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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI N. V. VASUDEVAN & SHRI JASON P BOAZ
Per Jason P Boaz, Accountant Member: These three appeals by the assessee are directed against the combined orders of CIT(A), Davangere, dated 12.06.2018, upholding the penalty levied by the Assessing Officer (AO) under section 271C of the Income Tax Act, 1961 (in short ‘the Act’) for Assessment Years 2011-12 to 2013-14 vide separate orders dated 26.07.2016. As common issues are involved, these appeals were heard together and we deem it appropriate to dispose them off by way of this combined order.
Briefly stated, the facts relevant for disposal of these appeals are as under:-
ITA Nos.2446 to 2448/Bang/2018 Page 2 of 9 2.1 The assessee is a society engaged in the running of educational institutions providing education in the field of nursing. Pursuant to survey action under section 133A of the Income Tax Act, 1961 (in short ‘the Act’) conducted at the assessee’s premises on 23.01.2013, the Assessing Officer (AO), on examination of the assessee’s accounts, was of the view that the assessee by virtue of non-deduction of the whole or part of tax at source on payments which fall within the ambit of TDS provisions under section 192, 194I, 194C and 194J of the Act was to be held as “an assessee in default” for Assessment Years 2011-12 to 2013-14 and accordingly passed orders under section 201(1) and 201(1A) of the Act dated 23.03.2013. While passing these orders, the AO recorded therein that penalty proceedings were being separately taken up.
2.2 Subsequently, the Addl. CIT, TDS Range, Hubli, passed separate orders dated 26.07.2016 under section 271C of the Act levying penalty thereunder on the assessee for Assessment Years 2011-12 to 2013-14. On appeal, the CIT(A), Davangere, dismissed the assessee’s appeals vide order dated 12.06.2018; thereby upholding the levy of penalty by the AO on the assessee for the three Assessment Years 2011-12 to 2013-14.
Aggrieved by the combined orders of the CIT(A), Davangere, dated 12.06.2018, upholding the levy of interest under section 271C of the Act on the assessee for Assessment Years 2011-12 to 2013-14, the assessee has raised identical grounds of appeal for the aforesaid three Assessment Years. We therefore only extract the grounds of appeal raised for Assessment Year 2011-12 hereunder:- 1. The Order of the learned CIT (A) is opposed to law, facts and circumstances of the case. 2. The Order is passed in haste, without providing sufficient and reasonable opportunity of being heard.
ITA Nos.2446 to 2448/Bang/2018 Page 3 of 9 3. The Order is passed against the principles of natural justice and thus liable to be quashed. 4. The Order of the Ld. AO is barred by limitation and is liable to be quashed. 5. The Ld. AO erred in levying penalty under section 271C of the Act for non- deduction of tax at source and the Ld. CIT(A) erred in confirming the same. 6. The Ld. AO ought to have appreciated that there was reasonable cause for non-deduction of tax at source and accordingly erred in not complying with the provisions of section 273B of the Act.
Ground No.2
4.1.1 At the outset, the learned AR for the assessee urged ground No.2 raised in all the three appeals for Assessment Years 2011-12 to 2013-14 (supra). In this ground, the assessee contends that the impugned orders dated 26.07.2016, levying penalty under section 271C of the Act, are barred by limitation. The learned AR submits that the orders under section 201(1) and 201(1A) of the Act for the Assessment Years 2011-12 to 2013-14 were passed vide separate orders dated 22.03.2013; and wherein the AO had stated that penalty proceedings are being taken up / referred to the Addl. CIT. It is submitted that no appeals were filed against these orders by the assessee. It is further submitted that the penalty levied on the assessee under section 271C of the Act; with reference to the aforesaid orders under section 201(1) and 201(1a) of the Act dated 22.03.2013 for Assessment Years 2011-12 to 2013-14; were passed on 26.07.2016; more than 3 calendar years later.
