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Income Tax Appellate Tribunal, DELHI BENCH “D”, NEW DELHI
Before: SH. G.D. AGRAWAL & SH. SUDHANSHU SRIVASTAVA
1929/Del/2016 is preferred against order dated 14.01.2016 passed by the Ld. CIT (Appeals), Meerut for assessment year 2004-05 wherein, vide the impugned order, the Ld. CIT (A) has deleted penalty of Rs. 12,55,000/- imposed u/s 271D of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) whereas penalty of Rs. 12,55,000/- imposed u/s 271E of the Act for assessment year 2004-05. Since both the appeals arise out of an identical issue, they were heard together and they are being disposed of through this common order for the sake of convenience.
The brief facts of the case are that the assessee firm had filed its return of income for assessment year 2005-06 declaring a taxable income of Rs. 75,820/-. During the assessment proceedings for assessment year 2005-06 the AO noticed that the assessee firm had accepted loan of Rs. 5 lac from Sri Mohd. Yonus in assessment year 2002-03 and a loan of Rs. 12,55,000/- during assessment year 2004-05 from Sri Mohd. Farman Malik. As per the penalty order passed for assessment year 2005-06, the AO held that both the loans totaling to Rs. 17,55,000/- were accepted in cash and were transferred to the capital account of the partner of the assessee firm and the same were repaid in cash. In the penalty order for assessment year 2005-06, penalty of Rs. 12,55,000/- was levied each u/s 271D and 271E of the Act for violation of sections 269SS and 269T of the Act. deleted the penalties. The department approached the ITAT against the deletion of the penalties and ITAT Delhi Bench dismissed the revenue’s appeals by holding that since the impugned loans pertained to other assessment years and not assessment year 2005- 06, penalties could not have been imposed in assessment year 2005-06.
2.2 Subsequent to the order of the ITAT, penalty proceedings were initiated for assessment years 2004-05 and 2002-03 vide notices dated 06.08.2014 and, thereafter, penalty of Rs. 12,55,000/- was imposed in assessment year 2004-05 for accepting the loan in cash by violating the provisions of section 269SS of the Act. Another penalty of Rs. 12,55,000/- was also imposed in assessment year 2004-05 for repayment of loan in cash violating the provisions of section 269T of the Act.
2.3 The assessee again approached the Ld. CIT (A) against the imposition of these two penalties and the Ld. CIT (A) deleted both the penalties by holding that these penalties were barred by limitation. cancellation of the penalties by the Ld. CIT (A) and has raised the following grounds:-
ITA 1929/Del/2016: 1- Whether the Ld. Commissioner of Income tax (Appeals) has erred in law and fact in deleting the Penalty under section 271D of the I.T. Act, 1961, without taking into consideration the fact that said penalty is not barred by limitation as there is no restriction in the Act that penalty under section 271D for violation of section 269SS has to be initiated during the course of assessment proceedings only. 2- Whether the Ld. Commissioner of Income Tax (Appeals) has erred in law and fact in deleting the penalty imposed upon the assessee under section 271D of the Act by treating it as barred by limitation ignoring the fact that the limitation for completion of penalty proceedings, as provided for in section 275(1 )(c) of the Act, shall commence from the date of issue of show cause notice by the competent authority. 3- Whether the Ld. Commissioner of Income Tax (Appeals) may be set aside and that of the A.O be restored.”
5 1930/Del/2016 (Pearson Chemicals Corporation) 1- Whether the Ld. Commissioner of Income tax (Appeals) has erred in law and fact in deleting the Penalty under section 271 E of the I.T. Act, 1961, without taking into consideration the fact that said penalty is not barred by limitation as there is no restriction in the Act that penalty under section 27IE for violation of section 269T has to be initiated during the course of assessment proceedings only. 2- Whether the Ld. Commissioner of Income Tax (Appeals) has erred in law and fact in deleting the penalty imposed upon the assessee under section 27IE of the Act by treating it as barred by limitation ignoring the fact that the limitation for completion of penalty proceedings, as provided for in section 275(l)(c) of the Act, shall commence from the date of issue of show cause notice by the competent authority. 3- Whether the Ld. Commissioner of Income Tax (Appeals) may be set aside and that of the A.O be restored.
