SUPARSHWA CONSTRUCTIONS,MUMBAI vs. ADDL CIT RG 6, MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER; 1. These two appeals by assessee are directed against the order of ld. CIT(A)- 38, Mumbai dated 26.02.2014 for Assessment Year 2002-03 & 2005-06. The assessee has raised certain common ground of appeal for both the

Assessment Years, facts for both the years are almost identical except variation of figures, therefore, with the consent of parties both the appeals were clubbed, heard and are decided by a consolidated order for the sake of

convenience and brevity. For appreciation of fact for Assessment Year 2002-03 are taken as a lead case. The assessee has raised the following grounds of appeal: The Learned CIT(A) erred on facts, in law and under the circumstances in:-

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a) confirming the penalty levied u/s 271D and u/s 271E of Income Tax Act of for the AY 2002-2003 u/s.271D of Rs.6,50,000/- b) failing to comprehend that the transactions between the parties resulting into receipt or payment in cash are not transactions of loans or deposit and therefore the provisions of Sec.269SS & 269T are not attracted. c) failing to comprehend that provisions of Sec.269SS & 269T were introduced in the Income Tax Act for specific purposes and when such are not the intentions than the provisions of Sec.273B which speaks of reasonable clause for not levying penalty has to be liberally construed and for technical breach, if any the appellant cannot be visited with such huge penalty. d) that the prevalence of reasonable cause cannot be overlooked by applying hyper technical grounds and penalty cannot be levied when the transactions are found to be genuine leading to no other additions on that account under the Income Tax Act, 1961. e) that the various transactions entered into by the appellant which has given rise to penalty u/s. 2710 & 271 E of Income Tax Act are not at all disbelieved or held as non-genuine. f) genuine business transaction entered by applicant with associate concerns having reasonable cause does not fall within the ambit of provisions of Section 269SS / 269T of Income Tax Act. The appellant submits that the CIT(A) has levied the penalty on hyper technical grounds and the transaction has not been disbelieved and that due to circumstances beyond the control of the appellant, it has to enter into such transaction. In view thereof, the penalty levied u/s 271D of Rs.6,50,000/- for AY 2002-2003 is required to be deleted. 2. Further, vide application dated 24.06.2017, the assessee has raised the

following additional grounds of appeal:

ADDITIONAL GROUND OF APPEAL 1. In the facts and the circumstances of the case and in law, the penalty order framed by the Addl. Commissioner of Income tax, Central Range - 6, Mumbai, ["the A.O."], under section 271D & 271E of the Income tax Act, 1961 ["the Act"], is bad, illegal, void and without jurisdiction as the same being time barred. 2

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business of construction and belongs to Sanghvi Group. A search and

seizure action was conducted at Sanghvi Group on 30.11.2007. For the year

under consideration, the assessment was completed under section 143(3)

r.w.s. 153A on 24.12.2009. The Assessing Officer while passing the

assessment order made disallowance on account of advertisement expenses

of Rs. 32,000/-. During the assessment, it was noted that assessee has

availed unsecured loan of Rs. 44,39,000/- from Sanghvi Enterprises. It was

further noted by Assessing Officer that assessee has taken loan in cash on

the following dates:

Sr.No. Date Amount (Rs.) 1 16.05.2001 1,00,000 2 15.06.2001 1,00,000 3 23.06.2001 50,000 4 05.07.2001 1,00,000 5 15.07.2001 1,00,000 6 01.08.2001 1,00,000 7 05.08.2001 1,00,000

provisions of section 279SS, therefore, liable for penalty under section

271D. The Assessing Officer made reference to the Additional

Commissioner of Income tax (Addl. C.I.T) – Central Circle-42, for taking

necessary action. The ld. Addl. CIT issued show-cause notice to the

assessee as to why the penalty under section 271D should not be imposed.

The assessee filed its reply dated 25.10.2010 and contended that the reply

furnished before DCIT-CC-41/Assessing Officer may be considered as a 3

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reply to the notice. In the reply dated 25.10.2010, the assessee stated that

the assessee-firm is in the business of builder and developer. There are

seven transactions on cash loan from Sanghvi Enterprises as mentioned in

the show-cause notice. The assessee has received cash loan from its group

concern, which are also involved in the same business, having common

partner and management, common Accountants and common

Administrative functions. The cash loan was taken due to necessity arising

by Firm on particular date due to shortage of cash and to bridge the gap of

said shortage and making payment on daily expenses. All the transactions

were made out of business exigencies; therefore, there was bonafide cause

to take such loan. The assessee also relied on various case laws and stated

that penalty proceeding may be dropped. 5. The reply of assessee was not accepted by Assessing Officer holding that

genuineness of transaction is of no consequence. A non-genuine credit in

the books of account is hit by section 68 of Income-tax Act. Section

269SS/T were inserted to curve the circulation of black money and to curve

the tax evasion. The Assessing Officer levied the penalty of equal of the

amount of loan availed by the assessee vide its order dated 28.09.2012

passed under section 271D. On appeal before the ld. CIT(A), the action of

Assessing Officer was confirmed. Thus, further aggrieved by the order of

ld. CIT(A), the assessee has filed the present appeal before us.

