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TMI Blog2024 (11) TMI 1310X X X X Extracts X X X X X X X X Extracts X X X X ..... ra, Accountant Member For the Appellant : Sh. Vikash Jain, Adv, Ms. Shrawani, Adv Sh. Hardik Jayal, Adv For the Respondent : Ms. Jaya Chaudhary, CIT(DR) ORDER PER YOGESH KUMAR U.S., JM : This appeal is filed by the Assessee against the order of Ld. Commissioner of Income Tax (Appeal) ( Ld. CIT(A) for short], dated 09/09/2016 for the Assessment Year 2009-10. 2. The grounds of appeal are as under:- 1. On the facts circumstances of the case the CIT(A) has erred in law in holding that the order u/s 271E passed by the Addl. CIT imposing penalty of Rs. 3,44,15,000/- was barred by limitation. 2. On the facts circumstances of the case the CIT(A) has erred in law in holding that the order u/s 271E was barred by limitation without appreciating that the order was passed within 6 months of initiation of proceeding by Addl. CIT, who was the competent authority to levy this penalty . 3. Brief facts of the case are that, the Assistant CIT, Central-17, vide letter dated 07/06/2011 reported that the Assessee had entered into transaction in contravention of provision of Section 269T of the Income Tax Act,1961( Act for short). Pursuant to the same, a penalty proceedings has been initiated against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f show cause notice dated 13.6.2011 by Addl.CIT (Range II), New Delhi u/s 271E. iv. Reply of the appellant with respect to the above mentioned show cause notice vide letter 20.6.2011 v. Penalty order passed by Addi. CIT (Range II) u/s 271E on 30.12.2011. It is seen that the AO had initiated penalty proceedings u/s 271E for repaying the interest on loans otherwise than by crossed cheque/drafts. The AO further issued show cause notice u/s 274 read with section 271E on 31.12.2010. The matter had been intimated to the Addi.CIT by the AO vide his letter dated 7.6.2011 for finalization of the penalty proceedings as the competent authority to impose the penalty was AddI.CIT/JCIT and not AO. The show cause notice had been issued by the AddI.CIT vide notice dated 13.6.2011 which was replied by the appellant on 20.6.2011. It has been claimed by the appellant that provisions of section 275 (1)(c) were attracted in the case of assessee which read as under:- (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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment proceedings and are not independent of it. 34. We have also noticed that this provision was brought into effect in 1970 with effect from April 1,1971, so that proceedings may not require rectification or modification depending on the outcome of the appeal against the orders passed in the relevant assessment proceedings or the other proceedings in the course of which the penalty proceedings are required to be initiated. 35. We have also noticed that Sections 271 and 273 were the two original penalty provisions, which require the penalty proceedings to be initiated during the course of relevant assessment proceedings or the other relevant proceedings as the case may be. The penalty proceedings could also be initiated during the appellate proceedings arising out of the relevant assessment proceedings. It is only where the assessment proceedings are independent and not directly linked to the assessment proceedings that the result of such proceedings in the course of which the penalty proceedings were initiated does not affect the levy of penalty. On such penalty proceedings, independent of the assessment proceedings Clause (c) has been made applicable. In this category the peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bros. on 21 July, 2006 Indian Kanoon redundant because otherwise as a matter of fact every penalty proceeding is usually initiated when during some proceedings such default is noticed, though the final fact finding in this proceeding may not have any bearing on the issues relating to establishing default e.g. penalty for not deducting tax at source while making payment to employees, or contractor, or for that matter not making payment through cheque or demand draft where it is so required 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. 39.Thus, both on the ground that the transaction in question retention of sale price by the kachha adhatiya did not amount to deposit and its utilisation and dealing with it at the instance of farmer constituents did not amount to repayment of loan or deposits within the meaning of Section 269SS or Section 269T and on the ground that limitation under Section 275(1)(c) applies to such proceedings we hold in favour of the respondents. The department went into appeal with the hon'ble apex co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t dependent on the pendency of appeal against the assessment or other order referred to in section 275(1)(a) of the Act. 4.Accordingly, no appeals may henceforth be filed on this ground by the officers of the Department and appeals already filed, if any, on this issue before various courts/tribunals may not be pressed upon. 5. The above may be brought to the notice of all concerned. 11. The next vital issue here is whether the period of 6 months as specified u/s 275(1)(c) has to be reckoned from the issuance of notice by ICIT/Addl.CIT or from the issuance of satisfaction/notice by the AO. The hon'ble jurisdictional High Court in the case of PCIT VS. JKD Capital Finlease Ltd. as already highlighted above has been categorical in holding that the period of limitation as specified u/s 275(1)(c) starts with issuance of notice by the AO and not by the JCIT/AddI.CIT. The specific observations of the Hon'ble Court on the issue are reproduced as under:- Mr. Kamal Sawhney, learned Senior standing counsel appearing for the Revenue submitted that the AO has no power to initiate the penalty proceedings under Section 271-E of the Act and it was only the Joint CIT who could have done so. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T did not issue a show cause notice to the Assessee under Section 271-E (1) till 20th March 2012. There is no explanation whatsoever for the delay of nearly five years after the assessment order in the Additional CIT issuing notice under Section 271-E of the Act. The Additional CIT ought to have been conscious of the limitation under Section 275(1)(c), i.., that no order of penalty could have been passed under Section 271-E after the expiry of the financial year in which the quantum proceedings were completed or beyond six months after the month in which they were initiated, whichever was later. In a case where the proceedings stood initiated with the order passed by the AO, by delaying the issuance of the notice under Section 271- E beyond 30th June 2008, the Additional CIT defeated the very object of Section 275(1)(c). In that view of the matter, the order of the CIT (A) which has been affirmed by the impugned order of the ITAT does not suffer from any legal infirmity. No substantial question of law arises for determination. The appeal is dismissed. 12. It is further seen that circular has been issued by the CBDT No.9 dated 26.4.2016 as under: 1. It has been brought to the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal View . Accordingly, the Assessing Officers (below the rank of Joint Commissioner of Income-tax) may be advised to make a reference to the Range Head, regarding any violation of the provisions of section 269SS and section 269T of the Act, as the case may be, in the course of the assessment proceedings (or any other proceedings under the Act). The Assessing Officer, (below the rank of Joint Commissioner of Income-tax) shall not issue the notice in this regard, The Range Head will issue the penalty notice and shall dispose/complete the proceedings within the limitation prescribed under section 275(1)(C) of the Act. 6. Where any High Court decides this issue contrary to the Departmental View, the Departmental View thereon shall not be operative in the area falling in the jurisdiction of the relevant High Court. However, the CCIT concerned should immediately bring the judgement to the notice of the Central Technical Committee. The CTC shall examine the said judgement on priority to decide as to whether filing of SLP to the Supreme Court will be adequate response for the time being or some legislative amendment is called for. 7. The above clarification may be brought to the notice of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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