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TMI Blog2011 (11) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... lay of three years and six months from the date of knowledge by the department of the alleged default committed by the appellant assessee u/s 269SS of the I.T. Act, 1961, the impugned penalty is barred by limitation and bad in law and therefore the same may please be annulled. 3. The relevant facts of the case are that this is a case which is covered u/s 132 of the Income-tax Act (hereinafter called as an `Act ). The date of search was 29.7.2003. During the search and seizure proceedings, it is mentioned that the department came to know of the violation of the provisions of section 269SS relating to mode of taking or accepting certain loans and deposits . Investigation wing of the Income tax Department sent the said information to the concerned assessing authorities (Addl. CIT Central Range-2) as per the set procedure and the said Addl. CIT, Central Range 2 intern sent the relevant information to the AO of the assessee. At this point of time, the re-assessment proceedings were initiated u/s 148 of the Act thereafter and the reassessment was completed on 8.12.2006. subsequently, on 23.1.2007, the penalty proceedings u/s 271D of the Act were initiated for violation of the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent proceedings. 4. In the instant case this office received information from Addl. CIT, Central Range-2, Pune on the basis of which proceedings u/s 147 of the Act was initiated and completed by the then A.O. on 8.12.2006 wherein due mention was made of violation of provisions of section 269SS and section 269T. The matter with regard to the violation of sections 269SS and 269T was referred to the then Addl. CIT Range-3, Pune on 8.12.2006. Accordingly the then Addl. CIT initiated penalty proceedings u/s 271D and 271E of the Act on 23.1.2007 and levied penalties u/s 271D and 271E on 26.6.2007. Thus it is clear that the initiation and subsequent levy of penalties were absolutely in order and not barred by limitation of time as contended by the assessee. 6. Thus, the issue is about the timing of the initiation of the penalty proceedings u/s 271D of the Act. AO s stand includes (i) law is silent on the timing of the initiation of such proceedings; and (ii) knowledge of information on the violation is not the correct timing but the end of the relevant assessment proceedings. AO initiated on 23.1.2007 the impugned penalty proceedings u/s 271D of the Act within 45 days from the end of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt refused to quash the penalty on ground of long gap between the date of assessment order and the date of imposing penalty. Further, in that case the showcause notice for penalty was issued in July 1961 and the penalty was levied in May 67. Therefore, the decision of hon ble Bombay High Court does not help the appellant at all. The other case cited by the appellant of CIT Vs. Harinagar Sugar Mills Ltd. (1989) 176 ITR 289 related to initiation of action provided under the Excess Profit Tax Act 1940, and therefore, was not related to the matter at hand and was thus distinguishable. 3.5 In view of the above discussion, though penalty proceedings u/s 271D and 271E could be initiated at any time, in this case it was initiated in the assessment order u/s 143(3) r.w.s. 147 dated 8.12.2006 and, therefore, was levied within the time limit prescribed u/s 275(1) i.e. on 26.6.2007. The appellant s additional ground of appeal is therefore, dismissed. 8. Thus, the CIT (A) passively relied on the AO s reasoning in the matter. Further, regarding the delay of period of 45 days, as understood by us, the CIT (A) relied on the citations quoted by the assessee i.e. Chimanram Motilal (P) Ltd supra. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed law that penalty proceedings u/s 271D are independent of assessment proceedings and the same need not be initiated during assessment proceedings (Please refer decision of Hon. Rajasthan High court in the case of CIT Vs. Hissaria Brothers reported in 291 ITR page 244) ii. The knowledge of the department as one unit is important and not knowledge of the concerned Assessing Officer having jurisdiction over the case of the assessee. The officer acquiring the knowledge of the alleged default is duty bound to immediately communicate the same to the officer having jurisdiction over the case of the defaulter. iii. Even in remand report submitted by the Ld. Assessing Officer to the learned CIT (A) during the appellate proceedings, a concession was made by the ld. Assessing Officer that it may be a fact that the department came to know of the cash loans on 29.7.2003 [please refer page no.3 of the impugned order passed by the Ld. CIT(A)] iv. Without prejudice to above, it is pertinent to note that in the paper book submitted by the department on 16.9.2011 a copy of letter dated 24.3.2006 written by the Ld. Additional CIT Central Range 2 Pune to ITO