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TMI Blog2025 (4) TMI 333X X X X Extracts X X X X X X X X Extracts X X X X ..... amounting to Rs. 34,00,000/- in cash and the assessing officer has clearly recorded his findings that the loans were received in cash after making detailed enquiry. The contention of the assessee to keep the proceedings u/s 271D in abeyance cannot be accepted as the assessee has filed appeal for the quantum addition only. In the absence of any supporting documents explanation of the assessee is rejected. Therefore, in my opinion, the assessee has violated provision of section 269SS and hence liable to pay, by way of penalty a sum equal to the amount of the loan or deposit so taken or accepted. Accordingly, I hereby levy a penalty of Rs. 34,00,000/- (Rs. Thirty-four lakhs) u/s. 271D of the Income Tax Act, 1961. Demand notice and challan issued along with this order." 3. The petitioner had suffered an Assessment Order dated 30.12.2019 for the Assessment Year 2017-2018 in the hands of the 1st respondent. The aforesaid Assessment Order was unsuccessfully challenged by the petitioner before this Court in W.P.No.2668 of 2020. 4. The said writ petition came to be dismissed on 05.02.2020 with a liberty to file an appeal against the Assessment Order dated 30.12.2019, before the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 as well as the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (hereinafter referred to as "TOLA, 2020"). 12. It was further submitted by the learned counsel for the petitioner that the 2nd respondent should have awaited the order of the Appellate Commissioner in the appeal filed by the petitioner against the Assessment Order dated 30.12.2019, before passing the impugned Penalty Order. 13. On the other hand, the learned Senior Standing Counsel for the respondents submitted that since an appeal was filed by the petitioner against the Assessment Order dated 30.12.2019, the 2nd respondent was justified in passing the impugned Penalty Order dated 19.08.2021 pursuant to the Show Cause Notice dated 18.02.2020. 14. The learned Senior Standing Counsel for the respondents further submitted that although the limitation period would have normally expired in terms of Section 275(1)(c) of the IT Act, the time limit to pass the impugned Penalty Order dated 19.08.2021 stood extended due to promulgation of the Ordinance and enactment of TOLA, 2020. 15. It is therefore submitted by the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t expired. Alternatively, it was also submitted by the petitioner that the impugned Penalty Order is premature. For the sake of clarity, Section 275 of the IT Act, is reproduced below:- Section 275. Bar of limitation for imposing penalties. (1) No order imposing a penalty under this Chapter shall be passed- (a) in a case where the relevant assessment or other order [is the subject-matter of an appeal to the Joint Commissioner (Appeals) or to the] Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253, 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 the order of the 28-29[Joint Commissioner (Appeals) or the] Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the 30[***]Principal 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 31[Joint Commissioner (Appeals) or to the] Commissioner (Appeals) under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty shall be passed- (a) unless the assessee has been heard, or has been given a reasonable opportunity of being heard; (b) after the expiry of six months from the end of the month in which the order of 34a[the Joint Commissioner (Appeals) or] the Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Supreme Court is received by the 34b[***] Principal Commissioner or Commissioner or the order of revision under section 263 or section 264 is passed: Provided further that the provisions of sub-section (2) of section 274 shall apply in respect of the order imposing or enhancing or reducing penalty under this sub-section. (2) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any action initiated for the imposition of penalty on or before the 31st day of March, 1989. Explanation.-In computing the period of limitation for the purposes of this section,- (i) the time taken in giving an opportunity to the assessee to be reheard unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was empowered to impose penalty under Section 271D(2) of the Act? 4. Whether, on the facts and in the circumstances of the case the Income-tax Appellate Tribunal was justified in holding that the assessee acted under bona fide belief and did have reasonable and sufficient cause as provided under Section 271D of the Act on account of precedence and trade practice allegedly amounting to res judicata?" 28. The assessee there acted as "Kachcha Arhatiya" i.e., as an agent for its farmer constituents who used to bring their crops to the assessee for sale and the assessee in this relationship used to sell their crops and retained the profits from the sale of the crops. The assessee also accepted cash deposits from the farmer constituents, creating fund accumulation for each of the farmers and adjusts the same towards supply of goods like fertilizers, seeds, pesticides etc., and other withdrawals made by the framers constituents for the purpose of meeting their timely needs, thus, catering to farmer constituents. 