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Income Tax Appellate Tribunal, “C” BENCH : KOLKATA
Before: Hon’ble Shri Aby. T. Varkey, JM & Shri M.Balaganesh, AM ]
IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH : KOLKATA [Before Hon’ble Shri Aby. T. Varkey, JM & Shri M.Balaganesh, AM ] I.T.A No. 1484/Kol/2016 Assessment Year : 2008-09 ITO, Ward-29(3), Kolkata -vs- M/s Auto Care Centre [PAN: AAHFA 8997 R] (Appellant) (Respondent)
For the Appellant : Shri Saurabh Kumar, Addl. CIT Sr. DR For the Respondent : Shri Miraj D Shah, AR Date of Hearing : 14.05.2018 Date of Pronouncement : 23.05.2018 ORDER Per M.Balaganesh, AM
This is an appeal filed by the revenue against the order of Learned Commissioner of Income Tax (Appeals) – 8, Kolkata [in short the ld CITA] in Appeal No. 98/2014-15 dated 19.4.2016 for the Asst Year 2008-09 deleting the penalty levied under section 271E of the Income-tax Act, 1961 (hereinafter referred to as the "Act") by the Learned Joint Commissioner of Income Tax, Range 29, Kolkata [in short the ld AO].
At the outset, there is a delay of 3 days in filing of appeal by the revenue before us which is supported by the condonation petiton and on going through the reasons stated therein, we are inclined to condone the delay and admit the appeal of the revenue for adjudication.
2 ITA No.1484/Kol/2016 M/s Auto Care Centre A.Yr.2008-09 3. The only issue to be decided in this appeal is as to whether the ld CITA was justified in deleting the penalty levied u/s 271E of the Act in the facts and circumstances of the case.
The brief facts of this issue are that the assessee is a partnership firm and had filed its return for the Asst Year 2008-09 on 27.9.2008 declaring total income of Rs 6,854/-. The assessment was completed u/s 143(1) of the Act. Later on the ld AO received information from the ITO Ward 30(3), Kolkata that the assessee had during the financial year 2007-08 repaid some loans in cash. On the basis of this information, the ld AO initiated proceedings u/s 147 of the Act and issued notice u/s 148 of the Act dated 31.3.2011. The assessment was completed u/s 143(3) 147 of the Act on 16.5.2011 determining the total income of the assessee at Rs 6,854/- without making any additions. In the said order, the ld AO had noted that the assessee had repaid certain loans in cash during the financial year 2007-08 to the tune of Rs 11,39,932/- to the partner of the assessee firm, for which penalty proceedings u/s 271D of the Act by the ld AO. Later in the course of proceedings before the ld JCIT, penalty proceedings u/s 271E of the Act were initiated on the assessee for violation of provisions of section 269T of the Act. The following facts are not in dispute :-
a) The partner’s case was selected for scrutiny and during the course of his assessment proceedings, confirmation for loan transactions with partnership firm (i.e the assessee firm herein) were sought for by the AO assessing the partner.
b) The confirmation was duly filed by the assessee firm before the AO of the partner.
c) From the said confirmation, the AO of the partner noticed that certain loans were repaid by the assessee firm to the partner in cash. This information was passed on to the AO of the assessee firm. Accordingly, notice u/s 148 of the Act was issued on the assessee for taking necessary action in the hands of the assessee firm.
3 ITA No.1484/Kol/2016 M/s Auto Care Centre A.Yr.2008-09 d) The ld AO of the assessee firm completed the re-assessment on 16.5.2011 without making any addition thereon , but initiated penalty proceedings u/s 271D of the Act initially , which was later rectified by the ld JCIT by issuing penalty notice u/s 271E of the Act in respect of repayments made by the assessee firm to its partner in cash.
The ld AO during the course of re-assessment proceedings of the assessee firm accepted the genuineness of loan transactions of the assessee firm with its partner and did not draw any adverse inference thereon except initiating penalty proceedings for violation of provisions of section 269T of the Act. The ld AO levied penalty u/s 271E of the Act in the sum of Rs 11,39,932/-.
