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TMI Blog2020 (9) TMI 467X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Considering the bonafide and genuine transaction, reasonable cause in terms of section 273B of the Act, exist in the case of the assessee for not complying with the provision of section 269SS and 269T and, therefore, we cancel the penalty levied in terms of section 271D and 271E of the Act. - Decided in favour of assessee. - ITA Nos.1370 And 1371/Del./2019 - - - Dated:- 10-9-2020 - Shri H.S. Sidhu, Judicial Member And Shri O.P. Kant, Accountant Member For the Appellant : Shri C.S. Agarwal, Sr. Adv., Shri R.P. Mall, Adv. For the Respondent : Shri Saras Kumar, Sr. DR ORDER PER O.P. KANT, AM: These two appeals by the assessee are directed against two separate orders, both dated 21/12/2018 passed by the learned CIT(Appeals)-13, New Delhi [in short the learned CIT(A) ] in relation to penalty levied by the Learned Additional Commissioner of Income Tax, Range 38, New Delhi under section 271D and 271E of the Income-tax Act, 1961 (in short the Act ) for violation of provision of section 269SS and 269T respectively. 2. The grounds raised in both the appeals are reproduced as under: Grounds of appeal raised in ITA No. 1370/Del./2019 1. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee was selected for scrutiny assessment. The scrutiny assessment under section 143(3) of the Act was completed on 26/12/2016 at total income of ₹ 1,03,830/-in the status of Association of persons (AOP). Thereafter, learned Additional Commissioner of Income Tax levied penalty of ₹ 36,45,841/- vide order dated 28/11/2017 under section 271D of the Act, for accepting cash deposits exceeding ₹20,000 in contravention to the provisions of section 269SS of the Act. He also levied penalty under section 271E in order dated 28/11/2017 amounting to ₹ 2,06,82,566/-for repayment of loans and deposits in cash exceeding ₹ 20,000 in contravention of the provision of section 269T of the Act. On further appeals by the assessee against these orders, the Learned CIT(A) upheld the finding of the Learned Additional CIT in both appeals. Aggrieved, the assessee is before the Tribunal challenging the confirmation of the penalties by the learned CIT(A). 4. Before us, the learned Senior Counsel of the assessee filed a consent for willingness to argue the cases through video conferencing. In hearing dated 10/08/2020, both the parties agreed to argue the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny ground not set forth in the memorandum of appeal. In a fit case it is always open to the Tribunal to permit an appellant to raise an additional ground not set forth in the memorandum of appeal. The safeguard is in the proviso to Rule 11 itself. The proviso states that the Tribunal shall not rest its decision on any other ground unless the party who may be affected thereby has had a sufficient opportunity of being heard on that ground. Thus even if it is a pure question of law, the Tribunal cannot consider an additional ground without affording the other side an opportunity of being heard. We venture to state that even in the absence of the proviso it would be incumbent upon the Tribunal to afford a party an opportunity of meeting an additional point raised before it. Moreover, even though Rule 11 requires an appellant to seek the leave of the Tribunal, it does not confine the Tribunal to a consideration of the grounds set forth in the memorandum of appeal or even the grounds taken by the leave of the Tribunal. In other words the Tribunal can decide the appeal on a ground neither taken in the memorandum of appeal nor by its leave. The only requirement is that the Tribunal ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of initiation of the penalty proceeding Under Sec. 271E would also not survive. This, according to us, is the correct proposition of law stated by the High Court in the impugned order. As pointed out above, insofar as, fresh assessment order is concerned, there was no satisfaction recorded regarding penalty proceeding under Section 271E of the Act, though in that order the Assessing Officer wanted penalty proceeding to be initiated under Section 271(1)(c) of the Act. Thus, insofar as penalty under Section 271E is concerned, it was without any satisfaction and, therefore, no such penalty could be levied. 