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the assessee and ld. Departmental Representative (DR) for the revenue and

perused the material available on record. We have also deliberated on

various case laws relied by lower authorities and ld. Representative of the

parties. In support of additional ground of appeal, the ld. AR of the

assessee submits that she has raised additional ground of appeal which is

purely legal in nature and goes to the root of the jurisdiction. The fact

related to raising the additional ground of appeal are already on record and

does not require any further fact or evidence to bring on record. The

additional grounds of appeal are emanating from the record of lower

authorities. The ld. AR of the assessee further submits that penalty order

for both the Assessment Years are that illegal and without jurisdiction

being barred by limitation prescribed under section 275 of Income-tax Act.

The ld. AR of the assessee further submits that opposite party would not

suffer any prejudice, if they have merit in their case. 7. On the other hand, the ld. DR for the revenue submits that the penalty order

was passed within prescribed period of limitation. The ld. DR further

submits that no such ground of appeal was raised by First Appellate

Authority (FAA). 8. We have considered the submission of both the parties, considering the fact

that the additional ground of appeal raised by assessee is purely legal in

nature and does not require to bring any additional fact or evidence on 5

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record. All facts from adjudication of the additional grounds of appeal are

emanating from the order of the lower authorities. Therefore, we admit the

additional ground of appeal for adjudication. The objection of ld. DR for

the revenue that no such additional ground was raised before FAA has no

force as legal issue can be raised which goes to the root of the case can be

raised at any stage, therefore, the additional ground of appeal raised by

assessee is allowed. 9. In support of additional grounds of appeal the ld. AR of the assessee

submits that assessment order under section 143(3) r.w.s 153A was passed

on 24.12.2009. The penalty proceeding was initiated by Addl. CIT in 2010.

The penalty order was passed on 28.09.2012, which is beyond the

prescribed period of limitation as the penalty order cannot be passed after

expiry of Financial Year in which penalty proceedings were initiated or six

month from the end of the month in which action of imposition of penalty

is initiated whichever period expired later as prescribed under section

275(1)(c) of the Act. The ld. AR further submits that though the assessee

sought permission for inspection of assessment order as well as penalty

proceeding record, however, despite repeated persuasion and efforts, the

Assessing Officer neither allowed the inspection of the record nor provided

the date of initiation of penalty proceeding. The ld. AR submits that

admittedly the penalty proceeding were initiated by Addl. CIT before

25.10.2010 as the assessee filed its reply to the show-cause notice on 6

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25.10.2010, which this fact is duly recorded by Addl. CIT in para-3 of its

order. The penalty order was passed on 28.09.2012 which is beyond the

prescribed period of limitation as prescribed under section 275(1)(c), therefore, the order passed under section 271D/E dated 28.09.2012 is

beyond the prescribed period of limitation. In support of her submission,

the ld. AR of the assessee relied upon the following decisions: 1. Pr.CIT v. Mahesh Wood Products P. Ltd. [(2017) 394 ITR 312 (Delhi)]. 2. Pr.CIT v JKD Capital & Finlease Ltd [(2015) 378 ITR 614 (Delhi)]. 3. CIT v. Jitendra Singh Rathore [(2013) 352 ITR 327 (Rajasthan)]. 4. CIT v. Narayani & Song (P.) Ltd. [(2016) 73 taxmann.com 21

(Calcutta)]. 5. Lodha Builders P. Ltd. v. ACIT [2015] 34 ITR(T) 157 (Mum. Trib.). 6. M.D.S University v. ACIT [(2014) 49 taxmann.com 297 (Jaipur-Trib.)]. 7. ACIT v. Smt. Meetu Agarwal [(2015) 42 ITR(T) 520 (Lucknow-Trib.). 10. In alternative proposition, the ld. AR of the assessee submits that penalty

cannot be levied under section 271D and or section 271E, if the assessee

has shown reasonable cause as provided in section 273B of the Act. In

support of her submission, the ld. AR relied upon the following decisions: 1. CIT v. Sunil Kumar Goeal [(2009) 315 ITR 163 (Punj. & Har.)]. 2. CIT v. Maheshwari Nirman Udyog [(2008) 302 ITR 201 (Raj.)] 3. CIT v/s Sree Krishna Promoters & Builders – [2011] 16 taxmann.com

