ITO, Meerut V. M/s. Pearson Chemicals Corporation, Meerut

ITA 1929/DEL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7116 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2004-2005
• Appeal Filed On: 11-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIR JAIN
• Assessee Lawyers: CHANDER MEHRA
• Keywords: Competent authority
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SH. G.D. AGRAWAL, PRESIDENT AND SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 1929-30/DEL/2016 (ASSESSMENT YEAR: 2004-05) ITO WARD-2(1) MEERUT VS. PEARSON CHEMICALS CORPORATION 5-A, MURARI PURAM MEERUT PAN : AAEFP5929R (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. CHANDER MEHRA, FCA REVENUE BY : SH. AMIR JAIN, SR. DR. DATE OF HEARING : 24.04.2018 DATE OF PRONOUNCEMENT : 18.07.2018 O R D E R PER BENCH : BOTH THESE APPEALS HAVE BEEN FILED BY THE DEPARTMEN T. ITA NO. 1929/DEL/2016 IS PREFERRED AGAINST ORDER DATED 14.0 1.2016 PASSED BY THE LD. CIT (APPEALS), MEERUT FOR ASSESSMENT YEA R 2004-05 WHEREIN, VIDE THE IMPUGNED ORDER, THE LD. CIT (A) H AS DELETED PENALTY OF RS. 12,55,000/- IMPOSED U/S 271D OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WH EREAS ITA NO. 2 ITA NO.1929, 1930/DEL/2016 (PEARSON CHEMICALS CORPORATION) 1930/DEL/2016 CHALLENGES THE ORDER OF LD. CIT (A), MEERUT IN DELETING PENALTY OF RS. 12,55,000/- IMPOSED U/S 271 E OF THE ACT FOR ASSESSMENT YEAR 2004-05. SINCE BOTH THE APPEALS ARI SE OUT OF AN IDENTICAL ISSUE, THEY WERE HEARD TOGETHER AND THEY ARE BEING DISPOSED OF THROUGH THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FIRM HAD FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06 DE CLARING A TAXABLE INCOME OF RS. 75,820/-. DURING THE ASSESSME NT PROCEEDINGS FOR ASSESSMENT YEAR 2005-06 THE AO NOTICED THAT THE ASSESSEE FIRM HAD ACCEPTED LOAN OF RS. 5 LAC FROM SRI MOHD. YONUS IN ASSESSMENT YEAR 2002-03 AND A LOAN OF RS. 12,55,000/- DURING A SSESSMENT YEAR 2004-05 FROM SRI MOHD. FARMAN MALIK. AS PER THE PEN ALTY ORDER PASSED FOR ASSESSMENT YEAR 2005-06, THE AO HELD THA T BOTH THE LOANS TOTALING TO RS. 17,55,000/- WERE ACCEPTED IN CASH AND WERE TRANSFERRED TO THE CAPITAL ACCOUNT OF THE PARTNER O F THE ASSESSEE FIRM AND THE SAME WERE REPAID IN CASH. IN THE PENALTY OR DER FOR ASSESSMENT YEAR 2005-06, PENALTY OF RS. 12,55,000/- WAS LEVIED EACH U/S 271D AND 271E OF THE ACT FOR VIOLATION OF SECTIONS 269SS AND 269T OF THE ACT. 3 ITA NO.1929, 1930/DEL/2016 (PEARSON CHEMICALS CORPORATION) 2.1 AGGRIEVED, THE ASSESSEE APPROACHED THE LD. CIT (A) WHO DELETED THE PENALTIES. THE DEPARTMENT APPROACHED TH E ITAT AGAINST THE DELETION OF THE PENALTIES AND ITAT DELHI BENCH DISMISSED THE REVENUES APPEALS BY HOLDING THAT SINCE THE IMPUGNE D LOANS PERTAINED TO OTHER ASSESSMENT YEARS AND NOT ASSESSM ENT YEAR 2005- 06, PENALTIES COULD NOT HAVE BEEN IMPOSED IN ASSESS MENT YEAR 2005-06. 