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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL
Before: SHRI G.D. AGRAWALG.D. AGRAWAL & AND BEFORE SHRI G.D. AGRAWALG.D. AGRAWAL & AND MS. SUCHITRA KAMBLE
PER BENCH :- PER BENCH PER BENCH PER BENCH ITA Nos.827 to 829/Del/2015 :- ITA Nos.827 to 829/Del/2015 : ITA Nos.827 to 829/Del/2015 : ITA Nos.827 to 829/Del/2015 : These appeals by the assessee for the assessment years 2006- 07, 2007-08 & 2008-09 are directed against the order of learned CIT(A), Ghaziabad dated 8th December, 2014.
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All these appeals have originated from the order u/s 154 of the Income-tax Act, 1961 dated 30th March, 2013 by which the Assessing Officer has rejected the assessee’s application for rectification of the order passed u/s 201(1) and 201(1A) of the Act.
At the time of hearing before us, it was pointed out by the learned counsel for the assessee that subsequently, the Assessing Officer has rectified the order passed u/s 201(1)/201(1A) vide his order dated 30th April, 2015 passed u/s 154 of the IT Act. In the said order, the Assessing Officer has partially accepted the assessee’s contention but still rejected some of the assessee’s contentions. He pointed out that the assessee is in appeal against the order u/s 154 dated 30th April, 2015. In view of the above, it is suggested by the learned counsel that the order of learned CIT(A) for all the three years where he has upheld the order of the Assessing Officer rejecting assessee’s application u/s 154 should be set aside and to restore the matter to the file of the CIT(A) to be adjudicated along with the appeal filed against the order of the Assessing Officer dated 30th April, 2015 passed u/s 154.
Learned DR, on the other hand, stated that the impugned appeal of the assessee has become infructuous and should be dismissed because once the order u/s 154 has been passed partially accepting the assessee’s contention and the assessee has already filed the appeal against the said order u/s 154, therefore, the only adjudication required by the learned CIT(A) is in the appeal of the assessee filed against the order u/s 154 dated 30th April, 2015. The earlier appeal does not survive for adjudication.
In the rejoinder, it is stated by the learned counsel that in the impugned order, learned CIT(A) has made certain observations holding that there was no prima facie mistake apparent from record in the
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order of the Assessing Officer passed u/s 201(1)/201(1A). Therefore, unless those observations are set aside, they will prejudice the case of the assessee while disposing of the assessee’s appeal against the subsequent order u/s 154.
We have considered the rival submissions and have perused the material placed before us. The sequence of events is that the Assessing Officer passed order u/s 201(1)/201(1A) for FY 2005-06, 2006-07 and 2007-08 i.e., relevant to assessment years 2006-07, 2007-08 and 2008-09. The assessee filed the application u/s 154 for all the three years which was rejected by the Assessing Officer vide order dated 30th March, 2013. The assessee has filed the appeals before learned CIT(A) in all these three years and the same were dismissed by him vide order dated 8th December, 2014. The assessee has filed appeals before the ITAT which are listed above for disposal vide ITA Nos.827/Del/2015, 828/Del/2015 & 829/Del/2015. In the meanwhile, the assessee filed subsequent application u/s 154 and the Assessing Officer, vide his order dated 30th April, 2015, rectified the order passed u/s 201(1)/201(1A) dated 26th June, 2008. As per assessee’s contention, in this order u/s 154, the Assessing Officer only partially accepted the assessee’s contention. Therefore, assessee is still aggrieved with regard to some of the items on which no rectification order is passed. He also stated that the assessee has filed appeal before the learned CIT(A) against the order u/s 154 dated 30th April, 2015. In the above circumstances, in our opinion, what is required for adjudication is only the subsequent appeal of the assessee which is filed by him against the order u/s 154 dated 30th April, 2015. The order u/s 154 dated 30th March, 2013 stood modified by the subsequent order passed u/s 154 dated 30th April, 2015. Therefore, in our opinion, no separate adjudication is required with reference to the order u/s 154 dated 30th March, 2013. To that extent, the present appeals filed by the assessee which have originated from the order u/s
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154 dated 30th March, 2013 have been rendered infructuous. However, we find some merit in the assessee’s contention that the observation of learned CIT(A) in the order dated 8th December, 2014 wherein he has upheld the order u/s 154 dated 30th March, 2013 may cause prejudice to the case of the assessee while disposing of its appeal against the order u/s 154 dated 30th April, 2015. Therefore, we hold that learned CIT(A) while deciding the appeal against the order u/s 154 dated 30th April, 2015 would not be influenced by any observation or finding given in his order dated 8th December, 2014 but he will decide the appeal afresh uninfluenced by any observation/finding in his order dated 8th December, 2014. With this remark, we dismiss the appeals filed by the assessee vide ITA Nos. 827/Del/2015, 828/Del/2015 & 829/Del/2015.
