M.S. Lokaiah, Hyd, Hyderabad V. Addl. CIT, Range-11, Hyd, Hyderabad

ITA 1272/HYD/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6398 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 29-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 04-11-2015
• Court: TRIBUNAL
• Department Lawyers: A SITARAMA RAO
• Keywords: Bonafide belief; Initiation of penalty proceedings; Reasonable cause; Competent authority; Ignorance of law
• Section: 273B; 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NO. 1272/HYD/2015 ASSESSMENT YEAR : 2007-08 M S LOKAIAH, HYDERABAD. VS. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-11, HYDERABAD. PAN: ACBPL 9337 Q APPELLANT RESPONDENT FOR ASSESSEE: SHRI K.C. DEVDAS (AR) FOR REVENUE: SHRI A. SITARAMA RAO (D.R.) DATE OF HEARING: 21/07/2016 DATE OF PRONOUNCEMENT: 03/ 08/2016 O R D E R PER LALIET KUMAR, J.M. : THIS IS THE APPEAL FILED BY THE ASSESSEE ARIS ES AGAINST THE ORDER DATED 29/09/2015 PASSED BY THE LD. CIT(A)-5, HYDERABAD FOR THE A.Y. 2007-08, WHEREBY THE ORDER PASSED BY THE LD CIT(A) U/S 271D OF THE INCOME TAX ACT, 1961 (IN SHORT THE AC T) WAS CONFIRMED TO THE EXTENT OF IMPOSITION OF PENALTY OF RS. 22,20,000/- FOR FAILURE ON THE PART OF THE ASSESSEE FO R COMPLYING THE PROVISIONS OF SECTION 269SS OF THE ACT. THE GROUND S TAKEN BY THE ASSESSEE IN APPEAL ARE AS UNDER:- I.T.A. NO. 1272/HYD/2015 M S LOKAIAH VS ADDL. CIT :- 2 -: 1. THE ORDER OF THE HONBLE CIT(A) SUSTAINING THE PENALTY LEVIED U/S 271D OF THE IT ACT IS ILLEGAL AND NOT MAINTAINABLE. 2. THE ORDER OF THE HONBLE CIT(A) UPHOLDING THE AC TION OF ADDL. CIT IN INITIATION OF PROCEEDINGS U/S 271D OF THE IT ACT VIDE NOTICE DATED 24/10/2013 IS AGAINST THE PROVISIONS OF THE ACT AND THEREFORE THE ORDER OF TH E HONBLE CIT(A) IS LIABLE TO BE CANCELLED. 3. THE HONBLE CIT(A) OUGHT TO HAVE OBSERVED THAT T HE ADDL. CIT WITHOUT CONSIDERING THE RELEVANT FACTS PROPERLY PROCEEDED TO LEVY PENALTY OF RS. 22,20,000 /- AND THEREFORE OUGHT TO HAVE DELETED THE PENALTY. 4. THE HONBLE CIT(A) OUGHT TO HAVE OBSERVED THAT T HE ASSESSING OFFICER WITHOUT DISCUSSING ANY FACTS AS T O HOW HE WAS NOT SATISFIED WITH THE EXPLANATION OF TH E ASSESSEE OR WITHOUT PASSING ANY SPEAKING ORDER PROCEEDED TO LEVY THE PENALTY AND THEREFORE THE SAM E IS LIABLE TO BE DELETED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS IN INDIVIDUAL AND HAS SHARE INCOME AND ALSO AGRICULTURA L INCOME. AS PER PAPER BOOK PAGE NO. 27 AND 28, THE ASSESSEE IS ALSO DRAWING REMUNERATION AND INTEREST FROM NARENDRA WINES, SRINIDHI WINES, SAI RAM SRINIDHI WINES AND SAI SRIN IVASA WINES. FOR THE A.Y. 2007-08, THE ASSESSEE FILED HIS RETURN OF INCOME ON 14/05/2008 DECLARING TOTAL INCOME OF RS. 4 ,40,140/- AND AGRICULTURAL INCOME OF RS. 3,84,000/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF I.T.A. NO. 1272/HYD/2015 M S LOKAIAH VS ADDL. CIT :- 3 -: SCRUTINY