The assessee pleaded before the ld JCIT ( i.e the ld AO herein) as under:-
a) that the initiation of proceedings u/s 148 itself was bad in law.
b) that no purported order of assessment u/s 147 / 143(3) was ever received / served.
c) that the initiation of the penalty proceedings was bad in law.
d) that even otherwise, the impugned penalty had already been barred by the limitation.
The ld JCIT however did not heed to the aforesaid contentions of the assessee and proceeded to levy penalty on the entire repayment of loans to partner made in the sum of Rs 11,39,932/- during the year, out of which, a sum of Rs 5,10,000/- was repaid by account payee cheques. Before the ld CITA, it was pleaded that reassessment was completed by the ld AO on 16.5.2011 at which point of time, penalty proceedings u/s 271D of the Act were initiated by the ld AO framing the re-assessment. But the show cause notice for the penalty u/s 271D of the Act was issued only on 5.12.2012 and served on the assessee on 6.12.2012. The assessee objected to the fact that it had not violated the provisions of section 269SS of the Act and hence penalty u/s 271D of the 3
4 ITA No.1484/Kol/2016 M/s Auto Care Centre A.Yr.2008-09 Act is not leviable. Later the ld JCIT on realizing his mistake, issued show cause notice u/s 271E of the Act on 16.1.2013. The ld JCIT levied penalty u/s 271E of the Act vide his order dated 27.2.2013.
The ld CITA deleted the penalty on the following grounds :-
a) The re-assessment order was framed u/s 147/143(3) of the Act on 16.5.2011. First show cause notice for penalty u/s 271D of the Act was issued on 5.12.2012. Later another show cause notice for penalty u/s 271E of the Act was issued on 16.1.2013. Both the notices u/s 271D and 271E are time barred in as much as the same was not issued within the time limit prescribed u/s 275(1)(c ) of the Act.
b) Genuineness of the loan transactions stood completely verified by the ld AO in the assessment proceedings and the same was also duly confirmed by the partner. The provisions of section 269T of the Act fall under Chapter XX-B which reads as “REQUIREMENT AS TO MODE OF ACCEPTANCE, PAYMENT OR REPAYMENT IN CERTAIN CASES TO COUNTERACT EVASION OF TAX”. In the instant case , since the lender (partner of the assessee firm) and borrower (i.e the assesse firm) are duly identified and the sources for repayment of loans stood duly proved. Hence the intention behind introduction of provisions of Chapter XX-B is in favour of the assessee and hence no penalty is eligible.
Aggrieved, the revenue is in appeal before us.
We have heard the rival submissions. It is not in dispute that the assessee firm had repaid loans in the sum of Rs 11,39,932/- to its partner Mr Sanjay Sen during the financial year 2007-08 relevant to Asst Year 2008-09. Out of this sum, a sum of Rs 5,10,000/- paid on 7.4.2007 amd 3.8.2007 by account payee cheques and hence the 4
5 ITA No.1484/Kol/2016 M/s Auto Care Centre A.Yr.2008-09 same would be automatically be outside the ambit of provisions of section 271E of the Act. Therefore, we are now left only with Rs 6,29,932/- (11,39,932-5,10,000) for our adjudication and validity of levy of penalty u/s 271E of the Act. It is not in dispute that the first show cause notice u/s 271D of the Act was issued on 5.12.2012 in respect of re-assessment completed on 16.5.2011. It is not in dispute that the second show cause notice u/s 271E of the Act was issued by the ld JCIT on 16.1.2013 after realizing his mistake in issuing wrong notice u/s 271D of the Act earlier. We find that both these show cause notices are barred by limitation in as much as the same are not issued within the time limit prescribed u/s 275(1)( c) of the Act. For the sake of convenience, the provisions of section 275(1)(c ) of the Act are reproduced below:-
38[Bar of limitation for imposing penalties. 275. 39[(1)] No order imposing a penalty under this Chapter shall be passed— 40[(a) in a case where the relevant assessment or other order is the subject-matter of the 41[***] an appeal to Commissioner (Appeals) under section 246 42[or section 246A] 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 completed43, or six months from the end of the month in which the order of the 44[***] Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the 45[Principal Chief Commissioner or] Chief Commissioner or 45[Principal Commissioner or] Commissioner, whichever period expires later : 46[Provided that in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A, and the Commissioner (Appeals) passes the order on or after the 1st day of 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 45[Principal Chief Commissioner or] Chief Commissioner or45[Principal 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 26346[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 5