4.1.2 According to the learned AR, as per the relevant provisions of section 275 of the Act, which deals with “Bar of limitation for imposing penalties”, since the assessee did not file appeals against the orders under sections 201(1) and 201(1A) of the Act dated 22.03.2013 and the assessee’s case is not
ITA Nos.2446 to 2448/Bang/2018 Page 4 of 9 one of revision under section 263 or 264 of the Act, the provisions of clauses (a) and (b) to sub section 1 of section 275 of the Act would not be attracted. It is contended by the learned AR that in these factual circumstances, it is the provisions of clause (c) of subsection 1 of section 275 that is applicable in the case on hand. Therefore, the AO ought to have passed the order levying penalty under section 271C of the Act, either before 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, or six months from the end of the month in which the action for imposition of penalty is initiated, whichever period expires later. The learned AR submits that since the proceedings by which the AO stated by his orders under section 201(1) and 201(1A) of the Act dated 22.03.2013 that penalty proceedings were being referred separately to the Addl. CIT, as per the provisions of section 275(1)(c) of the Act, the AO ought to have passed the orders under section 271C of the Act for all three Assessment Years 2011-12 to 2013-14 on or before 30.09.2013; and since these orders have actually been passed about 3 years later; i.e., on 26.07.2016, the same are barred by limitation and are required to be quashed.
4.2 Per contra, the learned DR supported the orders of the authorities below. Referring to the impugned orders of the AO levying penalty under section 271C of the Act dated 26.07.2016, the learned DR submitted that since the AO has mentioned therein that the penalty proceedings were initiated vide issue of notice under section 271C r.w.s. 274 of the Act dated 22.01.2016, the impugned orders were passed well within time; i.e., being within time frame of 6 months from the initiation of penalty proceedings and therefore were not barred by limitation as per the provisions of section 275(1)(c) of the Act.
4.3.1 We have considered the rival contentions and perused the material on record. The facts not in dispute are that the AO passed orders under section
ITA Nos.2446 to 2448/Bang/2018 Page 5 of 9 201(1) and 201(1A) of the Act for Assessment Years 2011-12 to 2013-14 vide orders dated 22.03.2013 wherein it has been stated that penalty proceedings, in the context of the above defaults, are being referred to the Addl. / Joint Commissioner of Income-Tax separately. It is also not disputed by Revenue that the assessee had not filed appeals against the above orders dated 22.03.2013 before appellate authorities.
4.3.2 As per the records before us, the AO has passed separate orders dated 26.07.2016 levying penalty under section 271C of the Act on the assessee in the case on hand for Assessment Years 2011-12 to 2013-14. According to the learned AR, as per section 275 of the Act dealing with ‘Bar of limitation for imposing penalties’, the assessee case; since it has not filed any appeal against the orders under sections 201(1) and 201(1A) of the Act dated 22.03.2013 and the orders are not part of revision proceedings; would fall within the ambit of the provisions of clause (c) of sub section (1) of section 275 of the Act and therefore the orders levying penalty under section 271C of the Act ought to have been passed on or before 30.09.2013. However, since the impugned orders under section 271C of the Act have been passed, almost 3 years later; on 26.07.2016, the same are barred by limitation. In this regard, it is necessary to extract the provisions of section 275(1)(c) of the Act which reads as under:-
“275. 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 Deputy Commissioner (Appeals) or 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 six months from the end of the month in which the order of 6b[the Deputy Commissioner (Appeals) or] the Commissioner (Appeals) or, as the case may be, the Appellate
ITA Nos.2446 to 2448/Bang/2018 Page 6 of 9 Tribunal is received by the Chief Commissioner or Commissioner whichever period expires later; (b) in a case where the relevant assessment or other order is the subject- matter of revision under section 263, 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. ]”
4.3.3 From a plain reading of section 275(1)(c) of the Act (supra), it is laid down that in a case, as the present one, no order imposing penalty shall be passed ‘after 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 six months from the end of the month in which action for imposition of penalty is initiated’. It is a settled principle of law that penalty proceedings should be initiated during the pendency of assessment.
