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal? 6. Whether the ld. 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., Commissioner (Appeals) and also in the absence of relevant materials on record? 8. Whether, on the facts and in the circumstances of the case, the issue o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those cases alone which fall u/s 271 or extends to initiating action for imposition of other penalties enumerated under Chapter XXI of the Income-tax Act also? 2. Whether section 275(1)(a) debars initiation of action in the relevant assessment for imposition of penalties u/s 271D/271E even if such action is integrally related to assessment? 3. Whether, on the facts and in the circumstances of the case, the Assessing Officer has, vide Para 19 of the block assessment order, initiated action for the imposition of impugned penalties in the relevant assessment, which was subsequently subject matter of appeal before the CIT(A)/ITAT and, if so, whether the cases under appeal would fall u/s 275(1)(a)? 4. Whether all the conditions laid down in clause (a) of sub-section (1) of section 275 of the Income-tax Act for its applicability are satisfied on the facts and in the circumstances of the case under appeal and, if so, whether the case falls under that clause for the purpose of limitation? 5. Whether clause (c) of sub-section (1) of section 275 can be invoked in those cases also in which action for imposition of penalty has been initiated in the relevant assessment, which is subsequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 275(1)(b) of the Act. He referred to para 34 of the learned AM's order wherein the decision of Hon'ble Supreme Court in Government of Karnataka (supra) was cited, and referred to along with certain other decisions of the Hon'ble Courts. He submitted that the order of the penalty has to be linked with the assessment order, and therefore, proviso to Section 275(1)(a) applies to the case of the assessee. The learned CIT-DR submitted that any other interpretation would amount to reading down the specific provision of the Act. He also referred to para 39 of the learned AM's order to submit that whether the penalty has been initiated in the assessment order or any "other order", which is subject matter of appeal, is essentially a finding of fact. He referred to other relevant portions of the learned AM's order in support of the case of the Revenue. 4. The learned counsel for the assessee has opposed the submissions of the learned CIT-DR. He submitted that the decision of Hon'ble Karnataka High Court in Shanbhag Restaurant (supra) and the decision of the Special Bench of the Chandigarh Tribunal in Dewan Chand Amrit Lal (supra) supports the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jitendra Singh Rathore (supra), wherein the issue has been decided in favour of the assessee, and there is no contrary decision of any other High Court on the issue, and therefore has the binding effect on the Tribunal. 5. The learned CIT-DR in his rejoinder submitted that decision of the Hon'ble Rajasthan High Court in Jitendra Singh Rathore (supra) is distinguishable on facts. He submitted that each decision of the Hon'ble Court has to be seen in light of the facts of each case and no decision can be seen in isolation thereof. He submitted that none of the decisions cited by the assessee are applicable to the facts of the assessee. 6. I have considered rival submissions and have perused the proposed orders of the learned JM and the learned AM on this issue. I find that the only issue before me as Third Member is to adjudicate that whether in the facts and circumstances of the case the provision of Section 275(1)(a) r.w. its proviso is applicable or provision of section 275(1)(c) is applicable for the purpose of calculating the limitation period for imposition of penalty under Section 271D/271E of the Act, in the case of the assessee. Once it is found that the case of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." Before me, no contrary decision of any other Hon'ble High Court or of the Hon'ble Supreme Court has been cited at the bar. In these facts of the case, I am bound by the ratio of the decision of the Rajasthan High Court cited supra, and since no contrary decision of any other Hon'ble High Court is brought to my knowledge, I respectfully following the same, agree with the order of the learned JM on the issue recorded in the points of difference by the learned Members of the Rajkot Bench in favour of the assessee and against the Revenue, and the points of differences referred to me by the learned JM and the learned AM are answered accordingly. 7. The matter will now go back to the Division Bench for passing order in accordance with majority view. Order under section 254(1) read with section 255(4) of the Income-tax Act, 1961 1. The aforesaid appeals were listed for hearing pursuant to the directions given by the Hon'ble jurisdictional High Court to whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccountant Member. During the proceeding before the third Member the Ld. Counsel of the assessee had filed an unreported judgment of the Hon'ble Rajasthan High Court in the case of CIT vs. Jitendra Singh Rathore in IT Appeal No. 90/2007 dtd. 10/1/2013. When confronted to the undersigned it was pointed out, that in the case of Jitendra Singh Rathore that there was a finding of the court in para-8 that the provision of penalty u/s 271D did not have any connection with the order in appeal before the CIT(A) and, therefore, the penalty u/s 271D could have been passed without out waiting for the order of the CIT(A) u/s 275(1)(c). The attention of the Member was drawn to the fact that in the case of the assessee cash credit found during the course of search were treated as unexplained and added to the income of the assessee. The assessee was before the CIT(A) in respect of this addition. Simultaneously proceedings u/s 271D were initiated, protectively treating this cash credit as loan. Therefore, if the addition was confirmed by the CIT(A) then the proceedings u/s 271D would have become infructuous and if the addition was deleted by the CIT(A) then a valid order u/s 271D could have b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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