PCIT-7 Vs Thapar Homes Ltd. (Delhi High Court)
Summary: The Delhi High Court in Pr. Commissioner of Income Tax-7 Vs Thapar Homes Ltd. dismissed the Revenue’s appeal concerning Assessment Year 2008-09 and upheld the cancellation of penalty proceedings initiated under Section 271D of the Income-tax Act, 1961. The Court held that the penalty order dated 30 December 2011 was barred by limitation under Section 275(1)(c), since the permissible period had expired on 30 June 2011. The Division Bench comprising Justice Rajiv Shakdher and Justice Girish Kathpalia rejected the Revenue’s contention that limitation should commence only when the competent penalty authority subsequently issued a notice. Following its earlier decision involving the same assessee, the Court reiterated that the Revenue cannot extend a statutory limitation period by delaying issuance of a penalty notice after proceedings have already been initiated.
The dispute arose from an assessment involving monies allegedly accepted by the assessee from 29 parties. The Revenue stated that these transactions resulted in additions aggregating ₹16,69,53,000 under Sections 69C and 68. While passing the assessment order dated 31 December 2010, the Assessing Officer initiated penalty proceedings under Sections 271D, 271E and 271AAA. Section 271D provides for a penalty equivalent to the amount of loans, deposits or specified sums accepted in contravention of Section 269SS, which prescribes the permissible modes of accepting such amounts. The Commissioner of Income Tax (Appeals) held that the penalty order dated 30 December 2011 was time-barred, and the Income Tax Appellate Tribunal sustained that conclusion in its order dated 23 November 2021.
The High Court examined the two alternative limitation periods prescribed under Section 275(1)(c). The financial year in which the relevant assessment proceedings concluded ended on 31 March 2011, while six months from the end of the month in which penalty proceedings were initiated expired on 30 June 2011. Since the statute permits the later of these two dates, 30 June 2011 was the applicable deadline. The penalty order was admittedly passed on 30 December 2011, approximately six months after that deadline.
The Revenue argued that the Assessing Officer was not competent to impose the relevant penalty and that the limitation period should therefore be calculated from 13 June 2011, when the Additional Commissioner of Income Tax issued the penalty notice. On that basis, it contended that the limitation period expired on 31 December 2011 and that the penalty order passed one day earlier was valid. The High Court rejected this interpretation by relying upon its earlier judgment in PCIT Vs Thapar Homes Limited, ITA 19/2021, neutral citation 2023:DHC:7808:DB.
In the earlier judgment, the Court had explained that allowing limitation to run from the date selected by the penalty authority for issuing notice would enable the Revenue to extend statutory deadlines at its discretion. It also noted that the Assessing Officer had obtained prior approval from the Additional Commissioner before initiating the proceedings through the assessment order dated 31 December 2010. The subsequent notice issued on 13 June 2011 could not extend the limitation period, which had expired by 30 June 2011. Applying that reasoning, the High Court found no reason to interfere with the Tribunal’s order and closed the appeal because no substantial question of law arose for consideration.
List of Cases Discussed:
1. PCIT Vs Thapar Homes Limited, ITA 19/2021, 2023:DHC:7808:DB (Delhi High Court): Followed by the Court. The earlier decision involving the same assessee held that the Revenue could not extend the limitation prescribed under Section 275(1)(c) by delaying issuance of the penalty notice after the Assessing Officer had already initiated proceedings.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. This appeal concerns Assessment Year (AY) 2008-09.
2. Via the instant appeal, the appellant/revenue seeks to assail the order dated 23.11.2021 passed by the Income Tax Appellate Tribunal [in short „Tribunal‟].
3. The record shows that the Tribunal was called upon to adjudicate on two appeals filed by the appellant/revenue, against orders dated 09.09.2016 and 28.10.2016 passed by the Commissioner of Income Tax (Appeals) [in short, “CIT(A)”] for AY 2008-09.
4. The record also discloses that the penalty proceedings were initiated against respondent/assessee for violating the provisions of Section 271D of the Income Tax Act, 1961 [in short „the Act‟]. Section 271D is tied in with the provisions of Section 269SS of the Act.
5. Thus, if the person takes or accepts any loan or deposit or specified sums in contravention of Section 269SS, he is liable to pay penalty equivalent to the sum taken or accepted as loan or deposit or specified sum.
6. Section 269SS of the Act, inter alia, discloses that no person shall take or accept loan or deposit or specified sum otherwise than by an account payee cheque or account payee bank draft or through the Electronic Credit System via a bank account.