Ward-3(2) Pune is filed wherein it has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this regard, he read out the contents of the remand report cited above. As per the DR, the delay if any, should start only from the date of completion of the re-assessment proceedings during the time the satisfaction of the A.O. becomes conclusive with regard to the said alleged violation. In terms of initiation, the penalties belongs the posterity of the assessment. Therefore, the re-assessment was completed on 18.12.2006 and initiation of the penalty proceedings u/s 271D of the Act on 26.6.2007 are in order. The very fact that this penalty proceedings were completed within the time prescribed in clause (c) of the section 275(1) of the Act. Therefore, the same is in order. 12. We heard both the parties, perused the orders of the revenue and the written submissions made by the assessee s counsel before us. We take up the issues raised in the additional ground first. The said issue relates to if the delay of 3 years in matters of initiation of the penalty proceedings u/s 271D of the Act constitutes ordinary delay; and there exists legally sustainable explanation from the department for the said delay. Ancillary to the same, we need to decide if the impugned penalty order is inva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incorporated which provides that notwithstanding anything contained in the provisions of s. 271D, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision if he proves that there was reasonable cause for such failure and if the assessee proves that there was reasonable cause for failure to take a loan otherwise than by account-payee cheque or account-payee demand draft, then the penalty may not be levied. Therefore, undue hardship is very much mitigated by the inclusion of s. 273B in the Act. If there was a genuine and bona fide transaction and if for any reason the taxpayer could not get a loan or deposit by account-payee cheque or demand draft for some bona fide reasons, the authority vested with the power to impose penalty has got discretionary power. In that view of the matter, we do not think that s. 269SS or 271D or the earlier s. 276 DD is unconstitutional on the ground that it was draconian or exproprietory in nature. 3. Chimanram Motilal (P) ltd. Vs. CIT 140 ITR 809 (Bom): However, whether delay in a given case is inordinate or not and whether the delay has been properly explained or not will be que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the language, which is not stated specifically. Therefore, Section 46(4) of the BFT Act. It is trite that if no period of limitation has been prescribed, statutory authority must exercise its jurisdiction within a reasonable period. What, however, shall be the reasonable period would depend upon the nature of the statute, rights and liabilities there under and other relevant factors. Three years period cannot be said to be a very long period and the power was exercised within a reasonable period of time. CIT Vs. Harinagar Sugar Mills Ltd. 176 ITR 289 (Bom): Although the income-tax proceedings were earlier completed, they were reopened and these proceedings (after reopening) were also completed in December 1962. Thereafter, excess profits tax assessment was sought to be reopened in July 1976. This 13 to 14 years delay has not been satisfactorily explained. The explanations offered have not found favour with the Tribunal and do not appeal to us also. It is true that there is no period of limitation fixed by the statute by the approach of this court, although indicated in a matter involving penalty, may also apply to reopening of excess profits tax assessments. Excess profits tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to be case specific and it differs from one case to as held by the Apex Court. There is no dispute on the fact that there are no express provisions for initiation of the proceedings u/s 271D of the Act in the instant case. Further, it is also clear from the above, there is need for explanation for the said delay if it constitutes delay or inordinate delay and such explanation has to be given by the person or authority responsible for the delay/inordinate delay. When this is the settled law at the level of the Apex Court, we have perused the orders of the revenue for details of delay or inordinate delay or explanation of the revenue etc. The revenue authorities in general, the CIT (A) in particular has not determined the issues properly as can be made out from the impugned order. CIT (A) considered the delay from the date of initiation of the penalty proceedings and the conclusion of the said proceedings leaving the contentious issue of why initiation is not done from the date of search. Thus, the CIT (A) sustained the penalty erroneously determined the issue and adjudicated the same relying on the judgments of the jurisdictional High Court reported in the case of Chimanram Moti ..... 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