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TMI Blog2005 (11) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... ding his satisfaction. Another view is that the period of limitation commences from the date of issue of notice by the Assessing Officer. Accordingly, constitution of Special Bench was recommended. The Hon'ble President, ITAT was pleased to constitute the Special Bench for the purposes of a decision in regard to the following issue: "Having regard to the provisions of sections 271D and 271E and section 275 of the Income-tax Act, whether period of limitations for purposes of section 275 of the Act is to be reckoned from the date when assessment proceedings are completed or from the date when penalty proceedings are initiated by the JCIT?" 3. It may be pertinent to mention that when the matter came up before the Special Bench on 25-7-2003, it was found that in the case of Shri Naresh Kumar, the Assessing Officer had issued intimation under section 143(1)(a) and that had become final as no order under section 143(3) had been passed. In the case of M/s. Bhagwan Dass Lalit Mohan, the return had been filed by the assessee in respect of which the assessee did not receive any intimation under section 143(1)(a) or any order under section 143(3). In the case of M/s. Dewan Chand Amrit Lal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those on the receipts. A letter was issued to the above assessee on 16-1-1996 and the assessee was asked to explain as to why his case should not be referred to DCIT for considering penalty under section 271D of the Income-tax Act. The assessee was required to submit its reply on or before 29-1-1996. None has attended his office on 29-1-1996 nor any written submission has been filed." The Assessing Officer referred the matter to the DCIT, Hissar on 5-11-1996 for considering the provisions related to penalty for the default along with copy of the receipt. The DCIT issued a show-cause notice to the assessee on 13-5-1996. The assessee replied to the notice. The reply of the assessee has been considered in the penalty order. We are not at this stage required to consider the merits of the penalty on the basis bf the claim of the assessee and the finding of the DCIT. We are, however, concerned with the objection raised by the assessee that the order passed by the DCIT, Hissar imposing the penalty on 5-11-1996 is barred by limitation. The issue relating to the limitation was also raised before the DCIT who has dealt with the same in para 6 of his order (which is reproduced hereunder) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated to be in contravention of the provisions of section 269SS of the Income-tax Act, 1961. The assessee was also required to intimate the utilization of the said amount and income if any earned therefrom. In response to the queries Sh. Naresh Kumar, Prop, attended and his statement was recorded. In his statement Shri Naresh Kumar denied having accepted any loan from Shri Surinder Kumar. When the aforesaid receipt was shown to Sh. Naresh Kumar which was on the letter pad of M/s. Punjab Ram Labh Chand and also bear the signatures of Sh. Naresh Kumar and the stamp of M/s. Punjab Ram Labh Chand it was submitted by Sh. Naresh Kumar that the letter pad used was of his firm. However, it was intimated that the signatures appended on the revenue stamps made in the name of Shri Naresh Kumar, were not his signatures. He was further asked to state whether he knows any Naresh Kumar which may be relegated to him or had any business connection or otherwise with him, it was replied that he does not know as to who has signed on the above-said letter pad. Sh. Naresh Kumar also confirmed that there is no person in the name of Shri Naresh Kumar in his relation both business or otherwise. Shri Nare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see as also required to show cause why the acceptance of deposit of in cash exceeding Rs. 20,000 should not be treated to be in contravention of the provisions of section 269SS of the Income-tax Act, 1961. The assessee was also required to intimate the utilization of the said amount and income if any earned therefrom. In response to the queries Sh. Dewan Chand attended and his statement was recorded. In his statement Shri Dewan Chand denied knowing Shri Surinder Kumar of Bathinda and also his signature on the receipt referred to above. He also stated that no receipt has ever been given by him. When his attention was drawn to the fact that the receipt had been given on the letter pad of the firm, it was stated that this paper of their letter pad might have been picked up in his absence and used accordingly. He was also required to put his signature in English thrice and on verification, it was noticed that his signature appended on the aforesaid receipt tally with the specimen signatures. Enquiries were also made from bank of Rajasthan where the firm was having a term deposit a/c. On a perusal of account opening form which contain the signature of Shri Diwan Chand, it is clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assumed that the law-making authority does not commit a mistake or make an omission. To my mind, the legislative intent is manifest by the plain words used in section 271A, or for that matter, also in section 271D, on the one hand and, on the other, the provisions such as section 271 of the Act. While in the latter case, penalty is initiable only in the course of proceedings under the Act, such embargo does not apply to the former group of cases. I am fortified in this view by the decision rendered by the ITAT, Allahabad Bench in Income-tax Appeal No.728 of 1992 - Miri Lal Mulk Raj v. ITO, Ground numbered 2 is, therefore, rejected." The appeals of other assessees have also been dismissed on the same grounds. 