6 ITA No.1484/Kol/2016 M/s Auto Care Centre A.Yr.2008-09 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.]
9.1. We find that the re-assessment was completed on 16.5.2011 accepting the returned income of Rs 6,854/- and hence there was no occasion for the assessee to prefer any appeal before the ld CITA against such reassessment order. Admittedly, the order of re- assessment was not subject matter of revision proceedings u/s 263 or 264 of the Act. Hence the assessee’s case squarely falls under clause (c ) of section 275(1) of the Act supra. In this case, penalty could be imposed on or before 30.11.2011 or on or before 31.3.2012 whichever is later. The later period is 31.3.2012. Hence the last date for imposition of penalty u/s 275(1)(c ) of the Act is 31.3.2012. In the instant case, even the first show cause notice (ie wrong notice u/s 271D of the Act ) was issued on 5.12.2012 which itself is barred by limitation. Hence we hold that the ld CITA had rightly deleted the penalty u/s 271E of the Act as barred by limitation. We find that the ld DR vehemently relied on the decision of the Hon’ble Kerala High Court in the case of Grihalakshmi Vision vs Additional CIT reported in 379 ITR 100 (Ker) wherein it was held that the proceedings u/s 271D and 271E of the Act could be validly initiated only by the Joint Commissioner of Income Tax and hence the time limit for imposing penalty u/s 275(1)(c ) of the Act is to be reckoned from the date on which the JCIT initiated the proceedings and not from the date of assessment order. The operative portion of the said judgment is as under:- 11. The only case of the assessee is that if the period of limitation prescribed in Section 275(1)(c) is reckoned from the date of the assessment order dated 6.11.2007, the penalty order passed by the Joint Commissioner on 29.7.2008 is beyond the time permitted in the above section. As we have already held, the initiation of the penalty proceedings is not by the Assessing Officer but by the Joint Commissioner and if that be so, the order levying penalty passed by the Joint Commissioner is within the time prescribed in Section 275(1)(c).
7 ITA No.1484/Kol/2016 M/s Auto Care Centre A.Yr.2008-09 We find that the Hon’ble Jurisdictional High Court in the case of CIT vs Narayani and Sons (P) Ltd in ITA No. 76 of 2009 dated 28.7.2016 reported in 2016 (9) TMI 449 (Calcutta High Court) after considering the decision of Hon’ble Kerala High Court supra had held as under:- “Md. Nizamuddin, learned Advocate appearing in support of the appeal drew our attention to a judgment of the Kerala High Court in the case of Grihalakshmi Vision vs. Additional Commissioner of Income Tax reported in (2015) 379 ITR 100 (Kerala), wherein the following views were taken:-
“Question to be considered is whether proceedings for levy of penalty, are initiated with the passing of the order of assessment by the Assessing Officer or whether such proceedings have commenced with the issuance of the notice issued by the Joint Commissioner. From the statutory provision, it is clear that the competent authority to levy penalty being the Joint Commissioner. Therefore, only the Joint Commissioner can initiate proceedings for levy of penalty. Such initiation of proceedings could not have been done by the Assessing Officer. The statement in the assessment order that the proceedings under section 271D and Section 271E are initiated is inconsequential. On the other hand, if the assessment order is taken as the initiation of penalty proceedings, such initiation is by an authority who is incompetent and the proceedings thereafter would be proceedings without jurisdiction. If that be so, the initiation of the penalty proceedings is only with the issuance of the notice issued by the Joint Commissioner to the assessee to which he had filed his reply. The only case of the assessee is that the period of limitation prescribed in section 271 (1)( c) is reckoned from the date of assessment order dated November 6, 2007, the penalty order passed by the Joint 29, 2008 is beyond the time permitted in the above section. As we have already of the penalty proceedings is not by the Assessing Officer but by the Joint at be so, the order levying penalty passed by the Joint Commissioner is within the time prescribed in 275(1)(c)."