138 (Karnataka). 7

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through the orders of authorities below. During the hearing of these appeals

on 09.01.2018, the ld. DR for the revenue was directed to call the record of

assessment to ascertain as to why the penalty proceeding under section

271B was initiated. However, despite the repeated direction of the bench,

the ld. DR failed to bring the assessment record. The assessment record

was required to ascertain the date of reference for levying penalty under

section 271D and or section 271E of the Act and the issuance of show-

cause notice for levying the penalty under section 271D and or section

271E of the Act. The ld. DR informed that he has written a number of

letters to the Assessing Officer. However, no response is received from

Assessing Officer. Since the revenue failed to comply with the direction of

the bench, the bench left no option except to proceed on the basis of

material available on record. 12. The Assessment Order under section 143 r.w.s. 153A was completed on

24.12.2009. The penalty order passed under section 271D dated 28.09.2012

reveals that a show-cause notice was issued by Addl. CIT as recorded in

para-3 of his order. However, no date of show-cause notice is recorded in

the order. It is further recorded in para-3 of the order that assessee attended

the proceeding and filed their submission on 25.10.2010 be treated as reply 8

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of the notice. Perusal of assessment order dated 24.12.2009 reveals that no

recommendation for initiation of penalty under section 271D was recorded

in the assessment order. We are conscious of the fact that the Assessing

Officer has no power to issue the notice under section 271D or section

271E, therefore, the Assessing Officer has to refer the matter for initiation

of penalty to Joint Commissioner. Careful perusal of penalty order passed

under section 271D dated 28.09.2012 reveals that it was initiated before

25.10.2010. Admittedly, the order is not passed with expiry of Financial

Year when it was initiated or six month from the end of month when

imposition of penalty was initiated. The Hon’ble Delhi High Court in PCIT

vs. J.K.D Capital & Finance Ltd. (supra) held that where penalty order

under section 271E was passed after expiry of financial year in which

quantum proceedings were completed and also beyond six month from

month in which penalty proceedings were initiated, same was barred by

limitation provided under section 275(1)(c). Further, the Mumbai Tribunal

in Lodha Builders P. Ltd. vs. ACIT (supra) held that in case of levy of

penalty under section 271D/271E limitation period would be counted from

date of assessment order with Assessing Officer's decision to make referral

to his Addl. CIT, who is authorized to impose penalty and not from date of

issue of show cause notice by Addl. CIT. We have also noted that the co-

ordinate bench of Tribunal in assessee’s group case in Sanghvi Premises

Pvt. Ltd. vs. Addl. CIT in ITA No. 2397/Mum/2014 dated 27.08.2018 held 9

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that the similar penalty order passed by Assessing Officer/Addl.CIT on

28.09.2012 as barred by limitation. 13. Now coming to the fact of the present case, as we have already noted that

assessment under section 143(3) r.w.s. 153A was completed on 24.12.2009

and the penalty under section 271D was levied by Addl. CIT on

28.09.2012. The revenue has failed to bring any material on record that the

penalty was initiated subsequent to the assessment order dated 24.12.2009

or that the penalty order passed under section 271D was passed within

prescribed period as prescribed under section 275(1)(c) of the Act from the

date of initiation of penalty. Therefore, the penalty order is passed beyond

the prescribed period of limitation and the same is liable to be set-aside. No

contrary fact, evidence or law is brought to our notice to take other view. In

the result, additional ground of appeal raised by assessee is allowed. 14. As we have allowed the additional ground of appeal, therefore, the

discussion on alternative submission of ld. AR of the assessee that assessee

has shown sufficient cause within the meaning of section 273B and on

original ground of appeal have become academic. 15. In the result, appeal of the assessee is allowed.

ITA No. 3084/Mum/2014 for A.Y. 2005-06 16. The assessee raised identical grounds of appeal. The facts for the year

under consideration are similar except that the penalty was levied by

Assessing Officer under section 271E for repayment of loan to Sanghvi 10

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Premises in cash. Considering our decision on similar fact for Assessment

Year 2002-03, the appeal for the year under consideration is also allowed

with similar direction. 17. In the result, appeal of the assessee is also allowed.

Order pronounced in the open court on 30/04/2019.

Sd/- Sd/- N.K. PRADHAN, PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Date: 30.04.2019 SK Copy of the Order forwarded to : 1. Assessee 2. Respondent 3. The concerned CIT(A) 4. The concerned CIT 5. DR “E” Bench, ITAT, Mumbai 6. Guard File

BY ORDER,

Dy./Asst. Registrar ITAT, Mumbai