2.2 SUBSEQUENT TO THE ORDER OF THE ITAT, PENALTY PR OCEEDINGS WERE INITIATED FOR ASSESSMENT YEARS 2004-05 AND 2002-03 VIDE NOTICES DATED 06.08.2014 AND, THEREAFTER, PENALTY OF RS. 12 ,55,000/- WAS IMPOSED IN ASSESSMENT YEAR 2004-05 FOR ACCEPTING TH E LOAN IN CASH BY VIOLATING THE PROVISIONS OF SECTION 269SS OF THE ACT. ANOTHER PENALTY OF RS. 12,55,000/- WAS ALSO IMPOSED IN ASSE SSMENT YEAR 2004-05 FOR REPAYMENT OF LOAN IN CASH VIOLATING THE PROVISIONS OF SECTION 269T OF THE ACT. 2.3 THE ASSESSEE AGAIN APPROACHED THE LD. CIT (A) A GAINST THE IMPOSITION OF THESE TWO PENALTIES AND THE LD. CIT ( A) DELETED BOTH THE PENALTIES BY HOLDING THAT THESE PENALTIES WERE BARRED BY LIMITATION. 4 ITA NO.1929, 1930/DEL/2016 (PEARSON CHEMICALS CORPORATION) 2.4 NOW, THE DEPARTMENT HAS APPROACHED THE ITAT AGA INST THE CANCELLATION OF THE PENALTIES BY THE LD. CIT (A) AN D HAS RAISED THE FOLLOWING GROUNDS:- ITA 1929/DEL/2016: 1- WHETHER THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW AND FACT IN DELETING THE PENALTY UNDER SECTION 271D OF THE I.T. ACT, 1961, WITHOUT TAKING INTO CONSIDERATION THE FACT THAT SAID PENALTY IS NOT BAR RED BY LIMITATION AS THERE IS NO RESTRICTION IN THE ACT TH AT PENALTY UNDER SECTION 271D FOR VIOLATION OF SECTION 269SS H AS TO BE INITIATED DURING THE COURSE OF ASSESSMENT PROCEEDIN GS ONLY. 2- WHETHER THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW AND FACT IN DELETING THE PENALTY I MPOSED UPON THE ASSESSEE UNDER SECTION 271D OF THE ACT BY TREATING IT AS BARRED BY LIMITATION IGNORING THE FA CT THAT THE LIMITATION FOR COMPLETION OF PENALTY PROCEEDINGS, A S PROVIDED FOR IN SECTION 275(1 )(C) OF THE ACT, SHAL L COMMENCE FROM THE DATE OF ISSUE OF SHOW CAUSE NOTICE BY THE COMPETENT AUTHORITY. 3- WHETHER THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) MAY BE SET ASIDE AND THAT OF THE A.O BE RESTORED. 5 ITA NO.1929, 1930/DEL/2016 (PEARSON CHEMICALS CORPORATION) ITA NO. 1930/DEL/2016: 1- WHETHER THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW AND FACT IN DELETING THE PENALTY UNDER SECTION 271 E OF THE I.T. ACT, 1961, WITHOUT TAKING INTO CONSID ERATION THE FACT THAT SAID PENALTY IS NOT BARRED BY LIMITATION AS TH ERE IS NO RESTRICTION IN THE ACT THAT PENALTY UNDER SECTION 2 7IE FOR VIOLATION OF SECTION 269T HAS TO BE INITIATED DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS ONLY. 2- WHETHER THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW AND FACT IN DELETING THE PENALTY IMPOS ED UPON THE ASSESSEE UNDER SECTION 27IE OF THE ACT BY TREATING IT AS BARRED BY LIMITATION IGNORING THE FACT THAT THE LIMITATION FOR COMPLETION OF PENALTY PROCEEDINGS, AS PROVIDED FOR IN SECTION 275(L)(C) OF THE ACT, SHALL COMMENCE FROM THE DATE OF ISSUE OF SHOW CAUSE NOTICE BY THE COMPETENT AUTHORITY. 