10. In the case of ACIT vs. Narsi Iron and Steel P Ltd (supra), the Tribunal observed that in the order of the assessment, there was no initiation/satisfaction, however, subsequent to the order of the assessment, by way of an order sheet, satisfaction had been recorded and penalty was initiated. The Tribunal, following the judgement of the Hon ble Supreme Court in the case of Jai Laxmi Mills (supra) held that such a course is not permissible. The learned Counsel submitted that in the instant case there was not even a whisper in the order of the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this finding of the Learned CIT(A), was wholly misconceived, unsupported by evidence and no evidence on record. Whereas, in support of the contention that the Assessing Officer recorded satisfaction on violation of the provisions of the section 269SS and 269T of the Act, the learned DR filed a copy of the letter dated 26/12/2016 of the Assessing Officer, addressed to the Joint Commissioner of Income Tax, Range 38, New Delhi. This letter has been issued on 26/12/2016 along with the issue of the assessment order on same date. 14. The learned DR submitted that in the case, existence of satisfaction is evident from reference by the Assessing Officer vide letter dated 26/12/2016 to the Addl. CIT for considering levy of penalty. He submitted that there was no specific requirement of the law that satisfaction on the violation of the section 269SS and section 269T are to be recorded only in the assessment order and according to him, it is sufficient if same is recorded during the course of the assessment proceeding. He submitted that in the case of Jai Laxmi Mills (supra) the main issue was when the original assessment order was set aside, can penalty could be levied on the satisfacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pired later. The stand of the respondent is that the show cause notice dated 20.12.2016, issued during the assessment proceedings by the Deputy Commissioner Income Tax, Indore, cannot be termed as notice under Section 271-D / 271-E of the Income Tax Act, in regard to initiation of penal proceeding under the aforesaid provision they Deputy Commissioner has no jurisdiction under this provision. The penalty under the aforesaid is independent from the assessment proceedings and both proceedings cannot be mixed up. The Deputy Commissioner of Income Tax, on the basis of Assessment Order, in the case of the petitioner under Section 153 A read with Section 143(3) of the Income Tax Act on 20.12.2016, referred the case to the respondent for initiation of penalty proceeding under Section 271-D and 271-E of the Act in Assessment Year 2009-10 and 2011, vide letter dated 27.4.2017, on receiving the information from the office by the Deputy Commissioner of Income Tax, the respondent issued first notice under Section 271-D and 271-E on 22.9.2017 to the petitioner. Hence, the penalty proceeding has been initiated w.e.f. 22.9.2017, which is getting barred on 31.3.2018. The Deputy Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 (64) taxmann.com 75 (SC) and submitted that under Section 275(1)(C), the starting point would be initiation of penalty proceedings . In the case of CITf Central - III V/s. Narayani Sons (P) Ltd (supra) the assessment was completed on 26.12.2006 under Section 153A/143(3) of the Income Tax Act. After passing of assessment order on the same date, ie, 26.12.2016 itself, the Assessing Officer issued a notice for imposition of penalty under Section 271(D)(1), of the Income Tax Act. The Division Bench of Calcutta High Court relied on the judgment of Rajasthan High Court in the case of Commissioner of Income Tax V/s. Jitendra Singh Rathore, (supra) has held that the Assessing Officer issued a notice dated 26.12.2006 on assessee, for imposition of penalty under Section 271(D) and thereafter, he referred the matter to the Additional Commissioner for necessary action. The Additional Commissioner issued the assessee a fresh notice dated 26.7.2007 and by order dated 21.9.2007, the learned Additional Commissioner levied penalty under Section 271 (D) of the Income Tax Act and held that the period of limitation commenced on 26.12.2006, when notice under Section 271(D) was issued by the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty under Section 271-D (was issued on 22.9.2017). It is also well settled that a penalty under this provision is independent under assessment. The action inviting imposition of penalty is granting of loans above the prescribed limitation otherwise then through banking channels and as such infringement of Section 269-SS of the Income Tax Act is not related to the income that may be assessed or finally adjudicated. We find no force on the contention advanced by the learned Senior counsel for the petitioner. The writ petition has no merit and is, accordingly, dismissed. No costs. 17. The learned DR also referred to the decision of the Hon ble Kerela High Court in the case of GRIHLAKSHMI Vision Vs ADDL CIT reported in 379 ITR 100 (Ker), wherein it is held as under: 10. Question to be considered is whether proceedings for levy of penalty, are initiated with the passing of the order of assessment by the Assessing Officer or whether such proceedings have commenced with the issuance of the notice issued by the Joint Commissioner. From statutory provision, it is clear that the competent authority to levy penalty being the Joint Commissioner. Therefore, only the Joint Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... society and its sole object is to promote the economic interest of its members. He submitted that during the course of its activities, the members, however, in order to earn interest, voluntarily deposits in the running accounts, their surplus