Kanakara Rajendra Prasad Reddy , Bangalore V. Joint Commissioner of INcome TAx Range-3(2), Bangalore

ITA 1962/BANG/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6087 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 05-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K LAKSH MI BENGALURU
• Assessee Lawyers: S RAMASUBRAMANIAN
• Keywords: Period of limitation; Initiation of penalty proceedings; Reasonable cause; Time period of passing order
• Section: 271D; 271E; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER I TA NO. 1962/ BANG / 2017 ASSESSMENT YEAR : 2013 - 14 KANAKARA RAJENDRA PRASAD REDDY, NO.82, 2 ND CROSS, 2 ND MAIN, BEHIND GENERAL CARIAPPA PARK, BANGALORE 560 098. PAN: ADCPR 0082Q VS. THE JOINT COMMISSIONER OF INCOME TAX, RANGE 3(2), BANGALORE. APP EL L ANT RESPONDENT APP ELL ANT BY : SHRI S. RAMASUBRAMANIAN, CA R E SPONDENT BY : SMT. K. LAKSH MI, ADDL.CIT(DR)(ITAT), BENGALURU. DATE OF HEARING : 01. 0 8 . 201 9 DATE OF PRONOUNCEMENT : 02 . 0 8 . 201 9 O R D E R PER N V VASUDEVAN, VICE PRESIDENT THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 31.8.2017 OF COMMISSIONER OF INCOME TAX (APPEALS)-3 , BENGALURU [CIT(A)] CONFIRMING THE ORDER OF THE ASSESSING OFFI CER (AO) IMPOSING PENALTY ON THE ASSESSEE U/S.271-E OF THE INCOME TAX ACT, 1961 (THE ACT), IN RELATION TO ASSESSMENT YEAR 2013-14. 2. THE ASSESSEE IS AN INDIVIDUAL, ENGAGED IN THE BUSIN ESS OF CIVIL CONSTRUCTION CONTRACTS FOR GOVERNMENT AND PRIVATE P ARTIES. IN THE COURSE OF ASSESSMENT COMPLETED FOR AY 2013-14 U/S.143(3) OF T HE ACT, THE AO ITA NO. 1962/BANG/2017 PAGE 2 OF 11 NOTICED THAT THE ASSESSEE HAD REPAID LOAN OF RS.10, 00,000 AVAILED FROM MR.K.M. KOTRESH, IN CASH. AS PER THE PROVISIONS OF SEC.269-T OF THE ACT, NO PERSON SHALL REPAY ANY LOAN OTHERWISE THAN BY AN AC COUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT DRAWN IN THE NAME OF THE P ERSON WHO GAVE THE LOAN, IF THE LOAN OR INTEREST PAYABLE THEREON EXCEE DS RS.20,000/-. UNDER SECTION 271-E OF THE ACT, IF A PERSON REPAYS ANY LOAN OR DEPOSIT OR SPECIFIED ADVANCE REFERRED TO IN SECTION 269T OTHERWISE THAN IN ACCORDANCE WITH THE PROVISIONS OF THAT SECTION, HE SHALL BE LIABLE TO P AY, BY WAY OF PENALTY, A SUM EQUAL TO THE AMOUNT OF THE LOAN . IN THE ORDER OF ASSESSMENT PASSED BY THE AO DATED 24.3.2016, THE AO I.E., THE ASST. COMM ISSIONER OF INCOME- TAX, CIRCLE-3(2)(1), BANGALORE, HAS OBSERVED AS FOL LOWS:- PENALTY U/S.271-E FOR REPAYMENT OF LOAN GIVEN IN C ASH IN VIOLATION OF PROVISION OF SEC.269-T WILL BE ATTRACT ED. 3. SECTION 271-E(2) OF THE ACT PROVIDES THAT PENALT Y IMPOSABLE U/S. 271-E OF THE ACT SHALL BE IMPOSED BY JOINT COMMISSI ONER OF INCOME TAX (JCIT). THE AO VIDE LETTER DATED 9.8.2016 INTIMATE D THE JCIT, RANGE 3(2), BANGALORE (JCIT) REGARDING THE DEFAULT U/S.269-T. THE JCIT ISSUED A SHOW CAUSE NOTICE U/S.271-E OF THE ACT BEFORE IMPOSING P ENALTY DATED 10.8.2016. THE JCIT FINALLY BY ORDER DATED 27.1.2017 IMPOSED P ENALTY ON THE ASSESSEE. 