SH. ASHOK KUMAR PORWAL,JHALAWAR vs. JCIT, RANGE-1, KOTA, KOTA

per record the assessee had accepted deposits in his bank account. The

assessee has not furnished any reasonable cause for making such

exercise. The ld. AO also noted that the assessee has not filed any

documentary evidence showing necessity of such type of unlawful

transactions. In the absence of evidence of undertaking such transaction

the ld. AO noted that it is violation of provision of section 269SS of the

Income Tax Act, 1961. The contention of the assessee that the same has

been done on account of ignorance of law and the genuineness of the

transaction is not under dispute. Considering the facts and circumstances of

the case the ld. AO noted that the assessee has accepted / obtained cash

loan amount of Rs. 31,78,000/- from M/s. Chaudhary Bhuramal H. Jatt

which is in violation of provision of section 269SS of the Act and therefore,

considering the provision of section 271D of the Act, penalty of Rs.

31,78,000/- was levied vide order dated 05.03.2020.

4 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT 4. Aggrieved from the order of the Assessing Officer, assessee

preferred an appeal before the ld. CIT(A)/NFAC. Apropos to the grounds so

raised by the assessee, the relevant finding of the ld. CIT(A)/NFAC is

reiterated here in below:

“7.0 Decision: 7.1 During the course of assessment proceedings u/s 147/143(3) of I.T. Act. 1961. it was found by ITO, Jhalawar, that during the F.Y. 2009-10, the appellant had accepted loan of Rs.31,78,000/- in cash from M/s Choudhary Bhuramal H. Jat otherwise than an account payee cheque or draft, the amount of loans exceeded the limit prescribed u/s 269SS of the Income Tax Act, 1961 thereby violating the provisions of section 269SS of the IT Act and penalty proceedings were initiated u/s 271D on 07.08.2019. The source of income of appellant was salary from Ch. Bhoora Mal H. Jatt, Jaira Patan. 7.2 During the course of penalty proceedings appellant's contention that he has not taken any cash loan and cash deposit in Bank account was only an accommodation transaction done was not accepted by Joint Commissioner of Income Tax, Range-1, Kota for the reason that no reasonable cause for taking cash loan has been submitted by the appellant because no there is no evidence have been furnished by the appellant showing the urgency or necessity of cash amount/loan taken or accepting in cash. The onus was on the appellant to prove the same. However, the appellant could not prove. Applicability of penalty proceedings u/s271D in the present case: "271D. (1) If a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted. (2) Any penalty imposable under subsection (1) shall be imposed by the Joint/Addl. Commissioner." 7.3 As per the class (iv) of 2nd proviso to 269SS "specified sum" means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place. 7.4 As per the above provision it is a clear case of contravention of provisions of sec 269SS and hence penalty u/s 271D attracts and as such the appellant shall be liable to pay by way of penalty a sum equal to the amount of specified sum

5 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT accepted or taken and hence sum of Rs. 17,00,000/- is levied as penalty u/s 271D on 18.03.2019 and penalty proceedings were completed. 7.5 As per section 269 SS Any loan or deposit or specified sum "taken or accepted from" or "taken or accepted by" the following entities - • The government • Any banking company, post office savings bank or co-operative bank • Any corporation established by a Central, State or Provincial Act • Any government company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013) • Any institution, association or body or class of institutions, associations or bodies notified in Official Gazette. 7.6 Thus, if any person accepts any loan or deposit or specified sum from the above-mentioned entities, or the entities accept any loan or deposit or specified sum from any person, provisions of 269SS will not apply. 7.7 Penalty on contravention of Section 269SS: 100% of the loan or deposit amount will be the quantum of penalty that can be levied by the assessing officer. A person accepting the loans and deposits in cash above the prescribed limit is liable to pay such penalty. Hence, the receiver of the money is required to ensure that the the provisions of Section 269SS are complied while accepting payments. However, if the person is able to prove that there is a reasonable cause for such transactions, and there were no malafide intentions, he/she may not be penalised. 7.8 The appellant has not been able to prove any reasonable cause for accepting cash. The transaction of the wife from the husband arising out of a sale transaction is not covered by any exception or a reasonable cause. It appears the husband received a share of property in cash for Rs. 17 lakhs and in a calculated way passed on entire cash to his wife, probably with the intention that by not declaring that amount in his return and treating it as a pass- through entity. he will be able to escape the vagaries of section 269SS. Since the beneficiary of this proceeds is his own wife, who has taken an unsecured loan in cash, and this being the substantial amount, provision of section 269SS gets attracted. Hence, the appellant having received Rs. 17 lakhs in amount in cash as unsecured loan from the husband, is a fit case to levy a penalty u/s 271D of the Act. The appellant has stated that the AO did not verify the entry. But the entry is visible on the balance sheet of the appellant and no more further verification is required as a narration of the entry explains it all.

6 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT 1. The source of income of appellant was salary from Ch. Bhoora Mal H. Jatt. Jaira Patan. 2. The assessee having bank account with Bank of Rajasthan, Jhaira patan A/C No. 686601070339. 3. The assessee has deposited cash in the above mentioned bank account on various dates from 26.11.2019 to 14.12.2019 total fo Rs.31.78,000/-. The said cash was made available by employer M / s Ch. Bhoora Mal H. Jatt, Jhaira Patan and appellant has issued cheques of the same amount on the same date in favour the employer Ch. Bhoora Mal H. Jatt. 7.9 The method of providing accommodation entry entails breaking up large amounts of money into smaller, less-suspicious amounts. In India, this smaller amount has to be below Rs. 50,000/- as deposit of cash below this amount does not require providing PAN of the depositors. The money is then deposited into one or more bank accounts either by multiple people or by a single person over an extended period of time. Also, even larger amounts are deposited in the banks with PAN numbers of individuals who are mostly illiterate and work for these entry operators for small salary or commission. 1. The transactions were in accommodation nature. The reason behind the said transactions was to avoid bank charges (Expenses) as levied by employer's banker on depositing cash in exceeding to certain limit. The employer doing business of running retail outlet of Bharat Petroleum Corporation Ltd., and cash collected from sale of petroleum products. 2. The appellant has not accepted/received/hold any loan or advances from employer. The appellant has immediately issued cheques for the same amount in favour the employer on the same date. 7.10 The appellant has done another law violation as trying to evade banking charges-which is not admissible as violation of any other law. Trying to evade bank charges is a frivolous reason as to when his employer who is giving him salary, it is beyond reason to gather as to why he should deposit in appellants account. Violation of any other law is no excuse. 1. According to above mentioned letter the employer has accepted that he has arranged the cash for depositing it in assessee's bank and simultaneously collected cheques from appellant. The employer has also submitted copy of the cash book as well as bank account in support of his statement. We are enclosing herewith all of these for your kind consideration. 7.11 The employer may have stated this but has not submitted any evidence as to generation of this cash as also appellant has not stated as to why he issued cheques to his employer and for what purposes. The cash amounting to Rs.39,99,000/- was received by him from M/s Chaudhary Bhuramal H. Jatt, Jhalarapatan on various dates and deposited in his