funds, which is highly meagre, which sums assessee further invest on which earns interest. At times of the needs, such members also overdraw from their accounts when needed on which such members suffer interest. The credits appearing in the members account was not deposited within the meaning of section 269SS as there existed no relationship of depositer and depository in law but the amounts standing to the credit of the members represents mere credit balances and as such the relationship between the assessee and the society was that of a creditor and debtor. He submitted that mere fact that the assessee was a debtor does not mean that it has taken loan or accepted any deposit. The Learned Counsel referred to 34 sheets of receipts and outgoing from the members recorded in the books of accounts of the assessee. 19. The learned Counsel further submitted the bye-laws of the society i.e. bye-law XI merely authorizes the society to acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngineering Udyog reported in 228 Taxman 295, wherein in para 13, the Hon ble High Court had explained the legal meaning of the word deposit . 21. The learned counsel thus submits that the findings of Addl. CIT at Pg. 2 of his order that the assessee has contravened the provisions of section 269SS of the Act by accepting cash deposits of ₹ 306,45,841/- is erroneous both on facts and in law and is based on no material. It is submitted that the learned AO on the contrary has impliedly held that the assessee has not violated any such provision, since he has recorded no satisfaction nor had issued even any show cause notice. It is submitted that any or every credit in an account automatically does not attains a character of acceptance of a deposit. Needless to re-emphasis that, neither in any preceding 10 years nor even in later years any such sum has been held by the authorities to be acceptance of deposits, despite the fact that similarly such sums were being credited in the accounts of depositors in their running account. 22. Learned DR on the other and relied on the order of the lower authorities to hold that amount in question were deposit/loan and repayment of loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT on 28/11/2017, when he had merely issued notice of hearing dated 12/09/2017, which is not amounting to initiation of any proceedings. As period of the six-month is to be reckoned from 26/12/2016, the period of the levy of penalty expired on 30/06/2017. According to the learned Counsel, the penalty could have been imposed before the end of the financial year i.e. 31/03/2017 or 30/06/2017, whichever was later and not thereafter. 24. The learned DR, on the other hand, submitted that penalty under the provisions of section 271D and 271E is independent of assessment. He submitted that action inviting levy of penalty for accepting loans/deposits or repayment thereof above the prescribed limit otherwise then banking channel, is not related to the income that would be finally adjudicated. He submitted that Hon ble Madhya Pradesh High Court in the case of Nitin Agrwal (supra) considered the decision of the Hon ble Rajasthan High Court in the case of Hisara Brothers (supra) and the SLP filed against the same which has been dismissed by the Hon ble Apex Court as reported in 386 ITR 719(SC), and thereafter held that competent authority to levy the penalty section 271D and 271D is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Those in charge of the affairs of the company in failing to register the company as a dealer acted in the honest and genuine belief that the company was not a dealer. Granting that they erred, no case for imposing penalty was made out. (Emphasis supplied) The learned counsel submitted that, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o made reference to the following two cases quoted by the AO: 1. The Allahabad High Court : Mahak Singh Vs. Commissioner of Income Tax 2. Delhi High Court: Commissioner of Income Tax vs. M/s Samora Hotels P. Ltd. The AO referred to these cases only to bring out instances where section 273B was applicable. The appellant did not get covered by such situations so as to get the protection of this provision. In one of the grounds of appeal the appellant has relied upon the ruling in the case of Farrukahabad Investment India Limited. The facts in this case are also distinguishable. It is a case of a non banking financial company as opposed to the assessee who is a cooperative society. There were other technical issues of limitation reinitiation of proceedings etc which are not there in the present case. In fact the Hon'ble Court has concluded that we are not going into the merits of the other submissions . Reference made to the above citations brings out that they are distinguishable on facts hence not applicable in the case of the appellant. 4.10 Perusal of the assessment record shows that when the AO during assessment proceedings specifically asked fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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