The Ld. Sr. Departmental Representative submitted that the Ld. CIT (A) had cancelled the penalty orders by erroneously holding that there was a time limit for initiation of penalty proceedings u/s 271D and 271E of the Act. The Ld. Sr. Departmental Representative further submitted that there is no restriction in the Statute that penalties u/s 271D and 271E have to be necessarily initiated only such an interpretation would render the provisions ineffective.
Reference was also made to an order of the Special Bench of ITAT, Chandigarh Bench in the case of Diwan Chand Amrit Lal reported in 98 ITD 200 (Chandigarh) (SB) wherein it was held that the object behind incorporation of sections 269SS and 269T was to counter attempts to circulate black money and if it was to be accepted that penalty proceedings are necessarily to be initiated in the course of assessment proceedings, then the object behind incorporation of Sections 269SS and 269T will lose its intent. The Ld. Sr.
Departmental Representative submitted that the impugned orders needed to be set aside and the penalty orders passed by the AO restored.
In response, the Ld. Authorised Representative placed extensive reliance on the findings of the Ld. CIT (A) and vehemently argued that the impugned penalties had rightly been deleted by the Ld. CIT (A). It was further submitted that the orders of the Ld. CIT (A) be upheld. the material on record. A perusal of the original assessment order dated 05.10.2007 for the assessment year 2005-06 shows that there is no mention about the acceptance of loan/repayment of loan by the assessee in contravention of provision of section 269SS of the Act. However, in the penalty order dated 19.5.2011, there is specific mention about the receipt of amount of Rs. 5 lac and repayment of amount of Rs. 5 lac in assessment year 2002-03.
Similarly, there is specific mention about the receipt of amount of Rs. 12,55,000/- and repayment of amount of Rs.l2,55,000/-in assessment year 2004-05. It is also undisputed that the Additional CIT imposed penalty under both the sections i.e. 27ID and 27IE of the Act for the A.Y. 2005-06 on total amount of Rs. 17,55,000/- (Rs. 5,00,000 + Rs. 12,55,000/-). From the records, it is undisputedly established that the Assessing officer was very well aware about the receipt of alleged loan in cash during the Assessment Years 2004-05 and 2002-03 and the repayment of the loan and but had wrongly initiated the earlier penalty proceedings for A.Y. 2005-06. The Assessment order was passed on 5.10.2007 and the penalties were initiated by the then Additional CIT on thus, the imposition of the penalties in the first round was time- barred. The second round of penalty proceedings was initiated on 06/08/2014 after the dismissal of the department’s appeals by the ITAT on the ground that the penalties had been imposed in a wrong assessment year. A perusal of the order of the ITAT dismissing the department’s appeals in and 5663/Del/2012 shows that while dismissing the appeals, the Bench observed that the penalties, if at all imposable, could have been imposed on account of the facts for the year under consideration and that the Statute does not permit the AO to levy penalty in a particular assessment year on facts which are relatable to some other assessment year. It is also seen that while dismissing the department’s appeals, there are no directions from the ITAT that penalty proceedings should be initiated for the assessment years in which the impugned transactions had taken place. Thus, it is very much evident that the present penalty orders were passed beyond the period of limitation and as such the same are not sustainable. A perusal of the orders of the Ld. CIT (A) also shows that the Ld. CIT (A) has reached the conclusion after examining the entire factual matrix of the case and Departmental Representative was also unable to point out any factual inaccuracy in the findings as recorded by the Ld. CIT (A) in the impugned orders. Therefore, in view of the facts and the findings with regard to the factual matrix of the case, as recorded by the Ld. CIT (A, which remain uncontroverted before us, we find no reason to interfere with the findings of the Ld. CIT (A) in both the appeals before us. We dismiss the grounds raised by the department in both the appeals.
In the final result, both the appeals of the department stand dismissed.
(Order pronounced in the open court on 18th July, 2018).