29. As an agent, the assessee collected, sold the crops, and managed proceeds and adjusted withdrawals for the farmers' needs. The transactions carried out by a "Kachcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posits within the meaning of section 269T. Coupled with this finding of fact about all transactions to be genuine and bona fide, looking to the practice prevailing and requirements of the farmers, the Tribunal was also of the opinion that the assessee had reasonable and sufficient cause for not complying with sections 269SS and 269T even if the same were to be considered as deposit and repayment of deposits. About the additions sustained by the Commissioner of Income-tax (Appeals) in respect of alleged cash credit, the Tribunal found such transaction to be not outside the purview of the transactions carried out by the assessee as kachcha adhatiya. Hence, the penalty sustained by the Commissioner of Income-tax (Appeals) was also set aside." 32. Although, in the aforesaid decision, the Court made a reference to a CBDT Circular, the particulars of Circular was not mentioned therein. However, on a reading of the order of the Tribunal in Hissaria Bros Vs. CIT (2001) 73 TTJ (NULL)1 which was impugned before the said Court, it was discerned that reference was to CBDT Circular No. 556 dated 23.02.1990. 33. Relevant portions of the said Circular No. 556 dated 23.02.1990 issued by Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the general instructions contained in the above Circular of CBDT insofar as the nature of the dealings of "Kachcha Arhatiya" on behalf of his constituents and cannot be considered as 'deposit' or 'repayment of deposit or loan', as found by the Assessing Officer himself. 35. It further held that hardly any occasion arose for invoking Section 269SS or 269T of the IT Act, even on the purported commission received by the assessee to comply with the requirements of the aforesaid provision for inviting penalty under section 271D and 271E of the IT Act. For the sake of clarity, Paragraph No.15 of the above decision is reproduced below:- "15. Ordinarily, whether there exists a reasonable cause for the assessee's failure to comply with the provision of sections 269SS and 269T inviting levy of penalty under sections 271D and 271E respectively and his absolution from penalty on account of existence of reasonable cause is a question of fact and it does not give rise to a question of law. Apparently, in the facts and circumstances of the case taken on the facts of each case no straight-jacket formula can be laid down for the purpose of determining a question of law wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduced 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 Tribunal under section 253, 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 6 months from the end of the month in which the order of Commissioner (Appeals) or, as the case may be, of the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later. 33. Apparently, clause (a) governs the categories which are integrally related to the assessment 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 assessment proceeding but are independent of it, therefore, the completion of appellate proceedings arising out of the assessment proceedings or the other proceedings during which the penalty proceedings under sections 271D and 271E may have been initiated has no relevance for sustaining or not sustaining the penalty proceedings and, therefore, clause (a) of sub-section (1) of section 275 cannot be attracted to such proceedings. If that were not so clause (c) of section 275(1) would be 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conclusions cannot be said to be ratio decidendi. They are merely the obiter dicta of the aforesaid decision. 42. Additionally, the Court also considered previous rulings and interpretations related to Section 275 of the IT Act which governs the limitation period for imposing penalties. This is clearly contrary to the contemporenea expositio of law in Circular No.56 dated 19.03.1971 which was also referred to by the Court in the above case. 43. However, the Court has ignored the true purport of the above circular issued in the context of the limitation period under Section 275(1)(a) of the IT Act. Though the Court in Paragraph No.24 made a specific reference to Circular No.56 dated 19.03.1971 issued by Central Board of Direct Taxes, it has ignored Paragraph No.33 of the said Circular. Relevant portions of the said Circular are reproduced below:- "TAXATION LAWS (AMENDMENT) ACT, 1970 CIRCULAR NO. 56, DATED 19-3-1971 ..... AMENDMENTS TO INCOME-TAX ACT STREAMLINING THE ASSESSMENT PROCEDURE, INCLUDING PROCEDURE AND TIME LIMITS FOR GRANT OF REFUNDS AND IMPOSITION OF PENALTIES, AND CONNECTED MATTERS, SO AS TO ACHIEVE EXPEDITIOUS DISPOSAL OF WORK AND SECURING BETTER VOLUNTARY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a calendar month. This will facilitate 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 good time. The Explanation to section 275 - which provides that the time taken in rehearing the assessee (due to change in the incumbent of the office of Income-tax Officer, Inspecting Assistant Commissioner or Appellate Assistant Commissioner having jurisdiction) and any period during which the penalty proceedings have been stayed by an order of the court, will be excluded in computing the period of limitation - has been retained. 