ASSESSMENT, THE ASSESSEE FURNISHED CONFIRMATI ON LETTER FROM VARIOUS CASH CREDITORS. DETAILS OF WHICH, IS AS UNDER:- NAME OF THE PARTY AMOUNT (RS) A. SMT. P. PUMA DEVI 4,50,000 B. SRI M.RAMACHANDRA REDDY 2,50,000 C. SRI P.VENU GOPAL RAO 6,00,000 D. DR. D.PEERA REDDY 1,70,000 E. MR. R.UPENDER RAO 3,00,000 F. MR. M.JAGADEESWARA RAO 4,50,000 22,20,000 AFTER THE SCRUTINY, THE LD A.O. FINALIZED THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) VI DE ORDER DATED 24/12/2009. 2.1 THE ADDITIONAL COMMISSIONER OF INCOME TAX ISSUED A NOTICE ON 24/10/2013 FOR IMPOSITION OF PENALTY U/S 2 71D OF THE ACT. IN RESPONSE TO THE NOTICE, THE ASSESSE FILED EXPL ANATION ALONGWITH THE CONFIRMATION LETTER FROM THE CREDITORS. T HE OFFICER WAS NOT CONVINCED WITH THE EXPLANATION BEING NOT SAT ISFACTORY HENCE, IMPOSING PENALTY U/S 271D OF THE ACT FOR RS. 22,20,000/-. 3. THE ASSESSEE FILED APPEAL BEFORE THE LD CIT(A) AN D THE LD CIT(A) VIDE IMPUGNED ORDER DATED 29/09/2015 HAS UPH ELD THE ORDER PASSED BY THE LD A.O. I.T.A. NO. 1272/HYD/2015 M S LOKAIAH VS ADDL. CIT :- 4 -: 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE ASS ESSEE HAS RAISED VARIOUS GROUNDS MENTIONED HEREINABOVE AND WE SHALL BE DECIDING THE APPEALS GROUND WISE. 4.1 GROUND NO. 2:- THE LD AR OF THE ASSESSEE HAS SUB MITTED BEFORE US THAT THE INITIATION OF PENALTY PROCEEDINGS BY THE ADDITIONAL COMMISSIONER AFTER ISSUING THE NOTICE ON 24/10/2012 WAS CLEARLY BARRED BY LIMITATION AS THE PRO CEEDINGS CANNOT BE INITIATED AFTER A LAPSE OF REASONABLE PERIOD AND IN THE PRESENT CASE AFTER ABOUT FOUR YEARS. THE LD AR FOR THA T PURPOSES, RELIED UPON THE JUDGMENT PASSED BY THE HONB LE DELHI HIGH COURT IN THE CASE OF NHK-JAPAN BROADCASTING VS DCIT AND ALSO THE DECISION OF THE HONBLE MUMBAI HIGH COUR T IN THE CASE OF MAHINDRA & MAHINDRA WHEREBY BOTH THE HONBLE HIGH COURTS HAVE DECIDED THE ISSUE OF INITIATION OF PENALTY WITH RESPECT TO PROCEEDINGS U/S 201 OF THE ACT AND HAS HELD THAT THOUGH THE LIMITATION HAS NOT BEEN PROVIDED UNDER THE AC T FOR INITIATION OF PENALTY BUT IT SHOULD BE REASONABLE AN D IN ANY CASE, IT CANNOT BE BEYOND THE PERIOD OF FOUR YEARS. 5. ON THE OTHER HAND THE LD. DR HAS DRAWN OUR ATTENTION TO THE ORDER PASSED BY THE LD CIT(A) WHEREIN THE LD CIT(A ) HAS ELABORATELY DEALT WITH THE CONTENTION OF THE LD AR AND T HEREAFTER I.T.A. NO. 1272/HYD/2015 M S LOKAIAH VS ADDL. CIT :- 5 -: HAS COME TO THE CONCLUSION THAT IN THE LIGHT OF SPECIAL B ENCH JUDGMENT IN THE CASE OF DIWAN CHAND AMRITLAL (2005) 9 8 TTJ 0947 HAS HELD THAT AS THE STATUTE HAS NOT PROVIDED ANY T IME FOR ISSUANCE OF NOTICE FOR INITIATION OF PENALTY, THEREFOR E, PENALTY U/S 271D, THE INITIATION OF PENALTY BY THE OFFICER WAS HELD TO BE IN ACCORDANCE WITH LAW. FOR THE SAKE OF GRAVITY AND P ROPRIETY, PARAGRAPH NO. 5.4 TO 5.8 OF THE LD CIT(A)S ORDER ARE REPRODUCED HEREUNDER: 5.4 IN CIT VS. HISSARIA BROS. (2007) 291 ITR 244 , HON'BLE HIGH COURT HAS 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 SS. 269SS AND 269T ARE NOT RELATED T O THE ASSESSMENT PROCEEDINGS BUT ARE INDEPENDENT OF IT, THEREFORE, THE COMPLETION OF APPELLATE PROCEEDINGS ARISING OUT OF THE ASSESSMENT PROCEEDINGS OR THE OTHER PROCEEDINGS DUR ING WHICH THE PENALTY PROCEEDINGS UNDER SS. 271D AND 271E MAY HAVE BEEN INITIATED HAS NO RELEVANCE FOR SUSTAINING OR N OT SUSTAINING THE PENALTY ... (EMPHASIS SUPPLIED). 5.5 THUS INITIATION OF PENALTY PROCEEDINGS FOR DEF AULT UNDER SS 269SS AND 269T IS NOT LINKED TO THE ASSESSMENT PROCEEDINGS BU T ONCE INITIATED IT HAS TO BE COMPLETED WITHIN 6 MONTHS OF INITIATION. AS PRESCRIBED IN SEC 275(1)(C). I.T.A. NO. 1272/HYD/2015 M S LOKAIAH VS ADDL. CIT :- 6 -: THUS THE ASSERTION OF THE APPELLANT THAT THE PENALT Y PROCEEDINGS U/S 271D HAS TO BE INITIATED BEFORE FINALIZATION OF ASS ESSMENT PROCEEDINGS FAILS. 5.6 FURTHER THE NECESSITY OF INITIATING PENALTY PR OCEEDINGS IN THE COURSE OF ANY PROCEEDINGS UNDER IT ACT HAS NOT BEEN STIPULATE D. THE SPECIAL BENCH DECISION IN THE CASE OF DEWAN CHAND AMRIT LAL (2005) 98 TTJ 0947 (SB): (2006) 98 ITD 0200 (SB) HAS CONSIDERED THE ISSUE AND HELD THAT: - '26. IN THE LIGHT OF THE ABOVE DISCUSSION, IT APPEA RS THAT THE LEGISLATURE HAS NOT CONSIDERED IT NECESSARY TO PROV IDE FOR LIMITATION FOR INITIATION OF PENALTY PROCEEDINGS UN DER SS. 271D AND 271E. IT BECOMES MORE PROBABLE WHEN WE CONSIDER THE INTENTION OF THE LEGISLATURE BEHIND INCORPORATION O F PROVISIONS OF SS. 269SS AND 269T. WE HAVE REFERRED TO THE LEGISLA TIVE INTENT BEHIND INCORPORATION OF SS. 269SS., 269T, 271D AND 271E IN THE PRECEDING PARAGRAPHS. THE INTENTION BEHIND INCORPO RATION OF THESE PROVISIONS WAS TO COUNTER THE PROLIFERATION O F BLACK MONEY, WHICH WHEN FOUND IN THE COURSE OF SEARCH IS SOUGHT TO BE EXPLAINED BY CASH LOANS FROM VARIOUS PERSONS. AS IT IS, THERE IS NO TIME-LIMIT FOR CONDUCTING SEARCHES. WHEN IN T HE COURSE OF SEARCH, SOME INFORMATION IS FOUND ABOUT CASH LOANS OR DEPOSITS OR REPAYMENT OF LOANS OR DEPOSITS OR SUCH CLAIMS AR E MADE, THE NECESSITY FOR INITIATING PROCEEDINGS UNDER S. 271D OR 271E ARISES. IF ONE WERE TO COMPUTE THE LIMITATION WITH REFERENCE TO THE ASSESSMENT PROCEEDINGS, THEN IN NO CASE, PENALT Y UNDER SS. 271D AND 271E COULD BE INITIATED IN THE CASES WHERE THE INFORMATION IS GATHERED IN THE COURSE OF SEARCH. TH AT WOULD DEFEAT THE VERY PURPOSE OF LEGISLATING THE PROVISIO NS OF SS. 2710 AND 271E. LOOKING FROM THE BACKGROUND WHICH GAVE RI SE TO I.T.A. NO. 1272/HYD/2015 M S LOKAIAH VS ADDL. CIT :- 7 -: INCORPORATION OF SS. 269SS, 269T, 27LD AND 27LE, WE ARE OF THE CONSIDERED VIEW THAT THE LEGISLATURE HAS CONSCIOUSL Y NOT PRESCRIBED ANY LIMITATION FOR INITIATION OF PENALT Y PROCEEDINGS UNDER SS. 27LD AND 27LE. THE LIMITATION OF COURSE H AS BEEN PRESCRIBED FOR IMPOSITION AFTER ITS INITIATION BY T HE COMPETENT AUTHORITY. 27. ASSUMING FOR ARGUMENT'S SAKE THAT THERE IS AN U NINTENDED OMISSION BY THE LEGISLATURE IN NOT PROVIDING LIMIT ATION FOR INITIATION OF PENALTY PROCEEDINGS UNDER SE. 271D A ND 27LE, EVEN IN THAT CASE, IT IS NOT FOR US TO PROVIDE FOR THE C ASUS OMISSUS OF THE LEGISLATURE. IN THE CASE OF PRAKASH NATH KHANNA & ANT. VS. CIT & ANR'. (2004) 187 CTR (SC) 97 : (2004) 266 ITR 1 (SC) AT P. 9. THEIR LORDSHIPS OF THE SUPREME COURT HELD. 'I T IS A WELL SETTLED PRINCIPLE IN LAW THAT THE COURT CANNOT READ ANYTHING INTO A STATUTORY PROVISION WHICH IS PLAIN AND UNAMBIGUOU S. A STATUTE IS AN EDICT OF THE LEGISLATURE. THE LANGUAGE EMPLOY ED IN A STATUTE IS THE DETERMINATIVE FACTOR OF LEGISLATIVE INTENT. THE FIRST AND PRIMARY RULE OF CONSTRUCTION IS THAT THE INTENTION OF THE LEGISLATION MUST BE FOUND IN THE WORDS USED BY THE LEGISLATURE ITSELF. THE QUESTION IS NOT WHAT MAY BE SUPPOSED AN D HAS BEEN INTENDED BUT WHAT HAS BEEN SAID.' IT HAS FURTHER BE EN HELD, 'WHILE INTERPRETING A PROVISION THE COURT ONLY INTE RPRETS THE LAW AND CANNOT LEGISLATE IT. IF A PROVISION OF LAW IS M ISUSED AND SUBJECTED TO THE ABUSE OF PROCESS OF LAW, IT IS FOR THE LEGISLATURE TO AMEND, MODIFY OR REPEAL IT, IF DEEMED NECESSARY. ' THEIR LORDSHIPS FURTHER HELD THAT A STATUTE MUST BE CONST RUED WITH REFERENCE TO THE CONTEXT AND OTHER CLAUSES THEREOF. IN THE PRESENT CASE, CONSIDERING THE CONTEXT IN WHICH THE PROVISIO NS OF SS. 269SS AND 269T AND CONSEQUENTIALLY INCORPORATION OF SS. 271D I.T.A. NO. 1272/HYD/2015 M S LOKAIAH VS ADDL. CIT :- 8 -: AND 271 E, WE ARE OF THE CONSIDERED VIEW THAT NON- PRESCRIBING THE LIMIT FOR INITIATION OF PENALTY PROCEEDINGS IS CONSCIOUS AND THERE IS NEITHER ANY NECESSITY NOR ARE WE EMPOWERE D TO PRESCRIBE ANY LIMITATION FOR INITIATION OF PENALTY PROCEEDINGS UNDER SS. 271D AND 271E IN INTERPRETING THE PROVISI ONS.- 28. IN THE FINAL ANALYSIS, WE HOLD THAT THE AUTHORI TY COMPETENT TO IMPOSE PENALTY UNDER SS. 271D AND 271E IS VESTED WI TH THE DY. CIT (NOW JT. CIT) AND THE AO DOES NOT HAVE THE POWE R EITHER TO INITIATE THE PENALTY PROCEEDINGS OR IMPOSE THE SAME . THERE IS NO PROCEDURE FOR REFERENCE BY THE AO TO THE COMPETENT AUTHORITY FOR IMPOSITION OF PENALTY UNDER SS. 271D OR 271E. T HEREFORE, THE LIMITATION FOR COMPLETION OF PENALTY PROCEEDINGS AS PROVIDED UNDER S. 275(1)(C) HAS GOT TO BE COMPUTED FROM THE DATE OF ISSUE OF SHOW-CAUSE NOTICE BY THE COMPETENT AUTHORITY, W HICH IN THE PRESENT CASE, IS THE DY. CIT (NOW JT. CIT). SINCE T HE RESPECTIVE ORDERS UNDER S. 27LD HAVE BEEN PASSED WITHIN A PER IOD OF SIX MONTHS FROM THE DATE OF INITIATION BY THE COMPETENT AUTHORITY, THE PENALTY ORDERS PASSED IN THE CASES OF THE APPEL LANTS HEREIN ARE NOT BARRED BY LIMITATION. 5.7 FURTHER, IN ITA NO. 1836/MUM/2009 ASSESSMENT Y EAR: 2003-04) SHRI PARAG A. DOSHI, HONBLE ITAT HELD: 'IN VIEW OF THE CONFLICTING DECISIONS OF VARIOUS TR IBUNALS ON THE ISSUE, A SPECIAL BENCH OF TRIBUNAL WAS CONSTITUTED. THE CHANDIGARH SPECIAL BENCH OF I.T.A.T. IN DEWAN CHAN D AMRIT LAL VS. DY. C.I.T. (2006) 283 ITR 203 (AT) HELD THA T THE ASSESSING OFFICER IS NOT COMPETENT TO IMPOSE PENALT Y. WHEN THE A.O CANNOT IMPOSE PENALTY, THE CRUCIAL QUESTION IS CAN HE INITIATE PROCEEDINGS FOR PENALTY? THE TRIBUNAL HEL D THAT WHEN I.T.A. NO. 1272/HYD/2015 M S LOKAIAH VS ADDL. CIT :- 9 -: A.O. HAS NO POWER TO IMPOSE PENALTY, NOTICE ISSUED BY HIM WOULD BE WITHOUT ANY JURISDICTION AND SUCH A NOTICE WILL BE INVALID. SO THE TRIBUNAL HELD THAT LIMITATION WOULD START FROM THE DATE THE AUTHORITY COMPETENT TO IMPOSE PENALTY ISSU ES THE NOTICE. IT WAS ARGUED BEFORE THE TRIBUNAL THAT THIS VIEW WO ULD LEAD TO UNCERTAINTY AND AMBIGUITY WHICH IS AGAINST THE LEGI SLATIVE INTENTION. THE TRIBUNAL OBSERVED THAT THE LEGISLATU RE HAS CONSCIOUSLY NOT PRESCRIBED ANY LIMITATION FOR INITI ATING PENALTY PROCEEDINGS UNDER SECTION 271 D AND E. THE TRIBUNAL FURTHER OBSERVED THAT EVEN ASSUMING FOR ARGUMENT SAKE THAT THERE HAS BEEN AN UNINTENDED OMISSION BY THE LEGISLATURE, IT WAS NOT FOR THE TRIBUNAL TO RECTIFY SUCH OMISSION. QUOTING SUPR EME COURT JUDGMENT THAT THE STATUTE IS AN EDICT OF LEGISLATUR E AND COURT CANNOT READ ANYTHING INTO A STATUTORY PROVISION WHI CH IS PLAIN AND UNAMBIGUOUS, THE TRIBUNAL HELD THAT IT IS NOT E MPOWERED TO PRESCRIBE ANY LIMITATIONS WHICH THE LEGISLATURE HAS CONSCIOUSLY NOT PRESCRIBED. THEREFORE THE SPECIAL BENCH OF THE TRIBUNAL HELD THAT PENALTY PROCEEDINGS UNDER SECTION 271D AND E C AN BE INITIATED ONLY BY THE JOINT COMMISSIONER AND THE LI MITATION FOR LEVY OF PENALTY, STARTS ONLY AFTER HE HAS INITIATED THE PENALTY PROCEEDINGS. THE UPSHOT OF THE ABOVE ANALYSIS IS THAT THE INITIA TION OF PROCEEDINGS FOR LEVY OF PENALTY UNDER SECTION 271D CAN BE MADE ONLY BY JOINT COMMISSIONER AND THE LIMITATION FOR L EVY OF PENALTY HAS TO BE RECKONED AS PROVIDED IN SECTION 2 75(1)(C) OF THE ACT FROM THE DATE OF INITIATION BY THE JOINT CO MMISSIONER. AS TO YOUR SPECIFIC QUESTION 'WHAT IS THE TIME LIMIT T O INITIATE THE PENALTY PROCEEDINGS U/S. 271D' IF YOU GO BY THE ORD ER OF THE SPECIAL BENCH OF ITAT CITED ABOVE, THERE APPEARS T O BE NO TIME I.T.A. NO. 1272/HYD/2015 M S LOKAIAH VS ADDL. CIT :- 10 -: LIMIT FOR ISSUE OF THE NOTICE [OR INITIATION OF PEN ALTY PROCEEDINGS. ' 5.8 THUS, GOING BY THE ORDER OF THE SPECIAL BENCH OF ITAT AND OTHER DECISIONS CITED ABOVE, THERE IS NO TIME LIMIT FOR I SSUE OF THE NOTICE FOR INITIATION OF PENALTY PROCEEDINGS U/S 271D. HENCE, CONTENTIONS OF THE APPELLANT ARE NOT ACCEPTED. 6. WE HAVE GONE THROUGH THE RIVAL CONTENTIONS OF BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON THE RECORD AND THE JUDGMENTS CITED BY THE LD CIT(A) MORE PARTICULARLY THE S PECIAL BENCH DECISION IN THE CASE OF DIWAN CHAND AMRITLAL (S UPRA) IS CLEARLY APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THEREFORE NO FURTHER DELIBERATION ON THIS ISS UE IS REQUIRED AND ACCORDINGLY WE DECIDE THE ISSUE AGAINST THE ASSESSEE BY RESPECTFULLY FOLLOWING THE BINDING PRECED ENT OF THE SPECIAL BENCH DECISION IN THE CASE OF DIWAN CHAND AM RITLAL (SUPRA). 7. GROUND NOS. 1, 3 AND 4:- IN RESPECT OF ALL THESE ISSUES, IT WAS CONTENDED BY THE LD AR OF THE ASSESSEE THAT ONCE THE ASSESSMENT PROCEEDINGS ATTEND FINALITY IN TERMS OF PASS ING OF THE SCRUTINY ASSESSMENT ORDER U/S 143(3) OF THE ACT ON 24/12/2009, THERE WAS NO SATISFACTION RECORDED BY THE A .O. OR BY THE ADDITIONAL COMMISSIONER BEFORE ISSUANCE OF N OTICE. FOR I.T.A. NO. 1272/HYD/2015 M S LOKAIAH VS ADDL. CIT :- 11 -: THAT PURPOSES, THE LD AR RELIED UPON THE PROVISIONS OF SECTION 269SS, 283B, 275 AND 274 OF THE ACT. IT WAS CONTENDED THAT FROM THE CONJOINT READING OF SECTION 269 OF THE ACT, I T IS CLEAR THAT THE A.O. IS DUTY BOUND TO RECORD THE SATISFACTION BEF ORE INITIATION OF THE PENALTY U/S 271D OF THE ACT AND IN TH E PRESENT CASE, NO SATISFACTION WAS RECORDED BY THE LD A.O. IN THE ASSESSMENT ORDER DATED 24/12/2009. IT WAS FURTHER CONTEN DED THAT AS PER SECTION 275( I )(C) OF THE ACT, THOUGH THE PER IOD OF INITIATION OF THE PENALTY HAS NOT BEEN GIVEN BUT PERIO D OF INITIATION OF PENALTY CANNOT BE MORE THAN THE PERIOD O F INITIATION OF ASSESSMENT PROCEEDINGS U/S 148 OF THE ACT. IT WAS, TH US, CONTENDED THAT THE JUDGMENT OF THE HONBLE DELHI HIGH COU RT IN THE CASE OF NHK-JAPAN BROADCASTING VS DCIT AND HONB LE MUMBAI HIGH COURT DECISION IN THE CASE OF DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) VS MAHINDRA AND MAHINDRA LTD. 2014] 48 TAXMANN.COM 150 (BOMBAY) ARE SQUARELY A GUIDING FACTOR FOR DETERMINING THE REASONABLE PERIOD EVEN FOR THE I NITIATION OF IMPOSITION OF PENALTY U/S 271D OF THE ACT. FURTHER, IT WAS CONTENDED THAT THE ASSESSEE DURING THE PENALTY PROCEEDI NGS BEFORE THE OFFICER HAS GIVEN A REASONABLE CAUSE IN T ERMS OF SECTION 273B OF THE ACT FOR ACCEPTING THE CASH OTHER TH AN THE BANKING CHANNELS IN CONTRAVENTION OF SECTION 269SS OF THE ACT. I.T.A. NO. 1272/HYD/2015 M S LOKAIAH VS ADDL. CIT :- 12 -: IT WAS CONTENDED THAT ONCE THE REASON GIVEN BY THE ASSES SEE HAS BEEN ACCEPTED DURING THE ASSESSMENT PROCEEDINGS B Y THE LD A.O. THE ASSESSEE CANNOT BE ASKED TO EXPLAIN THE SAME IN THE PENALTY PROCEEDINGS. IT WAS CONTENDED THAT THE EXPLANATIO N GIVEN BY THE ASSESSEE DURING THE COURSE OF ASSESSME NT PROCEEDINGS WERE DULY ACCEPTED BY THE LD A.O. THEREF ORE, THE SAME SET OF FACTS AND CIRCUMSTANCES, THE ASSESSEE CANNO T BE PENALIZE U/S 271D OF THE ACT FOR VIOLATION OF SECTION 269SS OF THE ACT. IT WAS SUBMITTED THAT THE ASSESSEE HAS SUBMITTED THE CONFIRMATION LETTER FROM 5 PERSON AND WERE ABLE TO PRO VE THE CREDITWORTHINESS, GENUINENESS, IDENTITY AND SOURCE O F CASH