10. As expressed earlier, we are concerned with the ground relating to limitation. The decision of the CIT(A) is contained in para 5 of the order which is reproduced above. Before us, written submissions were filed on behalf of the assessees by Shri Ravinder Bindlish, the sum and substance of which is as under: (i) That limitation under section 275(1)(c) for purposes of section 271D is prescribed to be up to the end of the financial year in which the proceedings in the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the object of limitation cannot be lost sight of and that the possibilities of the parties being dragged in Courts for an indefinite period is to be avoided. Reliance was also placed on the decision of Punjab & Haryana High Court in the case of Smt Tarawanti v. State of Haryana 1995(1) R.R.R. 110, 1994(3) R.R.R. 247, 1994 P.L.J. 495, in support of the contention that rule of limitation is founded on consideration of public and the provisions of the Act dealing with the litigation are required to be interpreted with the approach which advances the cause of public policy and not otherwise. Reliance has also been placed on the decision of Punjab & Haryana High Court in the case of Naurang Singh v. State of Punjab 1997(1) R.C.R.(Civil) 660,1997(1) P.L.R. 363, to support the contention that public policy demands that rule of law, justice, equity and good conscience which by now has become legend having got imbibed in the jurisprudence by innumerable consistent and persistent pronouncements of the Apex Court, the principle is that one should not be vexed twice for the same cause of action even by articulating or splitting the relief or claim, particularly when the element of certainty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that recording of the satisfaction for initiation of penalty proceedings is necessary. According to the ld. counsel, penalty proceedings are necessarily to be initiated by the ITO or by the appellate authority. Reliance was also placed on the decision of the Jodhpur Bench of the ITAT in the case of Hissaria Bros. v. Jt. CIT [2001] 73 TTJ (Jodh.) 1 in support of the contention that penalty proceedings under sections 271D and 271E are to be initiated in the course of assessment proceedings. It was, accordingly, pleaded that the penalty orders passed in these cases of the appellants may be held as barred by limitation. 13. Shri S.K. Mukhi, Advocate, appeared and sought permission of the Bench to assist the Court as amicus curiae in regard to the issue involved in this appeal. Considering the importance of the matter, the permission was granted. It was contended by Shri Mukhi that the interpretation which is canvassed on behalf of the revenue would result in hardship, futility, absurdity or uncertainty. Relying upon the decision of the Supreme Court in the case of D. Saibaba v. Bar Council of India [2003] 6 SCC 186, it was contended that where literal construction or plain meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the JCIT has been empowered to levy the penalty. There is no power with the Assessing Officer either to initiate the penalty proceedings or to impose the penalty under the aforementioned provisions of the Act. The ld. D.R. placed reliance on the decision of Nagpur Bench of the Tribunal in the case of ITO v. Ramnivas Agrawal (2004) 89 TTJ (Nag.) 795, wherein it has been held that the limitation for imposition of penalty under section 271D/271E is six months from the end of the month in which the DCIT had initiated the penalty proceedings. Similar view has been taken by the ITAT, Chandigarh Bench in the case of Asstt. CIT v. Shree Nivas Chemicals [2003] 84 ITD 76. The other decisions cited on behalf of the assessee are stated to be distinguishable on facts and in any case, it was contended that with due respects, the opinion to the contrary is not based on the correct interpretation of law. It was further contended that in this case, the Assessing Officer cannot assume jurisdiction and the condition for recording of satisfaction as in the case of penalty under section 271(1)(a), (b) or (c) is not required to be recorded in respect of penalty under section 271D/271E. Reference was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (2) of section 143 or fails to comply with a direction issued under sub-section (2A) of section 1420, or (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, The following clause (d) shall be inserted after clause (c) of sub-section (1) of section 271 by the Finance Act, 2005, w.e.f. 1-4-2006: (d) has concealed the particulars of the fringe benefits or furnished inaccurate particulars of such fringe benefits, he may direct that such person shall pay by way of penalty,- (i) omitted; (ii) in the cases referred to in clause (b), in addition to tax, if any, payable by him, a sum of ten thousand rupees for each such failure; (iii) in the cases referred to in clause (c) or clause (d), in addition to tax, if any, payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefits or the furnishing of inaccurate particulars of such income or fringe benefits. Explanation 1 to 7." 