M/s Sha Thanmal Sukharajji & Co, Ranebennuru V. The Additional Commissioner Of Income tax TDS RAnge , Hubli

ITA 1725/BANG/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1405 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-11-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 22-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K R NARAYANA JT BENGALURU
• Keywords: Bonafide belief; Period of limitation; Initiation of penalty proceedings; Non-deduction of tax; Reasonable cause; Time period of passing order; TDS
• Section: 271(1)(c); 201(1); 271E; 274; 13; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI A K GARODIA, ACCOUNTANT MEMBER ITA NOS. 1724 TO 1726/BANG/2018 ASSESSMENT YEARS: 2009-10, 2011-12 & 2010-11 M/S. SHA THANMAL SUKHARAJJI & CO., APMC YARD, RANEBENNUR 581 115. TAN: BLRS 14875A VS. THE ADDITIONAL COMMISSIONER OF INCOME TAX, TDS RANGE, HUBBALLI. APPELLANT RESPONDENT APPELLANT BY : SMT. SUMAN LUNKAR, CA RESPONDENT BY : SHRI K.R. NARAYANA, JT. CIT(DR)(ITAT) BENGALURU. DATE OF HEARING : 29.11.2019 DATE OF PRONOUNCEMENT : 13.12.2019 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THESE ARE APPEALS BY THE ASSESSEE DIRECTED AGAINS T A COMMON ORDER DATED 5.3.2018 OF COMMISSIONER OF INCOME TAX (APPEALS), DAVANAGERE CONFIRMING THE ORDER OF THE ASSESSING OF FICER (AO) IMPOSING PENALTY ON THE ASSESSEE U/S. 271C OF THE INCOME TAX ACT, 1961( THE ACT), IN RELATION TO ASSESSMENT YEARS 2009-10 TO 2011-12. 2. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUS INESS OF TRADING IN COTTON, KAPPAS AND COTTON SEEDS. HE MADE PAYMENT O F VARIOUS EXPENSES ITA NOS. 1724 TO 1726/BANG/2018 PAGE 2 OF 14 WITHOUT DEDUCTION OF TAX AT SOURCE AT THE TIME OF M AKING PAYMENT. THE PAYMENTS WERE ADMITTEDLY COVERED EITHER U/S.194C (P AYMENT MADE TO A CONTRACT FOR CARRYING OUT ANY WORK) SEC.194-H (COMM ISSION) ETC. ORDERS WERE PASSED BY THE ITO, TDS WARD, DAVANGERE DATED 1 1.2.2013 HOLDING THE ASSESSEE AS AN ASSESSEE IN DEFAULT FOR NOT DEDU CTING TAX AT SOURCE U/S.201(1) OF THE ACT AND ALSO LEVYING INTEREST ON TAX NOT DEDUCTED AT SOURCE FROM THE DATE ON WHICH TAX OUGHT TO HAVE PAI D TO THE CREDIT OF THE CENTRAL GOVERNMENT TILL THE DATE ON WHICH THE PAYME NTS ARE MADE U/S. 201(1A) OF THE ACT. IN THE AFORESAID ORDERS, THE I TO, TDS WARD, DAVANGERE OBSERVED THAT PENALTY PROCEEDINGS U/S. 27 1C WILL BE INITIATED SEPARATELY. THE FOLLOWING WERE THE RELEVANT OBSERVA TIONS OF THE ITO, TDS WARD, DAVANGERE:- 8. PENALTY PROCEEDINGS U/S.271C FOR FAILURE TO DE DUCT THE WHOLE OR ANY PART OF TAX AT SOURCE AS REQUIRED UNDER CHAP TER XVII-B WILL BE INITIATED SEPARATELY. THE AO HAS ALSO MENTIONED IN THE SAID ORDER AS FOLL OWS:- PENALTY NOTICE U/S.271-C IS ISSUED SEPARATELY. 3. SECTION 271C OF THE ACT PROVIDES FOR PENALTY FOR FAILURE TO DEDUCT TAX AT SOURCE AND IT LAYS DOWN AS FOLLOWS:- 271C. (1) IF ANY PERSON FAILS TO ( A ) DEDUCT THE WHOLE OR ANY PART OF THE TAX AS REQUIRED BY OR UNDER THE PROVISIONS OF CHAPTER XVII-B; OR ( B ) PAY THE WHOLE OR ANY PART OF THE TAX AS REQUIR ED BY OR UNDER ( I ) SUB-SECTION (2) OF SECTION 115-O; OR ( II ) THE SECOND PROVISO TO SECTION 194B, ITA NOS. 1724 TO 1726/BANG/2018 PAGE 3 OF 14 THEN, SUCH PERSON SHALL BE LIABLE TO PAY, BY WAY OF PENALTY, A SUM EQUAL TO THE AMOUNT OF TAX WHICH SUCH PERSON FAILED TO DEDUCT OR PAY AS AFORESAID.] (2) ANY PENALTY IMPOSABLE UNDER SUB-SECTION (1) SHA LL BE IMPOSED BY THE JOINT COMMISSIONER. 