3- WHETHER THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) MAY BE SET ASIDE AND THAT OF THE A.O BE RESTORED. 3. THE LD. SR. DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT THE LD. CIT (A) HAD CANCELLED THE PENALTY ORDERS BY ERR ONEOUSLY HOLDING THAT THERE WAS A TIME LIMIT FOR INITIATION OF PENAL TY PROCEEDINGS U/S 271D AND 271E OF THE ACT. THE LD. SR. DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT THERE IS NO RESTRICTION IN T HE STATUTE THAT PENALTIES U/S 271D AND 271E HAVE TO BE NECESSARILY INITIATED ONLY 6 ITA NO.1929, 1930/DEL/2016 (PEARSON CHEMICALS CORPORATION) DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT WAS SUBMITTED THAT SUCH AN INTERPRETATION WOULD RENDER THE PROVISIONS INEFFECTIVE. REFERENCE WAS ALSO MADE TO AN ORDER OF THE SPECIAL BENCH OF ITAT, CHANDIGARH BENCH IN THE CASE OF DIWAN CHAND AMRIT L AL REPORTED IN 98 ITD 200 (CHANDIGARH) (SB) WHEREIN IT WAS HEL D THAT THE OBJECT BEHIND INCORPORATION OF SECTIONS 269SS AND 269T WAS TO COUNTER ATTEMPTS TO CIRCULATE BLACK MONEY AND IF IT WAS TO BE ACCEPTED THAT PENALTY PROCEEDINGS ARE NECESSARILY TO BE INITIATED IN THE COURSE OF ASSESSMENT PROCEEDINGS, THEN THE OBJECT BEHIND INCO RPORATION OF SECTIONS 269SS AND 269T WILL LOSE ITS INTENT. THE L D. SR. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE IMPU GNED ORDERS NEEDED TO BE SET ASIDE AND THE PENALTY ORDERS PASSE D BY THE AO RESTORED. 4. IN RESPONSE, THE LD. AUTHORISED REPRESENTATIVE P LACED EXTENSIVE RELIANCE ON THE FINDINGS OF THE LD. CIT ( A) AND VEHEMENTLY ARGUED THAT THE IMPUGNED PENALTIES HAD RIGHTLY BEEN DELETED BY THE LD. CIT (A). IT WAS FURTHER SUBMITTED THAT THE ORDE RS OF THE LD. CIT (A) BE UPHELD. 7 ITA NO.1929, 1930/DEL/2016 (PEARSON CHEMICALS CORPORATION) 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIAL ON RECORD. A PERUSAL OF THE ORIGINAL A SSESSMENT ORDER DATED 05.10.2007 FOR THE ASSESSMENT YEAR 2005-06 SH OWS THAT THERE IS NO MENTION ABOUT THE ACCEPTANCE OF LOAN/RE PAYMENT OF LOAN BY THE ASSESSEE IN CONTRAVENTION OF PROVISION OF SE CTION 269SS OF THE ACT. HOWEVER, IN THE PENALTY ORDER DATED 19.5.2 011, THERE IS SPECIFIC MENTION ABOUT THE RECEIPT OF AMOUNT OF RS. 5 LAC AND REPAYMENT OF AMOUNT OF RS. 5 LAC IN ASSESSMENT YEAR 2002-03. SIMILARLY, THERE IS SPECIFIC MENTION ABOUT THE RECE IPT OF AMOUNT OF RS. 12,55,000/- AND REPAYMENT OF AMOUNT OF RS.L2,55 ,000/-IN ASSESSMENT YEAR 2004-05. IT IS ALSO UNDISPUTED THAT THE ADDITIONAL CIT IMPOSED PENALTY UNDER BOTH THE SECTIONS I.E. 27 ID AND 27IE OF THE ACT FOR THE A.Y. 2005-06 ON TOTAL AMOUNT OF RS. 17,55,000/- (RS. 5,00,000 + RS. 12,55,000/-). FROM THE RECORDS, IT IS UNDISPUTEDLY ESTABLISHED THAT THE ASSESSING OFFICER WAS VERY WELL AWARE ABOUT THE RECEIPT OF ALLEGED LOAN IN CASH DUR ING THE ASSESSMENT YEARS 2004-05 AND 2002-03 AND THE REPAYM ENT OF THE LOAN AND BUT HAD WRONGLY INITIATED THE EARLIER PENA LTY PROCEEDINGS FOR A.Y. 2005-06. THE ASSESSMENT ORDER WAS PASSED O N 5.10.2007 AND THE PENALTIES WERE INITIATED BY THE THEN ADDITI ONAL CIT ON 8 ITA NO.1929, 1930/DEL/2016 (PEARSON CHEMICALS CORPORATION) 15.11.2010 AND THE PENALTY ORDERS WERE PASSED ON 19 .05.2011 AND, THUS, THE IMPOSITION OF THE PENALTIES IN THE FIRST ROUND WAS TIME- BARRED. THE SECOND ROUND OF PENALTY PROCEEDINGS WAS INITIATED ON 06/08/2014 AFTER THE DISMISSAL OF THE DEPARTMENTS APPEALS BY THE ITAT ON THE GROUND THAT THE PENALTIES HAD BEEN IMPO SED IN A WRONG ASSESSMENT YEAR. A PERUSAL OF THE ORDER OF THE ITAT DISMISSING THE DEPARTMENTS APPEALS IN ITA NOS. 5662 AND 5663/DEL/ 2012 SHOWS THAT WHILE DISMISSING THE APPEALS, THE BENCH OBSERV ED THAT THE PENALTIES, IF AT ALL IMPOSABLE, COULD HAVE BEEN IMP OSED ON ACCOUNT OF THE FACTS FOR THE YEAR UNDER CONSIDERATION AND T HAT THE STATUTE DOES NOT PERMIT THE AO TO LEVY PENALTY IN A PARTICU LAR ASSESSMENT YEAR ON FACTS WHICH ARE RELATABLE TO SOME OTHER ASS ESSMENT YEAR. IT IS ALSO SEEN THAT WHILE DISMISSING THE DEPARTMENTS APPEALS, THERE ARE NO DIRECTIONS FROM THE ITAT THAT PENALTY PROCEE DINGS SHOULD BE INITIATED FOR THE ASSESSMENT YEARS IN WHICH THE IMP UGNED TRANSACTIONS HAD TAKEN PLACE. THUS, IT IS VERY MUCH EVIDENT THAT THE PRESENT PENALTY ORDERS WERE PASSED BEYOND THE PERIO D OF LIMITATION AND AS SUCH THE SAME ARE NOT SUSTAINABLE. A PERUSAL OF THE ORDERS OF THE LD. CIT (A) ALSO SHOWS THAT THE LD. CIT (A) HAS REACHED THE CONCLUSION AFTER EXAMINING THE ENTIRE FACTUAL MATRI X OF THE CASE AND 9 ITA NO.1929, 1930/DEL/2016 (PEARSON CHEMICALS CORPORATION) THESE FINDINGS OF THE LD. CIT (A) REMAIN UNCONVERTE D. THE LD. SR. DEPARTMENTAL REPRESENTATIVE WAS ALSO UNABLE TO POIN T OUT ANY FACTUAL INACCURACY IN THE FINDINGS AS RECORDED BY T HE LD. CIT (A) IN THE IMPUGNED ORDERS. THEREFORE, IN VIEW OF THE FACT S AND THE FINDINGS WITH REGARD TO THE FACTUAL MATRIX OF THE C ASE, AS RECORDED BY THE LD. CIT (A, WHICH REMAIN UNCONTROVERTED BEFO RE US, WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT (A) IN BOTH THE APPEALS BEFORE US. WE DISMISS THE GROUNDS RAISED BY THE DEPARTMENT IN BOTH THE APPEALS. 6. IN THE FINAL RESULT, BOTH THE APPEALS OF THE DEP ARTMENT STAND DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 18TH JULY, 2 018). SD/- SD/- (G.D.AGRAWAL) (SUDHANSHU SRIVASTAVA ) PRESIDENT JUDICIAL MEMBER DATE: 18.07.2018 BINITA 10 ITA NO.1929, 1930/DEL/2016 (PEARSON CHEMICALS CORPORATION) COPY OF ORDER TO: - 1) THE APPELLANT; 2) THE RESPONDENT; 3) THE CIT; 4) THE CIT(A)-, NEW DELHI; 5) THE DR, I.T.A.T., NEW DELHI; TRUE COPY BY ORDER ITAT, NEW DELHI