DEPOSIT. THE LD AR RELIED UPON THE ORDER OF THE HONBLE ALLAH ABAD HIGH COURT IN THE CASE OF CIT VS. DIMPLE YADAV IN ITA NO. 174 OF 2015 ORDER DATED 21/08/2015 AND IT WAS SUBMITTED TH AT THE FACTS IN THE SAID CASE WERE SIMILAR TO THE FACTS IN THE PRESENT CASE AND DESPITE THAT THE HONBLE ALLAHABAD HIGH COURT HAS RESTRICTED THE EXPLANATION GIVEN BY THE ASSESSEE AND HA VE DELETED THE PENALTY ORDER ISSUED U/S 271D OF THE ACT. THE LD AR ALSO RELIED ON THE VARIOUS OTHER JUDGMENTS INCLUDING THE JUDGMENT OF THE HONBLE HYDERABAD BENCH IN THE CASE OF THE CITIZEN CO-OPERATIVE SOCIETY LIMITED, HYDERABAD VS ADD L.CIT I.T.A. NO. 1272/HYD/2015 M S LOKAIAH VS ADDL. CIT :- 13 -: PASSED IN ITA NO. 1156/HYD/2009 WITH OTHER CASES ORDE R DATED 26/02/2010, FOR THAT PURPOSES, THE LD AR HAS EMPHASIZE D PARAGRAPH NO. 18 OF THE SAID JUDGMENT, THE SAME IS REP RODUCED HEREIN BELOW:- 18. TO SUM UP, A HARMONIOUS CONSTRUCTION OF THE RE LEVANT PROVISIONS OF SECTIONS 271D, 271E AND 273B CLEARLY REVEALS THE USE OF EXPRESSION SHALL BE LIABLE TO P AY IN SECTIONS 271D AND 271E AND THE PROVISIONS OF SEC. 273B PROVIDING THAT NO PENALTY WOULD BE LEVIABLE IF THE PERSON CONCERNED PROVES THAT THERE ARE REASONABLE CAUSE OR THE SAID FAILURE CLEARLY INDICA TES THESE PROVISIONS GIVE A DISCRETION TO THE AUTHORITY TO IMPOSE THE PENALTY OR NOT TO IMPOSE THE PENALTY. SU CH A DISCRETION HAS TO BE EXERCISED IN A JUST AND FAIR MANNER HAVING REGARD TO THE ENTIRE FACTS AND MATERIALS EXISTING ON RECORD. ORDINARILY, A PLEA AS TO BE IGNORANCE OF LAW CANNOT SUPPORT THE BREACH OF A STATUTORY PROVISION BUT THE FACT OF SUCH AN TECHNIC AL BREAK DUE TO IGNORANCE OF THE RELEVANT PROVISIONS O F LAW OR ON ACCOUNT OF BONAFIDE BELIEF, COUPLED WITH THE FACT THAT TRANSACTIONS IN QUESTION ARE GENUINE AND BONAFIDE TRANSACTION WERE UNDERTAKEN DURING THE REGULAR COURSE OF ITS BUSINESS WILL NOT RESULT IN L EVY OF PENALTY U/S 271D AND 271E. THE LD AR FURTHER MENTIONED THE VARIOUS JUDGMENTS TO SH OW THAT THE ASSESSEE HAD REASONABLE CAUSE U/S 273B OF TH E ACT , I.T.A. NO. 1272/HYD/2015 M S LOKAIAH VS ADDL. CIT :- 14 -: THEREFORE PENALTY SHOULD NOT BEEN IMPOSED IN THE MECHA NICAL AND STEREO TYPE MANNER. 8. ON THE OTHER HAND, THE LD DR HAS BROUGHT TO OUR NOTI CE THE VARIOUS PARAGRAPHS OF THE LD CIT(A) TO SHOW THAT THE ASSESSEE DURING THE COURSE OF PENALTY PROCEEDINGS HA VE FAILED TO JUSTIFY THE INTRODUCTION OF CASH IN HIS ACCOUNT AND HAS FURTHER FAILED TO PROVE THE BUSINESS EXIGENCY OR DIRE NEED OF CASH FOR THE PURPOSES OF SAME TRANSACTION OF THE PROPERTY. 9. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTI ES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE ARGUMENT OF THE LD AR FOR INITIATION OF PENALTY WITHIN THE REASO NABLE TIME AND IN ANY CASE NOT BEYOND FOR THE YEAR IS NOT ACCEPTA BLE, FOR THE SIMPLE REASON THAT THE ISSUE HAS ALREADY BEEN ADJUD ICATED BY THE SPECIAL BENCH AND THEREFORE, WE ARE BOUND BY THE CATEGORICAL PRONOUNCEMENT OF THE SPECIAL BENCH IN THIS REGARD. THEREFORE, THE PROCEEDINGS INITIATED, FOR VIOLATION OF SECTION 269SS, U/S 271D ARE WITHIN LIMITATION. IN OUR VIEW, ONCE THE ASSESSMENT ORDER HAS BEEN PASSE D ON THE PREMISE OF ACCEPTANCE OF CASH DEPOSIT FROM VARIOUS P ERSONS AND CONFIRMATION HAS BEEN PRODUCED BY THE ASSESSEE IN THE QUANTUM PROCEEDINGS AND PENALTY PROCEEDINGS. IN OUR VIEW THE I.T.A. NO. 1272/HYD/2015 M S LOKAIAH VS ADDL. CIT :- 15 -: REVENUE HAS ACCEPTED THE EXPLANATION OF CASH DEPOSIT IN THE BANK ACCOUNT , IN THE QUANTUM PROCEEDINGS , THEREFORE N O PENALTY PROCEEDING WERE INITIATED IN THE QUANTUM PROCEE DINGS . SINCE THE REVENUE HAS ACCEPTED THE EXPLANATION OF CASH IN THE ASSESSMENT PROCEEDINGS, THEREFORE, THE SAME SET OF FAC TS AND DOCUMENTS CANNOT BE MADE BASIS FOR IMPOSITION OF PE NALTY. THE ASSESSEE, HAS SUBMITTED THE REASONS FOR ACCEPTING THE CA SH IN THE QUANTUM PROCEEDINGS AND THE SAID REASONS WERE ACC EPTED BY THE A.O AND THE SAME REASONING SHOULD HAVE BEEN A CCEPTED IN PENALTY PROCEEDING AS WELL. IN OUR VIEW, NOW IN THE QUANTUM PROCEEDINGS U/S 271D OF THE ACT, THE OFFICER, IS NOT PE RMITTED TO REOPEN AND REEXAMINE THE REASONING GIVEN BY THE ASSES SEE. IT IS CORRECT THAT THE ASSESSMENT PROCEEDINGS AND PROCEEDINGS FOR VIOLATION OF SECTION 269SS OF THE ACT ARE INDEPENDENT PROCEEDINGS BUT IN THE CASES LIKE IN THE HAND, THE REVE NUE IS NOT PERMITTED TO TAKE CONTRARY STAND. THE JUDGMENT IN THE CAS E OF DIMPLE YADAV WAS SOUGHT TO BE DISTINGUISHED BY THE LD DR ON THE PREMISE THAT THE MONEY AFTER ACCEPTING FROM THE CREDI TOR WAS NOT ROUTED THROUGH THE BANKING CHANNEL FOR THE PAYM ENT TO THE SELLER. IN OUR VIEW, THIS ARGUMENT IS NOT AVAILABLE TO THE REVENUE AS THE REVENUE HAS NEITHER CHALLENGED THE REGI STRATION OF THE SALE DEED IN FAVOUR OF THE ASSESSEE NOR HAS CH ALLENGED THE I.T.A. NO. 1272/HYD/2015 M S LOKAIAH VS ADDL. CIT :- 16 -: CASH CONSIDERATION PAID BY THE ASSESSEE TO THE SELLER AT THE TIME OF REGISTRATION BEFORE THE SUB-REGISTRAR OF SALE DEED. IN OUR VIEW THE CASE OF THE DIMPLE YADAV IS SQUARELY APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE. IN THE LIGHT OF THE ABOVE , WE ARE OF THE VIEW, THE ASSESSEE HAS SHOWN THE REASONABLE CA USE WITHIN THE MEANING OF SECTION 273B OF THE ACT, THEREFO RE, THE PENALTY ORDER OF THE LOWER AUTHORITIES IS QUASHED AND THE APPEAL OF THE ASSESSE IS ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 03/08/2016. SD/- SD/- ( B. RAMAKOTAIAH ) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 03/08/2016 *RANJAN COPY FORWARDED TO: 1. M S LOKAIAH, C/O- B. NARSINGH RAO & CO. CHARTERED ACCOUNTANTS, PLOT NO. 554, ROAD NO. 92, JUBILEE HILLS , HYDERABAD-96. 2. THE ADDL.CIT, RANGE-11, HYDERABAD 3. CIT(APPEALS)-5, HYDERABAD. 4. PR. CIT-5, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.