7 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT bank account were not in the nature of loan, but it was an accommodation entries. 7.12 Ignorance of law is no excuse. Such arrangements are no exception under provisions of 269SS. The appellant has not been able to provide a cogent valid reason for such an act. 7.13 Accepting cash from anyone and for whatsoever arrangement between employer or employee is beyond the purview of the provisions of 269SS. It is also possible that the appellant accepted cash to provide accommodation entries which byu itself is a violation of law. 7.14 What if the employee for his own reasons, is trying to give accommodation entries to his employer to help him evade taxes, The employer if at all is violating another law and defrauding bank revenue and the appellant is assisting him in this endeavour. Any transaction done for illegal ends is a violation. 7.15 At best this is seen as an arrangement of accommodation entry and since appellant has not been able to explain/give evidences as to why he accepted such cash and why he gave cheques. 269SS is limited to acceptance of cash more than 20000 and does not cover as to how it was used in the end. 7.16 Words 'accommodation entries' have not been defined anywhere in the Act. however, in catena of decisions, the courts have dealt with the issue of 'accommodation entries'. It cannot be gainsaid that the tax-evaders in order to bring back their unaccounted income to their books of account without paying any tax thereon, use numerous methods and techniques. For routing the unaccounted income, the tax-evaders under the guise of loan entries or share capital entries or other camouflage entries create an appearance of legitimate transactions in their books of account. The accommodation entry is itself an illegal act to aid tax evaders. 7.17 As observed by the Supreme Court in the case of Sumati Dayal v. CIT (1995) 80 Taxman 89/214 ITR 801 (SC), apparent must be considered as real until it is shown that there are reasons to believe that apparent is not real, and that the Taxing Officers are entitled to look into the surrounding circumstances to find out the reality. and the matter has to be considered by applying the test of human probabilities. The explanation given by the assessee does not constitute a reasonable cause as contemplated in section 273B of the Act. 7.18 If it is the case with employer, he should declare this in his return and submit evidences that this accommodation entry is not akin to any mischief to evade tax. A mere statement is not enough in absence of cogent evidences in the form of books of account of employer, his ledger account etc. A mere

8 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT statement fails to justify the act and attempts to hid more than reveal the transparency. 7.19 It is not clear as to what was such exigency of business that the employee or appellant resorted to this method and his replies are not satisfactory. 7.20 The distinction sought to be drawn between a personal liability and a liability of the kind for the employer is not sustainable because anything done which is an infraction of the law and is visited with a penalty cannot on grounds of public policy be said to be allowed for the purpose of Income tax act. 7.21 The following case laws are being relied upon: INCOME TAX SLP dismissed against High Court ruling that where Assessing Officer made additions to assessee's income under section 68 in respect of amount received as share capital from several companies, in view of fact that all of these companies were maintained by one person who was engaged in providing accommodation entries through paper companies and all such companies were located at same address, impugned addition was justified[2019] 109 taxmann.com 53 (SC)/[2019] 266 Taxman 93 (SC) [03-... INCOME TAX: SLP dismissed against High Court ruling that where Assessing Officer had reason to believe that income chargeable to tax had escaped assessment as assessee was beneficiary of accommodation entries and basis for formation of such belief were several inquiries and investigation by Investigation Wing that there had been escapement of income of assessee from assessment because of his failure to disclose fully and truly all material facts, reopening of assessment was justified[2022] 138 taxmann.com 69 (SC)/[2022] 287 Taxman 187 (SC)[04... INCOME TAX: SLP dismissed against order of High Court that where a reopening notice was issued on ground that assessee was beneficiary of accommodation entry in form of long-term capital gain (LTCG) on sale of shares which was claimed as exempt under section 10(38), since said transactions of sale and purchase of shares were admitted by assessee and it had not brought on record anything to suggest that reassessment proceedings were being undertaken in arbitrary manner, impugned reopening notice was justified [2023] 152 taxmann.com 573 (SC)/[2023] 454 ITR 794 (SC) [04-0... INCOME TAX: Notice issued in SLP filed against impugned High Court order that where Assessing Officer made additions under section 68 solely on basis of information received from Investigation Wing that lenders from whom assessee- company acquired loans were indulged in bogus accommodation entries, since assessee was not granted an opportunity to cross-examine persons whose statements were recorded during investigation, impugned additions made on basis of such investigation which was not privy to assessee were to be deleted[2022] 143 taxmann.com 371 (SC)/[2022] 289 Taxman 625 (SC)[0....

9 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT INCOME TAX SLP dismissed against High Court ruling that where director of assessee-company obtained cash in excess of Rs. 20,000 as loan from a financier and deposited same in cash in bank account of company, merely because director took cash loans from financier and deposited it in current account of assessee- company on very same day and assessee utilized it to pay salaries, rent and EMI commitments, same could not be a ground to be taken as a mitigating factor to escape from rigour of levy of penalty under section 271D. [2021] 125 taxmann.com 266 (SC)/[2021] 278 Taxman 273 (SC) INCOME TAX: SLP dismissed as withdrawn against High Court’s ruling that where assessee failed to discharge its burden in proving there was a reasonable cause in accepting cash deposits from staff members in its bank account penalty order passed under section 271D was to be confirmed. [2021] 131 taxmann.com 127 (SC)/[2021] 283 Taxman 285 (SC) 8.0 In result, the appeal of the appellant is hereby dismissed.” 5. Feeling dissatisfied from the order of the ld. CIT(A) the assessee has

preferred this appeal on the grounds as reiterated here in above. To

support the various grounds so raised the ld. AR appearing on behalf of the

assessee has placed their written submission which is extracted in below:

Submission:- 1. It is submitted that penalty u/s 271D is independent of assessment proceedings and thus the limitation for levy of penalty u/s 271D would be governed by clause (c) of section 275(1). This clause provides that no order imposing the penalty shall be passed 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. In the present case, since penalty u/s 271D has not been initiated during the course of any proceedings, first part of sec. 275(1)(c) would have no application and it is only the second part which would apply. Thus the penalty order ought to have been passed within a period of six months beginning from the end of the month in which the action for imposition of penalty was initiated. Since the show cause notice u/s 271D was issued on 07.08.2019 (PB 28), the period of six months would have to be reckoned from 01.09.2019 that would end to 29.02.2020. Therefore, penalty order passed on 05.03.2020 is barred by limitation. For this purpose reliance is placed on the decision of Hon’ble Delhi High Court in case of Subodh Kumar Bharagava Vs. CIT (2009) 309 ITR 31 which was with reference to levy of penalty u/s 271B which is independent of the assessment proceeding like section

10 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT 271D which is also independent of the assessment proceedings. In this context the Hon’ble High Court in the relevant Para 11 to 14 held as under:-

“11. Sec. 275(1)(c) is a residuary clause and, therefore, is supposed to cover all cases not falling under cl. (a) or (b) of s. 275(1). Since the present case falls under this residuary clause (c), we need to examine the period of limitation prescribed in respect thereof. As noted earlier in this judgment, there are two periods of limitation prescribed under clause (c), the first period relates to those category of cases where action for the imposition of penalty has been initiated in the course of " some" proceedings. In such a situation, the period of limitation prescribed is up to the end and including the financial year in which such proceedings are completed.

11 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT where penalty proceedings are initiated in the course of some other proceedings, the Legislature has provided for two different periods of limitation. However, so that there is no confusion with regard to which of the two would apply, the Legislature has added the expression "whichever period expires later" at the end. To explain this, let us take two examples:

Example 1:

Assume that the action for imposition of penalty is initiated on 15th March, 2007 in the course of some proceedings which are completed on 25th March, 2007. On the basis of the first part of s. 275(1)(c) the period of limitation would end on 31st March, 2007 being the end of the financial year in which the proceedings in the course of which action for the imposition of penalty was initiated, are completed. However, taking recourse to the provisions of the second part of s. 275(1)(c) the end point of the period of limitation would be 30th Sept., 2007. This would be so because the action for imposition of penalty was initiated on 15th March, 2007 implying thereby that the end of the month would be on 31st March, 2007. The period of six months from such date would end on 30th Sept., 2007. Thus, in this example, we are faced with two dates on which limitation would end. But, because of the expression "whichever period expires later", the period of limitation would have to be taken as 30th Sept., 2007 which is relatable to the date on which action for imposition of penalty was initiated and not to the date on which the proceedings, in the course of which such action was initiated, are completed.

Example 2:

Let us assume that action for imposition of penalty is initiated on 15th April, 2007 in the course of proceedings which are completed on 25th May, 2007. Under the first part of s. 275(1)(c), the period of limitation for passing an order imposing penalty would end on 31st March, 2008 being the end of the financial year in which the proceedings, in the course of which action for imposition of the penalty had been initiated, are completed. However, in terms of the second part of s. 275(1)(c), the period of limitation would end on 31st Oct., 2007. This is because the period of six months would have to be reckoned from the end of the month in which action for imposition of penalty was initiated. Action for penalty in this example was initiated on 15th April, 2007. The end of the month would be 30th April, 2007. Consequently, the period of six months from this date would end on 31st Oct., 2007. Thus, in this example, we are once again faced with two periods of limitation : the period ending on 31st March, 2008 being the end of the financial year relatable to 25th May, 2007, the date on which the proceedings were completed and 31st Oct., 2007 being the date relatable to the initiation of the penalty proceedings. Once again, applying the expression "whichever period expires later", the period of limitation for this example would be 31st March, 2008.

12 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT 14. The above two examples illustrate cases where the applicable period of limitation would be relatable either to the date of initiation of the penalty proceedings or to the date of completion of the proceedings in the course of which action for the imposition of penalty has been initiated. But there is a third/residuary category of cases where the initiation of action for imposition of penalty is not in the course of some proceedings. In such cases, the first part of s. 275(1)(c) would have no application and it is only the period of limitation prescribed in the second part which would apply. Since only one period of limitation would be applicable, the expression "whichever period expires later" would have to be read as that very period of limitation. The present case undoubtedly falls under s. 275(1)(c) and, that too, under the second part thereof. Therefore, on a plain reading and on a logical analysis of the relevant provisions of the said Act, the period of limitation during which an order imposing a penalty could have been passed in the present case would be a period of six months beginning from the end of the month in which the action for imposition of penalty was initiated. We have already noticed above that the show-cause notice under s. 274 read with s. 271B of the said Act was issued on 31st July, 2003. Since that happened to be the end of the month also, the period of six months would have to be reckoned from that date. That would take us to 31st Jan., 2004. Thus, the penalty order could have been passed on any date up to and including 31st Jan., 2004. The penalty order came to be passed on 17th Feb., 2004, which would be hit by the bar of limitation.”

The ratio laid down in this decision is squarely applicable to the facts of assessee and therefore, order imposing penalty u/s 271D is barred by limitation and be quashed. This has been accepted by Hon’ble ITAT, Jaipur Bench in ITA No.205/JP/2021 for AY 2010-11 order dt. 25.05.2022 in case of Late Sh. Om Prakash Choudhary who was also employed with M/s Choudhary Bhooramal H. Jatt where also penalty imposed u/s 271D was deleted by giving following findings at Para 7 & 7.1 of the order (PB 50-51):-

"7. The Ld. DR, on the other hand strongly supporting the order of CIT(A) submitted that there is no merit in arguments taken by the LD AR of the assessee and further the LD DR submitted that the assessee has not raised this ground before the CIT(A) and but fairly and finally accepted the view of the bench that this ground is legal ground and it can be raised at any stage and LD DR raised no objection and dispute the facts relating to time bar.

