K Umesh Shetty , Bangalore V. The Income Tax Officer Ward-3(2)(4), Bangalore

ITA 2544/BANG/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8908 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-07-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 07-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKAS SURYAVAMSHI
• Assessee Lawyers: G N BHAT
• Keywords: Period of limitation; Reasonable cause; Set aside
• Section: 271D; 271E; 246A; 246; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 2544 /BANG/201 8 ASSESSMENT YEAR : 20 1 2 - 1 3 SHRI K. UMESH SHETTY, NO. 1441, KAMADHENU, II CROSS, II PHASE, CHANDRA LAYOUT, VIJAYANAGAR, BANGALORE 560 040. PAN: AUGPS2714M VS. THE INCOME-TAX OFFICER, WARD 3 (2) (4), BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI G.N. BHAT, CA REVENUE BY : SHRI VIKAS SURYAVAMSHI, ADDL. CIT (DR) DATE OF HEARING : 30 .0 7 .2019 DATE OF PRONOUNCEMENT : 20 . 0 9 .2019 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-3, BANGALORE DATED 10.07.2018 FOR ASSESSMENT YEAR 2012-13. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THE ORDER OF THE CIT(APPEALS)-3, IS OPPOSED TO LAW, PROBABILITIES, WEIGHT OF EVIDENCES, AND FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(APPEALS) ERRED IN UPHOLDING THE ORDER OF PENALTY U/S 271D IMPOSED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 3(2), BENGALURU ON 22.2.2018 AMOUNTING TO RS. 17,50,000/-. 3. THE LEARNED CIT(APPEALS) OUGHT TO HAVE HELD THAT THE ORDER OF PENALTY IS BARRED BY LIMITATION. 4. THE LEARNED CIT(APPEALS) ERRED IN NOT OBSERVING THAT THE REFERENCE WAS MADE BY THE INCOME TAX OFFICER TO THE ADDITIONAL COMMISSIONER BELATEDLY AND CONSEQUENTLY THE ORDER OF PENALTY IS NOT SUSTAINABLE IN LAW. ITA NO. 2544/BANG/2018 PAGE 2 OF 6 5. THE LEARNED CIT(APPEALS) ERRED IN NOT APPRECIATING THAT THE INITIATION OF PENALTY BY THE ADDITIONAL COMMISSIONER WAS MUCH LATER THAN THE DATE OF COMMUNICATION FROM THE ASSESSING OFFICER AND THE REASONS FOR SUCH DELAY ARE INEXPLICABLE. 6. THE LEARNED CIT(APPEALS) IGNORED THE FACT THAT THE ORDER IMPOSING PENALTY IS CONTRARY TO THE CIRCULARS OF THE CBDT, WHICH ARE BINDING ON THE AUTHORITIES BELOW. 7. THE LEARNED CIT(APPEALS) ERRED IN NOT CONSIDERING THAT THE APPELLANT HAD REASONABLE CAUSE FOR ACCEPTING THE LOANS IN CASH AMOUNTING TO RS. 17,50,000 FROM AGRICULTURISTS. THE LOAN TRANSACTIONS ARE BEYOND DOUBT GENUINE AND BONA FIDE. 8. THE LEARNED CIT(APPEALS) FAILED TO NOTICE THAT THE APPELLANT HAD COMPELLING CIRCUMSTANCES TO ACCEPT LOAN IN CASH. 9. THE LEARNED CIT(APPEALS) ERRED IN NOT CONSIDERING THE DECISIONS OF VARIOUS HIGH COURTS, AND ORDERS OF ITATS RELIED UPON BY THE APPELLANT DURING THE APPEAL PROCEEDINGS, WHICH SQUARELY APPLY TO THE FACTS OF THE APPELLANT'S CASE. 10. THE APPELLANT CRAVES LEAVE TO ADD, DELETE, SUBSTITUTE ANY OF THE GROUNDS BEFORE THE HEARING OF APPEAL. 