Section 271D cannot be imposed after expiry of larger period of limitation

Jagdish Chandra Suwalka Vs JCIT (ITAT Jaipur)

ITAT observed that the provisions contained u/s 275(1)(a)are not applicable on the facts of present case for the reason that undisputedly no appeal has been filed against the assessment order passed on 28.12.2017. Therefore, it cannot be said that the relevant assessment or other order was subjected to some appellate proceeding. Consequently, the extended period of limitation of 6 months from the availability of the appellate order, will not be available to the revenue. But otherwise also, the computation of the income has no bearing over the imposition or otherwise of the penalty provided u/s 271D and 271E of the Act.

For the same reason section 275 (1)(b) is also not applicable in as much as the assessment order was not subjected to Revision u/s 263 or u/s 264. Now coming to section 275(1)(c), we find that two types of limitations are provided therein viz, (1) 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 (2) six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later.

Thus, a penalty u/s 271D could not be imposed after the expiry of the larger period of limitation. In this case, we find that the ld. JCIT in the impugned penalty order has clearly observed that the assessment for A.Y 2015-16 was completed by the AO (ACIT Tonk) vide assessment order dated 28.12.2017 u/s 147/143(3) of the Act. The ld. JCIT also referred to the observation made by the AO that the assessee had received cash payment of Rs.47,50,000/- from various persons as per details given, which are in contravention of Sec.269SS of the IT Act. Thus, the relevant proceedings were the assessment proceedings during the course of which, the default of accepting cash over the prescribed limit was noted by the AO and since the assessment proceedings were completed on 28.12.2017, the related financial year ended on 31.03.2018. Accordingly, the first time limit thus expired on 31.03.2018. For the second time limit, an action for imposition of penalty was taken on 28.12.2017 by the AO, when the assessment was completed and six months from end of that month expired on 30.06.2018 which time limit clearly expires later. Hence, the penalty u/s 271D could have been validly imposed only on before 30.06.2018 as against which, in this case, the impugned penalty was imposed much later on 28.05.2019 hence, the same is clearly barred by limitation. The ld. D/R however, contended that for this period of 6 months has to be reckoned from the date of issue of show cause notice by the ld. JCIT, who was the competent Authority to impose a penalty u/s 271D and since he issued the notice on dated 06.11.2018 and imposed the penalty on 28.05.2019 itself, which was well within the period of 6 month from the month in which action for imposition of penalty was taken. The ld. A/R however, strongly contended that for this purpose the observation made by the AO in the assessment order has to be considered and the date of the assessment order being 28.12.2017 was relevant and therefore, the period of 6 months has to be reckoned from that date. Consequently, the limitation from that date the limitation had already expired.

ITAT find that the issue involved in the present case is fully covered by the decision of Hon’ble Jurisdictional High Court in the case of CIT vs. Hissaria Bros. (Supra).The same has been affirmed by the Hon’ble Apex Court in the case of CIT Vs. Hissaria Brothers [2016] 386 ITR 719 (SC), holding as under.

“Penalty under ss. 271D and 271E-Limitation under s. 275- Computation-Penalty orders under ss. 271D and 271E passed beyond six months from the end of the month in which the assessments were completed were barred by limitation-CIT vs. Hissaria Bros. (2007) 211 CTR (Raj) 156 affirmed.”

Similar view was taken again by the Hon’ble Rajasthan High Court in the JCIT Vs. Jitendra Singh Rathore [2013] 352 ITR 327(Raj), wherein it was held under:

“Penalty under s. 271D-Limitation under s. 275-Applicability of cl (a) or cl. (c) of s. 275(1)-Show-cause notice was served on the assessee by AO on 27th March, 2003-Thereafter, the matter was referred to the Jt. CIT on 22nd March, 2004-Penalty levied by Jt. CIT by order dt. 28th May, 2004 was clearly barred by limitation- Sec. 275(1)(c) was applicable to the case-Even when the authority competent to impose penalty under s. 271D was the Jt. CIT, the period o f limitation for the purpose of such penalty proceedings was not to be reckoned from the issue of show cause by the Jt. CIT, but the period of limitation was to be reckoned from the date of issue of first show cause for initiation of such penalty proceedings”.

Since there is no dispute on the facts stated above, hence respectfully applying the binding judicial precedents, I hold that the penalty imposed u/s 271D, under challenge, is barred by limitation u/s 275(1)(c) of the Act. Hence, the same is hereby quashed.

FULL TEXT OF THE ORDER OF ITAT JAIPUR

This appeal by the assessee is directed against the order of ld. CIT (A), National Faceless Appeal Centre (NFAC), Delhi dated 30.08.2022 for the assessment year 2015-16. The assessee has raised the following grounds of appeal :-

1. The impugned penalty order u/s 271D dated 28.05.2019 is bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same kindly be quashed.

2. Rs. 47,50,000/-: The ld. CIT (A) erred in law as well as on the facts of the case confirming the penalty imposed u/s 271D of the Act. The penalty so imposed by the AO and confirmed by the ld. CIT (A) being totally contrary to the provisions of law and facts kindly be deleted in full.

3. The ld. CIT (A) erred in law as well as on the facts of the case in passing the impugned order in a haste without affording adequate and reasonable opportunity of being heard. The impugned order having been framed in gross breach of natural justice, hence the same kindly be quashed or alternatively be restored to the file of the ld. CIT (A).

4. The appellant prays your honour indulgences to add, amend or alter of or any of the grounds of the appeal on or before the date of hearing.

2. The brief facts of the case are that the assessee filed his return declaring income of Rs.3,12,060/- and agriculture income of Rs. 75,200/- on 29.10.2015 through E-filing which was processed u/s 143(1) at the returned income. The case of the assessee was selected for limited scrutiny through CASS and hence notice u/s 143(2) and 142 were issued on different dates. In response Sh. Ravi Kumar Jain and Sh. Mukesh Kumar Jain, Advocates & A/R attended and furnished details as required from time to time. Various aspects of the case were discussed with them. During the relevant period the assessee was engaged in trading of Tudi i.e. wastage of Sarson plant which is used as a fuel by the bio-bricks manufacturing units. The assessee had shown sales of Tudi amounting to Rs. 12,56,230/- on which net profit of Rs. 54,970/- only was declared. The AO held that by applying provisions of section 44AD the net profit @8% i.e. Rs. 100,498/- should have been declared. Thus there is a difference of Rs 45,528/- which the AO added to the income of the assessee and assessment was completed vide order dated 28.12.2017 u/s 143(3) of the Act at total income of Rs. 4,19,430/-. However, no appeal was filed against the additional income of Rs. 45,528/-.

2.1 After completion of the assessment proceeding, the ld. JCIT issued a show cause notice dated 06.11.2018 under section 271D. In response to which, the assessee filed detailed submission on 4.01.2019, which are reproduced at page 2-3 of the penalty order. From the perusal of the assessment order, it doesn’t appear that the AO has initiated the penalty proceedings u/s 271D nor there any reference in the impugned order of getting any reference or request from concerned jurisdictional offices i.e., ITO WD, TONK. The Ld. JCIT not feeling satisfied with the submissions so made, imposed penalty of Rs 47,50,000/- vide order dated 28.05.2019 holding as under:

“Assessee’s submission has been considered thoroughly, however, same has not been found to be acceptable for the reason that the amount received in cash for filling an application for the tender of liquor could have been taken by the way of account payee cheque/ Demand Draft/ RTGS rather than taking in form of cash. Further, assessee could not prove that there was reasonable cause which was beyond the control of the assessee for accepting cash loans. In the view of the above discussion, it is apparent that the assess has violated the provisions of section 269SS by accepting cash loans of Rs 47,50,000/-instead of account payee cheque or demand draft from the various persons. Thus, this is a fit case for imposing penalty u/s 271D of the I.T. Act 1961 levied for default so committed.”

Aggrieved by the order of the AO, the assessee preferred appeal before ld. CIT (A). The ld. CIT (A), National Faceless Appeal Centre (NFAC), Delhi, confirming the order of the AO, dismissed the appeal of the assessee.

3. Now the assessee is in appeal before the Tribunal. The assessee has also raised an additional ground, which is purely legal, as under and relying on the decision of Hon’ble Supreme Court in the case of National Thermal Power corporation Ltd., 229 ITR 383 (SC) prayed admission of the same :

Additional Ground :

“ That the impugned penalty order dated 28.05.2019 passed by the ld. JCIT Range-7 Jaipur is clearly barred by limitation u/s 275(1)(c) of the Act and therefore the same deserves to be quashed. ”

4. After hearing both the parties, I am convinced that this is purely a legal ground objecting to the imposition of the penalty as barred by limitation. Since the facts relating to this ground are available on the record, requiring no fresh investigation of facts hence, relying upon the judgment of Hon’ble Supreme Court in the case of National Thermal Power Corporation Ltd. 229 ITR 383 (SC), the additional ground is hereby admitted.

5. Before me, the ld. A/R of the assessee submitted his submissions as under :-

“At the outset, it is submitted that based on the undisputed facts available on record, imposition of penalty vide the impugned order u/s 271D passed by the ld. JCIT, Jaipur on 28.05.2019, is clearly barred by the limitation in as much as, the law u/s 275(1)(c) reads as under:

1. 275. (1) No order imposing a penalty under this Chapter shall be passed

x————- x——————– x—————– x————————– x——— x

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.

It may be noted that the provision uses the phrase initiation of action forimposition of penalty which does not mean the imposition of penalty itself but it is a preliminary exercise and the AO being the first person who can possibly notice the contravention, mostly during the course of assessment proceedings and the competent authority being JCIT, who is the person to impose the penalty, therefore, the fact of contravention must be noted by the AO who may refer to the JCIT. Such reference is the initiation of action forimposition of penalty, as contemplated by the law. Thus, the law contained u/s 275(1)(c) does not provide that the limitation to be reckoned from the end of the month in which the competent authority (JCIT) issued a SCN, which is not the initiation of such action for he may wake up after 10-20 year, issues SCN and impose penalty in 6 month, is against legislative intent. Therefore, the phrase action forimposition of penalty should mean the action taken by any other income tax authority for eg. the AO in this case, but not by the competent authority.

1.2. Supporting Case Laws: This legislative intention is very clear and this contention is fully supported by decisions of Hon’ble Rajasthan High Court.

1.2.1. JCIT Vs. Jitendra Singh Rathore [2013] 352 ITR 327(Raj)(DPB 1-4) held as under:

“Penalty under s. 271D—Limitation under s. 275—Applicability of cl. (a) or cl. (c) of s. 275(1)—Show-cause notice was served on the assessee by AO on 27th March, 2003—Thereafter, the matter was referred to the Jt. CIT on 22nd March, 2004—Penalty levied by Jt. CIT by order dt. 28th May, 2004 was clearly barred by limitation—Sec. 275(1)(c) was applicable to the case—Even when the authority competent to impose penalty under s. 271D was the Jt. CIT, the period of limitation for the purpose of such penalty proceedings was not to be reckoned from the issue of show cause by the Jt. CIT, but the period of limitation was to be reckoned from the date of issue of first show cause for initiation of such penalty proceedings”.

1.2.2.CIT Vs. Hissaria Brothers [2016] 386 ITR 719 (SC)(DPB 5-6):

“Penalty under ss. 271D and 271E—Limitation under s. 275— Computation—Penalty orders under ss. 271D and 271E passed beyond six months from the end of the month in which the assessments were completed were barred by limitation— CIT vs. Hissaria Bros. (2007) 211 CTR (Raj) 156 affirmed.”

1.3 Application over the Facts of Present case:

No penalty u/s 271D could be imposed after the expiry of limitation prescribed being the later of (a) expiry of the related financial year or (b) within a period of 6 months from the end of the month in which action for imposition of penalty was taken by the Assessing Officer. The ld. JCIT in the impugned penalty order has observed that the assessment (part of appeal set) for AY 2015-16 was completed by the ACIT, Tonk u/s 147/143(3) of the Act on 28.12.2017 (wrongly typed as 27.12.2017) stating as under:

“The AO observed that the assessee had received cash payment of Rs.47,50,000/- from various persons as per details given, which are in contravention of S.269SS of the IT Act.”

This is followed by the details of 8 persons from whom total Rs.47,50,000 was received in cash. Thus, the relevant proceedings are the assessment proceedings which stood completed on 28.12.2017 falling in the FY ending on 31.03.2018, which is the first time limit. The action for imposition of penalty can also be said to be the date of the assessment order itself i.e., 28.12.2017 during the course of which, the AO observed the contravention of S.269SS receiving cash in excess of the prescribed limit. Hence 6 months from 31.12.2017 expires on 30.06.2018, which is the second time limit, and being the later time limit, the JCIT was supposed to have imposed the penalty on/before 30.06.2018. However, as against 30.06.2018, the he imposed the penalty much later i.e. on 28.05.2019. Therefore, the same is clearly barred by limitation and has to be quashed.

1.4 Further it may be clarified that the provisions contained u/s 275(1)(a) have got no relevance and are not applicable on the facts of this case because the completion of the appellate proceedings whether arising from assessment or any other proceedings during which penalty proceedings for S.271D and 271E are initiated have got no relation with the computational/assessment aspect therefore such appellate proceedings are not relevant for sustaining such type of penalties. It has been held that in such cases, S.275 (1)(a) has got no application. Kindly refer CIT Vs. Hissaria Brothers [2016] 386 ITR 719 (SC) (para 27).

“27. By these amendments, the three categories were made for applying limitation for completing the penalty proceedings taking into consideration the various penalty proceedings for default of certain provisions of the Income-tax Act which are not necessarily linked with proceedings for any particular assessment year in the course of which only penalty proceedings were required to be initiated. Such consequences of default were not linked with the principal assessment proceedings for any specific assessment year but were independent of it.”

In view of the law settled by apex court, the impugned penalty deserves to be quashed as becoming barred by limitation.

GOA 2: On Merits Impugned penalty without jurisdiction, this ground is on merit and submissions shall be made separately.

GOA 3: No adequate opportunity

3.1 The ld. CIT(A) erred in law as well as on the facts of the case in passing the impugned order in a haste on dated 30.08.2022 without affording adequate and reasonable opportunity of being heard. The impugned order having been framed in gross breach of natural justice, kindly be quashed or alternatively be restored to the file of the ld. CIT(A), as would appear from the following date chart:

Chart Showing Different notices and compliances:

A bare perusal of the above chart shows that the so-called many opportunities granted by the CIT(A) to the appellant, is illusionary and shall reveal an interesting fact that the first notice was given in January 2021 which was duly complied with. However, there was a long silence and after a long gap of almost 10 months the ld. CIT(A) woke up and issued a notice on 13.10.2021 giving a week’s time only. Again thereafter there was complete silence for around 10 months before issuing another notice on 30.07.2022 providing a short period of 11 days only. Immediately thereafter on 30.08.2022 he passed the ex-parte order. The appellant is a layman engaged in the trading of tudi. He comes from a rural background and naturally does not understand the complexities of tax laws. No doubt, a tax consultant was engaged who must be receiving notice/s for hearing.

Undisputedly, there has been a paradigm shift so far as the service of notices and orders are concerned in as much as under the pre-amended law, the assessee/AR used to get hard copies of the notices/orders which are now being uploaded on the portal and sent on email. The question is that when the authority sends the notice after such a long gap it may be difficult for the recipient to check his e-mail/portal every next day throughout the period of 8-10 months. Not only the assessee but also the tax consultant who are also practicing in small towns are not sound with the technical knowledge and infrastructure, it is quite basic for them to have lost sight of such communication if any sent by the department. Another aspect to take note of is that COVID-19 was still prevalent at that time and activities did not resume with full force and it was only in March 2022, the normalcy could have been said to be restored as evident from the order of Apex court passed on dated 23.03.2020 in Suomotu Writ Appeal (Civil) No. 3 of 2020 on the issue of law of limitation holding as under:

“…The period from 15-3-2020 till 28-2-2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings.”

In the meanwhile, the Central Government was continuously relaxing the time limits for taking actions/making compliance through TOLA.

In these circumstances there appears no justified reason at all as to why the ld. CIT(A) was issuing notices for such a short period of 7-10 days only. Also there was no urgency to pass the appellate order hastily and that too completely ignoring huge amount of penalty i.e., 47,50,000/- imposed merely on technical ground. Therefore, there is no hesitation to say that the ld.CIT(A) just to show a disposal on his part, passed the impugned order in complete disregard to principles of natural justice i.e., Audi alterampartem.

Hence, to do substantial justice, the appeal kindly be decided in favour of the assessee or alternatively restored to the file of the ld. CIT(A).

3.2 CIT(A) did not act as per Law:

The CIT(A) has not decided the appeal on merits which is contradictory to the mandate of Section 250(6). The same is reproduced here under for your ready reference:

“(6) The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision.”

A bare perusal of above provision makes it clear that the CIT(A) is bound to dispose of the appeal before him on merits. Merely because the assessee didn’t turn up, he cannot dismiss the appeal in Limine. The law contained u/s 250(6) & 251 do not at all contemplates the CIT(A) passing an appellate order in this manner. There are judicial guidelines to support this contention.

3.3 Supporting Case Laws:

3.3.1 Corporate International Financial Services V ITO ITA No. 2147/Del/2017 held as:

“Further, it is well-settled that powers of Ld. CIT(A) are coterminus with powers of the Assessing Officer. Useful reference may be made to order of Apex Court decision in CIT vs. Kanpur Coal Syndicate 53 ITR 225 (SC) in which it was held that the first appellate authority, the Ld. CIT(A) in the case before us, has plenary powers in disposing off an appeal; that the scope of her power is co-terminus with that of the ITO, that she can do what the ITO can do and also direct him to do what he failed to do. In this context, useful reference may also be made to Hon’ble Apex Court’s decisions in the cases of CIT vs. RaiBahadurHardutroyMotilalChamaria 66 ITR 443 (SC) and CIT vs. B.N. Bhattachargee 118 ITR 461 (SC) for the proposition that an assessee having once filed an appeal, cannot withdraw it and even if the assessee refuses to appear at the hearing, the first appellate authority can proceed with the enquiry and if he finds that there has been an underassessment, he can enhance the assessment. Just as, once the assessment proceedings are set in motion, it is not open to the Assessing Officer to not complete the Assessment Proceedings by allowing the Assessee to withdraw Return of Income; it is similarly, not open for Ld. CIT(A) to not pass order on merits by dismissing the appeal in limine, whether on account of non-prosecution of appeal by the Assessee or due to the Assessee seeking to withdraw the appeal or if the assessee does not press the appeal. When the Commissioner (Appeals) dismisses the appeal of assessee in limine for non-prosecution of appeal by the assessee; in effect, indirectly it leads to same results as withdrawal of appeal by assessee. When the assessee is not permitted to withdraw the appeal filed before the first appellate authority, the first appellate authority is duty bound to not allow a situation to arise, through dismissal of appeal in limine for non-prosecution of appeal before the first appellate authority; in which, in effect, indirectly the same results are obtained as arise from withdrawal of appeal by the assessee. What cannot be permitted in law to be done directly, cannot be permitted to be done indirectly either, as is well settled. In view of the foregoing discussion; it is amply clear that Ld. CIT(A) was in error in dismissing the appeal in limine for non-prosecution of appeal by the assessee. We draw support from order of Hon’ble Bombay High Court in the case of CIT vs. PremkumarArjundasLuthra (HUF) [2016] 240 taxman 133 for the proposition that Ld. CIT(A) is required to apply her mind to all issues which arise from impugned order before her whether or not same had been raised by appellant before her; and further, that CIT(A) is obliged to dispose of the appeal on merits.

X                                           XX

In view of the foregoing, we hold that the Ld. CIT(A) erred in dismissing the appeal of the Assessee in limine for non prosecution of appeal by assessee. We set aside the impugned order of the Ld. CIT(A) and we direct the Ld. CIT(A) to pass denovo order as per law, in accordance with Sections 250 and 251 of I.T. Act.”

3.3.2 CIT vs. PremkumarArjundasLuthra (HUF) [2016] 240 taxman 133 it was held that:

“8……….. It is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the Assessing Officer to make further inquiry and report the result of the same to him as found in Section 250(4) of the Act. Further Section 250(6) of the Act obliges the CIT(A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Section 251(l)(a) and (b) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-section (2) of Section 251 of the Act also makes it dear that while considering the appeal, the CTT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed Assessee or due to the Assessee seeking to withdraw the appeal or if the assessee does not press the appeal. When the Commissioner (Appeals) dismisses the appeal of assessee in limine for non-prosecution of appeal by the assessee; in effect, indirectly it leads to same results as withdrawal of appeal by assessee. When the assessee is not permitted to withdraw the appeal filed before the first appellate authority, the first appellate authority is duty bound to not allow a situation to arise, through dismissal of appeal in limine for non-prosecution of appeal before the first appellate authority; in which, in effect, indirectly the same results are obtained as arise from withdrawal of appeal by the assessee. What cannot be permitted in law to be done directly, cannot be permitted to be done indirectly either, as is well settled. In view of the foregoing discussion; it is amply clear that Ld. CIT(A) was in error in dismissing the appeal in limine for non-prosecution of appeal by the assessee. We draw support from order of Hon’ble Bombay High Court in the case of CIT vs. PremkumarArjundasLuthra (HUF) [2016] 240 taxman 133 for the proposition that Ld. CIT(A) is required to apply her mind to all issues which arise from impugned order before her whether or not same had been raised by appellant before her; and further, that CIT(A) is obliged to dispose of the appeal on merits.

X                     XX

In view of the foregoing, we hold that the Ld. CIT(A) erred in dismissing the appeal of the Assessee in limine for non prosecution of appeal by assessee. We set aside the impugned order of the Ld. CIT(A) and we direct the Ld. CIT(A) to pass denovo order as per law, in accordance with Sections 250 and 251 of I.T. Act.”

3.3.2 CIT vs. PremkumarArjundasLuthra (HUF) [2016] 240 taxman 133 it was held that:

“8……….. It is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the Assessing Officer to make further inquiry and report the result of the same to him as found in Section 250(4) of the Act. Further Section 250(6) of the Act obliges the CIT(A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Section 251(l)(a) and (b) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-section (2) of Section 251 of the Act also makes it dear that while considering the appeal, the CTT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). Thus once an assessee files an appeal under Section 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact, the CIT(A) is obliged to dispose of the appeal on merits. In fact with effect from 1st June, 2001 the power of the CIT(A) to set aside the order of the Assessing Officer and restore it to the Assessing Officer for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the CTT(A) is co-terminus with that of the Assessing Officer i.e. he can do all that Assessing Officer could do. Therefore just as it is not open to the Assessing Officer to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CTT(A) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply dear from the Section 251(l)(a) and (b) and Explanation to Section 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act.“

3.3.3 The decision of ShriOnkar Mal in ITA No. 1262/JP/2018 followed in Shri Ram Borewell& Construction company V ACIT ITA No. 180/JP/2019 (DPB 7-10) it was held as:

“As per provisions of Section 250(6) of the Act, the ld. CIT(A) is required to pass a speaking order in writing giving reasons for reaching to the conclusion. However, the order passed by the ld. CIT(A) are not in terms of Section 250(6) of the Act. Therefore, in the substantial interest of justice, we set aside the ex parte order of the ld. CIT(A) and restore the matter back to the file of the ld. CIT(A) for deciding the issue afresh on merits. The assessee is also directed to appear before the ld. CIT(A) within two months from the date of receipt of this order. In case of any failure on the part of the assessee, the ld. CIT(A) is at liberty to pass order after considering the material placed on record.”

Thus, not only in the ground of the inadequate opportunity but also on the ground of limitation, the impugned penalty order deserves to be quashed or alternatively the order of the CIT(A) be set aside and appeal may kindly be restored to the CIT(A).”

In addition to the above submissions made by the assessee, the ld. A/R further submitted as under :-

1. Additional Ground: Impugned Penalty Barred by Limitation: In addition, and continuation to our earlier Written Submission dt. 04.01.2023 available on records, it is further submitted/ clarified as to why the provisions of S. 275(1)(a) are not applicable in the present case. In this connection we draw your kind attention towards pg no. 4&5 para 1.4 wherein this aspect has already been dealt with. The same is being reproduced here under: –

“Further it may be clarified that the provisions contained u/s 275(1)(c) have got no relevance and are not applicable on the facts of this case because the completion of the appellate proceedings whether arising from assessment or any other proceedings during which penalty proceedings for S.271D and 271E are initiated have got no relation with the computational/assessment aspect therefore such appellate proceedings are not relevant for sustaining such type of penalties. It has been held that in such cases, S.275 (1)(a) has got no application.

“27. By these amendments, the three categories were made for applying limitation for completing the penalty proceedings taking into consideration the various penalty proceedings for default of certain provisions of the Income-tax Act which are not necessarily linked with proceedings for any particular assessment year in the course of which only penalty proceedings were required to be initiated. Such consequences of default were not linked with the principal assessment proceedings for any specific assessment year but were independent of it.”

There apart, as a matter of fact, otherwise no appeal has been filed by the assessee and there is no pendency of appeal therefore, there is no question of applying S.275(1)(a) of the Act.

1.2.3In case M.D.S. University vs. ACIT(TDS) (2014) 161 TTJ (Jp)(UO) 11(DPB 34-38) it was held as under:

“Penalty under s. 271C—Limitation under s. 275(1)(c)—Computation— Proceedings for levying the penalty under s. 271C were initiated vide order dt. 19th March, 2009 which fell in the financial year 2008-09 ending on 31st March, 2009 and the action for imposition of penalty was initiated on 24th Dec., 2009 when the reference was made by the AO to the Addl. CIT (TDS)—Accordingly, six months from the end of the month in which the action for imposition of penalty was initiated expired on 30th June, 2010—Hence, the order imposing penalty under s. 271C could have been passed on or before 30th June, 2010— Therefore, order levying penalty under s. 271C passed by the Addl. CIT on 18th Aug., 2010 was barred by limitation.”

1.2.4 In Lodha Builders (P) LTD. vs. ACIT (2014) 163 TTJ (Mumbai) 778(DPB 29-33)it was held as under:

“Penalty under ss. 271D and 271E—Limitation under s. 275— Applicability of cl. (a) or cl. (c) of s. 275(1)—Provisions of s. 275(1)(c) only are attracted to levy of penalty under ss. 271D and 271E, and the provisions of cl. (a) of s. 275(1) are not applicable—Further, the limitation period is to be counted from the date of the assessment order i.e., AO’s decision to make referral to the Addl. CIT who is authorized to impose penalty—In view of the fact that the assessee’s assessment order in the instant case is dated 5th Dec., 2011, 6 months from the end of the month in which the action of levy of penalty was initiated as per the provisions of cl. (c) of s. 275(i) expired on 30th June, 2012, and the extended limitation under Explanation to s. 275 r/w s. 129 expired on 30th July, 2012—Therefore, the penalty order passed by the Addl. CIT on 28th Sept., 2012 is barred by limitation.”

1.3 The decision by DR- not applicable: What has been held in the case of Dewan Chand Amrit Lal vs DCIT (2005) 98 TTJ (Chd)(SB) 947taking a contrary view doesn’t hold water in view of binding decision of Hon’ble Judiciary High Court in Jitendra Singh (supra). Therefore, the same has to be ignored.

2. GOA-2: A)On Merits Impugned penalty without jurisdiction as the disputed amount is not in the nature of loan or deposit:

Facts: Kindly refer the impugned order

Submission:

1. The facts are not disputed that the assessee was running an AOP for obtaining liquor license and for that purpose assessee along with 10-12 other members have constituted a group and filed the application for tender. He obtained cash deposits from these members to issue DD for application, details of those are already available in the orders of the authorities below and impugned order as well. The assessee received the amount in cash which was deposited in the bank account of the assessee for the transfer to the concerned excise department. There was no dispute that the amount was transferred for obtaining liquor license and after the close of tendering process the assessee returned back the demand drafts to unsuccessful bidders. The returned DDs have been deposited in the same bank account from which they were issued earlier. Thus, from these facts it is evidently clear that the nature of the amount received in the hands of the assessee was not a type of loan or advance but it was a sort of capital contribution by all those persons, who were impliedly the members of the Association of Persons (AOP) impliedly formed for the purpose of conducting liquor business. In that direction, capital contribution was made by all the persons and that amount was duly given to excise department for obtaining liquor license. These facts are also affirmed by all those persons in their respective affidavits, which were admittedly filed before the AO & were available before the ld. JCIT. The ld. JCIT has not at all disputed these facts in the impugned order. Once these are the admitted jurisdictional fact, there is no scope of imposition of penalty under section 271D of Income Tax Act, 1961 towards the contravention of provisions of section 269SS. As a condition precedent the ld. JCIT was bound to have established that it was a case of acceptance of loan or deposit by the assessee, then only, he could invoke section 269SS. However, in the present case, the assessee did not accept any loan or deposit but the amount was obtained as a capital contribution towards obtaining a liquor license. These facts were neither denied nor disputed. In view of the above facts, the present matter is out of scope of section 269SS read with section 271D of Income Tax Act, 1961.

2. This contention is directly supported by the following decisions:

2.1 Sunil Kumar Chirawa vs Addl. Commissioner of Income Tax, Jhunjhunu ITA No. 203 & 204/JP/2018 vide order dated 09.01.2019 (DPB 11-19) wherein it was held that “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 was accepted by the assessing officer then it will not fall in the ambit of loan or deposit as contemplated in the provisions of section 269SS and 269T of the act and in absence of any fresh material or contrary record to show that the amount was taken as a loan by the assessee for the assessee’s requirement, the penalty levied u/s 271D or section 271E are not justified.”

2.2 Commissioner of Income-tax v. Panchsheel Owners Associations [2015] 55 taxmann.com 202 (Guj)(DPB20-22) wherein the court said, “it cannot be held that capital contribution by a member of an AOP in the account of AOP can be treated as a deposit or loan in its true sense.”

2.3 Shrepak Enterprises V. Dy. CIT 60 TTJ (Ahd) 199 (DPB 23­28) also held that “amount paid by firm to partners and vice-versa is payment to self and does not partake the character of loan or deposit in general law. Therefore, provision of section 269SS are not applicable to such facts. In this case there is deposit from a member of AOP in the account of AOP, therefore, this case is squarely covered by the decision of I.T.A.T. Ahmedabad. Following the decision of the I.T.A.T., it cannot be held that the member had given any deposit to the AOP so as to attract provisions of sec. 269SS.”

Thus, it is already being held in similar facts and circumstances of the case that what the various persons have given to the assessee was nothing but capital contribution and was not in the nature of loan or deposit. S.269SS cannot be invoked.

GOA 2: B)The disputed amount was not considered as an undisclosed income of the assessee.

Submission:

1.1 It is further submitted that the disputed amount of Rs. 47,50,000, which was received by the assessee for a definite purpose, as explained above, was accepted by the learned JCIT without disputing/ disproving the same but his only objection was that the assessee could have received such amount through banking channels. However, he ignored one vital aspect going to the root of the issue is that in the assessment order dated 27.12.2017, even the A.O has accepted the genuineness of the fact of the receipt of the amount of Rs. 47,50,000 from the different persons. Hence, addition on that ground was made at all. In view of these undisputed facts, the subjected amount was rightly not held as undisclosed income/ the black money of the assessee which was the main object behind introducing these penalty provisions. Therefore, no penalty could be imposed u/s 271D of the Act.

1.2 Kindly refer

2.There did exists a reasonable cause in terms of section 273B of the Act in as much as the assessee is a layman poor villager, poorly literate, having no knowledge of the complexities of tax laws. He is not otherwise a regular assessee and having no exposure in past to income tax proceedings. It is settled that there is no presumption that everybody knows law as held in the case of M/s MotilalPadampat Sugar Mills 118 ITR 326 (SC).

3.Further w.r.t GOA 3: No adequate opportunity, kindly refer the following chart in place of the chart shown in our earlier written submission at pages 5 & 6.

Chart Showing Different notices and compliances:

It is further submitted thus, on two occasions compliance was made however, for last occasion no notice was received by Shri Mukesh Jain advocate as evident from screen shots of his Gmail from 28.07.2022 to 01.08.2022 (copy enclosed).

Hence, the impugned penalty may be quashed in toto or alternatively be restored to the CIT(A).”

6. On the other hand, the ld. D/R supported the orders of the revenue authorities. The ld. D/R relied on the decision of Chandigarh Bench of the Tribunal in the case of Dewan Chand Amrit Lal vs. DCIT (2006)(AT) 2003 Chandigarh (SB) wherein the Bench observed as under :-

“ 27. In the final analysis, we hold that the authority competent to impose penalty under sections 271D and 271E is vested with the Dy. CIT (now Joint CIT) and the Assessing Officer does not have the power either to initiate the penalty proceedings or impose the same. There is no procedure for reference by the Assessing Officer to the competent authority for imposition of penalty under section 271D or 271E. Therefore, the limitation for completion of penalty proceedings as provided under section 275(1)(c) has got to be computed from the date of issue of show-cause notice by the competent authority, which in the present case, is the DCIT (now JCIT). Since the respective orders under section 271D have been passed within a period of six months from the date of initiation by the competent authority, the penalty orders passed in the cases of the appellants herein are not barred by limitation. ”

7. I have heard rival contentions of both the sides, perused the material on record and gone through the orders of the revenue authorities and the case laws cited by both the sides. I first take up the additional ground for adjudication as under.

7.1 The law of limitation in the cases of penalty has been provided u/s 275. The same is reproduce here 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 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 o f 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 that in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246  or section 246A, and the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Commissioner (Appeals) is received by the Principal Chief Commissioner or Chie f Commissioner or Principal Commissioner or Commissioner, whichever is later;

(b) in a case where the relevant assessment or other order is the subject-matter o f 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    xxx”

At the very beginning it is observed that the provisions contained u/s 275(1)(a)are not applicable on the facts of present case for the reason that undisputedly no appeal has been filed against the assessment order passed on 28.12.2017. Therefore, it cannot be said that the relevant assessment or other order was subjected to some appellate proceeding. Consequently, the extended period of limitation of 6 months from the availability of the appellate order, will not be available to the revenue. But otherwise also, the computation of the income has no bearing over the imposition or otherwise of the penalty provided u/s 271D and 271E of the Act. This has been so held by the Hon’ble Jurisdictional High Court in the case of CIT Vs. Hissaria Brothers(2007) 211 CTR (Raj) 156/ [2008] 169 Taxman 262 (Rajasthan) wherein it was held as under:

“27. 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 proceedings 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) o f 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 o f correct tax on chargeable income; if clause (a) was to be invoked, no necessity of clause (c) would arise.

28. Thus, both on the ground that the transaction in question of retention of sale price by the Kachcha Arhatiya did not amount to deposit and its utilization and dealing with it at the instance of farmer constituents did not amount to repayment of loan or deposits within the meaning of section 269SS or section 269T, and on the ground that limitation under section 275(1)(c) applies to such proceedings, we hold in favour of the respondent…. ”

For the same reason section 275 (1)(b) is also not applicable in as much as the assessment order was not subjected to Revision u/s 263 or u/s 264. Now coming to section 275(1)(c), we find that two types of limitations are provided therein viz, (1) 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 (2) six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later.

Thus, a penalty u/s 271D could not be imposed after the expiry of the larger period of limitation. In this case, we find that the ld. JCIT in the impugned penalty order has clearly observed that the assessment for A.Y 2015-16 was completed by the AO (ACIT Tonk) vide assessment order dated 28.12.2017 u/s 147/143(3) of the Act. The ld. JCIT also referred to the observation made by the AO that the assessee had received cash payment of Rs.47,50,000/- from various persons as per details given, which are in contravention of Sec.269SS of the IT Act. Thus, the relevant proceedings were the assessment proceedings during the course of which, the default of accepting cash over the prescribed limit was noted by the AO and since the assessment proceedings were completed on 28.12.2017, the related financial year ended on 31.03.2018. Accordingly, the first time limit thus expired on 31.03.2018. For the second time limit, an action for imposition of penalty was taken on 28.12.2017 by the AO, when the assessment was completed and six months from end of that month expired on 30.06.2018 which time limit clearly expires later. Hence, the penalty u/s 271D could have been validly imposed only on before 30.06.2018 as against which, in this case, the impugned penalty was imposed much later on 28.05.2019 hence, the same is clearly barred by limitation. The ld. D/R however, contended that for this period of 6 months has to be reckoned from the date of issue of show cause notice by the ld. JCIT, who was the competent Authority to impose a penalty u/s 271D and since he issued the notice on dated 06.11.2018 and imposed the penalty on 28.05.2019 itself, which was well within the period of 6 month from the month in which action for imposition of penalty was taken. The ld. A/R however, strongly contended that for this purpose the observation made by the AO in the assessment order has to be considered and the date of the assessment order being 28.12.2017 was relevant and therefore, the period of 6 months has to be reckoned from that date. Consequently, the limitation from that date the limitation had already expired.

7.2. After careful consideration, I find that the issue involved in the present case is fully covered by the decision of Hon’ble Jurisdictional High Court in the case of CIT vs. Hissaria Bros. (Supra).The same has been affirmed by the Hon’ble Apex Court in the case of CIT Vs. Hissaria Brothers [2016] 386 ITR 719 (SC), holding as under.

“Penalty under ss. 271D and 271E-Limitation under s. 275- Computation-Penalty orders under ss. 271D and 271E passed beyond six months from the end of the month in which the assessments were completed were barred by limitation-CIT vs. Hissaria Bros. (2007) 211 CTR (Raj) 156 affirmed.”

Similar view was taken again by the Hon’ble Rajasthan High Court in the JCIT Vs. Jitendra Singh Rathore [2013] 352 ITR 327(Raj), wherein it was held under:

“Penalty under s. 271D-Limitation under s. 275-Applicability of cl (a) or cl. (c) of s. 275(1)-Show-cause notice was served on the assessee by AO on 27th March, 2003-Thereafter, the matter was referred to the Jt. CIT on 22nd March, 2004-Penalty levied by Jt. CIT by order dt. 28th May, 2004 was clearly barred by limitation- Sec. 275(1)(c) was applicable to the case-Even when the authority competent to impose penalty under s. 271D was the Jt. CIT, the period o f limitation for the purpose of such penalty proceedings was not to be reckoned from the issue of show cause by the Jt. CIT, but the period of limitation was to be reckoned from the date of issue of first show cause for initiation of such penalty proceedings”.

Since there is no dispute on the facts stated above, hence respectfully applying the binding judicial precedents, I hold that the penalty imposed u/s 271D, under challenge, is barred by limitation u/s 275(1)(c) of the Act. Hence, the same is hereby quashed. The additional ground of appeal taken by the assessee is therefore, allowed.

8. Since I have already quashed the penalty on the short ground of limitation, we do not propose to adjudicate the other grounds on merits.

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

Order pronounced in the open court on 28/04/2023.