7.1 We have heard both the parties, perused material available on record and gone through the order of authorities below. From perusal of record, we observed that according to the averments made by Ld AR for the assessee is that the case is barred by limitation and penalty u/s 27ID is independent of assessment proceedings. We were of the considered view that assessee is bared by limitation and governed by section 275(1)(C) and it cannot be linked with 27ID because section 271 D is independent section where 1st limb of section in not applicable by the assessee and whereas second limb of section is applicable in

13 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT assessee case in case penalty was initiated on 07.08.2019 and from the end of 1st Sept 2019. In the present case, whereas the penalty was initiated on 03.03.2020 that is after 6 months, therefore it is barred by limitation. The LD AR relied on the decision of Delhi High Court in case of Subodh Kumar Bhargava vs CIT (2009) 309 ITR 31 (Del), the relevant observation held in paras no. 13, 14 which clearly explains the levy of penalty u/s 271B which is as independent assessment proceeding like 27ID also which is independent. From the facts and circumstances of the case, this bench has no hesitation to allow ground 2 based the ratio laid down in decision where ordering penalty u/s 27ID is barred by limitation."

“Even otherwise the initiation of penalty proceedings U/s 271D and 271E of the Act is based on the premises that the assessee has taken this amount of Rs. 3,36,000/- from one Shri Shreeram and it was also repaid by the assessee to the said person but since the receipt and payment was in cash, therefore, it was held to be in violation of provisions of Section 269SS and 269T of the Act. It is pertinent to note that when the explanation of the assessee that the said amount was deposited by the said person in the bank account of the assessee for the purpose of taking a D.D. in favour of the Excise Department for participating in the tender of liquor shops then it would not fall in the ambit of loan or deposits as contemplated in the provisions of Section 269SS and 269T of the Act. Therefore,

14 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT once it is not a loan taken by the assessee for his requirement but the explanation was accepted by the Assessing Officer that this amount was deposited by Shri Shreeram for his requirement of participating in the tender of the liquor shops then in absence of any fresh material or contrary record to show that the amount was taken as a loan by the assessee for assessee’s requirement, the penalty levied U/s 271D and 271E are not justified.”

In the present case also, the cash amount has been deposited by the employer of the assessee in his saving bank account maintained with Bank of Rajasthan Ltd. and immediately the exact amount is transferred from the bank account of the assessee to the bank account of his employer maintained with ICICI bank as is evident from the bank account of the assessee (PB 21-23) and ledger account of the assessee in the books of his employer M/s Choudhary Bhooramal H. Jatt (PB 26-27). The assessee has not been the beneficiary of this amount even for a single minute. Thus the amount credited in the bank account of the assessee in cash is “amanat” amount or the amount received in “trust” which is neither a loan nor a deposit. Hence, there is no contravention of section 269SS and consequently no penalty u/s 271D is leviable.

Hon’ble ITAT, Jaipur Bench in case of Late Sh. Om Prakash Choudhary ITA No.205/JP/2021 for AY 2010-11 order dt. 25.05.2022 (PB 51-54) after considering the above facts at Para 8.1 to 8.3 of the order, deleted the penalty at Para 8.4 of the order.

32.1 Unaccounted cash found in the course of searches carried out by the Income-tax Department is often explained by taxpayers as representing loans taken from or deposits made by various persons. Unaccounted income is also brought into the books of account in the form of such loans and deposits and taxpayers are also able to get confirmatory letters from such persons in support of their explanation.

32.2 With a view to countering this device, which enables taxpayers to explain away unaccounted cash or unaccounted deposits, the Finance Act has inserted a new section 269SS in the Income-tax Act debarring persons from taking or accepting, after 30th June, 1984, from any other person any loan or deposit otherwise than by an account payee cheque or account payee bank draft if the amount of such loan or deposit or the aggregate amount of such loan and deposit is Rs. 10,000 or more. This prohibition will also apply in cases where on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), and the amount or the aggregate amount

15 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT remaining unpaid is Rs. 10,000 or more. The prohibition will also apply in cases where the amount of such loan or deposit, together with the aggregate amount remaining unpaid on the date on which such loan or deposit is proposed to be taken, is Rs. 10,000 or more

Hon’ble Supreme Court in 255 ITR 258, 263 has also observed that the object of introducing sec. 269SS is to ensure that a taxpayer is not allowed to give false explanation for his unaccounted money, or if he has given some false entries in his accounts, he shall not escape by giving false explanation for the same. During search and seizures, unaccounted money is unearthed and the tax payer would usually give the explanation that he had borrowed or received deposits from his relatives or friends and it is easy for the so-called lender also to manipulate his records later to suit the plea of the taxpayer. The main object of s. 269SS was to curb this menace.

From the above it can be noted that the object for enacting section 269SS is to prohibit the tax payers in explaining the unaccounted cash found in course of search as representing loan taken from or deposit made by various persons. In the present case the genuineness of transaction is not in dispute, it is not a case of explaining any undisclosed income in garb of acceptance of loan or deposit and the AO himself has verified the source of such amount in the hands of M/s Choudhary Bhooramal H. Jatt. Hence it is not a case of bringing any unaccounted income in the bank account of the assessee and therefore even on the basis of the intent and purpose for which this section was brought into the statute, no adverse inference of violation of section 269SS is required to be drawn.

CIT Vs. Maheshwari Nirman Udyog (2008) 302 ITR 201(Raj.) (HC) The Hon’ble High Court at Para 6 to 9 of this judgment held as under:- 6. We have heard learned counsel for the parties. We have also gone through the orders of the Tribunal, Jodhpur Bench, Jodhpur, the CIT(A)-I, Jodhpur, as well as the order of the Dy. CIT, Bikaner. It is true that as per the provisions of s. 269SS of the Act, no person shall, after the 30th day of June, 1984, take or accept from any other person, any loan or deposit otherwise than by an account payee cheque or account payee draft, if such loan or deposit is of Rs. 20,000 or more. Accordingly, the payment, in the instant case, should have been made either by way of cheque or by way of bank draft. However, so far as question about imposition of penalty is concerned, s. 271D of the Act deals with the same. Sec. 273B provides that if the assessee proves that there was reasonable cause

16 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT for any failure, no penalty shall be imposable on the person or the assessee as provided under s. 271D of the Act. Sec. 273B of the Act provides as under:

"Notwithstanding anything contained in the provision of s. 271D, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure, referred to in the said provision if he proves that there was reasonable cause for the said failure."

"After careful consideration of the matter, I find that the appellant is a contractor doing business in a remote area of Nokha Tehsil. The appellant had to make spot payments to the labour, etc. and for that the appellant needed cash. Therefore, the appellant borrowed the money from sister concern at the work site. Therefore, it is only a technical breach of law and for a mere technical breach, no penalty is exigible. Therefore, the penalty levied by the Dy. CIT, Bikaner, is cancelled because the source of the deposits has not been disbelieved by the AO. Therefore, the penalty is cancelled."

"We have considered the rival submissions. The learned Authorised Representative. contended that the transactions between two sister concerns are not covered by the provisions of s. 269SS. For the purpose he has relied upon four judgments. In the case of Muthoot M. George Bankers vs. Asstt. CIT (1993) 47 TTJ (Coch) 434: (1993) 46 ITD 10 (Coch) it was held as under: ‘In the instant case, there was no evidence to show that money was loaned or kept deposited for a fixed period or repayable on demand. Further, the sister concerns and the assessee were owned by the same family group of people with a common managing partner with centralised accounts under the same roof. Transfer of funds had taken place in a whimsical manner. Therefore, it was rather difficult to say that the transactions were in the nature of deposits or loans with certain conditions attached to them, either as regards the period of such deposits or loans or with regard to their repayments. From the copies of the accounts furnished all that could be gathered was that funds had been transferred from and to the sister concerns as and when required and since the managing partner was common to all the sister concerns, the decision to transfer the funds from one concern to another concern or to repay the funds could be said to have been largely influenced by the same individual. In such circumstances of the case, the transactions inter se between the sister concerns and the assessee could not

17 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT partake of the nature of either ‘deposit’ or ‘loan’ though interest might have been paid on the same.’ Therefore, we find that the funds had been borrowed from the sister concern not at Nokha where the assessee had bank account but in Sriganganagar District for engagement of fresh labourers. Therefore, we agree with the contention of the learned Authorised Representative on this ground. The assessee had undertaken various sites at remote area at a time where no banking facilities are available and money was urgently required and there were no banks at the sites. This is considered to be a reasonable cause."

Sonia Verma Vs. ITO (2023) 200 ITD 1 (Chd.) (Trib.) Assessee sold her flat and received sale proceeds in cash on 5 different dates. Revenue levied penalty u/s 271D for violation of provision of section 269SS. Assessee contended various reasons for proving that said transaction was bonafide and genuine and in no way was related to evasion of tax; (i) she sold her flat for arranging funds for marriage of her daughter which was being

18 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT repeatedly postponed due to lack of funds (ii) buyer of property told assessee that he could not pay in lump sum on a single date and thus sales consideration was received in cash on 5 different dates (iii) assessee on account of medical infirmity of her husband travelled to Delhi to collect the sale proceeds on different dates and simultaneously made purchases for the wedding of daughter. Assessee also contended that she could not rely upon the purchaser to make payments by cheques which might or might not be honoured, that getting the amount deposited by way of RTGS/cheque in her Jagraon account and then travelling with cash withdrawn at Jagraon to Delhi to make purchases was considered to be unsafe/impractical and that there was a limit of cash withdrawals from ATMs. It was held that since assessee had successfully made out a case demonstrating that there was a reasonable cause for her to accept payments in cash on the specific dates, explanation offered by her was to be accepted. Therefore, impugned penalty was liable to be quashed.

PCIT Vs. Akash Infra-com-Projects (P.) Ltd. (2022) 289 Taxman 300 (Orissa) (HC) Where assessee had taken loan of Rs.1.25 crores in cash from its sister concerns and offered explanation that amounts were taken in cash for making labour payments at far off places and there was an urgency to do so, explanation offered by assessee was a reasonable explanation and therefore, penalty imposed u/s 271D r.w.s. 269SS was not justified.

Meera Devi Kumawat Vs. JCIT (2022) 193 ITD 250 (Jaipur) (Trib.) Assessee received substantial amount from her husband out of which Rs.3 lakhs were received in cash. Assessee claimed that Rs.3 lakhs were received in cash for purchase of plot and construction of residential house on it and same cannot be treated as loan in case of husband and wife as repayment was not mandatory and there was no element of interest. However, AO rejected assessee’s explanation and imposed penalty u/s 271D for contravention of section 269SS. It was held that assessee offered explanation that payment towards construction expenses like purchase of construction material and payment to labourers were required to be incurred in cash. Further all transactions including cash transactions were duly documented in registered sale deed. Also pooling of family funds was done by assessee due to her family’s requirement and as she doesn't have any known sources of funds. Since assessee offered a reasonable explanation justifying said cash transactions, penalty could not be levied u/s 271D for violation of section 269SS. 6. The observation made by the Ld. CIT(A) in its order are incorrect and irrelevant in as much as, as explained above, assessee has not taken any cash loan. The cash amount deposited in the bank account of the assessee by his employer is only an accommodation transaction done for the reasons stated above. Even if it is considered to a loan transaction, there is a reasonable cause for the same and the default is only technical which is saved by section 273B of the Act as held in various decision referred supra. The case laws relied by Ld. CIT(A) are not relevant in as much as the first four cases are with reference to the addition u/s

19 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT 68 of the Act. The next case is on a fact where the director of the company obtained cash loan from a financier and deposited the cash in the bank account which is not the facts of the present case. The last case is where the assessee failed to discharge its burden in proving that there was a reasonable cause in accepting the cash deposit from the staff members in its bank account which is also not the facts of the present case.

20 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT in Bhatinda District Coop. MIL P. Union Ltd. (supra) action must be initiated by the competent authority under the IT Act, where no limitation is prescribed as in s. 201 of the Act within that period of four years.

Further Hon’ble ITAT, Chennai Bench in case of RMG Benefit Fund Ltd. Vs. ACIT (2018) 53 CCH 0269 has held that penalty proceeding should have been initiated within reasonable time even though no limitation was provided in Income-tax Act. Threat of initiating penalty proceeding could not be allowed to hang over head of assessee for an unreasonable period of time. There should be an end to proceeding, that also within a reasonable period. Penalty proceeding initiated by AO after expiry of almost six years was barred by limitation. Further reliance is placed on the decision of Hon’ble Delhi High Court in case of Clix Capital Services (P) Ltd. Vs. JCIT (2023) 225 DTR 232 where it is held that it is apparent that while a timeframe has been provided for the conclusion of penalty proceedings once initiated, there is no indication as to when the period of six months ought to commence. Initiation of penalty proceeding cannot be left to the whims and fancies of the revenue and it should be hitched to the dicta of "reasonable period" adopted by Courts in such situations, in the absence of a statutory provision. In this case, the initial return qua the assessment year in issue i.e., AY 2007-08 was filed on 31st March, 2007, revised return was filed on 31st March, 2009 and scrutiny assessment u/s 143(3) was framed on 28th Oct., 2011. Show-cause notice dt. 9th Nov., 2017 is woefully delayed and hence deserves to be quashed.

In the present case also, the transaction which is alleged to be in violation of section 269SS of the Act took place in the month of November and December 2009. Thereafter AO issued u/s 148 dated 31.03.2017 and completed the assessment on 23.08.2017 where he stated to refer the matter for imposition of penalty u/s 271D. Even then the notice for imposition of penalty u/s 271D was issued on 07.08.2019 i.e. after about 2 years when the AO took the view that matter should be referred for levy of penalty u/s 271D. Hence when the penalty proceedings are initiated after 9 years of the date of transaction, the penalty so levied is bad in law.

In view of above, penalty of Rs.31,78,000/- confirmed by Ld. CIT(A) is uncalled for and be directed to be deleted.”

21 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT

book and the same is extracted here in below :

S. No. Particulars Pg No. Filed before AO/CIT(A) 1 Copy of submission filed before Ld. CIT(A) 1-14 CIT(A) 2 Copy of Index of Paper Book filed before Ld. CIT(A) 15 CIT(A) 3 Copy of acknowledgement of return along with computation of total 16-17 Both income 4 Copy of replies filed during the course of assessment proceedings 18-20 Both 5 Copy of bank statement of assessee 21-23 Both 6 Copy of notice dt. 18.07.2017 issued u/s 133(6) of IT Act to M/s 24 Both Chaudhary Bhooramal H. Jatt 7 Copy of reply filed by Chaudhary Bhooramal H. Jatt, Jhalra Patan 25 Both in response to above notice 8 Copy of ledger account of assessee in the books of Chaudhary 26-27 Both Bhooramal H. Jatt J. Patan 9 Copy of show cause notice dt. 07.08.2019 issued u/s 271D of IT 28 Both Act 10 Copy of show cause notice dt. 10.10.2019 issued u/s 271D of IT 29-30 Both Act 11 Copy of assessee’s reply dt. 21.10.2019 in response to above 31-32 Both show cause notice 12 Copy of Hon’ble ITAT, Jaipur Bench order dt. 25.05.2022 in case 33-54 Both of Late Sh. Om Prakash Choudhary vs. JCIT ITA No. 205/JP/2021

written submission and submitted that the penalty proceeding are

independent of assessment proceeding. In the present case the transaction

is alleged to be in violation of section 269SS of the Act took place in the

month of November and December 2009. Thereafter AO issued notice u/s.

148 and completed the assessment on 23.08.2017. Considering the facts of

22 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT the case the penalty proceedings initiated is barred by limitations. He

further submitted that when the transaction are reflected in the account of

both the parties the same are not in violation of provision of section 269SS

of the Act.

authorities and more particularly advanced the similar contentions as stated

in the order of the ld. CIT(A). Considering the provision of section 275 of the

Act the ground of limitation is required to be dismissed. As regards the

merits of the case the assessee has not placed on record the complete

details the finding of the lower authority be confirmed as the assessee has

violated the provision of specific section of acceptance of cash and there is

no such excuse in the law and therefore, the penalty levied should be

sustained.

record and gone through the various judicial precedents cited by both the

parties to drive home to their respective contentions. The case law cited by

the ld. AR of the assessee have been persuaded but considering the

findings of the lower authority in this case the same are different on facts

23 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT and considering the discussion recorded by us the same are not applicable

with the facts of the case. Thus, in this case the bench noted the assessee

has disputed the levy of penalty of Rs. 31,78,000/- by the ld. AO and the

relevant finding on the issue by the ld. AO is as under:-

“9. Further, the assessee has emphasized on his ignorance of the law, genuineness of transaction and acceptance of loan/deposits from employer. In relation to ignorance of law. submission of assessee is not acceptable because, Sh. Ashok Kumar Porwal is an employee of Chaudhary Bhuramal H.Jat, Jhalarapatan and relation between the two assessees do not give any right for violation of any of the provisions of Income Tax Act such as 26955 in the instant case. So far as the genuineness of the transaction is concerned the AO has considered these transactions violative of the law and referred the same for imposition for penalty. Moreover, section 26955 does not provide any immunity to cash transaction. 10. Moreover, no reasonable cause for taking cash loan has been submitted by the assessee, because, there is no evidence have been furnished by the assessee showing the urgency or necessity of cash amount / loan taken or accepting in cash. The assessce should have managed his affairs/requirement in such a manner that the prevalent law might have been followed. Therefore, fact/reply given by the assessee are differentiable on facts and circumstances from realty of the assessee's case.”

9.1 Whereas the finding on facts in the order of the ld. CIT(A) is also

relevant to understand the issue on hand and therefore, the same is

reiterated here in below:-

“7.2 During the course of penalty proceedings appellant's contention that he has not taken any cash loan and cash deposit in Bank account was only an accommodation transaction done was not accepted by Joint Commissioner of Income Tax, Range-1, Kota for the reason that no reasonable cause for taking cash loan has been submitted by the appellant because no there is no evidence have been furnished by the appellant showing the urgency or necessity of cash

24 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT amount/loan taken or accepting in cash. The onus was on the appellant to prove the same. However, the appellant could not prove.”

9.2 Thus, on the merits of the case there is no evidence that the

assessee has not violated the provisions of section 269SS of the Act and

therefore, there is no factual error on the part of the lower authority. But as

regards the contention of the ld. AR of the assessee that these transactions

are not loan and accommodative transactions between the assessee and

his employer. But the bench noted that on issue there is not material

evidence made available by the ld. AR of the assessee. The ld. AR of the

assessee has placed on record only the ledger account at page 26-27 of his

paper book. From that it is not clear whether the said transactions are

considered as loan or the accommodative transactions or sales. It is also

not clear whether the employer has received the cheque amount as sales

consideration or as the amount as loan to employee in the books of the

employer. This basic finding of the fact is not emanating from the records

made available. Therefore, bench feels that the ld. AO in the interest of

justice bring necessary evidence as to whether the transaction are on

account of sales or on account of loan recorded will decide the applicability

of the provision of section 269SS of the Act. It is also not clear as to

whether the provision of section 269T is initiated at the other hand or not.

