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2013 DIGILAW 73 (RAJ)

Commissioner of Income v. Jitendra Singh Rathore

2013-01-10

ARUN BHANSALI, DINESH MAHESHWARI

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JUDGMENT 1. - This appeal under section 260A of the Income-tax Act, 1961 ("the Act"), has been preferred by the Revenue against the judgment dated September 22, 2006, passed by the Income-tax Appellate Tribunal, Jodhpur Bench, Jodhpur ("the Tribunal"), relating to the assessment year 2001-02. 2. The appeal was admitted on the following question of law : "Whether, on the facts and in the circumstances of the case as well as in the law, the learned Tribunal was justified in deleting the penalty under section 271D holding that the penalty was not imposed within the prescribed period under section 275(1)(c) from the date of initiation by the Assessing Officer ignoring the legal provision that the authority competent to impose penalty under section 271D was the Joint Commissioner and, hence, the period of limitation should be reckoned from the issue of first show cause by the Joint Commissioner ?" 3. Briefly stated the facts are that the assessee, an individual, derives income from his two proprietary concerns. The assessment proceedings under section 143(3) of the Act were completed on March 25, 2003. The Assessing Officer ("the AO") noticed that the assessee had accepted cash loans exceeding the limit specified under section 269SS to the tune of Rs.4,00,000; and the same being in contravention of section 269SS, initiated the penalty proceedings under section 271D of the Act. The show cause notice in this regard was served on the assessee on March 27, 2003. Thereafter, the matter was referred to the Joint Commissioner of income-tax, Range-2, Udaipur, on March 22, 2004, who was the competent authority under section 271D to impose such penalty. The Joint Commissioner of Income-tax came to the conclusion, by his order dated May 28, 2004, that the assessee was liable for penalty under section 271D of the Act and imposed a penalty of Rs. 4,00,000 being the sum equal to the loan/deposit accepted in contravention of the provisions of section 269SS of the Act. 4. Feeling aggrieved, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), Udaipur ("the CIT(A)"), who, by the order dated March 29, 2005, allowed the appeal while holding that the penalty proceedings were barred by limitation. 4,00,000 being the sum equal to the loan/deposit accepted in contravention of the provisions of section 269SS of the Act. 4. Feeling aggrieved, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), Udaipur ("the CIT(A)"), who, by the order dated March 29, 2005, allowed the appeal while holding that the penalty proceedings were barred by limitation. The Commissioner of Income-tax (Appeals) came to the conclusion that for penalty proceedings under section 271D of the Act, the period of limitation prescribed under section 275(1)(c) was applicable and not the limitation prescribed under section 275(1)(a) because the penalty proceedings were not dependent on the assessment and, therefore, the penalty proceedings stood barred by limitation on September 30, 2003. 5. Dissatisfied with the order dated March 29, 2005, so passed by the Commissioner of Income-tax (Appeals), the Revenue preferred an appeal before the Tribunal, who came to the conclusion that the matter called for no interference and, hence, dismissed the appeal by the impugned order dated September 22, 2006. 6. Assailing the order impugned, it has been contended on behalf of the appellant that the penalty proceedings under section 271D of the Act could not have been taken as barred by limitation because the authority competent to impose such penalty was the Joint Commissioner of Income-tax and the period of limitation would be reckoned only from the date of issue of show-cause notice by the Joint Commissioner. It is submitted that in the present case, the Joint Commissioner issued the notice for the penalty proceedings after the matter was referred to him on March 22, 2004; and, hence, the order passed by him on May 28, 2004, could not have been considered barred by limitation. Nobody has appeared for the respondent despite service. 7. After having given thoughtful consideration to the submissions made on behalf of the appellant and having examined the record, we are clearly of the view that this appeal remains meritless and the formulated question deserves to be answered against the appellant particularly for the view already taken by this court in the case of CIT v. Hissaria Bros. 7. After having given thoughtful consideration to the submissions made on behalf of the appellant and having examined the record, we are clearly of the view that this appeal remains meritless and the formulated question deserves to be answered against the appellant particularly for the view already taken by this court in the case of CIT v. Hissaria Bros. reported at (2007) 291 ITR 244 (Raj), wherein, this court has specifically held as under (page 257) : "We are, therefore, of the opinion that since penalty proceedings for default in not having transactions through the bank as required under sections 269SS and 269T are not related to the assessment proceeding but are independent of it, therefore, the completion of appellate proceedings arising out of the assessment proceedings or the other proceedings during which the penalty proceedings under sections 271D and 271E may have been initiated has no relevance for sustaining or not sustaining the penalty proceedings and, therefore, clause (a) of sub-section (1) of section 275 cannot be attracted to such proceedings. If that were not so clause (c) of section 275(1) would be redundant because otherwise as a matter of fact every penalty proceeding is usually initiated when during some proceedings such default is noticed, though the final fact finding in this proceeding may not have any bearing on the issues relating to establishing default e.g. penalty for not deducting tax at source while making payment to employees, or contractor, or for that matter not making payment through cheque or demand draft where it is so required to be made. Either of the contingencies does not affect the computation of taxable income and levy of correct tax on chargeable income; if clause (a) was to be invoked, no necessity of clause (c) would arise." 8. In the present case, the notice for issuance of the penalty proceedings under section 271D of the Act for the alleged contravention of provisions of section 269SS was issued to the assessee, of course by the Assessing Officer, on March 25, 2003. Even if the matter had otherwise been in appeal before the Commissioner of Income-tax (Appeals) against the original assessment order and the appeal was decided on February 13, 2004, the same was hardly of relevance so far the penalty proceedings under section 271D were concerned. As held by this court in Hissaria Bros. Even if the matter had otherwise been in appeal before the Commissioner of Income-tax (Appeals) against the original assessment order and the appeal was decided on February 13, 2004, the same was hardly of relevance so far the penalty proceedings under section 271D were concerned. As held by this court in Hissaria Bros. (2007) 291 ITR 244 (Raj) , completion of appellate proceedings arising out of assessment proceedings has no relevance over sustaining such penalty proceedings. As held clearly by this court, in such a matter, clause (c) of section 275(1) would be applicable. Section 275(1)(c) could be noticed as under : "275. Bar of limitation for imposing penalties. - (1) No order imposing a penalty under this Chapter shall be 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." 9. 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. 10. 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 here in above, for the proceedings having been initiated on March 25, 2003, the order passed by the Joint Commissioner under section 271D 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. 11. Consequently, the appeal fails and is, therefore, dismissed. *******