ITA Nos.1897/Del/2012, 1978/Del/2012 & 1979/Del/2012 : ITA Nos.1897/Del/2012, 1978/Del/2012 & 1979/Del/2012 :- ITA Nos.1897/Del/2012, 1978/Del/2012 & 1979/Del/2012 : ITA Nos.1897/Del/2012, 1978/Del/2012 & 1979/Del/2012 : 7. All these appeals by the assessee are against the levy of penalty imposed u/s 271C of the Income-tax Act, 1961 as under:-
Assessment Year Penalty levied
2006-07 `6,63,102/- 2007-08 `3,16,58,404/- 2008-09 `12,33,848/-
At the time of hearing before us, it is submitted by the learned counsel that the Assessing Officer has modified the amount of penalty in view of the order u/s 154 as under:-
Assessment Year Amount of Penalty 2006-07 `2,99,016/- 2007-08 `94,49,969/- 2008-09 `35,172/-
At the time of hearing before us, it is contended by the learned counsel that the penalty order passed by the Assessing Officer is
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barred by limitation. Since the facts and the date of order for all the three years are common, we shall consider the order for assessment year 2006-07 which would be applicable to all the three years. He pointed out that the Assessing Officer passed the order u/s 201(1A) on 20th June, 2008 during which, penalty proceedings u/s 271C were initiated. However, penalty order was passed on 2nd March, 2010 which is barred by limitation as per Section 275(1)(c). In support of his contention, he relied upon the following decisions:-
CIT Vs. Dinesh Jain – ITA No.751/2014, order dated 27th April, (i) 2015 (Delhi High Court). (ii) ITO Vs. Dinesh Jain – [2014] 34 ITR (Trib) 709 (Delhi). (iii) Pr. Commissioner of Income Tax-5 Vs. JKD Capital & Finlease Ltd. – ITA No.780/2015, order dated 13th October, 2015 (Delhi High Court).
Learned DR, on the other hand, stated that the relevant date for initiation of penalty proceedings should be the date on which the matter is referred to the competent authority by the Assessing Officer. He stated that the Assessing Officer does not have the jurisdiction to impose the penalty u/s 271C and, therefore, the period of limitation has to be considered only when the competent authority issued show cause notice to the assessee. He stated that the penalty has been levied within six months from the issue of show cause notice by the competent authority and, therefore, the same is not barred by limitation.
We have carefully considered the submissions of both the sides and perused material placed before us. We find that the period of limitation for imposing the penalties has been provided in Section 275 which reads as under:-
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“275. 275. 275. [(1)] No order imposing a penalty under this Chapter 275. shall be passed—
[(a) 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] 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 the [***] Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner, whichever period expires later :
[Provided Provided Provided that in a case where the relevant assessment or Provided 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 [Principal Chief Commissioner or] Chief Commissioner or [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 263 [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 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.].”
Admittedly, in the case of the assessee, clause (c) of sub-section (1) would be applicable because the relevant order u/s 201(1)/201(1A)
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was not the subject matter of appeal to the CIT(A) and similarly, the same was not the subject matter of revision u/s 263. As per clause (c) of sub-section (1), the penalty order cannot be passed after the (i) expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed and (ii) six months from the end of the month in which action for imposition of penalty is initiated whichever period expires later. Therefore, the crucial date would be the date of the initiation of penalty proceedings. In the order u/s 201(1) and 201(1A) dated 27th June, 2008, the Assessing Officer observed as under:-
“Issue penalty notice u/s 221 and 271C and 272A(2)(c) & 272A(2)(k) of I.T. Act, 1961 are being issued separately for each & every such default for all the years involved.”
Thus, the Assessing Officer, during the course of passing of order u/s 201(1) & 201(1A), directed for issue of penalty notice u/s 271C. Thus, the penalty proceedings were initiated by the direction of the Assessing Officer for issue of penalty notice u/s 271C. It is contended by the learned DR that as per Section 271C sub-section (2), only the Joint Commissioner of Income-tax is authorized to impose the penalty u/s 271C. Order u/s 201(1) & 201(1A) was passed by the ITO who is not authorized to levy the penalty u/s 271C and, therefore, the period of limitation for the purpose of levy of penalty is to be considered when the Joint Commissioner issued the notice u/s 271C.