25 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT Thus, fasting the liability on the assessee without bringing all the relevant

facts on record is not correct and therefore, we are of the considered view

that let the ld. JCIT should after giving proper opportunity to the assessee to

decide the issue afresh but by providing adequate opportunity of being

heard. The assessee is also directed not to take unnecessary adjournment

on frivolous ground and submit the documents concerning the issue in

question. Thus the appeal of the assessee is allowed for statistical

purposes in ground no. 1.Before parting, we may make it clear that our

decision to restore the matter back to the file of the AO shall in no way be

construed as having any reflection or expression on the merits of the

dispute, which shall be adjudicated by the JCIT/AO independently in

accordance with law.

order on limitation stating that the order passed by the lower authority

ordering the levy of the penalty was barred by limitation in accordance with

the provision of section 275(1)(c) of the Act. Therefore, it is relevant to

extract the provision of the said section and the same is as under:

Bar of limitation for imposing penalties. 275. (1) No order imposing a penalty under this Chapter shall be passed— (a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the58-59[Joint Commissioner (Appeals) or to the] Commissioner

26 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT (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 the58-59[Joint Commissioner (Appeals) or 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 that in a case where the relevant assessment or other order is the subject-matter of an appeal to the60[Joint Commissioner (Appeals) or to the] Commissioner (Appeals) under section 246 or section 246A, and60[the Joint Commissioner (Appeals) or] 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 of60[the Joint Commissioner (Appeals) or] 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. (1A) In a case where the relevant assessment or other order is the subject-matter of an appeal60[to the Joint Commissioner (Appeals) or] to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253 or an appeal to the High Court under section 260A or an appeal to the Supreme Court under section 261 or revision under section 263 or section 264 and an order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty is passed before the order of60[the Joint Commissioner (Appeals) or] the Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Supreme Court is received by the Principal Chief Commissioner or Chief Commissioner or the Principal Commissioner or Commissioner or the order of revision under section 263 or section 264 is passed, an order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty may be passed on the basis of assessment as revised by giving effect to such order of60[the Joint Commissioner (Appeals) or] the Commissioner (Appeals) or, the Appellate Tribunal or the High Court, or the Supreme Court or order of revision under section 263 or section 264:

27 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT Provided that no order of imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty shall be passed— (a) unless the assessee has been heard, or has been given a reasonable opportunity of being heard; (b) after the expiry of six months from the end of the month in which the order of61[the Joint Commissioner (Appeals) or] the Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Supreme Court is received by the Principal Chief Commissioner or Chief Commissioner or the Principal Commissioner or Commissioner or the order of revision under section 263 or section 264 is passed: Provided further that the provisions of sub-section (2) of section 274 shall apply in respect of the order imposing or enhancing or reducing penalty under this sub- section. (2) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any action initiated for the imposition of penalty on or before the 31st day of March, 1989. Explanation.—In computing the period of limitation for the purposes of this section,— (i) the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129; (ii) any period during which the immunity granted under section 245H remained in force; and (iii) any period during which a proceeding under this Chapter for the levy of penalty is stayed by an order or injunction of any court, shall be excluded.

Thus, now on the rival contention that based on that set of facts the

provision of section 275(1)(c) will apply or 275(1)(a) will apply. On this

issue we note that there is judgment of HIGH COURT OF ANDHRA

PRADESH in the case of Seetharama Lakshmi Rice & Groundnut Oil Mill

Contractors Co. Vs. Income-tax Officer reported at 111 ITR 212 (AP) where

in on the similar issue the court observed as under :

28 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT

Section 275 was substituted by the Taxation Laws (Amendment) Act, 1970, with effect from April 1, 1971. Earlier it was not so elaborate as the present provision; it contained only one provision which is practically the same as the present clause (b) excepting the words "from the end of the financial year". Under the old section two years' period was fixed from the time when the proceedings, in the course of which action for imposition of penalty was initiated, have been completed. It can easily be seen that it was in general terms, possibly covering within its sweep many possibilities. Evidently Parliament, while recasting the section, was anxious to plug very many loop-holes and escape valves for imposition of penalty. That is why in the present section it has endeavoured to make a detailed provision. It is better to extract the section first. It is as follows: "No order imposing a penalty under this Chapter shall be passed— (a)in a case where the relevant assessment or other order is the subject-matter of an appeal to the Appellate Assistant Commissioner under section 246 or an appeal to the Appellate Tribunal under sub-section (2) of section 253, after the expiration of a period of— (i)two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or (ii)six months from the end of the month in which the order of the Appellate Assistant Commissioner or, as the case may be, the Appellate Tribunal is received by the Commissioner, whichever period expires later; (b)in any other case, after the expiration of two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed." It is immediately seen that it divides cases into two categories, one category covering cases where the relevant assessment or other order is the subject-matter of an appeal and all other cases coming under the second category. Clause (a) deals with the first category and clause (b) with the second category. In order to bring a case within the ambit of clause (a) there should have been an appeal to the Appellate Assistant Commissioner under section 246 or an appeal to the Appellate Tribunal under section 253(2). Section 246 covers many cases including orders of assessment, reassessment or recomputation and an order imposing a penalty under section 271 and other provisions. In its turn, section 253 provides for appeals to the Appellate Tribunal against orders passed by the Appellate Assistant Commissioner in regard to the matters mentioned therein. If there has been an appeal against the assessment or other order, the period of limitation for imposing penalty under clause (i) is two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed. Since this condition is satisfied and there was an appeal to the Appellate Assistant Commissioner who remanded the matter back to the Income-tax Officer, it was contended for the department that the present case comes within clause (i). On the other hand, learned counsel for the assessee asserted thatthe relevant assessment order postulated by clause (a ) is the original assessment and not the later assessment order passed by the Income-tax Officer after remand.