7. The case of the appellant/revenue was that the respondent/assessee had accepted monies from 29 parties, which led to addition of Rs. 16,69,53,000/- under Section 69C and 68 of the Act.
8. Accordingly, against this backdrop, the Assessing Officer (AO) initiated penalty proceedings under Section 271D, 271E, and 271AAA.
9. The record shows that the CIT(A) via order dated 29.09.2016 ruled in favour of the respondent/assessee on the ground that the penalty order dated 30.12.2011 was barred by the limitation. This view has been sustained by the Tribunal via the impugned order.
10. As indicated above, while framing the assessment order dated 31.12.2010, the AO initiated penalty proceedings under Section 271D, 271E and 271AAA.
11. Therefore, in terms of the provisions of Section 275(1)(c), the penalty order could have been passed either before the expiry of the Financial Year [FY] in which proceedings in the course of which action for imposition of penalty was initiated is completed or within six months from the end of the month in which action for imposition of penalty was initiated, with the caveat that the appellant/revenue had the benefit of taking advantage of whichever period expired later.
12. In the facts that obtain in the instant case, the FY in the course of which the quantum proceedings, in the course of which the penalty proceedings were initiated, concededly culminated on 31.03.2011. On the other hand, the period of six months from the end of the month in which action for imposition of penalty was initiated ended on 30.06.2011.
13. Concededly, the penalty order was passed way beyond the later date i.e., 30.06.2011.
13.1 The record discloses that the penalty order was passed on 30.12.2011.
14. Mr Ruchir Bhatia, Senior Standing Counsel, who appears on behalf of the appellant/revenue, says that the AO was not empowered to pass the penalty order under the provisions referred to hereinabove.
14.1 Mr. Bhatia places reliance on Section 271E(2), which provides that the penalty imposable under sub-section (1) of the said section shall be imposed by the ACIT.
14.2 It is based on the language of sub-section (2) of section 271E that Mr. Bhatia argues that the AO could not have triggered the penalty proceedings and hence, the limitation would commence, as prescribed, only from the date when the ACIT issued the notice, i.e., 13.06.2011.
14.3 Therefore, based on this line of argument, Mr. Bhatia says that the limitation in this case expired only on 31.12.2011, and since the penalty order was passed on 30.12.2011, it was within the prescribed period of limitation, as being the latter of the two dates, as indicated in Section 275 (1) (c) of the Act.
15. We may note that the very same issue stands concluded against the appellant/revenue via the decision rendered by this Court in ITA 19/2021 titled as PCIT vs. Thapar Homes Limited, 2023:DHC:7808:DB. The following observations made in the aforesaid judgment in this behalf, being relevant, are extracted hereafter:
“17. In our view, this argument, if accepted, would lead to absurdity, the reason being that once the appellant/ revenue decides to trigger penalty proceedings against the respondent/ assessee, it is incumbent upon them to keep an eye on the limitation period prescribed under Section 275 (1) (c) of the Act.
18. If the limitation period is connected to when the concerned officer issues notice, then the appellant/ revenue can extend the period of limitation, way beyond the timeline prescribed in Section 275 (1) (c).
19. We are clearly of the view that the notice issued by the JCIT on 13.06.2011 could not have extended the period of limitation, as prescribed under Section 275 (1) (c) of the Act.
20. In this case, what is required to be brought to the forefront is that the AO had taken prior approval of the ACIT, who is equal in rank to the JCIT, before triggering the penalty proceedings. Thus, although the decision to initiate penalty proceedings is found embedded in the assessment order dated 31.12.2010 and approval to frame the assessment order was given prior to the said date, the notice was issued only on 13.06.2011.
20.1 Even though this may be an additional factor in this particular case, our reasons for holding the limitation period as prescribed under Section 275 (1) (c) of the Act had expired latest by 30.06.2011, is not confined only to this aspect of the matter. The appellant/ revenue, as noticed above, cannot extend the period of limitation by deciding at its whim and fancy when the notice has to be issued. The notice under Section 274 should have been issued before the period of limitation, as discussed above.
21. Thus, for the foregoing reasons, the question of law which has been framed is answered against the appellant/ revenue and in favour of the respondent/ assessee.
22. The appeal is disposed of, in the aforesaid terms.”
16. Therefore, in our opinion the impugned order requires no interference.
17. Given the aforesaid position, the appeal is closed as no substantial question of law arises for consideration.