We find that this issue has already been considered by the ITAT as well as Hon'ble Jurisdictional High Court. In the case of Dinesh Jain (supra), Delhi ‘B’ Bench considered an identical issue and held as under:-
“Held, dismissing the appeal, (i) that under section 271E the penalty was to be imposed by the Joint Commissioner. However, there was no bar on the Assessing Officer to
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initiate the penalty proceedings under section 271E because when there is any acceptance or repayment of loan in violation of section 269SS or 269T, it is the Assessing Officer who has to prima facie satisfy himself whether there is a violation of section 269SS or 269T and if so, initiate penalty proceedings under section 271D or 271E and thereafter refer the matter to the Joint Commissioner who would finally decide and if satisfied, levy the penalty under section 271D or 271E. Hence the period of limitation was to be counted from the date of the initiation of the penalty proceedings by the Assessing Officer, that is, December 5, 2011. The penalty proceedings were initiated in the course of assessment proceedings in the financial year 2011-12, and such financial year expired on March 31, 2012. Six months from the initiation of penalty proceedings also expired on June 30, 2012. The penalty order passed on September 14, 2012 was certainly after the period of limitation prescribed under section 275(1)(c).”
In the case of JKD Capital & Finlease Ltd. (supra), Hon'ble Jurisdictional High Court held as under:-
“11. In fact, when the AO recommended the initiation of penalty proceedings the AO appeared to be conscious of the fact that he did not have the power to issue notice as far as the penalty proceedings under section 271-E was concerned. He, therefore, referred the matter concerning penalty proceedings under Section 271-E to the Additional CIT. For some reason, the Additional CIT did not issue a show cause notice to the assessee under Section 271-E(1) till 20th March 2012. There is no explanation whatsoever for the delay of nearly five years after the assessment order in the Additional CIT issuing notice under Section 271-E of the Act. The Additional CIT ought to have been conscious of the limitation under Section 275(1)(c), i.e., that no order of penalty could have been passed under Section 271-E after the expiry of the financial year in which the quantum proceedings were completed or beyond six months after the month in which they were initiated, whichever was later. In a case where the proceedings stood initiated with the order passed by the AO, by delaying the issuance of the notice under Section 271-E beyond 30th June 2008, the Additional CIT defeated the very object of Section 275(1)(c).
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In that view of the matter, the order of the CIT(A) which has been affirmed by the impugned order of the ITAT does not suffer from any legal infirmity.
No substantial question of law arises for determination.”
Though the above two decisions were with respect to levy of penalty u/s 271E but the ratio of both the above decisions would be squarely applicable in respect of levy of penalty u/s 271C because as in Section 271C, u/s 271E also, only the Joint Commissioner of Income-tax is authorized to levy the penalty under the relevant Section and, therefore, the question before the Tribunal was what would be the date of initiation of the penalty proceedings and Delhi Bench of the Tribunal as well as Hon'ble Jurisdictional High Court held that the initiation of penalty proceedings by the Assessing Officer is the date of initiation of penalty proceedings. Though the penalty is to be imposed by the Joint Commissioner of Income-tax but there is no bar on the initiation of penalty proceedings by the ITO. After initiating penalty proceedings, he has to transfer the proceedings to the Joint Commissioner who is competent to levy the penalty. The penalty is to be levied within the period of limitation prescribed u/s 275(1). Now, reverting to the facts of the assessee’s case, the ITO issued the penalty notice u/s 271C vide his order u/s 201(1) and 201(1A) dated 27th June, 2008. Therefore, as per clause (c) of Section 275(1), the penalty proceedings were initiated in the course of order u/s 201(1) and 201(1A) dated 27th June, 2008 and the relevant financial year would expire on 31st March, 2009. Six months from the end of the month in which penalty proceedings were initiated would expire on 31st December, 2008. Therefore, the competent authority could have imposed the penalty before the expiry of 31st March, 2009. However, the penalty order has been passed on 2nd March, 2010 which is clearly barred by limitation. We, therefore, respectfully following the decision of Hon'ble Jurisdictional High Court in the case of JKD Capital & Finlease Ltd. (supra), and ITAT Delhi Bench
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in the case of Dinesh Jain (supra), hold that the penalty order passed u/s 271C was barred by limitation. The same is quashed.
In the result, the appeals of the assessee vide ITA No.827 to 829/Del/2015 are dismissed being infructuous and the appeals of the assessee vide ITA No.1897/Del/2012, 1978/Del/2012 & 1979/Del/2012 are allowed. Decision pronounced in the open Court on 26.04.2016.
Sd/- Sd/- (SUCHITRA KAMBLE (SUCHITRA KAMBLE) (SUCHITRA KAMBLE (SUCHITRA KAMBLE (G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL) G.D. AGRAWAL JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT
VK.