He, Therefore, submitted that the views taken by the learned Tribunal should be reversed and the appeal should be allowed.
Mr. Khaitan, Learned senior advocate, appearing for the assessee drew our attention to a judgment of the Court in the case of CIT Vs Jitendra Singh Rathore reported in (2013) 352 ITR 327 wherein the following views were taken:-
“In the present case, the first show-cause notice for initiation of proceedings was issued by the Assessing Officer on March 25, 2003, and was served on the assessee on March 27, 2003. Obviously, the later period also expired on September 30, 2003 when six months expired from the end of the month in which the action for imposing the penalty was initiated. The order as passed by the Joint Commissioner of Income-tax for the penalty under Section 271D on May 28, 2004 was clearly hit by the bar of limitation and has rightly been set aside in the orders impugned.
8 ITA No.1484/Kol/2016 M/s Auto Care Centre A.Yr.2008-09 In view of the above, our answer to the formulated question of law is that even when the authority competent to impose penalty under section 271D was the Joint Commissioner, the period of limitation for the purpose of such penalty proceedings was not to be reckoned from the issue of the first show cause by the Joint Commissioner; but the period of limitation was to be reckoned from the date of issue of the first show cause for initiation of such penalty proceedings. For the purpose of present case, as observed hereinabove, for the proceedings having been initiated on March 25, 2003, the order passed by the Joint Commissioner under section 271 0 on May 28, 2004, was hit by the bar of limitation. The Commissioner of Income-tax (Appeals) and the Tribunal have, thus, not committed any error in setting aside the order of penalty.”
Mr. Khaitan submitted that the aforesaid judgment was cited before the Kerala High Court but the Kerala High Court did not give any reasons as to why was the view taken by Rajasthan High Court not acceptable to the Hon'ble Division Bench of the Kerala High Court.
We have considered the rival submissions advanced by the learned advocates appearing for the parties. Sub- section 2 of Section 271 D provides that the jurisdiction of imposing penalty is vested in the Joint Commissioner. The Subsection 2 provides as follows:-
'Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner"
Section 274 lays down the procedure for imposition of penalty. Sub-section 1 of Section 274 provides for affording a reasonable opportunity of hearing to the assessee before an order imposing penalty is passed. Though Section 271 D vests the jurisdiction of imposing penalty solely in the Joint Commissioner, it is silent as regards initiation of the proceedings. The question is, can such initiation of proceedings be made by the Assessing Officer? The Assessing Officer is the person, who is likely to come across the cases of concealment or violation of the provisions of law attracting penal provisions. Can the Assessing Officer, having come across a case of violation of law attracting penal provisions, issue a notice and in case he does so, would that be an act without jurisdiction? This question has been answered by the Kerala High Court in the affirmative. A somewhat similar situation is contemplated or is bound to arise under Sub-Section 2 of Section 274 which provides as follows:-
“2) No order imposing the penalty under this Chapter shall be made - (a) By the Income Tax Officer, where the penalty exceeds ten thousand rupees; (b) By the Assistant Commissioner [or Deputy Commissioner}, where the penalty exceeds twenty thousand prior approval of the [Joint] Commissioner."