11. THE APPELLANT, THEREFORE, PRAYS THAT THE ITAT MAY BE PLEASED TO SET ASIDE THE ORDER OF CIT(APPEALS), CANCEL THE ORDER OF PENALTY U/S 271 D, IN THE INTEREST OF JUSTICE. 3. VARIOUS ARGUMENTS WERE MADE BY LD. AR OF ASSESSEE. IT WAS SUBMITTED BY HIM THAT ASSESSEE HAS FILED WRITTEN SUBMISSIONS WHICH IS AVAILABLE ON PAGES 1 TO 20 OF THE PAPER BOOK AND IN PARTICULAR, OUR ATTENTION WAS DRAWN TO PAGE NO. 4 OF THE PAPER BOOK AND IT WAS POINTED OUT THAT THE SYNOPSIS OF DATES AND EVENTS ARE TABULATED ON THIS PAGE OF THE WRITTEN SUBMISSIONS. IT WAS POINTED OUT THAT THE ASSESSMENT ORDER IS DATED 26.02.2015 BUT THE REFERENCE MADE BY THE AO TO LD. CIT(A) IS DATED 16.11.2016 WHICH IS AFTER 21 MONTHS FROM THE DATE OF ASSESSMENT ORDER AND THEREAFTER, SHOW CAUSE NOTICE WAS ISSUED BY THE ADDL. CIT TO LEVY PENALTY U/S. 271D ON 10.11.2017 WHICH IS AFTER A DELAY OF 33 MONTHS FROM THE DATE OF ASSESSMENT ORDER AND AFTER A DELAY OF 12 MONTHS FROM DATE OF REFERENCE FROM THE AO AND PENALTY ORDER U/S. 271D WAS PASSED ON 22.02.2018 WHICH IS AFTER A DELAY OF 36 MONTHS FROM THE DATE OF ASSESSMENT ORDER. OUR ATTENTION WAS DRAWN TO THE PROVISIONS OF SECTION 275 OF THE IT ACT AND IT WAS POINTED OUT THAT THE PENALTY ORDER IS BAD IN LAW AS PER THE PROVISION OF THIS ITA NO. 2544/BANG/2018 PAGE 3 OF 6 SECTION IN THE FACTS OF THE PRESENT CASE. RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE RAJASTHAN HIGH COURT RENDERED IN THE CASE OF CIT VS. HISSARIA BROS. AS REPORTED IN (2007) 291 ITR 0244. IT WAS ALSO SUBMITTED THAT ON PAGE NOS. 34 AND 35 OF THE PAPER BOOK IS THE CBDT CIRCULAR NO. 09/DV/2016 DATED 26.04.2016 AND IT WAS POINTED OUT THAT IN THIS CIRCULAR, IT IS STATED BY THE CBDT THAT THE AO BELOW THE RANK OF JOINT COMMISSIONER OF INCOME TAX MAY BE ADVISED TO MAKE A REFERENCE TO THE RANGE HEAD, REGARDING ANY VIOLATION OF THE PROVISIONS OF SECTION 269SS AND SECTION 269T OF THE ACT, AS THE CASE MAY BE, IN THE COURSE OF THE ASSESSMENT PROCEEDINGS OR ANY OTHER PROCEEDINGS UNDER THE ACT. HE SUBMITTED THAT WHEN AS PER THE CBDT CIRCULAR, THE AO WAS TO MAKE A REFERENCE TO THE RANGE HEAD REGARDING ANY VIOLATION OF THE PROVISIONS OF SECTION 269SS AND 269T, AS THE CASE MAY BE, IN COURSE OF ASSESSMENT PROCEEDINGS AND THIS HAS NOT BEEN DONE BY THE AO IN THE PRESENT CASE, IT SHOULD BE HELD THAT THE PRESENT PENALTY ORDER IS TIME BARRED. LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL, WE EXAMINE THE APPLICABILITY OF THE JUDGMENT OF HONBLE RAJASTHAN HIGH COURT RENDERED IN THE CASE OF CIT VS. HISSARIA BROS. (SUPRA). PARA NOS. 25 TO 27 ARE RELEVANT IN THIS REGARD AND HENCE, THESE PARAS ARE REPRODUCED HEREINBELOW. 25. WE HAVE ALSO NOTICED THAT SECTIONS 271 AND 273 WERE THE TWO ORIGINAL PENALTY PROVISIONS, WHICH REQUIRE THE PENALTY PROCEEDINGS TO BE INITIATED DURING THE COURSE OF RELEVANT ASSESSMENT PROCEEDINGS OR THE OTHER RELEVANT PROCEEDINGS AS THE CASE MAY BE. THE PENALTY PROCEEDINGS COULD ALSO BE INITIATED DURING THE APPELLATE PROCEEDINGS ARISING OUT OF THE RELEVANT ASSESSMENT PROCEEDINGS. IT IS ONLY WHERE THE ASSESSMENT PROCEEDINGS ARE INDEPENDENT AND NOT DIRECTLY LINKED TO THE ASSESSMENT PROCEEDINGS THAT THE RESULT OF SUCH PROCEEDINGS IN THE COURSE OF WHICH THE PENALTY PROCEEDINGS WERE INITIATED DOES NOT AFFECT THE LEVY OF PENALTY. ON SUCH PENALTY PROCEEDINGS, INDEPENDENT OF THE ASSESSMENT PROCEEDINGS CLAUSE (C) HAS BEEN MADE APPLICABLE. IN THIS CATEGORY THE PERIOD OF LIMITATION FOR COMPLETING THE PENALTY PROCEEDINGS IS LINKED WITH THE INITIATION OF THE PENALTY PROCEEDINGS ITSELF. IN SUCH CASES, THE PENALTY PROCEEDINGS CAN BE INITIATED INDEPENDENT OF ANY PROCEEDINGS BUT OBVIOUSLY, THE PENALTY PROCEEDINGS CAN BE INITIATED ONLY WHEN THE DEFAULT IS BROUGHT TO THE NOTICE OF THE CONCERNED AUTHORITY WHICH MAY BE DURING THE COURSE OF ANY ITA NO. 2544/BANG/2018 PAGE 4 OF 6 PROCEEDINGS AND, THEREFORE, FOR THIS TYPE OF CASES WHERE THE PENALTY PROCEEDINGS HAVE BEEN INITIATED IN CONNECTION WITH THE DEFAULTS FOR WHICH NO STATUTORY MANDATE IS THERE ABOUT ANY PARTICULAR PROCEEDINGS DURING THE COURSE OF WHICH ONLY SUCH PENALTY PROCEEDINGS CAN BE INITIATED, A DIFFERENT PERIOD OF LIMITATION HAS BEEN PRESCRIBED UNDER CLAUSE (C) AS A SEPARATE CATEGORY. IN CASES FALLING UNDER CLAUSE (C) PENALTY PROCEEDINGS ARE TO BE COMPLETED WITHIN 6 MONTHS FROM THE END OF THE MONTH IN WHICH THE PROCEEDINGS DURING WHICH THE ACTION FOR IMPOSITION OF PENALTY IS INITIATED, ARE COMPLETED, OR SIX MONTHS FROM THE END OF THE MONTH IN WHICH ACTION FOR IMPOSITION OF PENALTY IS INITIATED, WHICHEVER PERIOD EXPIRES LATER. THERE IS NO PROVISION UNDER CLAUSE (C) FOR THE EXTENDED PERIOD OF LIMITATION COMMENSURATING WITH COMPLETION OF THE APPELLATE PROCEEDINGS IF ANY ARISING FROM THE PROCEEDINGS DURING THE COURSE OF WHICH SUCH PENALTY PROCEEDINGS ARE INITIATED AS IN THE CASE WHERE THE PENALTY PROCEEDINGS ARE LINKED WITH THE ASSESSMENT PROCEEDINGS OR THE OTHER RELEVANT PROCEEDINGS. 