4. SEC.273B OF THE ACT PROVIDES THAT NO PENALTY SHA LL BE IMPOSED U/S.271-C OF THE ACT IF THE ASSESSEE PROVES THAT TH ERE WAS A REASONABLE CAUSE FOR THE FAILURE TO DEDUCT TAX AT SOURCE. THE ASSESSEE IN RESPONSE TO THE SHOW CAUSE NOTICE BEFORE IMPOSING PENALTY U/S.2 71C OF THE ACT TOOK A PLEA THAT IT WAS A SMALL TRADER IN COTTON, KAPPAS A ND SEEDS AT RANEBENNUR, WHICH IS A SMALL TOWN. THE ASSESSEE LACKS KNOWLEDG E OF TDS PROVISIONS AND THERE ARE NO QUALIFIED PROFESSIONALS WHO COULD ADVISE THE ASSESSEE REGARDING COMPLIANCE OF TDS PROVISIONS. IT IS ONLY WHEN THE SURVEY WAS CONDUCTED U/S.133A OF THE ACT BY THE ITO, TDS THAT IT CAME TO KNOW ABOUT ITS OBLIGATION TO DEDUCT TAX AT SOURCE. 5. THE ASSESSEE ALSO TOOK A PLEA THAT THE ORDER IMP OSING PENALTY U/S.271C OF THE ACT IS BARRED BY TIME. SECTION 275 (1)(C) OF THE ACT READS THUS:- 275. (1) NO ORDER IMPOSING A PENALTY UNDER THIS CH APTER SHALL BE PASSED (A).... (B)..... (C) IN ANY OTHER CASE, AFTER THE EXPIRY OF THE FINA NCIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHICH ACTIO N FOR THE IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPL ETED, OR SIX MONTHS FROM THE END OF THE MONTH IN WHICH ACTIO N FOR IMPOSITION OF PENALTY IS INITIATED, WHICHEVER PERIOD EXPIRES LATER. ITA NOS. 1724 TO 1726/BANG/2018 PAGE 4 OF 14 6. IT WAS THE SUBMISSION OF THE ASSESSEE THAT THE O RDER U/S.201(1) OF THE ACT WAS PASSED ON 11.2.2013 AND BECAME FINAL AN D THEREFORE IN TERMS OF FIRST PART OF SEC.275(1)(C) OF THE ACT THE START ING POINT OF LIMITATION WILL BE 11.2.2013 AND END POINT WILL BE 31.3.2013 I.E., END OF THE FINANCIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHICH ACTIO N FOR THE IMPOSITION OF PENALTY HAS BEEN INITIATED ARE COMPLETED. AS FAR A S THE SECOND PART OF SEC.275(1)(C) OF THE ACT IS CONCERNED, IT WAS THE P LEA OF THE ASSESSEE THAT THOUGH IN THE ORDER DATED 11.2.2013, IT IS MENTION ED THAT ACTION FOR IMPOSITION OF PENALTY U/S. 271C WILL BE INITIATED S EPARATELY BECAUSE THE ITO, TDS, DAVANGERE, WHO PASSED THE SAID ORDER WAS NOT C OMPETENT TO LEVY PENALTY BECAUSE THE PROVISIONS OF SEC.271C(2) LAYS DOWN THAT PENALTY CAN BE IMPOSED ONLY BY JOINT COMMISSIONER OF INCOME TAX , THE DATE OF INITIATION OF PENALTY U/S.271C SHOULD BE REGARDED A S THE DATE OF PASSING OF THE ORDER U/S.201(1) OF THE ACT DATED 11.2.2013 AS IN THE SAID ORDER THERE HAS BEEN AN OBSERVATION THAT PENALTY NOTICE U/S. 27 1C IS ISSUED SEPARATELY. IT WAS THE PLEA OF THE ASSESSEE BEFORE CIT(A) THAT IN TERMS OF SECTION 275(1)(C) OF THE ACT, THE PENALTY ORDER COULD HAVE ONLY BEEN PASSED ON OR BEFORE 31 ST AUGUST, 2013 AND SINCE THE ORDER IMPOSING PENALTY U/S.271C WAS PASSED ON 25.7.2016, THE PENALTY ORDER WAS BARR ED BY LIMITATION. 7. THE AO REJECTED THE PLEA OF EXISTENCE OF REASONA BLE CAUSE FOR FAILURE TO DEDUCT TAX AT SOURCE AND ALSO REJECTED T HE PLEA OF THE ASSESSEE THAT THE ORDER IMPOSING PENALTY IS BARRED BY LIMITA TION U/S.275(1)(C) OF THE ACT. THE AO HELD THAT ASSESSEE ACCEPTED THE DEFAUL T AND PAID TAXES AND THAT ITSELF SHOWED THAT THE ASSESSEE WAS WELL VERSE D WITH THE RELEVANT STATUTORY PROVISIONS. ON THE PLEA OF LIMITATION, T HE AO HELD THAT PENALTY PROCEEDINGS WERE INITIATED BY ISSUE OF NOTICE U/S.2 74 OF THE ACT DATED 22.1.2016 AND THE ORDER IMPOSING PENALTY COULD BE P ASSED WITHIN 6 MONTHS FROM THE END OF THE MONTH IN WHICH THE PROCEEDINGS FOR IMPOSING PENALTY ARE INITIATED. THEREFORE THE AO HELD THAT THE ORDE R IMPOSING PENALTY U/S. ITA NOS. 1724 TO 1726/BANG/2018 PAGE 5 OF 14 271C OF THE ACT (WHICH WAS DATED 25.7.2016 ) WAS PA SSED WITHIN THE PERIOD OF LIMITATION CONTEMPLATED BY SEC.275(1)(C) OF THE ACT. THE CIT(A) CONFIRMED THE ORDER OF THE AO. 8. AGGRIEVED BY THE ORDERS OF THE CIT(APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. IN THE ORIGINAL GROUND S OF APPEAL, THE ASSESSEE HAS NOT RAISED ANY SPECIFIC GROUND RELATING TO THE ORDERS OF THE AO IMPOSING PENALTY U/S. 271C OF THE ACT BEING INVALID BECAUSE IT WAS PASSED BEYOND THE PERIOD OF LIMITATION PRESCRIBED U/S. 271(1)(C) OF THE ACT. HOWEVER AN APPLICATION TO RAISE THE AFORESAID GROUND ON LIMITA TION WAS FILED BY WAY OF ADDITIONAL GROUND ON THE GROUND THAT THE SAID GROUN D WAS INADVERTENTLY OMITTED TO BE TAKEN IN THE ORIGINAL GROUNDS OF APPE AL. WE ARE OF THE VIEW THAT THE PLEA OF LIMITATION BEING A LEGAL PLEA WHIC H CAN BE ADJUDICATED ON FACTS ALREADY AVAILABLE ON RECORD AND WHICH ARISES OUT OF THE IMPUGNED ORDER, SHOULD BE ADMITTED FOR ADJUDICATION. WE ACC ORDINGLY ADMIT THE ADDITIONAL GROUND FOR ADJUDICATION. 9. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE PLEA PUT FORTH BEFORE THE AO AND FURTHER PLACED RELIANCE ON DECISI ON OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. HISSARIA BROS., 291 ITR 244 (RAJ) FOR THE PROPOSITION THAT WHEN THE SUBJECT MATTER OF THE QUANTUM PROCEEDINGS WAS THE NON-COMPLIANCE WITH SECTION 269 T OF THE ACT, THERE WAS NO NEED FOR THE APPEAL AGAINST THE SAID ORDER I N THE QUANTUM PROCEEDINGS TO BE DISPOSED OF BEFORE THE PENALTY PR OCEEDINGS COULD BE INITIATED. IN OTHER WORDS, THE INITIATION OF PENALT Y PROCEEDINGS DID NOT HINGE ON THE COMPLETION OF THE APPELLATE QUANTUM PROCEEDI NGS AND THEREFORE CLAUSE (C) OF SEC.275(1) WOULD GOVERN THE PERIOD OF LIMITATION FOR PASSING SUCH ORDERS IMPOSING PENALTY U/S.271D AND 271E OF T HE ACT. HE ALSO RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF PR.CIT VS. MAHESH WOOD PRODUCTS PVT.LTD. 394 ITR 312 (DEL) & C IT VS. JKD CAPITAL ITA NOS. 1724 TO 1726/BANG/2018 PAGE 6 OF 14 & FINLEASE LTD. 378 ITR 614(DEL) WHEREIN IT WAS HELD THAT DATE ON WHICH THE AO INFORMS THE OFFICER COMPETENT TO IMPOSE PEN ALTY U/S.271E OF THE ACT, WOULD BE DATE OF INITIATION OF PENALTY PROCEED INGS U/S.271E OF THE ACT FOR THE PURPOSE OF COMPUTING PERIOD OF LIMITATION I N TERMS OF SEC.275(1)(C) OF THE ACT. RELIANCE WAS ALSO PLACED ON THE DECISI ON OF THE ITAT BANGALORE B BENCH IN THE CASE OF KANAKARA RAJENDRA PRASAD REDDY VS. JCIT ITA NO.1962/BANG/2017 ORDER DATED 2.8.2019 WHEREIN IT WAS HELD THAT DATE ON WHICH THE DEFAULT FOR WHICH PENALTY IS LEVIED U/S. 271C OF THE ACT IS NOTICED, WOULD BE THE STARTING POINT OF TIME FOR LIMITATION PURPOSE UNDER THE SECOND PART OF SEC.275(1)(C) OF THE ACT. IT WAS FURTHER H ELD THAT THE FACT THAT THE ORDER NOTICING THE DEFAULT IS NOT COMPETENT TO INIT IATE PENALTY PROCEEDINGS AND THEREFORE THE ARGUMENT OF THE REVENUE THAT THE DATE OF ISSUE OF SHOW CAUSE BY THE COMPETENT OFFICER SHOULD BE RECKONED A S DATE OF INITIATION OF PENALTY PROCEEDINGS FOR THE PURPOSE OF SEC.275(1)(C ) OF THE ACT WAS NOT ACCEPTABLE. 10. THE LEARNED DR SUBMITTED THAT THE PROCEEDINGS W ERE NOT BARRED BY TIME. HE SUBMITTED THAT IN THE ORDER U/S. 201(1) O F THE ACT DATED 11.2.2013, THE AO HAS NOT INITIATED PENALTY PROCEEDINGS U/S.27 1C OF THE ACT AND HAS MERELY MADE AN OBSERVATION THAT PENALTY PROCEEDINGS U/S. 271C OF THE ACT WOULD BE INITIATED SEPARATELY. IT WAS SUBMITTED BY HIM THAT THE JCIT ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE U/S. 271C OF THE ACT DATED 22.1.2016 AND THAT WAS THE DATE OF INITIATION, ACCORDING TO H IM. SIX MONTHS FROM THE END OF THE MONTH IN WHICH PROCEEDINGS WERE INITIATE D WOULD THEREFORE BE 31.7.2016 AND SINCE THE IMPUGNED ORDER WAS PASSED O N 25.7.2016, THE ORDER PASSED WAS WELL WITHIN TIME. HIS FURTHER SUB MISSION WAS THAT THE DECISIONS CITED BY THE LEARNED COUNSEL FOR THE ASSE SSEE ARE IN RELATION TO DEFAULT U/S.269E AND 269T OF THE ACT AND THOSE PROC EEDINGS STAND ON A DIFFERENT FOOTING THAN THE PROCEEDINGS U/S.201(1) O F THE ACT BASED ON WHICH PENALTY PROCEEDINGS WERE INITIATED U/S.271C OF THE ACT, IN THE PRESENT CASE. ITA NOS. 1724 TO 1726/BANG/2018 PAGE 7 OF 14 IN SUPPORT OF HIS CONTENTION THAT THE DATE OF INITI ATION WOULD BE DATE ON WHICH JCIT ISSUES SHOW CAUSE NOTICE TO THE ASSESSEE U/S. 274 OF THE ACT READ WITH SEC.271C OF THE ACT, I.E., 22.1.2016 WOUL D BE THE DATE OF INITIATION OF PENALTY PROCEEDINGS AND RECKONED FROM THAT DATE, THE ORDER IMPOSING PENALTY HAS BEEN PASSED WELL WITHIN THE PERIOD OF L IMITATION. HE PLACED RELIANCE ON A DECISION OF THE ITAT JAIPUR BENCH IN THE CASE OF JAIPUR NATIONAL UNIVERSITY VS. JCIT ITA NO.870/JP/2018 ORD ER DATED 6.2.2019 . IN THAT CASE THE ORDER U/S.201(1) WAS PASSED ON 31.10. 2012. THE OFFICER WHO PASSED THE ORDER U/S.201(1) OF THE ACT WAS NOT COMP ETENT TO INITIATE AND PASS ORDER IMPOSING PENALTY U/S.271C OF THE ACT. O N 22.1.2013, HE MADE A REFERENCE TO THE COMPETENT OFFICER FOR IMPOSING P ENALTY PROCEEDINGS U/S.271C OF THE ACT. THE OFFICER COMPETENT TO IMPO SE PENALTY I.E., THE JCIT ISSUED SHOW CAUSE NOTICE DATED 11.2.2013. THE ORDE R IMPOSING PENALTY WAS PASSED ON 29.8.2013. ON THE ABOVE FACTS, THE TRIBUNAL HELD AS FOLLOWS:- 9. ON PERUSAL OF THE ORDER PASSED BY THE AO U/S 201(1) R.W.S. 201(1A) DATED 31.10.2012, IT IS CLEAR THAT A REFERE NCE WAS BEING MADE TO THE JCIT (TDS) FOR INITIATION OF PENALTY PR OCEEDING U/S 271C OF THE ACT AND THE SAID REFERENCE WAS ACTUALLY MADE VIDE AOS LETTER DATED 22.01.2013 TO JCIT(TDS). THEREAFT ER, THE JCIT(TDS) INITIATED THE PENALTY PROCEEDINGS U/S 271 C BY WAY OF ISSUANCE OF NOTICE DATED 11.02.2013 TO THE ASSESSEE AND THE PENALTY ORDER U/S 271C WAS THEREAFTER PASSED ON 29. 08.2013 WHICH IS WELL WITHIN THE LIMITATION PERIOD PRESCRIB ED U/S 275(1)(C) OF THE ACT. THE LD ARS CONTENTION THAT T HE AO WHILE PASSING THE ORDER U/S 201(1) R.W.S. 201(1A) HAS INI TIATED THE PENALTY PROCEEDINGS IS NOT FOUND FACTUALLY CORRECT AS THERE IS NO NOTICE WHICH HAS BEEN ISSUED BY THE AO TO THE ASSES SEE. SECONDLY, THE CONTENTION OF THE LD AR THAT THE INIT IATION OF THE PENALTY PROCEEDINGS SHOULD BE RECKONED FROM THE DAT E WHEN THE REFERENCE WAS MADE BY THE AO TO JCIT(TDS) CANNOT AG AIN BE ACCEPTED AS THE INITIATION OF SUCH PROCEEDINGS HAVE TO BE BY WAY OF ISSUANCE OF A NOTICE TO THE ASSESSEE AND NOT BY MERE REFERENCE FROM THE AO TO JCIT(TDS). THE DECISION OF THE HONB LE ITA NOS. 1724 TO 1726/BANG/2018 PAGE 8 OF 14 SUPREME COURT IN CASE OF HISSARIA BROTHERS IS IN CO NTEXT OF APPLICABILITY OF CLAUSE (C) TO SUB-SECTION (1) TO S ECTION 275 WHICH IS NOT IN DISPUTE AS FAR AS PRESENT CASE IS CONCERN ED. FURTHER, THE DECISION OF COORDINATE BENCH IN CASE OF SUBHASH PAR ETA DOESNT SUPPORT THE CASE OF THE ASSESSEE AS IN THAT CASE AL SO, THE AO DIDNT INITIATE THE PENALTY PROCEEDINGS AND THE FIRST NOTI CE WAS ISSUED BY ADD. CIT ONLY INITIATING THE PENALTY PROCEEDINGS AN D THEREAFTER, THE ORDER WAS PASSED WITHIN THE PRESCRIBED LIMITATI ON PERIOD. IN LIGHT OF ABOVE DISCUSSIONS, WE ARE OF THE CONSIDERE D VIEW THAT THE IMPUGNED ORDER IS NOT BARRED BY LIMITATION AND THE CONTENTIONS SO ADVANCED BY THE LD AR IN THIS REGARD ARE NOT FOUND ACCEPTABLE. 11. RELIANCE WAS ALSO PLACED BY HIM ON A DECISION O F ITAT MUMBAI G BENCH IN THE CASE OF MRS.SONAL SHAH VS. JCIT ITA NO.6462/MUM/2018 (AY 2009-10) ORDER DATED 25.2.2019 WHEREIN FOLLOWING THE DECISIONS OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. GUPTA MILLS STORES (2009) 184 TAXMAN 230 (ALL) AND HONBLE KERALA HIGH COURT IN THE CASE OF GRIHALAKSHMI VISION VS. ADDL.CIT (2015) 63 TAXMANN. COM 196 (KER.) , THE TRIBUNAL TOOK THE VIEW THAT THE DATE ON WHICH THE J CIT ISSUES NOTICE U/S.271-C SHOULD BE RECKONED AS THE DATE OF INITIAT ION OF PENALTY PROCEEDINGS FOR THE PURPOSE OF THE SECOND PART OF S EC.275(1)(C) OF THE ACT. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THER E IS NO DISPUTE THAT THE PERIOD OF LIMITATION IS REQUIRED TO BE EXAMINED IN THE LIGHT OF THE PROVISIONS OF SEC.275(1)(C) OF THE ACT. THE DECISI ON OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. HISSARIA BROS (SUPRA) WHICH WAS CONFIRMED BY THE HONBLE SUPREME COURT CLEARLY LAYS DOWN THAT THE PERIOD OF LIMITATION FOR PENALTIES THAT ARE TO BE I MPOSED WHICH ARE NOT DEPENDENT UPON OUTCOME IN QUANTUM APPEALS SHOULD BE GOVERNED BY THE PROVISIONS OF SEC.275(1)(C) OF THE ACT. THE ISSUE IN THE PRESENT CASE IS AS WHAT IS THE STARTING POINT OF TIME U/S.275(1)(C) OF THE ACT IN THE PRESENT CASE. AS FAR AS APPLICABILITY OF THE FIRST PART OF SEC.275(1)(C) OF THE ACT IS CONCERNED VIZ., AFTER THE EXPIRY OF THE FINANCIAL YEAR IN WHICH THE ITA NOS. 1724 TO 1726/BANG/2018 PAGE 9 OF 14 PROCEEDINGS, IN THE COURSE OF WHICH ACTION FOR THE IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPLETED,. IN THE PRESENT CA SE, AT THE LEVEL OF THE AO, THE PROCEEDINGS U/S.201(1) OF THE ACT WAS COMPLETED ON 11.2.2013 AND THE ASSESSEE ACCEPTED THE SAID ORDER PASSED U/S. 201(1) OF THE ACT AND DID NOT PREFER ANY FURTHER APPEAL. GOING BY THIS DATE, THE PENALTY ORDER COULD NOT HAVE BEEN PASSED LATER THAN 31.8.2013. 13. AS FAR AS THE SECOND PART OF SEC.275(1)( C ) OF THE ACT IS CONCERNED, THE SAME RELATES TO EXPIRY OF SIX MONTHS FROM THE MONTH IN WHICH THE PENALTY PROCEEDINGS WERE INITIATED. THE CONCLUSION OF THE CIT(A) WAS THAT IN THE ORDER U/S.201(1) OF THE ACT DATED 11.2.2013 , THE AO HAS NOT INITIATED PENALTY PROCEEDINGS U/S.271C OF THE ACT AND HAS MER ELY MADE AN OBSERVATION THAT THERE IS A DEFAULT ATTRACTING PENA LTY U/S.271C OF THE ACT. WE HOWEVER FIND THAT THE HONBLE DELHI HIGH COURT I N THE CASE OF JKD CAPITAL & FINLEASE LTD. (SUPRA) HAS TAKEN A DIFFERENT VIEW. THE FACTS IN THE CASE DECIDED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF JKD CAPITAL AND FINLEASE LTD. (SUPRA) WAS THAT WHILE FINALISING THE ASSESSMENT ORDER DATED 28TH DECEMBER 2007 THE ASSESSING OFFICER ['AO '] IN THE CONCLUDING PARAGRAPH ISSUED A DIRECTION TO INITIATE PROCEEDING S AGAINST THE ASSESSEE UNDER SECTION 271E OF THE ACT. ADMITTEDLY, UNDER SE CTION 271E OF THE ACT, ANY PENALTY UNDER SECTION 271E(1) CAN BE IMPOSED ON LY BY THE JOINT COMMISSIONER OF INCOME TAX ['JOINT CIT']. CONSEQUEN TLY, THE AO REFERRED THE MATTER TO THE COMPETENT OFFICER. THE COMPETENT OFFICER ISSUED SHOW- CAUSE NOTICE DATED 12.3.2012 INITIATING PENALTY PRO CEEDINGS UNDER SECTION 271E. BY ORDER DATED 20.3.2012 PENALTY WAS LEVIED U/S.271E OF THE ACT. THE CIT (A) DELETED THE ABOVE PENALTY INTER ALIA ON THE GROUND THAT, IN TERMS OF SECTION 275(1)(C) OF THE ACT, THE PENALTY ORDER COULD HAVE ONLY BEEN PASSED ON OR BEFORE 30TH JUNE 2008 RECKONING T HE PERIOD OF LIMITATION FROM THE DATE OF AOS ORDER I.E., 28.12.2007 AND TH EREFORE, THE PENALTY ORDER PASSED ON 20TH MARCH 2012 WAS BARRED BY LIMIT ATION. THE TRIBUNAL ITA NOS. 1724 TO 1726/BANG/2018 PAGE 10 OF 14 UPHELD THE ORDER OF CIT(A). ON FURTHER APPEAL BY T HE REVENUE, THE HONBLE DELHI HIGH COURT HELD AS FOLLOWS: 11. IN FACT, WHEN THE AO RECOMMENDED THE INITIA TION OF PENALTY PROCEEDINGS THE AO APPEARED TO BE CONSCIOUS OF THE FACT THAT HE DID NOT HAVE THE POWER TO ISSUE NOTICE AS F AR 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 A DDITIONAL CIT DID NOT ISSUE A SHOW CAUSE NOTICE TO THE ASSESS EE UNDER SECTION 271-E (1) TILL 20TH MARCH 2012. THERE IS NO EXPLANATION WHATSOEVER FOR THE DELAY OF NEARLY FIVE YEARS AFTER THE ASSESSMENT ORDER IN THE ADDITIONAL CIT ISSUING NOTI CE UNDER SECTION 271-E OF THE ACT. THE ADDITIONAL CIT OUGHT TO HAVE BEEN CONSCIOUS OF THE LIMITATION UNDER SECTION 275 (1) (C), I.E., THAT NO ORDER OF PENALTY COULD HAVE BEEN PASS ED UNDER SECTION 271-E AFTER THE EXPIRY OF THE FINANCI AL YEAR IN WHICH THE QUANTUM PROCEEDINGS WERE COMPLETED OR BEY OND SIX MONTHS AFTER THE MONTH IN WHICH THEY WERE INITIATED , WHICHEVER WAS LATER. IN A CASE WHERE THE PROCEEDINGS STOOD IN ITIATED WITH THE ORDER PASSED BY THE AO, BY DELAYING THE ISSUANCE OF THE NOTICE UNDER SECTION 271- E BEYOND 30TH JUNE 2008, THE ADD ITIONAL CIT DEFEATED THE VERY OBJECT OF SECTION 275 (1) (C). 14. THE ITAT JAIPUR BENCH IN THE CASE OF JAIPUR NATIONAL UNIVERSITY (SUPRA) HAS HOWEVER TAKEN A CONTRARY VIEW HOLDING THAT THE DATE OF INITIATION OF PENALTY PROCEEDINGS U/S.271C IS WHEN THE OFFICER COMPETENT TO IMPOSE PENALTY ISSUES SHOW CAUSE NOTICE AND NOT WHEN THE A O WHO PASSED ORDER U/S.201(1) OF THE ACT, MAKES A REFERENCE TO THE COM PETENT OFFICER FOR IMPOSITION OF PENALTY. THE SAME VIEW HAS BEEN TAKE N BY THE HONBLE ITAT MUMBAI G BENCH IN THE CASE OF MRS.SONAL SHAH (SUPRA) . THE MUMBAI ITAT IN THE CASE OF MRS.SONAL SHAH (SUPRA) HAS MADE REFERENCE TO DECISIONS OF HONBLE ALLAHABAD HIGH COURT IN THE CA SE OF GUPTA MILLS STORES (SUPRA) AND THE HONBLE KERALA HIGH COURT IN THE CASE OF GRIHALAKSHMI VISION (SUPRA) AND HAS ALSO NOTICED CONTRARY VIEW OF THE DELHI HIG H COURT IN THE CASE OF MAHESH WOOD PRODUCTS (P) LTD. (SUPRA) AND JKD CAPITAL & ITA NOS. 1724 TO 1726/BANG/2018 PAGE 11 OF 14 FINLEASE LTD. (SUPRA) . THE TRIBUNAL FINALLY CONCLUDED ON THE ISSUE BY HOLDING THAT MAJORITY OF HIGH COURTS HAVE TAKEN A V IEW THAT THE DATE OF INITIATION OF PENALTY PROCEEDINGS U/S.271C IS WHEN THE OFFICER COMPETENT TO IMPOSE PENALTY ISSUES SHOW CAUSE NOTICE AND NOT WHE N THE AO WHO PASSED ORDER U/S.201(1) OF THE ACT, MAKES A REFEREN CE TO THE COMPETENT OFFICER FOR IMPOSITION OF PENALTY AND THEREFORE THA T VIEW IS PREFERABLE. WE HOWEVER NOTICE THAT THE HONBLE ALLAHABAD HIGH COUR T DID NOT EXPRESS ANY SUCH OPINION AND HAS IN FACT IN PARAGRAPH-7 OF ITS JUDGMENT HELD THAT IT IS NOT NECESSARY TO CONSIDER WHETHER THE PERIOD OF SIX MONTHS SHOULD BE CALCULATED FROM THE DATE OF NOTICE ISSUED BY THE IT O OR BY THE JCIT WHO WAS COMPETENT TO LEVY PENALTY U/S.271-E OF THE ACT. 15. IN THE CASE BEFORE THE HONBLE ALLAHABAD HIGH C OURT IN THE CASE OF GUPTA MILLS STORES(SUPRA) , THE FACTS WERE THAT ITO ISSUED NOTICE U/S.271-E ON 1.8.2003 AND THE JCIT ISSUED SHOW CAUSE NOTICE U /S.271-E ON 3.9.2004. THE ORDER IMPOSING PENALTY U/S.271-E OF THE ACT WAS PASSED BY THE JCIT ON 29.3.2004 I.E., WITHIN 6 MONTHS FROM THE END OF THE MONTH IN WHICH THE ITO ISSUED NOTICE U/S.271-E OF THE ACT. THEREFORE IT CANNOT BE SAID THAT MAJORITY OF HIGH COURTS HAVE TAKEN THE VIEW THAT IN ITIATION OF PENALTY PROCEEDINGS HAS TO BE RECKONED FROM THE DATE ON WHI CH OFFICER COMPETENT TO IMPOSE PENALTY ISSUE SHOW CAUSE NOTICE AND NOT W HEN THE AO WHO PASSED ORDER U/S.201(1) OF THE ACT, MAKES A REFEREN CE TO THE COMPETENT OFFICER FOR IMPOSITION OF PENALTY. THE HONBLE KER ALA HIGH COURT IN THE CASE OF GRIHALAKSHMI VISION (SUPRA) TOOK THE VIEW THAT INITIATION OF PENALTY PROCEEDINGS HAS TO BE RECKONED FROM THE DATE ON WHI CH OFFICER COMPETENT TO IMPOSE PENALTY ISSUE SHOW CAUSE NOTICE. 