Prior to introduction of Tax Laws (Amendment) Act, 1975, Sub-Section 2 of Section 274 was as follows:-
9 ITA No.1484/Kol/2016 M/s Auto Care Centre A.Yr.2008-09 “(2) Notwithstanding anything contained in clause (iii) of sub-section (1) of section 271, if in a case falling under clause (c ) of that sub-section, the minimum penalty imposable exceeds a sum of rupees one Income-tax Officer shall refer the case to the Inspecting Assistant Commissioner who shall, for the purpose, have all the powers conferred under this Chapter for the imposition of penalty."
Sub-Section 2 of Section 274, as it was, goes to show that before the said Act of 1975 was introduced, the Assessing Officer had jurisdiction to impose penalty not exceeding a sum of Rs. 1000/-. A case involving penalty imposable exceeding a sum of Rs. 1000/- was required to be referred by him to the Inspecting Assistant Commissioner, who had the jurisdiction to impose penalty exceeding a sum of Rs. 1000/-. Question arose whether in a case involving penalty imposable exceeding a sum of Rs. 1000/-, the Assessing Officer could initiate the proceedings by issuing a notice. That question was answered by the Supreme Court in the affirmative. Their Lordships in the case of D.M. Manasvi vs. C.I.T., Gujarat. reported in [1972] 86 ITR 557, held as follows:
“We are also not impressed by the argument advanced on behalf of the appellant that the proceedings for the imposition of penalty were initiated not by the Income-tax Officer but by the Inspecting Assistant Commissioner when the matter had been referred to him under section 274(2) of the Act. The proceedings for the imposition of penalty in terms of sub-section (7) of section 271 have necessarily to be initiated either by the Income-tax Officer or by the Appellate Assistant Commissioner. The fact that the Income-tax Officer has to refer the case to the Inspecting Assistant Commissioner if the minimum imposable penalty exceeds the sum of rupees on thousand in a case falling under clause (c) of sub-section (1) of section 271 would not show that the proceedings in such a case cannot be initiated by the Income-tax Officer. The Income-tax Officer in such an event can refer the case to the Inspecting Assistant Commissioner after initiating the proceedings. It would, indeed, be the satisfaction of the Income-tax Officer in the course of the assessment proceedings regarding the concealment of income which would constitute the basis and foundation of the proceedings for levy of penalty."
Applying the views expressed by the Apex Court it can be said that in a case falling under Section 271D the Assessing Officer is not precluded from initiating the proceedings by issuing a notice.
The views expressed by the Kerala High Court cannot be followed. Once it is realized that the proceedings were initiated on 26th December, 2006 when the notice was issued by the Assessing Officer, the period of limitation necessarily expired on 30th June, 2007 whereas the order imposing penalty was passed on 21st September, 2007. No elaborate reasoning is required to demonstrate that the order is hit by limitation.
In that view of the matter, the substituted question is answered in the negative and against the revenue.
10 ITA No.1484/Kol/2016 M/s Auto Care Centre A.Yr.2008-09 The appeal is, therefore, dismissed.”
Respectfully following the ratio laid down by the Hon’ble Jurisdictional High Court supra, we hold that the penalty imposed by the ld JCIT on 27.2.2013 is barred by limitation u/s 275(1)( c) of the Act and hence the penalty levied u/s 271E of the Act is hereby directed to be deleted. In view of this , the other issue that the genuineness of the loan transactions are not doubted and hence no penalty u/s 271E of the Act could be validly levied, need not be gone into. Accordingly, the grounds raised by the revenue are dismissed.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the Court on 23.05.2018
Sd/- Sd/- [A.T. Varkey] [ M.Balaganesh ] Judicial Member Accountant Member Dated : 23.05.2018 SB, Sr. PS Copy of the order forwarded to: 1. ITO, Ward-29(3), Kolkata, Aayakar Bhawan Dakshin,2 , Gariahat Road (South), Kolkata-700068. 2. M/s Auto Care Centre, 200A/A, S. P. Mukherjee Road, Kolkata-700026. 3. C.I.T(A)- , Kolkata 4. C.I.T.- Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata.