SANGHVI PREMISES P. LTD, MUMBAI V. ADDL CIT CEN RG 6, MUMBAI

ITA 2397/MUM/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2538 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2005-2006
• Appeal Filed On: 10-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Initiation of penalty proceedings; Assessment record
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.2397/M/2014 ASSESSMENT YEAR: 2005-06 M/S. SANGHVI PREMISES PVT. LTD., GR FLOOR, VEETRANG CHAMBERS, CAWASJI PATEL STREET, FORT, MUMBAI 400 001 PAN: AAACL 0598D VS. ADDL. CIT, CENTRAL RANGE-6, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : MS. DINKLE HARIYA, A.R. REVENUE BY : SHRI V. JUSTIN, D.R. DATE OF HEARING : 26.06.2018 DATE OF PRONOUNCEMENT : 27.08.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 29.10.2012 OF THE COMMISSIONE R OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2005-06. 2. THE ONLY ISSUE CHALLENGED BY THE ASSESSEE IN THE VARIOUS GROUNDS RAISED IS AGAINST THE CONFIRMATION OF PENAL TY UNDER SECTION 271A OF RS.21,42,895/-. THE ASSESSEE HAS AL SO TAKEN ADDITIONAL GROUND VIDE LETTER DATED 01.11.2017 WHIC H IS REPRODUCED AS UNDER: 1. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE PENALTY ORDER FRAMED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX , CENTRAL RANGE-6, MUMBAI, [THE A.O.], UNDER SECTION 271D & 271E OF THE INCO ME TAX ACT, 1961 [THE ACT], IS BAD, ILLEGAL, VOID AND WITHOUT JURISDICTION AS THE SAME BEING TIME BARRED. ITA NO.2397/M/2014 M/S. SANGHVI PREMISES PVT. LTD. 2 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELETE OR MODIFY ALL OR ANY THE ABOVE GROUND AT THE TIME OF HEARING. 3. BY WAY OF THIS ADDITIONAL GROUND, THE ASSESSEE HA S CHALLENGED THE JURISDICTION OF THE AO TO LEVY PENAL TY AS THE SAME IS ILLEGAL AND WITHOUT JURISDICTION AS BEING T IME BARRED UNDER SECTION 275 OF THE ACT. FIRST WE WOULD LIKE TO DEAL WITH THE ADDITIONAL GROUND. 4. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT TH E ISSUE OF JURISDICTION IS ARISING FROM THE ASSESSMENT REC ORD AND THE ORDER OF AO PASSED UNDER SECTION 271D AND 271A OF T HE ACT DATED 28.09.2012 AND THEREFORE DESERVED TO BE ADMIT TED. THE LD. A.R. SUBMITTED THAT THIS BEING A LEGAL AND TECHN ICAL ISSUE AND THE ASSESSEE IS WITHIN ITS JURISDICTION TO RAIS E THE SAME BEFORE THIS HONBLE FORUM. 5. THE LD. D.R., ON THE OTHER HAND, OPPOSED THE ADMISS ION OF ADDITIONAL GROUND ON THE GROUND THAT THE SAME WA S NOT TAKEN UP BEFORE THE FIRST APPELLATE AUTHORITY AND T HEREFORE SHOULD NOT BE ADMITTED. 6. HAVING HEARD BOTH THE PARTIES AND PERUSING THE R ELEVANT MATERIAL ON RECORD, WE FIND THAT THE LEGAL ISSUE RAI SED BY THE ASSESSEE CHALLENGING THE JURISDICTION OF AO TO LEVY PENALTY IS ARISING OUT OF THE ASSESSMENT RECORD BEFORE US AND THEREFORE DESERVES TO BE ADMITTED. ACCORDINGLY, WE ADMIT THE SAME FOR ADJUDICATION IN THE ENSUING PARAS. ITA NO.2397/M/2014 M/S. SANGHVI PREMISES PVT. LTD. 3 7. THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAS BOR ROWED LOANS FROM VARIOUS PARTIES IN CASH TO THE TUNE OF RS.25,36,348/- WHICH WERE REPORTED BY THE TAX AUDIT OR IN FORM 3CD. THE AO CAME TO THE CONCLUSION THAT THE S AID LOANS WERE ACCEPTED IN VIOLATION OF PROVISIONS OF SECTION 269SS OF THE ACT AND ARE LIABLE FOR PENALTY UNDER SECTION 27 1D OF THE ACT. SIMILARLY, THE AO OBSERVED FROM FORM 3CD THAT ASSESSEE HAS REPAID CERTAIN LOANS IN CASH TO THE TUNE OF RS.2 1,42,895/- AND THE SAME ARE IN VIOLATION OF PROVISIONS OF SECT ION 269T OF THE ACT AND ARE LIABLE FOR PENALTY UNDER SECTION 2 71E OF THE ACT. THE AO ULTIMATELY IMPOSED THE PENALTY OF RS.25,3 6,348/- UNDER SECTION 271D AND RS.21,42,895/- UNDER SECTION 2 71E OF THE ACT VIDE TWO DIFFERENT ORDERS OF EVEN DATED 28. 09.2012. THE PENALTY WAS INITIATED IN 2010 WHEREAS THE ORDER IMPOSING PENALTY WAS PASSED ON 28.09.2012. THE LD. A.R. VEHEMENTL Y SUBMITTED BEFORE US THAT SINCE THE PENALTY WAS INIT IATED IN 2010 AND ORDER IMPOSING PENALTY WAS PASSED ON 28.09.2 012 AND THEREFORE THE SAME IS IN CONTRAVENTION OF PROVI SIONS OF SECTION 275(1)(C) OF THE ACT AND THUS THE ORDER PA SSED BY THE AO IS BAD IN LAW AND VOID AB INITIO AND SO IS THE O RDER OF THE LD. CIT(A).THE LD AR PRAYED THAT THE ORDER OF IMPOSI NG PENALTIES UNDER SECTION 271D AND 271E SHOULD BE QU ASHED. 8. THE LD. D.R., ON THE OTHER HAND, SUBMITTED THAT THE IS SUE OF TIME BARRED WAS NEVER RAISED BEFORE THE LD. CIT(A ) AND THEREFORE SHOULD NOT BE ALLOWED TO BE RAKED UP AT T HIS STAGE. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE DE CISIONS ITA NO.2397/M/2014 M/S. SANGHVI PREMISES PVT. LTD. 4 CITED BY THE LD. A.R. THE UNDISPUTED FACTS ARE THA T THE PENALTIES PROCEEDING WERE INITIATED IN 2010 AND O RDER IMPOSING PENALTY UNDER SECTION 271D AND 271E OF THE ACT WERE PASSED ON 28.09.2012 AFTER A GAP OF ALMOST TWO YEARS. THE CONTENTIONS OF THE LD. A.R. IS THAT THE ORDERS IMPOSING PENALTY IS BARRED BY LIMITATIONS AND THUS VOID AB-I NITIO AND PASSED WITHOUT ANY JURISDICTION UNDER THE ACT. WE WOULD LIKE TO REPRODUCE THE PROVISIONS OF SECTION 275(1)(C) OF THE ACT FOR THE PURPOSE OF BETTER UNDERSTANDING OF THE ISSUE AT HAND WHICH IS REPRODUCED AS UNDER: 271(1)( C ) IN ANY OTHER CASE, AFTER THE EXPIRY OF THE FINAN CIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHICH ACTION FOR THE IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPLETED, OR SIX MONTHS FROM THE EN D OF THE MONTH IN WHICH ACTION FOR IMPOSITION OF PENALTY IS INITIATED, WHICHEVER P ERIOD EXPIRES LATER. 10. IT IS CLEAR FROM THE PROVISIONS OF SECTION AS REPRODUCED ABOVE THAT NO ORDER IMPOSING PENALTY UNDER THIS CHA PTER SHALL BE PASSED AFTER THE EXPIRY OF THE FINANCIAL YEAR I N WHICH THE PROCEEDING, IN THE COURSE OF WHICH THE ACTION FOR IM POSITION OF PENALTY HAS BEEN INITIATED OR SIX MONTHS FROM THE E ND OF THE MONTH IN WHICH THE ACTION FOR IMPOSITION OF PENALTY IS INITIATED WHICHEVER IS EXPIRE LATER. IN THE PRESENT CASE, TH E ASSESSMENT WAS COMPLETED MUCH BEFORE WHEREAS THE PENALTY WAS INITIATED IN 2010. THE ORDERS IMPOSING PENALTY SHOULD HAVE BEE N PASSED WITHIN SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE PROCEEDINGS IMPOSING PENALTIES WERE INITIATED HOWEVER THE PENALTY ORDER WAS FINALLY PASSED ON 28.09.2012 WH ICH IS IN CLEAR VIOLATION OF THE PROVISION OF SECTION 275(1)( C) OF THE ACT. IN THE CASE OF PR. CIT VS. MAHESH WOOD PRODUCTS P. LTD. (2017) 82 TAXMANN.COM 39 (DELHI) THE HONBLE DELHI HIGH ITA NO.2397/M/2014 M/S. SANGHVI PREMISES PVT. LTD. 5 COURT HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PARA OF THE SAID DECISION IS QUOTED AS UNDER: 9. HOWEVER, THIS QUESTION CAME UP FOR CONSIDERATIO N IN PCIT V. JKD CAPITAL & FINLEASE LTD.(SUPRA). THE DATE ON WHICH THE AO RECO MMENDED THE INITIATION OF PENALTY PROCEEDINGS WAS TAKEN TO BE THE RELEVANT DA TE AS FAR AS SECTION 275(1)(C) WAS CONCERNED. THERE WAS NO EXPLANATION FOR THE DELAY O F NEARLY FIVE YEARS IN THE ACIT ACTING ON THE SAID RECOMMENDATION. THE COURT HELD T HAT THE STARTING POINT WOULD BE THE 'INITIATION' OF PENALTY PROCEEDINGS. GIVEN THE SCHEME OF SECTION 275(1)(C) IT WOULD BE THE DATE ON WHICH THE AO WROTE A LETTER TO THE ACIT RECOMMENDING THE ISSUANCE OF THE SCN. WHILE IT IS TRUE THAT THE ACIT HAD THE DISCRETION WHETHER OR NOT TO ISSUE THE SCN, IF HE DID DECIDE TO ISSUE A SCN, THE LIMITATION WOULD BEGIN TO RUN FROM THE DATE OF LETTER OF THE AO RECOMMENDING 'INI TIATION' OF THE PENALTY PROCEEDINGS. 11. IN THE CASE OF PR. CIT VS. JKD CAPITAL & FINLEASE LTD. (2017) 81 TAXMANN.COM 80 (DELHI) THE HONBLE DELHI HIGH COURT HAS HELD THAT WHERE THE PENALTY ORDER IS UNDE R SECTION 271(1)(C) AND IS PASSED AFTER THE EXPIRY OF FINANCI AL YEAR IN WHICH QUANTUM PROCEEDINGS WERE COMPLETED AND ALSO B EYOND SIX MONTH FROM MONTH IN WHICH PENALTY PROCEEDINGS W ERE INITIATED, SAME WAS BARRED BY LIMITATION PROVIDED UN DER SECTION 271(1)(C). AFTER CONSIDERING THE FACTS OF THE ASSESSEES CASE IN THE LIGHT OF THE PROVISIONS OF T HE ACT AND THE RATIO LAID DOWN BY THE HONBLE HIGH COURTS AS DISCU SSED HEREINABOVE WE ARE OF THE VIEW THAT PENALTY IMPOSED BY THE ADDITIONAL CIT IS BARRED BY LIMITATION AND THEREFOR E WITHOUT JURISDICTION. ACCORDINGLY, WE QUASH THE ORDER IMPOS ING PENALTY UNDER SECTION 271D AND 271E OF THE ACT. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 27.08.2018. SD/- SD/- (C.N. PRASAD) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 27.08.2018. * KISHORE, SR. P.S. ITA NO.2397/M/2014 M/S. SANGHVI PREMISES PVT. LTD. 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.