M/s. Modipon Ltd., Ghaziabad V. Addl. CIT (TDS), Ghaziabad

ITA 1044/DEL/2013

• Counselvise Citation: 104420114 RSA 2013
• Duration Of Justice: 2 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 22-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 22-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Assessee Lawyers: SANTOSH AGARWAL
• Keywords: Period of limitation; Question of law; Initiation of penalty proceedings; Reasonable cause; Competent authority
• Section: 246; 263; 201(1)

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI H.S.SIDHU JUDICIAL MEMBER SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 2275, 2276 & 1044/DEL/2013 ASSESSMENT YEAR: - 206 - 07, 2007 - 08 & 2008 - 09 MODIPON LTD, MODINAGAR, GHAZIABAD PAN:AAACM2069E VS ADDLL. CIT (TDS), GHAZIABAD (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANTOSH AGARWAL, ADV. REVENUE BY SH. P. DAM KANUNJNA, SR. DR DATE OF HEARING 22/06/2016 DATE OF PRONOUNCEMENT 2 7 /06/2016 ORDER PER BENCH 1. THESE THREE APPEALS FILED BY THE ASSESSEE WERE EARLIER DISPOSED OFF VIDE ORDER DATED 26.06.2015 BY THE COORDINATE BENCH AND SUBSEQUENTLY A MISCELLANEOUS APPLICATION NO.215/DEL2015 WAS FILED BY THE ASSESSEE AND CONSEQUENT TO THAT THE APPEAL S WERE RECALLED V IDE ORDER DATED 29.04.2016. 2. THE MAIN REASON FOR RECALLING THE APPEAL IS THAT 2 A. GROUND NO. 4 OF THE APPEAL STATING THAT THE PENALTY ORDER DATED 16.03.2010 PASSED BY THE LD ASSESSING OFFICER IS TIME BARRED AND B. FURTHER , THE ALLEGED FAILURE OF NOT DEPOSITING TAX IN TIME DUE TO FINANCIAL HARDSHIP AND CONSEQUENTLY, DELAY OCCURRED IN FILING E - TDS RETURN IS BECAUSE OF REASONABLE CAUSE. 3. THESE TWO ISSUES WERE NOT DECIDED IN THE ORIGINAL APPEAL. NOW AS THE APPEAL IS RECALLED WE DECIDE THE ABOVE TWO GROUND S OF APPEA L . 4. GROUND NO. 4 OF THE APPEAL IS THAT THE LD CIT(A) ERRED IN HOLDING THAT THE PENALTY ORDER DATED 16.03.2010 PASSED U/S 272A(2)(K) OF THE INCOME TAX ACT WAS NOT TIME BARRED AS PER THE PROVISION OF SECTION 275 AND AS SUCH NOT BAD IN LAW. THE MAIN CONTENTION OF THE LD AR IS THAT THE PENALTY PROCEEDINGS WERE INITIATED ON 27.06.2008 WHERE THE ITO ( TDS), GHAZIABAD PASSED A CONSOLIDATED ORDER U/S 201(1) AND 201(1A) OF THE ACT FOR THE AY 20063 - 07 TO 2008 - 096 DETERMINING THE DEFICIENCIES WITH RESPECT TO TAX DEDUCTION AT SOURCE. HE REFERRED TO THE PARA WHERE THE LD ASSESSING OFFICER HAS DIRECTED TO ISSUE PENALTY NOTICES. ACCORDING TO THE LD AR THE PENALTY ORDERS WERE PASSED BY THE ADDITIONAL CIT (TDS) ON 16.03. 2010. ACCORDING TO HIM THIS ORDER SHOULD HAVE BEEN PASSED BY 30 TH SEPTEMBER 200 9 AND HENCE, TIME BARRED. FOR THIS PROPOSITION HE RELIED ON THE ORDER OF THE COORDINATE BENCH IN ASSESSEES OWN CASE WHEREIN PENALTY FOR THE SAME YEARS LEVIED U/S 271C WHICH WA S ALSO INITIATED BY THE SAME ORDER IS HELD TO BE TIME BARRED. 5. ON THE ISSUE OF REASONABLE CAUSE HE PLEADED THAT THE ASSESSEE HAS NOT BEEN ABLE TO PAYS SALARIES OF THE EMPLOYEES UNABLE TO REPAY THE LOAN INCURRING PERSISTENT LOSSES AND CONSEQUENTLY UNABLE TO PAY DIVIDEND SHOWS THAT DUE TO FINANCIAL HARDSHIP TAXES COULD NOT BE DEPOSITED AND THEREFORE THE RETURNS WERE DELAYED. HE FURTHER SUBMITTED THAT PAYMENT OF TAXES IS PRE REQUISITE FOR FILING E - TDS RETURN AND UNLESS THEY ARE DEPOSITED TDS 3 RETURNS CANNOT BE FILED. IN VIEW OF THE ABOVE TWO ARGUMENTS, HE SUBMITTED THAT PENALTY ORDERS MAY BE CANCELLED. 6. LD DR RELIED ON THE PROVISION OF SECTION 275 AND STATED THAT THE FIRST NOTICE WAS ISSUED BY THE ADDLL. CIT ON 25.02.2010 AND ORDERS HAVE BEEN PASSED ON 16.03.201 0 AND THEREFORE, THE ORDERS ARE NOT TIME BARRED. HE FURTHER STATED THAT THE PROVISIONS DO NOT AUTHORIZE THE INCOME TAX OFFICER TO ISSUE NOTICES FOR LEVY OF THESE PENALTIES AND THEREFORE, SUCH MENTION IN THE ORDER DOES NOT PROVIDE THAT LIMITATION SHOULD RUN FROM THAT DATE. HE FURTHER STATED THAT NON DEPOSIT OF TDS CANNOT BE THE REASONABLE CAUSE AND FURTHER, THE REASONS PLEADED BY THE ASSESSEE ARE UNSUBSTANTIATED AS NO EVIDENCES HAVE BEEN PLACED. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION. WE HAVE ALS O PERUSED THE ORDER OF THE COORDINATE BENCH IN ITA NO. 1897, 1978 AND 1979/DEL/2012 FOR THE AY 2006 - 07 TO 2008 - 09 WHEREIN, WHILE DECIDING THE ISSUE OF PENALTY U/S 271C EMANATING FROM THE SAME ORDERS WHEREIN IT HAS BEEN HELD THAT THE TIME LIMIT RUNS FROM T HE DATE I.E. 27.06.2008 ON WHICH THE ORDERS U/S 201(1) AND 201(1A) WAS PASSED. ACCORDINGLY, THE RELEVANT FINANCIAL YEAR WOULD EXPIRE ON 31.03.2009 AND PENALTY PROCEEDINGS INITIATED SHOULD HAVE BEEN COMPLETED WITHIN 6 MONTHS FROM THAT DATE I.E. 3 0.09 .2009 . IN SHORT THE PENALTY ORDERS SHOULD HAVE BEEN PASSED BY 30.09.2009 AND WHICH ARE ALLEGEDLY PASSED ON 16.03.2010. THE COORDINATE BENCH HAS HELD AS UNDER: - 11. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AND PERUSED MATERIAL PLACED BEFORE US. WE FIND THAT THE PERIOD OF LIMITATION FOR IMPOSING THE PENALTIES HAS BEEN PROVIDED IN SECTION 275 WHICH READS AS UNDER: - 275. [(1)] NO ORDER IMPOSIN G 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 UN DER 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 4 COMPLETED, OR SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ORDER OF THE [***] COMMISS IONER (APPEALS) OR, AS THE CASE MAY BE, THE APPELLATE TRIBUNAL IS RECEIVED BY THE [PRINCIPAL CHIEF COMMISSIONER OR] CHIEF COMMISSIONER OR [PRINCIPAL COMMISSIONER OR] COMMISSIONER, WHICHEVER PERIOD EXPIRES LATER : [PROVIDED PROVIDED PROVIDED THAT IN A CASE WHERE THE RELEVANT ASSESSMENT OR 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 I N WHICH THE ORDER OF THE COMMISSIONER (APPEALS) IS RECEIVED BY THE [PRINCIPAL CHIEF COMMISSIONER OR] CHIEF COMMISSIONER OR [PRINCIPAL COMMISSIONER OR] COMMISSIONER, WHICHEVER IS LATER;] (B) IN A CASE WHERE THE RELEVANT ASSESSMENT OR OTHER ORDER IS THE SUBJ ECT - 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 CO URSE 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.]. 12. ADMITTEDLY, IN THE CASE OF THE AS SESSEE, CLAUSE (C) OF SUB - SECTION (1) WOULD BE APPLICABLE BECAUSE THE RELEVANT ORDER U/S 201(1)/201(1A) WAS NOT THE SUBJECT MATTER OF APPEAL TO THE CIT(A) AND SIMILARLY, THE SAME WAS NOT THE SUBJECT MATTER OF REVISION U/S 263. AS PER CLAUSE (C) OF SUB - SECT ION (1), THE PENALTY ORDER CANNOT BE PASSED AFTER THE (I) EXPIRY OF THE FINANCIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHICH ACTION FOR IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPLETED AND (II) SIX MONTHS FROM THE END OF THE MONTH IN WHIC H ACTION FOR IMPOSITION OF PENALTY IS INITIATED WHICHEVER PERIOD EXPIRES LATER. THEREFORE, THE CRUCIAL DATE WOULD BE THE DATE OF THE INITIATION OF PENALTY PROCEEDINGS. IN THE ORDER U/S 201(1) AND 201(1A) DATED 27TH JUNE, 2008, THE ASSESSING OFFICER OBSERVE D AS UNDER: - ISSUE PENALTY NOTICE U/S 221 AND 271C AND 272A(2)(C) & 272A(2)(K) OF I.T. ACT, 1961 ARE BEING ISSUED SEPARATELY FOR EACH & EVERY SUCH DEFAULT FOR ALL THE YEARS INVOLVED. 13. THUS, THE ASSESSING OFFICER, DURING THE COURSE OF PASSING OF ORDE R U/S 201(1) & 201(1A), DIRECTED FOR ISSUE OF PENALTY NOTICE U/S 271C. THUS, THE PENALTY PROCEEDINGS WERE INITIATED BY THE DIRECTION OF THE ASSESSING OFFICER FOR ISSUE OF PENALTY NOTICE U/S 271C. IT IS CONTENDED BY THE LEARNED DR THAT AS PER SECTION 5 271C S UB - SECTION (2), ONLY THE JOINT COMMISSIONER OF INCOME - TAX IS AUTHORIZED TO IMPOSE THE PENALTY U/S 271C. ORDER U/S 201(1) & 201(1A) WAS PASSED BY THE ITO WHO IS NOT AUTHORIZED TO LEVY THE PENALTY U/S 271C AND, THEREFORE, THE PERIOD OF LIMITATION FOR THE PUR POSE OF LEVY OF PENALTY IS TO BE CONSIDERED WHEN THE JOINT COMMISSIONER ISSUED THE NOTICE U/S 271C. 14. WE FIND THAT THIS ISSUE HAS ALREADY BEEN CONSIDERED BY THE ITAT AS WELL AS HON'BLE JURISDICTIONAL HIGH COURT. IN THE CASE OF DINESH JAIN (SUPRA), DELHI B BENCH CONSIDERED AN IDENTICAL ISSUE AND HELD AS UNDER: - HELD, DISMISSING THE APPEAL, (I) THAT UNDER SECTION 271E THE PENALTY WAS TO BE IMPOSED BY THE JOINT COMMISSIONER. HOWEVER, THERE WAS NO BAR ON THE ASSESSING OFFICER TO INITIATE THE PENALTY PROC EEDINGS UNDER SECTION 271E BECAUSE WHEN THERE IS ANY ACCEPTANCE OR REPAYMENT OF LOAN IN VIOLATION OF SECTION 269SS OR 269T, IT IS THE ASSESSING OFFICER WHO HAS TO PRIMA FACIE SATISFY HIMSELF WHETHER THERE IS A VIOLATION OF SECTION 269SS OR 269T AND IF SO, INITIATE PENALTY PROCEEDINGS UNDER SECTION 271D OR 271E AND THEREAFTER REFER THE MATTER TO THE JOINT COMMISSIONER WHO WOULD FINALLY DECIDE AND IF SATISFIED, LEVY THE PENALTY UNDER SECTION 271D OR 271E. HENCE THE PERIOD OF LIMITATION WAS TO BE COUNTED FROM THE DATE OF THE INITIATION OF THE PENALTY PROCEEDINGS BY THE ASSESSING OFFICER, THAT IS, DECEMBER 5, 2011. THE PENALTY PROCEEDINGS WERE INITIATED IN THE COURSE OF ASSESSMENT PROCEEDINGS IN THE FINANCIAL YEAR 2011 - 12, AND SUCH FINANCIAL YEAR EXPIRED ON MARC H 31, 2012. SIX MONTHS FROM THE INITIATION OF PENALTY PROCEEDINGS ALSO EXPIRED ON JUNE 30, 2012. THE PENALTY ORDER PASSED ON SEPTEMBER 14, 2012 WAS CERTAINLY AFTER THE PERIOD OF LIMITATION PRESCRIBED UNDER SECTION 275(1)(C). 15. IN THE CASE OF JKD CAPITAL & FINLEASE LTD. (SUPRA), HON'BLE JURISDICTIONAL HIGH COURT HELD AS UNDER: - 11. IN FACT, WHEN THE AO RECOMMENDED THE INITIATION OF PENALTY PROCEEDINGS THE AO APPEARED TO BE CONSCIOUS OF THE FACT THAT HE DID NOT HAVE THE POWER TO ISSUE NOTICE AS FAR AS THE PENALTY PROCEEDINGS UNDER SECTION 271 - E WAS CONCERNED. HE, THEREFORE, REFERRED THE MATTER CONCERNING PENALTY PROCEEDINGS UNDER SECTION 271 - E TO THE ADDITIONAL CIT. FOR SOME REASON, THE ADDITIONAL CIT DID NOT ISSUE A SHOW CAUSE N OTICE TO THE ASSESSEE UNDER SECTION 271 - E(1) TILL 20 TH MARCH 2012. THERE IS NO EXPLANATION WHATSOEVER FOR THE DELAY OF NEARLY FIVE YEARS AFTER THE ASSESSMENT ORDER IN THE ADDITIONAL CIT ISSUING NOTICE UNDER SECTION 271 - E OF THE ACT. THE ADDITIONAL CIT OUG HT TO HAVE BEEN CONSCIOUS OF THE LIMITATION UNDER SECTION 275(1)(C), I.E., THAT NO ORDER OF PENALTY COULD HAVE BEEN PASSED UNDER SECTION 271 - E AFTER THE EXPIRY OF THE FINANCIAL YEAR IN WHICH THE QUANTUM PROCEEDINGS WERE COMPLETED OR BEYOND SIX MONTHS AFTER THE MONTH IN WHICH THEY WERE INITIATED, WHICHEVER WAS LATER. IN A CASE WHERE THE PROCEEDINGS STOOD INITIATED WITH THE ORDER PASSED BY THE AO, BY DELAYING THE ISSUANCE OF THE NOTICE UNDER SECTION 271 - E BEYOND 30 TH JUNE 2008, THE ADDITIONAL CIT DEFEATED TH E VERY OBJECT OF SECTION 275(1)(C). 6 12. IN THAT VIEW OF THE MATTER, THE ORDER OF THE CIT(A) WHICH HAS BEEN AFFIRMED BY THE IMPUGNED ORDER OF THE ITAT DOES NOT SUFFER FROM ANY LEGAL INFIRMITY. 13. NO SUBSTANTIAL QUESTION OF LAW ARISES FOR DETERMINATION. 16. THOUGH THE ABOVE TWO DECISIONS WERE WITH RESPECT TO LEVY OF PENALTY U/S 271E BUT THE RATIO OF BOTH THE ABOVE DECISIONS WOULD BE SQUARELY APPLICABLE IN RESPECT OF LEVY OF PENALTY U/S 271C BECAUSE AS IN SECTION 271C, U/S 271E ALSO, ONLY THE JOINT COMM ISSIONER OF INCOME - TAX IS AUTHORIZED TO LEVY THE PENALTY UNDER THE RELEVANT SECTION AND, THEREFORE, THE QUESTION BEFORE THE TRIBUNAL WAS WHAT WOULD BE THE DATE OF INITIATION OF THE PENALTY PROCEEDINGS AND DELHI BENCH OF THE TRIBUNAL AS WELL AS HON'BLE JURI SDICTIONAL HIGH COURT HELD THAT THE INITIATION OF PENALTY PROCEEDINGS BY THE ASSESSING OFFICER IS THE DATE OF INITIATION OF PENALTY PROCEEDINGS. THOUGH THE PENALTY IS TO BE IMPOSED BY THE JOINT COMMISSIONER OF INCOME - TAX BUT THERE IS NO BAR ON THE INITIATI ON OF PENALTY PROCEEDINGS BY THE ITO. AFTER INITIATING PENALTY PROCEEDINGS, HE HAS TO TRANSFER THE PROCEEDINGS TO THE JOINT COMMISSIONER WHO IS COMPETENT TO LEVY THE PENALTY. THE PENALTY IS TO BE LEVIED WITHIN THE PERIOD OF LIMITATION PRESCRIBED U/S 275(1) . NOW, REVERTING TO THE FACTS OF THE ASSESSEES CASE, THE ITO ISSUED THE PENALTY NOTICE U/S 271C VIDE HIS ORDER U/S 201(1) AND 201(1A) DATED 27TH JUNE, 2008. THEREFORE, AS PER CLAUSE (C) OF SECTION 275(1), THE PENALTY PROCEEDINGS WERE INITIATED IN THE COUR SE OF ORDER U/S 201(1) AND 201(1A) DATED 27TH JUNE, 2008 AND THE RELEVANT FINANCIAL YEAR WOULD EXPIRE ON 31ST MARCH, 2009. SIX MONTHS FROM THE END OF THE MONTH IN WHICH PENALTY PROCEEDINGS WERE INITIATED WOULD EXPIRE ON 31ST DECEMBER, 2008. THEREFORE, THE COMPETENT AUTHORITY COULD HAVE IMPOSED THE PENALTY BEFORE THE EXPIRY OF 31ST MARCH, 2009. HOWEVER, THE PENALTY ORDER HAS BEEN PASSED ON 2 ND MARCH, 2010 WHICH IS CLEARLY BARRED BY LIMITATION. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE JU RISDICTIONAL HIGH COURT IN THE CASE OF JKD CAPITAL & FINLEASE LTD. (SUPRA), AND ITAT DELHI BENCIN THE CASE OF DINESH JAIN (SUPRA), HOLD THAT THE PENALTY ORDER PASSED U/S 271C WAS BARRED BY LIMITATION. THE SAME IS QUASHED. 8. THERE IS NO DIFFERENCE IN LIMITAT ION PROVISION FOR PENALTY U/S 271C AND 272A (2) (K) OF THE ACT AND THEREFORE RATIO LAID DOWN IN THE ORDER OF THE COORDINATE BENCH SQUARELY APPLIES TO THE FACTS OF THE CASE IN THESE APPEALS. THEREFORE, FOLLOWING THE DECISION OF THE COORDINATE BENCH WE ALSO HOLD THAT THAT THE PENALTY ORDER PASSED ON 16.03.2010 BY THE ADDLL. CIT (TDS) LEVYING PENALTY OF RS. 898200/ - , RS. 299400/ - AND RS. 190500/ - FOR AY 2006 - 07, 2007 - 08 AND 2008 - 09 U/S 272A (2)(K) FOR RESPECTIVE YEARS ARE BARRED BY LIMITATION OF TIME AND HEN CE, CANCELLED. IN THE RESULT GROUND NO. 4 OF THE APPEAL OF THE ASSESSEE FOR ALL THESE YEARS ARE ALLOWED. 7 9. AS WE HAVE ALREADY CANCELLED THE PENALTY ORDERS WE DO NOT ADJUDICATE THE PLEA OF THE ASSESSEE OF REASONABLE CAUSE AND HENCE, THAT GROUND IS REJECTED. 10. IN THE RESULT THE GROUND NO. 4 IS ALLOWED CANCELLING THE PENALTY AND OTHER GROUNDS OF APPEAL ARE DISMISSED AS PREMATURE. 11. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 7 /06/2016 - S D / - - S D / - H. S. SIDHU PRASHANT M MAHARISHI JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : - 2 7 06/2016 COPY OF THE ORDER FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(A) 5) DR BY ORDER A SSISTANT REGISTRAR