271D. (1) If a person takes or accepts any loan or deposit in contravention of the provisions of section 269SS, he sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Commissioner (Appeals) is received by the Chief Commissioner or Commissioner, whichever is later, (b) in a case where the relevant assessment or other order is the subject-matter of revision under section 263 or section 264, after the expiry of six months from the end of the month in which such order of revision is passed; (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 for imposition of penalty is initiated, whichever period expires later. (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is relevant for the present controversy. 17. In nutshell, under section 275, the penalty order under Chapter XXI was required to be passed within two years from the date of completion of the proceedings in course of which the proceedings for imposition of penalty were commenced. From 1-4-1971 to 31-3-1989, section 275 divided cases into two categories, namely, (i) where the assessment to which the proceedings for imposition of penalty relate was the subject-matter of an appeal to the DCIT(A)/AAC, as the case may be, the CIT(A) or Appellate Tribunal, and (ii) all other cases. The period of limitation for the cases under category (i) was as under: (i) two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated were completed, or (ii) six months from the end of the month in which the order of the Deputy Commissioner (Appeals) up to 31-3-1988, Appellate Assistant Commissioner or w.e.f. 10-7-1978 Commissioner (Appeals) or, as the case might be, the Appellate, Tribunal was received by the Chief Commissioner or Commissioner up to 31-3-1988, the Commissioner, whichever period expired later. The perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been explained in the departmental Circular No. 387, dated 6-7-1984. The relevant portion is reproduced hereunder:- "(xxiv) Prohibition against taking or accepting certain loans and deposits in cash.- 32.1. Unaccounted cash found in the course of searches carried out by the Income-tax Department is often explained by taxpayers as representing loans taken from or deposits made by various persons. Unaccounted income is also brought into the books of account in the form of such loans and deposits, and taxpayers are also able to get confirmatory letters from such persons in support of their explanation. 32.2 With a view to countering this device, which enables taxpayers to explain away unaccounted cash or unaccounted deposits, the Finance Act, 1984, has inserted a new section 269SS in the Income-tax Act debarring persons from taking or accepting, after 30-6-1984, from any other person any loan or deposit otherwise than by an account payee cheque or account payee bank draft if the amount of such loan or deposit or the aggregate amount of such loan and deposit is Rs. 10,000 or more. This prohibition will also apply in cases where on the date of taking or accepting such loan or depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n most of the cases would be completed before the date of search. This background, in our considered view, is important for getting us to take a pragmatic view in the matter of interpretation of section 275. Now, reverting to section 275, as pointed out earlier, there are three categories of cases for which a separate limitation has been provided under the said section. It is nobody's case that the assessees' case falls under category-I or category-II, i.e., under clause (a) or clause (b) of section 275. The assessees' case, admittedly, falls under category-III, i.e., under clause (c) of section 275. We have reproduced section 271 along with other relevant provisions involved of the Act elsewhere in this order. It would appear that quoting of section 271 was unnecessary but we purposely quoted the same so as to remove the impression, or if we may say so, the confusion which is created by reference to the decided cases relating to the provisions of section 271. In order to appreciate the distinction between sections 271 and 271D and 271E, it is necessary to keep in mind the authority having jurisdiction to impose the penalty under the respective provisions of the Act. Their Lordship ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at this point of time has the authority is what is relevant. Whoever this authority may be, he is obliged to impose such penalty as was permissible under the law in that behalf on the date on which the offence of concealment was committed, that is to say, on the date of the offending return. The two aspects must be firmly borne in mind, namely, who may impose the penalty and in what measure." Similar view has been expressed by their Lordships of Supreme Court in the case of CIT v. Dhadi Sahu [1993] 199 ITR 610. The relevant observations are as under: "Held, reversing the decision of the High Court, that the reference of the cases was validly made by the Income-tax Officer before 1-4-1971, and the Inspecting Assistant Commissioner validly acquired jurisdiction to pass the orders imposing penalty. The amending Act did not make any provision that references validly pending before the Inspecting Assistant Commissioner should be returned without any final order being passed. The previous operation of section 274(2) as it stood prior to 1-4-1971, and anything done thereunder continued to have effect under section 6(b) of the General Clauses Act, 1897, enabling the Inspecting Assistant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edent for imposition of penalty for specified defaults. Under sections 271D and 271E, there is no such requirement of recording of satisfaction in the course of any proceedings. Moreover, the authority for imposition of penalty under section 271 is the Assessing Officer or the CIT(A), as the case may be. On the other hand, the authority for imposition of penalty under sections 271D and 271E is the Dy. CIT which has later on been substituted by the Jt. CIT. With reference to the proceedings of section 271, their Lordships of the Punjab & Haryana High Court also in the case of CIT v. Munish Iron Store [2003] 263 ITR 484, held that jurisdiction to impose penalty under section 271 flows from recording of satisfaction of the Assessing Officer regarding concealment of income. Similar view has been taken by the Delhi High Court in the case of CIT v. Vikas Promoters (P.) Ltd. [2005] 277 ITR 337 and earlier in some other cases. However, these decisions lose significance when we compare the plain language of provisions of sections 271D and 271E vis-a-vis that of section 271. It is evident from the language used by the Legislature that the condition precedent of recording satisfaction as requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a notice dated 8-6-1994 asking the assessee to show cause as to why penalty under sections 271D and 271E may not be imposed. The assessee filed reply. The DCIT after considering the explanation of the assessee imposed the penalty under sections 271D and 271E vide order dated 28-3-1995. On appeal against the imposition of penalty, the CIT(A) held that order passed by the DCIT was barred by limitation as having been passed alter the expiry of six months from the date of initiation. On appeal, the Tribunal reversed the order of the CIT(A) by holding that the penalty orders had been passed by the DCIT within the financial year after the end of the financial year in which the assessment was made. On further appeal, the Hon'ble Karnataka High Court held that the financial year in respect of the assessment order expired on 31-3-1994. The action for imposition of penalty was initiated by issue of notices dated 8-6-1994 by the DCIT. Their Lordships further held that in that event the orders imposing penalty should have been passed before 31-12-1994 as six months period from the end of June 1994 expired on 31-12-1994. The order dated 28-3-1995 imposing penalty was, thus, held to be barred b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. In the case of Food Corpn. of India v. CST [1998] 109 STC 131 (SC), the issue relating to limitation within which a penalty order could be passed by the appellate authority/Commissioner of Madhya Pradesh General Sales Tax Act, 1958 arose before the Hon'ble Supreme Court. Their Lordships explaining similar provisions under the M.P. General Sales Tax Act, 1958 as the provisions of the Income-tax Act relating to penalty, held that when the appellate authority/Commissioner has been given additional powers to impose penalty for the first time in the course of proceedings before him, the limitation prescribed for initiation of penalty proceedings by the Assessing Officer do not apply for initiation by the appellate authority/Commissioner. Under the Income-tax Act, 1961, section 271 also gives additional power to the CIT(A) to impose penalty. As pointed out earlier, the CIT(A) not having any limitation for deciding an appeal by implication means that there is no limitation for initiation of penalty proceedings by him. The limitation starts from initiation of penalty in the course of proceedings before the CIT(A). Another example of uncertain period of limitation may be derived from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, it is not for us to provide for the casus omissus of the Legislature. In the case of Prukash Nath Khanna v. CIT [2004] 266 ITR 1 at page 9, their Lordships of the Supreme Court held, "It is a well-settled principle in law that the Court cannot read anything into a statutory provision which is plain and unambiguous. A statute is an edict of the Legislature. The language employed in a statute is the determinative factor of legislative intent. The first and primary rule of construction is that the intention of the legislation must be found in the words used by the Legislature itself. The question is not what may be supposed and has been intended but what has been said." It has further been held, "While interpreting a provision t he Court only interprets the law and cannot legislate it. If a provision of law is misused and subjected to the abuse of process of law, it is for the Legislature to amend, modify or repeal it, if deemed necessary." Their Lordships furl her held that a statute must be construed with reference to the context and other clauses thereof. In the present case, considering the context in which the provisions of sections 269SS and 269T and consequentially incorp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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