29 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT

Since the original assessment order was made on 27th of December, 1969, the imposition of penalty on 23rd of December, 1972, is clearly barred by limitation. He further pointed out that clause (i) has no application because there was no further appeal against the remand order. That is why, he argued, clause (ii) would apply to the case. He placed reliance on Sarangpur Cotton Manufacturing Co. Ltd. v. Commissioner of Income-tax [1957] 31 ITR 698 (Bom), K. Gopalaswami Mudaliar v. Fifth Additional Income-tax Officer [1963] 49 ITR 322 (Mad) and Shadilal Sugar and General Mills v. Union of India [1972] 85 ITR 363 (All) in support of his contention that it was the first assessment that was postulated by clause (a). A broad analysis of the section would show that wherever there has been an appeal against the assessment or other order, be it an appeal to the Appellate Assistant Commissioner or to the Appellate Tribunal, as the case may be, and if the matter reached a finality with the order of either authority, the period as fixed by sub-clause (ii) of clause (a) is six months from the end of the month in which the aforesaid final order is received by the Commissioner. The Commissioner being in overall superintendence over these matters and since he can examine the regularity of these proceedings, six months' time was fixed from the end of the month in which the order was received by him. In cases where the proceedings are not completed with the order of the Appellate Assistant Commissioner or the order of the Appellate Tribunal, patently clause (ii) would have no application. Supposing the Appellate Assistant Commissioner or the Appellate Tribunal has remanded the case back to the Income-tax Officer and that officer completes the proceeding, as it has happened in this case, then it would be unreasonable to bring such a case within the scope of sub-clause (ii). No doubt, Sri Dasaratharama Reddy argued that even where the matter was remitted back to the Income-tax Officer, he was expected to complete the proceeding within six months and that is the very purpose for which that period has been fixed. Otherwise, so the learned counsel urged, it would result in giving unlimited time to the Income-tax Officer to complete a proceeding and such a situation could never be the intention of Parliament. There is no reason to suppose that the Income-tax Officers would unnecessarily and unduly delay the disposal of assessments and other cases pending before them. On the other hand, quick disposal of such cases appears to be the intention of the entire Act. Where in the appeal the appellate authority sends back the matter to the Income-tax Officer, then the case squarely walks into the ambit of sub-clause (i). In such a case all the requirements of sub-clause (i) of clause (a) are satisfied. The relevant assessment order has been the subject-matter of an appeal, action for imposition of penalty has been initiated in the course of the assessment proceedings and those proceedings have been completed by the Income-tax Officer. In such a case, the imposition can be levied within a period of two years from the end of the financial year in which the proceedings are completed. It is important to note that sub-clause (i) uses the words "the proceedings.........are completed". The contrast between these words and the words "assessment or other order" should be particularly noted. Clause (a) and sub-clause (ii) use the word "order" while sub-clause (i) keeps the position in a broad manner by what we feel the deliberate use of the words "the proceedings……..are completed" It is reasonable to gather the intention of Parliament from this that not merely passing an

30 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT

order but the completion of the proceeding as such is the crucial aspect, and the period of limitation under sub-clause (i) starts from the end of the financial year in which these proceedings reached the stage of completion. Thus, sub-clauses (i) and (ii) provided for two classes of cases where there has been an appeal. It is also worthy of note that after the two sub-clauses, the words "whichever period expires later" occur. Evidently, Parliament thought that certain matters may be governed by both the sub-clauses and in such an eventuality the longer period must be taken. The cases where there has been no appeal are governed by clause (b). We are not much concerned in this case with the import of the Explanation to the section. Applying the above analysis to the facts of the present case, there has been an appeal preferred by the assessee against the first assessment, thereby satisfying the requirement of main clause (a). The assessment proceedings, in the course of which action for imposition of penalty has been initiated, were completed only when the Income-tax Officer made a fresh assessment on 25th of July, 1972. By no stretch of imagination could it be said that they ware completed by the original assessment order of 1969 or the order of the Appellate Assistant Commissioner remitting the matter back to the Income-tax Officer. The statement of facts disclose that there was no further appeal against the assessment made by the Income-tax Officer after remand. Logically, it should follow that the assessment proceedings were completed on 25th July, 1972, on which day the fresh assessment was made.

In this connection, it would be material to note that the Appellate Assistant Commissioner, while allowing the appeal, completely set aside the original assessment made by the Income-tax Officer and sent back the matter. With the result, the original assessment was no more in existence and a new assessment came into being after remand on 25th of July, 1972. Section 251 confers the power of annulling an assessment while disposing of an appeal. It was this power that the Appellate Assistant Commissioner exercised while setting aside the assessment made by the Income-tax Officer. Clause (a) of section 251 further empowers the Appellate Assistant Commissioner to refer the case to the Income-tax Officer for making fresh assessment and the Income-tax Officer shall thereupon proceed to make such fresh assessment and determine, where necessary, the amount of tax payable on the basis of such fresh assessment. In this case when the Income-tax Officer made a fresh assessment after remand, the proceeding came to an end and there was no further appeal. We are thus satisfied that this matter is covered by sub-clause (i) and not by sub-clause (ii). Sub- clause (ii) would have applied had the matter ended with the Appellate Assistant Commissioner finally disposing of the case.

Even supposing for argument's sake that the expression "the relevant assessment order" occurring in clause (a) refers to the second and fresh assessment made by the Income-tax Officer after remand, since there was no appeal thereagainst, the case must then walk into the realm of clause (b), in which eventuality also the imposition of penalty would be within the limitation because that was done after the expiration of two years

31 ITA No. 572/JP/2023 Sh. Ashok Kumar Porwal vs. JCIT from the end of the financial year in which the proceedings are completed. In such a case, the proceedings are completed with the fresh assessment order. Either way, we are satisfied that there is no bar of limitation for the imposition of penalty.

On being consistent to the view so taken we are of the considered view that

looking to the present set of facts and circumstances the provision of

section 275(1)(a) will apply so we see no merits in the arguments advanced

by the ld. AR of the assessee and therefore, the ground no. 2 raised by the

assessee stands dismissed.

In the result, appeal of the assessee is partly allowed.

Order pronounced in the open court on 19/12/2023. Sd/- Sd/- ¼ lanhi xkslkbZ ½ ¼ jkBkSM deys’k t;arHkkbZ ½ (Sandeep Gosain) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 19/12/2023 *Ganesh Kumar, PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Sh. Ashok Kumar Porwal, Jhalawar izR;FkhZ@ The Respondent- JCIT, Range-1, Kota 2. vk;dj vk;qDr@ The ld CIT 3. 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File (ITA No. 572/JP/2023) vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत