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TMI Blog2021 (9) TMI 982X X X X Extracts X X X X X X X X Extracts X X X X ..... rement expressly provided in the Act. Penalty u/s.271D or 271E of the Act is concerned, those are independent proceedings and having nothing to do with assessment proceedings or its outcome - CIT(A) was not justified in cancelling the orders imposing penalty on the ground that the assessment proceedings, during the course of which, penalty u/s.271D and 271E of the Act were initiated have been held to be invalid. Apart from the fact that the order holding the assessments to be invalid has not become final, the CIT(A) ought not to have cancelled the orders imposing penalty on this ground. We therefore find merit in these appeals by the Revenue. Since, the CIT(A) has not adjudicated the matter on merits, the proper course would be to remit the question of imposition of penalty to the CIT(A) for fresh consideration, leaving all aspects open - Revenue Appeals are allowed for statistical purpose. - ITA Nos.2631, 2633 to 2637/Bang/2018 - - - Dated:- 20-9-2021 - Shri N. V. Vasudevan, Vice President And Shri Chandra Poojari, Accountant Member For the Revenue : Ms. Neera Malhotra, CIT(DR)(ITAT), Bangalore For the Assessee : Shri. V. Chandrashekar, Advocate ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank and no other company or co-operative society and no firm or other person shall repay any loan or deposit made with it or any specified advance received by it otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who has made the loan or deposit or paid the specified advance, or by use of electronic clearing system through a bank account if- (a) the amount of the loan or deposit or specified advance together with the interest, if any, payable thereon is twenty thousand rupees or more,, or (b) the aggregate amount of the loans or deposits held by such person with the branch of the banking company or co-operative bank or, as the case may be, the other company or co-operative society or the firm, or other person either in his own name or jointly with any other person on the date of such repayment together with the interest, if any, payable on such loans or deposits is twenty thousand rupees or more,, or (c) the aggregate amount of the specified advances received by such person either in his own name or jointly with any other person on the date of such repayment together with the interest, if any, payable on such spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t proceedings that the appellant had violated provisions of section 271E. 12. The appellant's submission that assessment orders for AYs 2009-10, 2010-11 2011-12 have been found to be unsustainable in law in as much as the same were passed without following the due process of law, and that these penalty orders which stem out of the same assessments which had been nullified also ought to be quashed, is also seen to be reasonable. 13.In view of the fact that assessment orders for impugned assessment years have been found to be unsustainable in law and also in view of the fact that appellant had not been afforded sufficient opportunity to explain the nature of transaction and the nature of receipts during assessment proceedings, Penalty levied u/s 271E in respect of all three assessment years 2009-10, 2010-11 2011-12 are also found to be unsustainable in law and opposed to principles of natural justice. 14.In the result the assessee's appeals are allowed. Order relating to penalty u/s.271E, the following were the observations of the CIT(A): 10. Perusal of assessment orders for AYs 2009-10 to 2011-12 reveal that notices were issued for initiating pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t his case, overlooking the facts that the assessment order itself records more than eight opportunities to the assessee over a period of more than six months and that the assessee was given sufficient opportunity in the penalty proceedings? 4. On the facts and circumstances of the case, whether the Ld CIT(A) is justified in holding that the penalty order stems out of the corresponding nullified assessment order and that such penalty order stemming out of such nullified assessment order is also unsustainable, whereas, it is established law that penalty proceedings are independent of assessment proceedings. 5. On the facts and circumstances of the case, the Ld. CIT(A) is erred in omitting to recognize that the basis for the penalty u/s 271D is cash credits which are claimed by the assessee himself to be cash advances/repayments received on various accounts and it is the failure of the assessee to explain the same satisfactorily which has resulted the Range Head levying the penalty. The fact of cash advance received, which is in fact admitted by the assessee himself, and application of section 269SS thereto, does not; diluted by the fate of the assessment order. 6. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing of the appeal. 10. We have heard the rival submissions. In our view the CIT(A) was not justified in cancelling the orders imposing penalty on the ground that the assessment proceedings in the course of which penalty was initiated have been held to be bad in law and annulled. It is admitted by the parties before us that the revenue is in appeal before the Tribunal against the orders of first appellate authority cancelling the assessment proceedings as invalid and those appeals are pending for consideration. For penalties pertaining to section 271(1) of the Act, there is a specific requirement that the AO, CIT(A), PCIT or CIT only can initiate the penalty proceedings in the course of any proceedings under the act. But, with regard to initiation of penalty under section 271D or 271E of the Act there is no such categorical requirement expressly provided in the Act. 11. In Commissioner of Income-tax vs. Hissaria Bros 291 ITR 244 (Raj), the assessee's contention was that the orders of penalty U/s.271D E of the Act passed in each case for the assessment years 1993-94, 1994-95 and 1995-96 were barred by time in terms of Section 275(1)(c) was not accepted by the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows: 23. Under the Income-tax Act, 1961 as originally enacted, no limitation was prescribed for completion of the penalty proceedings. However, considering that there should not be any inordinate delay in imposing penalty and to streamline the levy of penalty within reasonable time in the Act of 1961, Section 275 was enacted as a new provision for regularising imposition of penalty. It is pertinent to notice that if at the relevant time when the scheme for levy of penalty was enacted in the 1961 Act, the case in which the penalty was envisaged under Chapter XXI, the penalty proceedings were required to be initiated during the course of relevant assessment proceedings or its appellate proceedings by the appellate authority. Attention may be invited to the provisions contained in Sections 271 and 273 which were the principal provisions for imposing penalty. The simple provision which was enacted was that no order in this Chapter shall be passed after the expiration of two years from the completion of proceedings, in the course of which the proceedings for imposition of penalty have been commenced. Thus, the limitation for imposing penalty under Section 275 as originally e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed. However, in a case where the relevant assessment or other order is the subject-matter of an appeal to the Appellate Assistant Commissioner or an appeal by the Income-tax Officer to the Appellate Tribunal, the time limit for completing the penalty proceedings will be either the two-years period as stated above or a period of six months from the end of the month in which the order of the Appellate Assistant Commissioner or, as the case may be, of the Appellate Tribunal is received by the Commissioner, whichever period expires later. It may be noted that the two year period will henceforth expire at the end of a financial year, instead of on different dates during the financial year, and the six month period will expire at the end of a calendar month. This facilitates the exercise of vigilance by the tax administration on the expiry of the limitation period and ensure that penalty proceedings are completed in all cases in time. 26. Secondly, the Direct Tax Laws (Amendment) Act, 1987 which came into effect with effect from April ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cases falling under the above Category III is 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. In the last category filing of appeal in respect of order passed in proceedings during which penalty proceedings were initiated is not relevant. 31. To this effect, a Circular No. 551 dated January 23, 1990 see [1990] 183 ITR (St.) 7 and another Circular No. 554 dated February 13, 1990 (see [1990] 183 ITR (St.) 130) were issued by the Central Board of Direct Taxes. 32. A close scrutiny of Section 275 which reproduced hereinabove shows that Clause 1(a) covers those cases where the penalty proceedings are in respect of a default related to principal assessment for a particular assessment year and the penalty proceedings are required to be initiated in the course of that proceedings only. In such case where the relevant assessment order or other orders are the subject-matter of an appeal to the Commissioner (Appeals) under Section 246 or an appeal to the Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limitation has been prescribed under Clause (c) as a separate category. In cases falling under Clause (c) penalty proceedings are to be completed within 6 months from the end of the month in which the proceedings during which the action for imposition of penalty is 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. There is no provision under Clause (c) for the extended period of limitation commensurating with completion of the appellate proceedings if any arising from the proceedings during the course of which such penalty proceedings are initiated as in the case where the penalty proceedings are linked with the assessment proceedings or the other relevant proceedings. 37. The expression other relevant thing used in Section 275(1)(a) and Clause (b) of Sub-section (1) of Section 275 is significantly missing from Clause (c) of Section 275(1) to make out this distinction very clear. 38. We are, therefore, of the opinion that since penalty proceedings for default in not having transactions through the bank as required under Sections 269SS and 269T are not related to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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