16. THEREFORE THERE APPEARS TO BE TWO CONFLICTING D ECISIONS OF HIGH COURTS I.E., THE HONBLE HIGH COURT OF KERALA IN TH E CASE OF GRIHALAKSHMI VISION (SUPRA) AND THE HONBLE DELHI HIGH COURT IN THE CASE OF JKD CAPITAL ITA NOS. 1724 TO 1726/BANG/2018 PAGE 12 OF 14 AND FINLEASE PVT.LTD. (SUPRA) . THERE IS NO DECISION OF HONBLE JURISDICTIONAL HIGH COURT ON THIS POINT. WE ARE ALSO OF THE VIEW THAT THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF HISSARIA BROTHERS (SUPRA) WHICH WAS AFFIRMED BY THE HONBLE SUPREME COURT IS NOT ON THE ISSUE OF WHAT IS THE DATE OF INITIATION WHEN THE OFFICER NOT ICING THE DEFAULT IN ONE PROCEEDINGS IS NOT COMPETENT TO IMPOSE PENALTY FOR THE SAID DEFAULT AND THEREFORE HAS TO MAKE REFERENCE TO ANOTHER OFFICER COMPETENT TO IMPOSE PENALTY. THE SAID DECISION IS AUTHORITY FOR THE PR OPOSITION THAT TIME LIMIT FOR PROCEEDINGS FOR LEVY OF PENALTY U/S.271-D AND 271-E OF THE ACT ARE GOVERNED BY THE PROVISIONS OF SEC.275(1)(C) OF THE ACT. 17. IN THE GIVEN FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT WE WOULD PREFER TO DECIDE THIS APPEAL ON THE QUESTION OF REASONABLE CAUSE FOR NON-COMPLIANCE WITH THE PROVISIONS AS ENVISAGED U/S .273B OF THE ACT RATHER THAN ON THE POINT OF LIMITATION. IT IS SEEN THAT T HE ASSESSEE CARRIES ON BUSINESS IN COTTON, KAPPAS AND SEEDS AT RANEBENNUR A SMALL TOWN. HE MADE PAYMENTS FOR GINNING AND PRESSES OF KAPPAS AND LINT CONVERTING CHARGES BESIDES COMMISSION TO DALALS. THE TOTAL PA YMENTS FOR WHICH THEY ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE AND THE EXTENT TO WHICH THERE WAS SHORT DEDUCTION WAS AS FOLLOWS: AY TDS DEDUCTIBLE TDS DEDUCTED SHORT DEDUCTION 2009-10 RS.2,12,573 RS.1,56,056 RS.56,517 2010-11 RS.5,81,960 RS.5,18,048 RS.63,913 2011-12 RS.56,107 NIL RS.56,107 18. THERE WAS ACTUALLY NON-DEDUCTION OF TAX AT SOUR CE BY THE ASSESSEE BUT THE TDS DEDUCTED WAS GIVEN CREDIT ONLY ON THE B ASIS THAT THE PAYEES HAVE FILED THEIR RETURNS OF INCOME SHOWING THE AMOU NTS RECEIVED FROM THE ASSESSEE AND HENCE THE ASSESSEE WAS GIVEN THE BENEF IT OF TDS DEDUCTED TO THAT EXTENT AS PER THE DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF HINDUSTAN COCO COLA BEVERAGE PVT.LTD. 293 ITR 226(S C) . THE PLEA OF ITA NOS. 1724 TO 1726/BANG/2018 PAGE 13 OF 14 THE ASSESSEE THAT FAILURE TO DEDUCT TAX AT SOURCE W AS UNINTENTIONAL AND WAS UNDER THE BONAFIDE BELIEF THAT TAX IS NOT DEDUCTIBL E ON PAYMENTS IN QUESTION HAS TO BE ACCEPTED IN THE GIVEN FACTS AND CIRCUMSTA NCES OF THE CASE. IT IS ALSO NOT DISPUTED THAT THE DEFAULT WAS NOTICED ONLY AT THE TIME OF SURVEY PROCEEDINGS. TAKING INTO CONSIDERATION THE NATURE OF BUSINESS AND SMALL TOWN IN WHICH THE ASSESSEE CARRIES ON BUSINESS AND OTHER CIRCUMSTANCES, WE ARE OF THE VIEW THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALTY U/S.271-C OF THE ACT, AS THE CIRCUMSTANCES POINTED OUT ABOVE WOU LD BE REASONABLE CAUSE FOR THE FAILURE OF THE ASSESSEE TO DEDUCT/SHO RT DEDUCT TAX AT SOURCE. WE THEREFORE CANCEL THE ORDER IMPOSING PENALTY U/S. 271-C OF THE ACT ON THIS GROUND ON THE PECULIAR FACTS AND CIRCUMSTANCES OF T HE CASE. 19. IN THE RESULT, APPEALS BY THE ASSESSEE ARE ALLO WED. PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF DECEMBER, 2019. SD/- SD/- ( A K GARODIA ) ( N V VASUDEVAN ) ACCOUNTANT MEMBER VICE PRE SIDENT BANGALORE, DATED, THE 13 TH DECEMBER, 2019. / DESAI S MURTHY / ITA NOS. 1724 TO 1726/BANG/2018 PAGE 14 OF 14 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FIL E BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.