34. The amendment of section 275 will come into effect from 1-4-1971. Accordingly, the revised time limit will apply to penalty proceedings commenced on or after that date as also to penalty proceedings commenced before that date and pending on 1-4-1971, provided the period of limitation specified in the existing provisions of section 275 has not already expired. [Section 50 of the Amending Act]" 44. The observations made in the context of Question No.1 framed by the said Court in the aforesaid decision in Paragraph Nos.32 to 38 was merely an obiter dicta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of such order of the Appellate Authority by the Principal Commissioner or Commissioner, in terms of provisio to Section 275(1)(a) of IT Act. This will be also in tune with Circular No. 56 dated 19.03.1971 issued by Central Board of Direct Taxes. 50. In terms of Section 275 of the IT Act, if the Penalty Order under Chapter XXI of the IT Act was to be passed before the end of the financial year, as in (a) of Paragraph No.48 of this order, it ought to have been passed on or before 31.03.2020 in the present case. 51. In case, Penalty Order is not passed before the end of the Financial year in which the Assessment Order was passed, it has to be deferred till the Appellate Authority passes an appellate order in an appeal filed against the relevant Assessment Order. The Penalty Order has to be passed within a period of one year from the end of the month of the receipt of the order of the Appellate Authority, by the Principal Commissioner or Commissioner, provided such an appeal is filed as in (b) of Paragraph No.48 of this order. 52. In fact, in taxing matters, Courts are expected to apply the plain language. In this connection, the famous dictum of the Kings Bench in Cape Brandy Syn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be any doubt on this aspect. Accordingly, this court is of the view that the proviso to section 275(1)(a) of the Act, does not nullify the availability to the third respondent of the period of limitation of six months from the end of the month when the order of the Income-tax Appellate Tribunal, Chennai, is received by the third respondent herein." 56. Though, I am in agreement with the ratio of the Court in the above decision, it has to be mentioned that the Court had failed to take note of provisio to Section 275(1)(a) of the IT Act which was inserted by the Finance Act, 2003 w.e.f. 01.06.2003. There, the Assessment Order which gave rise to the penalty proceeding was dated 29.03.2004. Therefore, the limitation period should have been reconciled in terms of proviso to Section 275(1)(a) of the IT Act. In the present case also the limitation period should have been reconciled in terms of proviso to Section 275(1)(a) of the IT Act. 57. Limitation period under Section 275(1)(c) of the IT Act is not applicable to the facts of the present case. Limitation period under Section 275(1)(c) r/w. Section 274 of the IT Act for the purpose of imposition of penalty under Section 271D of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other date after the 31st day of December, 2020, as the Central Government may, by notification, specify in this behalf, for the completion or compliance of such action as - (a) completion of any proceeding or passing of any order or issuance of any notice, intimation, notification, sanction or approval, or such other action, by whatever name called, by any authority, commission or tribunal, by whatever name called, under the provisions of the specified Act;" 62. The Government of India in the Ministry of Finance, (Department of Revenue) has issued the following notifications under Section 3(1) of the TOLA, 2020 extending the period of limitation for passing various order including the Penalty Order under Chapter XXI of the IT Act. The details of the notifications issued are as under:- Sl.No. Notifications No./Statute Date of the Notifications / Act Relevant Period Last Date after extension 1 93/2020 31.12.2020 30.03.2020 to 30.03.2021 31.03.2021 2 10/2021 27.02.2021 30.03.2020 to 29.06.2021 30.06.2021 3 74/2021 25.06.2021 30.03.2020 to 29.09.2021 30.09.2021 4 113/2021 17.09.2021 30.03.2020 to 30.03.2022 31.03.2022 63. Clause A of the Notification N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the impugned Penalty Order has been passed before the expiry of the limitation period, it can be revised after the appeal is disposed by the Appellate Authority against the Assessment Order dated 30.12.2019, in terms of Section 275(1A) of the IT Act. Therefore, the impugned order imposing penalty is not required to await the order of the Appellate Authority in the appeal filed by the petitioner against the Assessment Order dated 30.12.2019. By the same token, it cannot be also said that the impugned Penalty Order is premature. 68. Consequently, this Writ Petition has to fail. At best, liberty can be given to the petitioner to challenge the impugned Penalty Order on merits before the Appellate Commissioner. 69. In view of the above discussion, this Writ Petition is dismissed with liberty to the petitioner to challenge the impugned Penalty Order dated 19.08.2021 by way of filing an appeal before the Appellate Commissioner under Section 246A of the IT Act, within a period of 30 days from the date of receipt of a copy of this order. On filing of such appeal by the petitioner, the Appellate Commissioner shall dispose of the same on merits alone. No costs. Consequently, connected mis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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