26. THE EXPRESSION OTHER RELEVANT THING USED IN SECTION 275(1)(A) AND CLAUSE (B) OF SUB-SECTION (1) OF SECTION 275 IS SIGNIFICANTLY MISSING FROM CLAUSE (C) OF SECTION 275(1) TO MAKE OUT THIS DISTINCTION VERY CLEAR. 27. WE ARE, THEREFORE, OF THE OPINION THAT SINCE PENALTY PROCEEDINGS FOR DEFAULT IN NOT HAVING TRANSACTIONS THROUGH THE BANK AS REQUIRED UNDER SECTIONS 269SS AND 269T ARE NOT RELATED TO THE ASSESSMENT PROCEEDING BUT ARE INDEPENDENT OF IT, THEREFORE, THE COMPLETION OF APPELLATE PROCEEDINGS ARISING OUT OF THE ASSESSMENT PROCEEDINGS OR THE OTHER PROCEEDINGS DURING WHICH THE PENALTY PROCEEDINGS UNDER SECTIONS 271D AND 271E MAY HAVE BEEN INITIATED HAS NO RELEVANCE FOR SUSTAINING OR NOT SUSTAINING THE PENALTY PROCEEDINGS AND, THEREFORE, CLAUSE (A) OF SUB-SECTION (1) OF SECTION 275 CANNOT BE ATTRACTED TO SUCH PROCEEDINGS. IF THAT WERE NOT SO CLAUSE (C) OF SECTION 275(1) WOULD BE REDUNDANT BECAUSE OTHERWISE AS A MATTER OF FACT EVERY PENALTY PROCEEDING IS USUALLY INITIATED WHEN DURING SOME PROCEEDINGS SUCH DEFAULT IS NOTICED, THOUGH THE FINAL FACT FINDING IN THIS PROCEEDING MAY NOT HAVE ANY BEARING ON THE ISSUES RELATING TO ESTABLISHING DEFAULT E.G. PENALTY FOR NOT DEDUCTING TAX AT SOURCE 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 BE MADE. EITHER OF THE CONTINGENCIES DOES NOT AFFECT THE COMPUTATION OF TAXABLE INCOME AND LEVY OF CORRECT TAX ON CHARGEABLE INCOME; IF CLAUSE (A) WAS TO BE INVOKED, NO NECESSITY OF CLAUSE (C) WOULD ARISE. ITA NO. 2544/BANG/2018 PAGE 5 OF 6 5. WE ALSO REPRODUCE THE PROVISIONS OF SECTION 275(1) OF THE IT ACT. BAR OF LIMITATION FOR IMPOSING PENALTIES. 275. (1) NO ORDER IMPOSING A PENALTY UNDER THIS CHAPTER SHALL BE PASSED (A) IN A CASE WHERE THE RELEVANT ASSESSMENT OR OTHER ORDER IS THE SUBJECT-MATTER OF AN APPEAL TO THE COMMISSIONER (APPEALS) UNDER SECTION 246 OR SECTION 246A OR AN APPEAL TO THE APPELLATE TRIBUNAL UNDER SECTION 253, AFTER THE EXPIRY OF THE FINANCIAL 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 END OF THE MONTH IN WHICH THE ORDER OF THE COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE APPELLATE TRIBUNAL IS RECEIVED BY THE PRINCIPAL CHIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL COMMISSIONER OR COMMISSIONER, WHICHEVER PERIOD EXPIRES LATER : PROVIDED THAT IN A CASE WHERE THE RELEVANT ASSESSMENT OR OTHER ORDER IS THE SUBJECT-MATTER OF AN APPEAL TO THE COMMISSIONER (APPEALS) UNDER SECTION 246 OR SECTION 246A, AND THE COMMISSIONER (APPEALS) PASSES THE ORDER ON OR AFTER THE 1ST DAY OF JUNE, 2003 DISPOSING OF SUCH APPEAL, AN ORDER IMPOSING PENALTY SHALL BE PASSED BEFORE THE EXPIRY OF THE FINANCIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHICH ACTION FOR IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPLETED, OR WITHIN ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER OF THE COMMISSIONER (APPEALS) IS RECEIVED BY THE PRINCIPAL CHIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL COMMISSIONER OR COMMISSIONER, WHICHEVER IS LATER; (B) IN A CASE WHERE THE RELEVANT ASSESSMENT OR OTHER ORDER IS THE SUBJECT-MATTER OF REVISION UNDER SECTION 263 OR SECTION 264, AFTER THE EXPIRY OF SIX MONTHS FROM THE END OF THE MONTH IN WHICH SUCH ORDER OF REVISION IS PASSED; (C) IN ANY OTHER CASE, AFTER THE EXPIRY OF THE FINANCIAL 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 END OF THE MONTH IN WHICH ACTION FOR IMPOSITION OF PENALTY IS INITIATED, WHICHEVER PERIOD EXPIRES LATER. 6. FROM THE RELEVANT PARAS OF THIS JUDGMENT OF HONBLE RAJASTHAN HIGH COURT, IT IS SEEN THAT AS PER THIS JUDGMENT IN RESPECT OF PENALTY U/S. 271D AND 271E OF THE IT ACT, TIME LIMITATION HAS TO BE EXAMINED U/S. 275 (1) (C) OF THE IT ACT AND AS PER THE SAME, PENALTY HAS TO BE IMPOSED BEFORE THE EXPIRY OF THE FINANCIAL 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 END OF THE MONTH IN WHICH ACTION FOR IMPOSING OF PENALTY HAS BEEN INITIATED, WHICHEVER ITA NO. 2544/BANG/2018 PAGE 6 OF 6 PERIOD EXPIRES LATER. IN THE PRESENT CASE, REFERENCE WAS MADE BY THE AO TO THE ADDL. CIT ON 16.11.2016 AND HENCE, IN OUR CONSIDERED OPINION, ON THIS DATE, THE ACTION FOR THE IMPOSITION OF PENALTY HAS BEEN INITIATED AND HENCE, IN OUR CONSIDERED OPINION, PENALTY SHOULD HAVE BEEN IMPOSED BEFORE THE EXPIRY OF SIX MONTHS FROM THE END OF THIS MONTH I.E. NOVEMBER 2016 BECAUSE ACTION FOR IMPOSITION OF PENALTY HAS BEEN INITIATED IN NOVEMBER 2016 BY THE ACTION OF THE AO TO MAKE A REFERENCE TO THE ADDL. CIT IN THIS REGARD. HENCE, THE PENALTY SHOULD HAVE BEEN IMPOSED ON OR BEFORE 31.05.2017. BUT THE AO HAS IMPOSED THE PENALTY ON 22.02.2018 AND HENCE, THE PRESENT PENALTY IS BARRED BY LIMITATION. WHILE HOLDING SO, WE FIND SUPPORT FROM THE JUDGMENT OF HONBLE RAJASTHAN HIGH COURT NOTED ABOVE IN WHICH IT IS HELD THAT CLAUSE (A) OF SUB- SECTION (1) OF SECTION 275 CANNOT BE ATTRACTED TO THE PENALTY PROCEEDINGS U/S. 271D AND 271E OF THE IT ACT. HENCE, RESPECTFULLY FOLLOWING THIS JUDGMENT OF THE HONBLE RAJASTHAN HIGH COURT, WE HOLD THAT IN THE PRESENT CASE, THE PENALTY ORDER IS BARRED BY LIMITATION AND HENCE, NOT MAINTAINABLE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- (PAVAN KUMAR GADALE) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 20 TH SEPTEMBER, 2019. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.