4. IT WAS THE PLEA OF THE ASSESSEE BEFORE CIT(A) T HAT IN TERMS OF SECTION 275 (1) (C) OF THE ACT, THE PENALTY ORDE R COULD HAVE ONLY BEEN PASSED ON OR BEFORE 30TH SEPTEMBER, 2016 AND SINCE THE ORDER IMPOSING PENALTY U/S.271E WAS PASSED ON 27.1.2017, THE PENAL TY ORDER PASSED ON 27.1.2017 WAS BARRED BY LIMITATION. SECTION 275(1)( C) OF THE ACT READS THUS:- ITA NO. 1962/BANG/2017 PAGE 3 OF 11 275. (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 PERIO D EXPIRES LATER. 5. IT WAS THE SUBMISSION OF THE ASSESSEE BEFORE CIT (A) THAT IN TERMS OF THE ABOVE PROVISION, THERE ARE TWO DISTINCT PERIODS OF LIMITATION FOR PASSING A PENALTY ORDER, AND ONE THAT EXPIRES LATER WILL APPL Y. ONE IS THE END OF THE FINANCIAL YEAR IN WHICH THE QUANTUM PROCEEDINGS ARE COMPLETED IN THE FIRST INSTANCE. IN THE PRESENT CASE, AT THE LEVEL OF THE AO, THE QUANTUM PROCEEDINGS WAS COMPLETED ON 24.3.2016. GOING BY TH IS DATE, THE PENALTY ORDER COULD NOT HAVE BEEN PASSED LATER THAN 30 TH SEPTEMBER, 2016. CONSIDERING THAT 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 IN THE QUANTUM PROCEE DINGS TO BE DISPOSED OF BEFORE THE PENALTY PROCEEDINGS COULD BE INITIATED. IN OTHER WORDS, THE INITIATION OF PENALTY PROCEEDINGS DID NOT HINGE ON THE COMPLETION OF THE APPELLATE QUANTUM PROCEEDINGS. THE SECOND POSSIBLE DATE IS EXPIRY OF SIX MONTHS FROM THE MONTH IN WHICH THE PENALTY PROCEEDI NGS WERE INITIATED. WITH THE AO HAVING INITIATED THE PENALTY PROCEEDING S IN HIS ORDER OF ASSESSMENT DATED 24.3.2016, THE LAST DATE BY WHICH THE PENALTY ORDER COULD HAVE BEEN PASSED IS 30TH SEPTEMBER, 2016. THE LATER OF THE TWO DATES IS 30TH SEPTEMBER, 2016. ITA NO. 1962/BANG/2017 PAGE 4 OF 11 6. BEFORE THE CIT(A), THE ASSESSEE PLACED RELIANCE ON DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. HISSARIA BROS. 291 ITR 244 (RAJ) AND DELHI HIGH COURT IN THE CASE OF PR.CIT VS. MAHESH WOOD PRODUCTS PVT.LTD. 394 ITR 312 (DEL) WHEREIN IT WAS HELD THAT WHEN THE SUBJECT MATTER OF THE QUANTUM PROCEEDINGS WAS THE N ON-COMPLIANCE WITH SECTION 269 T OF THE ACT, THERE WAS NO NEED FO R THE APPEAL AGAINST THE SAID ORDER IN THE QUANTUM PROCEEDINGS TO BE DISPOSE D OF BEFORE THE PENALTY PROCEEDINGS COULD BE INITIATED. IN OTHER WORDS, THE INITIATION OF PENALTY PROCEEDINGS DID NOT HINGE ON THE COMPLETION OF THE APPELLATE QUANTUM PROCEEDINGS. 7. THE ARGUMENT DID NOT FIND FAVOUR WITH THE CIT(A) , WHO HELD THAT THE PROCEEDINGS WERE NOT BARRED BY TIME. THE CIT(A) FI RSTLY HELD THAT IN THE ASSESSMENT ORDER DATED 24.3.2016, THE AO HAS NOT IN ITIATED PENALTY PROCEEDINGS U/S.271-E OF THE ACT AND HAS MERELY MAD E AN OBSERVATION THAT THERE IS A DEFAULT ATTRACTING PENALTY U/S.271E OF T HE ACT. SECONDLY, HE HELD THAT THE LETTER OF THE AO TO THE JCIT RECOMMENDING PENALTY WAS DATED 9.8.2016 AND ON THE BASIS OF THE SAME THE JCIT ISSU ED SHOW CAUSE NOTICE TO THE ASSESSEE U/S.271-E OF THE ACT ON 10.8.2016. THAT WAS THE DATE OF INITIATION ACCORDING TO HIM. SIX MONTHS FROM THE E ND OF THE MONTH IN WHICH PROCEEDINGS WERE INITIATED WOULD THEREFORE BE 28.2. 2017 AND SINCE THE IMPUGNED ORDER WAS PASSED ON 27.1.2017, THE CIT(A) HELD THAT THE ORDER PASSED WAS WELL WITHIN TIME. THE FOLLOWING WERE TH E OBSERVATIONS OF THE CIT(A):- 5.1 ON PERUSAL OF THE ABOVE TWO DECISIONS, IT IS O BSERVED THAT IN THE CASE OF CIT VS HISSARIA BROS. (SUPRA), THE PENALTY WAS INITIATED BY THE AO DURING THE ASSESSMENT PROCEEDIN G ITSELF. HOWEVER, IN THE CASE UNDER CONSIDERATION NO SUCH IN ITIATION OF PENALTY HAS BEEN DONE BY THE AO. A MERE OBSERVATION REGARDING THE DEFAULT BY THE AO IN THE ASSESSMENT ORDER IN TH E CASE UNDER CONSIDERATION, AS REPRODUCED SUPRA IN PARA 4.0, DOE S NOT AMOUNT ITA NO. 1962/BANG/2017 PAGE 5 OF 11 TO INITIATION OF PENALTY PROCEEDINGS. NO NOTICE FOR INITIATION OF PENALTY U/S 271E OF THE ACT WAS SENT BY THE AO TO T HE APPELLANT ALONG WITH THE ASSESSMENT ORDER. IN FACT, IN THE CA SE UNDER CONSIDERATION THE AO HAS NOT EVEN USED THE WORDS 'I NITIATED', SO THE POSSIBILITY OF CONSIDERING THE OBSERVATION OF T HE AO IN THE ORDER TO BE 'INITIATION OF PENALTY' WOULD NOT ARISE . CONSIDERING THESE FACTS, THE DECISION OF THE RAJASTHAN HIGH COU RT, AS RELIED UPON BY THE APPELLANT, WOULD NOT BE APPLICABLE TO T HE FACTS OF CASE UNDER CONSIDERATION. 5.2 AS REGARDS, DECISION OF DELHI HIGH COURT IN THE CASE OF MAHESH WOOD PRODUCTS (SUPRA), THE SAME HOLDS THAT THE DATE OF ISSUE OF LETTER BY THE AO TO THE ADDL CIT RECOMMEND ING THE ISSUANCE OF NOTICE OF PENALTY IS THE DATE OF INITIA TION OF PENALTY. ACCORDINGLY THE ORDER U/S 271E SHOULD BE PASSED WIT HIN SIX MONTHS FROM THE END OF THE MONTH IN WHICH LETTER RE COMMENDING INITIATION OF PENALTY PROCEEDING IS SENT BY THE AO OR END OF THE FINANCIAL YEAR IN WHICH SUCH LETTER IS WRITTEN, WHI CHEVER IS LATER. IN THE CASE UNDER CONSIDERATION, AS NOTED SUPRA IN PARA 4.1, SUCH A LETTER WAS ISSUED BY AO ON 09.08.2016. ACCORDINGLY, SIX MONTHS FROM THE END OF AUGUST 2016 WOULD END ON 28.02.2017 . ACCORDINGLY, THE TIME BARRING DATE IN THE CASE UNDE R CONSIDERATION WOULD BE 31.03.2017, BEING END OF THE FINANCIAL YEAR. THE ORDER U/S 271E HAS BEEN PASSED BY JCIT ON 27.01.2017, WHICH IS WELL WITHIN TIME LIMITATION PERIOD. THIS I S IMPORTANT TO NOTE THAT THE DECISION IN CASE OF MAHESH WOOD PRODUCTS (SUPRA) WAS RENDERED BY THE HON'BLE HIGH COURT BY RELYING O N THE DECISION IN CASE OF PRINCIPAL COMMISSIONER OF INCOME-TAX-5 V. JKD CAPITAL & FINLEASE LTD [2015] 378 ITR 614 (DELH I). THE DECISION IN CASE OF CIT VS HISSARIA BROS. (SUPRA) W AS DULY CONSIDERED IN THE ABOVE REFERRED DECISION IN CASE O F JKD CAPITAL & FINLEASE LTD(SUPRA) , AND THE COURT DECIDED THAT THE DATE OF INITIATION OF PENALTY WOULD BE DATE OF ISSUE OF LET TER BY THE AO TO THE ADDL CIT RECOMMENDING THE ISSUANCE OF NOTICE OF PENALTY. ANYHOW DUE TO DIFFERENT FACTS OF THE CASE UNDER CON SIDERATION, AS DISCUSSED SUPRA, THE DECISION IN CASE OF CIT VS HISSARIA BROS. (SUPRA) WOULD NOT BE APPLICABLE. AS REGARDS DECISION IN CA SE OF MAHESH WOOD PRODUCTS (SUPRA), THE ORDER IN THE CASE UNDER CONSIDERATION HAS BEEN PASSED WELL WITHIN THE TIME BARRING DATE. ITA NO. 1962/BANG/2017 PAGE 6 OF 11 THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN CIT (PRINCIPAL) VS JKD CAPITAL AND FINLEY LTD 378 ITR 614 FOR THE PROPOSITION THAT IF THE ASSESSING OFFICER M ENTIONS IN THE ASSESSMENT ORDER THAT THE PENALTY PROCEEDINGS U/S 2 71E OF THE ACT ARE TO BE INITIATED, THE DATE OF INITIATION OF PENALTY PRO CEEDINGS AS PER THE LATER PORTION OF S.275(1)(C ) OF THE ACT IS THE DATE OF T HE ASSESSMENT ORDER. THE LD. AR RELIES ON THE OBSERVATION IN PARAGRAPH 11, P AGE 619 WHEREIN IT WAS OBSERVED AS UNDER:- IN A CASE WHERE THE PROCEEDINGS STOOD INITIATED WI TH THE ORDER PASSED BY THE ASSESSING OFFICER, BY DELAYING THE IS SUANCE OF THE NOTICE UNDER SECTION 271E BEYOND JUNE 30, 2008, THE ADDITIONAL COMMISSIONER OF INCOME-TAX DEFEATED THE VERY OBJECT OF SECTION 275(1)(C) 8. THE HON'BLE HIGH COURT HAS RELIED ON THE DECISIO N OF THE RAJASTHAN HIGH COURT IN CIT VS HISSARIA BROTHERS 291 ITR 244 . IT IS SUBMITTED THAT THE DECISION OF THE RAJASTHAN HIGH COURT IN HISSARIA BROTHERS HAS BEEN APPROVED BY SUPREME COURT ON THIS ISSUE IN CIT VS HISSARIA BROTHERS 3S6 ITR 719. 9. HE ALSO RELIED ON THE FOLLOWING OBSERVATIONS OF THE HON'BLE RAJASTHAN HIGH COURT IN PARAGRAPH 5 PAGE 248 WHEREI N IT NOTED THE FACT THAT THE PENALTY PROCEEDINGS U/S 271D AND 271E RESPECTIV ELY WERE INITIATED DURING THE ASSESSMENT PROCEEDINGS. ON THE BASIS OF SUCH FACTS THE TRIBUNAL HELD THAT THE ORDER OF PENALTY SHOULD HAVE BEEN PAS SED WITHIN SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ASSESSMENT W AS COMPLETED (PARAGRAPH 9 AT PAGE 249 OF THE REPORT). THIS ORDER OF THE TRIBUNAL WAS UPHELD BY THE HIGH COURT IN 291 ITR 244 AND FURTHER UPHELD BY THE HON'BLE SUPREME COURT IN 386 ITR 719. ITA NO. 1962/BANG/2017 PAGE 7 OF 11 10. HE SUBMITTED THAT THE LD. CIT(APPEALS) HAS DIST INGUISHED THE ABOVE DECISION ON THE GROUND THAT IN THE PRESENT ASSESSEE S CASE, THERE IS NO INITIATION OF THE PROCEEDINGS BY THE ASSESSING OFFI CER IN THE ASSESSMENT ORDER. IT WAS SUBMITTED THAT THIS FINDING OF THE CI T(APPEALS) IS CONTRARY TO THE OBSERVATION OF THE LEARNED ASSESSING OFFICER IN PAGE 4 OF THE ASSESSMENT ORDER WHEREIN IT HAS BEEN STATED AS UNDE R:- PENALTY U/S 271E FOR REPAYMENT OF LOAN IS GIVEN IN CASH IN VIOLATIONS OF PROVISIONS OF S.269T WILL BE ATTRACTE D. 11. IT WAS ALSO SUBMITTED THAT THE ACT OF AO IN NOT ING IN THE ASSESSMENT ORDER THAT ACCORDING TO HIM, THERE IS A VIOLATION O F SECTION 269T AND CONSEQUENTLY SECTION 271E IS ATTRACTED WOULD AMOUNT TO INITIATION BY THE AO. HENCE, THE FINDING OF THE LEARNED CIT(APPEALS) ON THIS ISSUE IS CLEARLY ERRONEOUS. 12. THE LEARNED DR APPEARING FOR THE REVENUE SUBMIT TED THAT THE AO HAS NO POWER TO INITIATE THE PENALTY PROCEEDINGS UN DER SECTION 271E OF THE ACT AND IT WAS ONLY THE JOINT CIT WHO COULD HAVE DO NE SO. THEREFORE, FOR THE PURPOSE OF LIMITATION UNDER SECTION 275 (1) (C) , THE RELEVANT DATE SHOULD BE THE DATE ON WHICH NOTICE IN RELATION TO THE PENA LTY PROCEEDINGS WAS ISSUED BY THE JCIT. IN THE PRESENT CASE, AS THE ADD ITIONAL CIT ISSUED NOTICE TO THE ASSESSEE ON 10.8.2016, THE ORDER PASSED ON 2 7.1.2017 WAS WITHIN LIMITATION. 13. 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 SECTION 275(1)(C) OF THE ACT. THE IS SUE IN THE PRESENT CASE IS AS TO, 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, THE SAME IS WITH REGARD TO AFTER THE EXPIRY OF THE FINANCIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHI CH ACTION FOR THE ITA NO. 1962/BANG/2017 PAGE 8 OF 11 IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPL ETED . IN THE PRESENT CASE, AT THE LEVEL OF THE AO, THE QUANTUM PROCEEDIN GS WAS COMPLETED ON 24.3.2016. GOING BY THIS DATE, THE PENALTY ORDER CO ULD NOT HAVE BEEN PASSED LATER THAN 30.9.2016. CONSIDERING THAT THE S UBJECT MATTER OF THE QUANTUM PROCEEDINGS WAS THE NON-COMPLIANCE WITH SEC TION 269 T OF THE ACT, THERE WAS NO NEED FOR THE APPEAL AGAINST THE S AID ORDER IN 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. THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME- TAX V. HISSARIA BROS. (2007) 291 ITR 244(RAJ) TOOK THE VIEW THAT DEFAULT IN NOT HAVING TRANSACTIONS THROUGH THE BANK AS REQUIRED UN DER SECTIONS 269SS AND 269T ARE NOT RELATED TO THE ASSESSMENT PROCEEDI NG BUT ARE INDEPENDENT OF IT, THEREFORE, THE COMPLETION OF APP ELLATE PROCEEDINGS ARISING OUT OF THE ASSESSMENT PROCEEDINGS OR THE OTHER PROC EEDINGS DURING WHICH THE PENALTY PROCEEDINGS UNDER SECTIONS 271D AND 271 E MAY HAVE BEEN INITIATED HAS NO RELEVANCE. IT WAS ALSO HELD THAT IF THAT WERE NOT SO, CLAUSE (C) OF S. 275(1) WOULD BE REDUNDANT BECAUSE OTHERWI SE, AS A MATTER OF FACT, EVERY PENALTY PROCEEDING IS USUALLY INITIATED WHEN DURING SOME PROCEEDINGS SUCH DEFAULT IS NOTICED, THOUGH THE FIN AL FACT FINDING IN THIS PROCEEDING MAY NOT HAVE ANY BEARING ON THE ISSUES R ELATING TO ESTABLISHING DEFAULT E.G. PENALTY FOR NOT DEDUCTING TAX AT SOURC E 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 B E MADE. THEREFORE, EVEN GOING BY THE FIRST PART OF SEC.275(1)(C) OF TH E ACT, THE STARTING POINT OF TIME WILL BE 24.3.2016. 14. AS FAR AS THE SECOND PART OF SEC.275(1)(C) OF T HE ACT IS CONCERNED, THE SAME RELATES TO EXPIRY OF SIX MONTHS FROM THE MONTH IN WHICH THE PENALTY PROCEEDINGS WERE INITIATED . WE DO NOT AGREE WITH THE CONCLUSION OF ITA NO. 1962/BANG/2017 PAGE 9 OF 11 THE CIT(A) THAT THAT IN THE ASSESSMENT ORDER DATED 24.3.2016, THE AO HAS NOT INITIATED PENALTY PROCEEDINGS U/S.271-E OF THE ACT AND HAS MERELY MADE AN OBSERVATION THAT THERE IS A DEFAULT ATTRACTING P ENALTY U/S.271E OF THE ACT. IN THIS REGARD, WE FIND THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF JKD CAPITAL AND FINLEASE LTD. (SUPRA) OBSERVED THAT THE AO WHEN HE NOTICES DEFAULT U/S.269-T OF THE ACT IN THE ORDER OF ASSESS MENT HAS TO BE CONSCIOUS OF THE TIME LIMIT LAID DOWN IN SEC.275(1)( C) OF TH E ACT AND THE REVENUE CANNOT BE HEARD TO SAY THAT THE DATE OF INITIATION OF PROCEEDINGS U/S.271-E OF THE ACT IS THE DATE ON WHICH THE PROPOSAL TO LEV Y PENALTY IS CONVEYED BY THE AO TO THE OFFICER WHO IS COMPETENT TO IMPOSE PE NALTY U/S.271-E OF THE ACT. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF THE COURT:- 11. IN FACT, WHEN THE AO RECOMMENDED THE INITIATIO N 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 TH E 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). 15. THEREFORE, IT IS FUTILE TO CONTEND THAT THE DAT E OF INITIATION OF PROCEEDINGS IS THE DATE ON WHICH THE JCIT RECEIVES INTIMATION FROM THE AO OR THE DATE ON WHICH THE JCIT ISSUES SHOW CAUSE NOT ICE TO THE ASSESSEE ITA NO. 1962/BANG/2017 PAGE 10 OF 11 U/S.271-E OF THE ACT. IN THAT VIEW OF THE MATTER, WE HOLD THAT THE AO HAVING INITIATED THE PENALTY PROCEEDINGS ON 24.3.2016, THE LAST DATE BY WHICH THE PENALTY ORDER COULD HAVE BEEN PASSED IS 30TH SEPTEM BER 2016. 16. THUS, LATER OF THE TWO DATES IS 30TH SEPTEMBER, 2016 IN THE PRESENT CASE. WITH THE AO HAVING INITIATED THE PENALTY PROC EEDINGS IN HIS ORDER OF ASSESSMENT DATED 24.3.2016, THE LAST DATE BY WHICH THE PENALTY ORDER COULD HAVE BEEN PASSED IS 30TH SEPTEMBER, 2016. THE PENALTY ORDER WAS PASSED ONLY ON 27.1.2017. THEREFORE THE SAME IS BA RRED BY TIME. THE ORDER IMPOSING PENALTY IS THEREFORE HELD TO BE BAD IN LAW AND IS HEREBY CANCELLED. 17. SINCE THE ORDER IS HELD TO BE BAD AND CANCELLED ON THE GROUND OF LIMITATION, WE ARE NOT GOING INTO THE EXISTENCE OF REASONABLE CAUSE WHICH WILL EXONERATE THE ASSESSEE FROM IMPOSITION OF PENA LTY U/S.273B OF THE ACT. 18. IN THE RESULT, APPEAL BY THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON THIS 02 ND DAY OF AUGUST, 2019. SD/- SD/- ( JASON P. BOAZ ) ( N.V . VASU DEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 02 ND AUGUST, 2019. / D ESAI S MURTHY / ITA NO. 1962/BANG/2017 PAGE 11 OF 11 COPY TO: 1. THE APP ELLANT 2. THE R ESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUA R D F ILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.