4.3.4 We are unable to accept the proposition put forth by the learned DR that; even though the proceedings under section 201(1) of the Act were completed by orders dated 22.03.2013; since the notice for penalty proceedings was only by notice dated 22.01.2016, the imposition of penalty under section 271C of the Act vide the impugned orders dated 26.07.2016 were not barred by limitation. In coming to this view, we drew support from the decision of the ITAT Delhi Bench in the case of ITO Vs. Suresh Kumar in ITA No.1861/Del/2017 wherein the Tribunal in similar circumstances, when dealing with the matter of levy of penalty under section 271D of the Act, held as under:-
“After going through the aforesaid finding of the Ld. CIT(A), I find that in this case assessment order was passed on 30.11.2011
ITA Nos.2446 to 2448/Bang/2018 Page 7 of 9 and the AO has not issued any notice to the assessee u/s. 271D of the 1. T. Act, 1961 during the pendency of the assessment proceedings. The show cause notice was issued only on 28.04.2015. therefore, the penalty in dispute was rightly quashed by the Ld CIT(A) by respectfully following the order of the ITAT, Mumbai Bench in the case of Keshu Ramsay vs JCIT reported at 5 SOT 9 wherein, it has been held that "Where no proceedings relevant to that assessment year is pending when penalty notice was issued, is bad in law. In view of above the penalty notice issued after completion of assessment proceedings may be held as illegal by your good self”.
In coming to this view, the Delhi Bench of the ITAT, in the aforesaid case of Suresh Kumar (supra), followed the decision of the ITAT – Mumbai Bench in the case of Keshu Ramsay Vs. JCIT 5 SOT 9 (Mum. Tribunal).
4.3.5 In the case on hand, the proceedings as contemplated under section 275(1)(c) of the Act, are the orders under section 201(1) and 201(1A) of the Act dated 22.03.2013 for Assessment Year 2011-12 to 2012-13 and we find that action for penalty was contemplated therein by the AO against the assessee under section 271C of the Act. That a show cause notice was only issued on 22.01.2016; about 3 years later would not help Revenue case as the same is issued much after the completion of TDS proceedings under section 201(1) of the Act and not during the pendency of these proceedings. In this regard, the Hon’ble Delhi High Court in the case of PCIT Vs. JKD Capital and Finlease Ltd., (2015) 378 ITR 614 (Delhi) observed at para 11 thereof as under:-
ITA Nos.2446 to 2448/Bang/2018 Page 8 of 9
4.3.6 Therefore, in our considered view, it is futile to contend that the date of initiation of proceedings is the date the Addl. CIT issued the show cause notice i.e., 22.01.2016. In that view of the matter, respectfully following the decision of the Hon’ble Delhi High Court in the case of PCIT Vs. JKD Capital and Finlease Ltd., (2015) 378 ITR 614 (Delhi) and of the ITAT Delhi Bench in the case of ITO Vs. Suresh Kumar in ITA No.1801/Del/2017, which are on similar facts on the issue of levy of penalty under section 271E / 271D of the Act, we are of the view and hold that the impugned orders levying penalty under section 271C of the Act dated 26.07.2016 for Assessment Years 2011-12 to 2013-14 are barred by limitation since the impugned penalty orders ought to have been passed by 30.09.2013, but were passed on 26.07.2016 and are therefore liable to be quashed. The AO is accordingly directed. Consequently, ground No.2 of assessee’s appeals for Assessment Years 2011-12 to 2013-14 are allowed.
In view of our decision in respect of ground No.2 (supra), quashing the orders levying penalty under section 271C of the Act, the other ground Nos.1 and 3 to 6 raised in assessee’s appeals for Assessment Year 2011-12 to 2013-14 are rendered academic and do not call for any adjudication.
ITA Nos.2446 to 2448/Bang/2018 Page 9 of 9
In the result, the assessee’s appeals for Assessment Years 2011-12 to 2013-14 are allowed.
Order pronounced in the open court on this 14th day of August, 2019.
Sd/- Sd/- (N. V. VASUDEVAN) (JASON P BOAZ) Vice President Accountant Member Bangalore. Dated: 14th August, 2019. /NS/*
Copy to: 1. Appellants 2. Respondent 3. CIT 5. DR 6. Guard file 4. CIT(A) By order
Assistant Registrar, ITAT, Bangalore.