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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI C.N. PRASAD & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 29.10.2012 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2005-06.
The only issue challenged by the assessee in the various grounds raised
is against the confirmation of penalty under section 271A of Rs.21,42,895/-. The assessee has also taken additional ground vide letter dated 01.11.2017 which is reproduced as under:
1. In the facts and the circumstances of the case and in law, the penalty order framed by the Additional 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. The Appellant craves leave to add, alter, delete or modify all or any the above ground at the time of hearing.”
By way of this additional ground, the assessee has challenged the jurisdiction of the AO to levy penalty as the same is illegal and without jurisdiction as being time barred under section 275 of the Act. First we would like to deal with the additional ground.
The Ld. Counsel of the assessee submitted that the issue of jurisdiction is arising from the assessment record and the order of AO passed under section 271D and 271A of the Act dated 28.09.2012 and therefore deserved to be admitted. The Ld. A.R. submitted that this being a legal and technical issue and the assessee is within its jurisdiction to raise the same before this Hon’ble forum.
The Ld. D.R., on the other hand, opposed the admission of additional ground on the ground that the same was not taken up before the first appellate authority and therefore should not be admitted.
Having heard both the parties and perusing the relevant material on record, we find that the legal issue raised by the assessee challenging the jurisdiction of AO to levy penalty is arising out of the assessment record before us and therefore deserves to be admitted. Accordingly, we admit the same for adjudication in the ensuing paras.
3 M/s. Sanghvi Premises Pvt. Ltd.
The facts in brief are that the assessee has borrowed loans from various parties in cash to the tune of Rs.25,36,348/- which were reported by the tax auditor in Form 3CD. The AO came to the conclusion that the said loans were accepted in violation of provisions of section 269SS of the Act and are liable for penalty under section 271D of the Act. Similarly, the AO observed from Form 3CD that assessee has repaid certain loans in cash to the tune of Rs.21,42,895/- and the same are in violation of provisions of section 269T of the Act and are liable for penalty under section 271E of the Act. The AO ultimately imposed the penalty of Rs.25,36,348/- under section 271D and Rs.21,42,895/- under section 271E of the Act vide two different orders of even dated 28.09.2012. The penalty was initiated in 2010 whereas the order imposing penalty was passed on 28.09.2012. The Ld. A.R. vehemently submitted before us that since the penalty was initiated in 2010 and order imposing penalty was passed on 28.09.2012 and therefore the same is in contravention of provisions of section 275(1)(c) of the Act and thus the order passed by the AO is bad in law and void ab initio and so is the order of the Ld. CIT(A).The ld AR prayed that the order of imposing penalties under section 271D and 271E should be quashed.
The Ld. D.R., on the other hand, submitted that the issue of time barred was never raised before the Ld. CIT(A) and therefore should not be allowed to be raked up at this stage.
We have heard the rival submissions of both the parties and perused the material on record including the decisions
4 M/s. Sanghvi Premises Pvt. Ltd. cited by the Ld. A.R. The undisputed facts are that the penalties proceeding were initiated in 2010 and order imposing penalty under section 271D and 271E of the Act were passed on 28.09.2012 after a gap of almost two years. The contentions of the Ld. A.R. is that the orders imposing penalty is barred by limitations and thus void ab-initio and passed without any jurisdiction under the Act. We would like to reproduce the provisions of section 275(1)(c) of the Act for the purpose of better understanding of the issue at hand which is reproduced as under: “271(1)(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.”
It is clear from the provisions of section as reproduced above that no order imposing penalty under this chapter shall be passed after the expiry of the financial year in which the proceeding, in the course of which the action for imposition of penalty has been initiated or six months from the end of the month in which the action for imposition of penalty is initiated whichever is expire later. In the present case, the assessment was completed much before whereas the penalty was initiated in 2010. The orders imposing penalty should have been passed within six months from the end of the month in which the proceedings imposing penalties were initiated however the penalty order was finally passed on 28.09.2012 which is in clear violation of the provision of section 275(1)(c) of the Act. In the case of Pr. CIT vs. Mahesh Wood Products P. Ltd. (2017) 82 taxmann.com 39 (Delhi) the Hon’ble Delhi High 5 M/s. Sanghvi Premises Pvt. Ltd. Court has decided the identical issue in favour of the assessee. The relevant para of the said decision is quoted as under: “9. However, this question came up for consideration in PCIT v. JKD Capital & Finlease Ltd.(supra). The date on which the AO recommended the initiation of penalty proceedings was taken to be the relevant date as far as Section 275(1)(c) was concerned. There was no explanation for the delay of nearly five years in the ACIT acting on the said recommendation. The Court held that the starting point would be the 'initiation' of penalty proceedings. Given the scheme of Section 275(1)(c) it would be the date on which the AO wrote a letter to the ACIT recommending the issuance of the SCN. While it is true that the ACIT had the discretion whether or not to issue the SCN, if he did decide to issue a SCN, the limitation would begin to run from the date of letter of the AO recommending 'initiation' of the penalty proceedings.”
In the case of Pr. CIT vs. JKD Capital & Finlease Ltd. (2017) 81 taxmann.com 80 (Delhi) the Hon’ble Delhi High Court has held that where the penalty order is under section 271(1)(c) and is passed after the 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 271(1)(c). After considering the facts of the assessee’s case in the light of the provisions of the Act and the ratio laid down by the Hon’ble High Courts as discussed hereinabove we are of the view that penalty imposed by the Additional CIT is barred by limitation and therefore without jurisdiction. Accordingly, we quash the order imposing penalty under section 271D and 271E of the Act.
In the result, appeal of the assessee is allowed. Order pronounced in the open court on 27.08.2018.