Sri Parameswari Projects Pvt., Visakhapatnam V. THE Addl. CIT, Srikakulam

ITA 54/VIZ/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8663 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 11-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S ARAVINDAKSHANDR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM , . . , BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER & SHRI DUVVURU R.L. REDDY, JUDICIAL MEMBER . / I . T .A.NO. 54 /VIZAG/ 2016 ( / ASSESSMENT YEAR: 2006 - 07 ) M/S SRI PARAMESWARI PROJECTS PVT. LTD. REGIDI VILLAGE, SRIKAKULAM [PAN :AAIC5336E] VS. ADDL.COMMISSION E R OF INCOME TAX, RANGE - 4, VISAKHAPATNAM ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI Y.A.RAO, AR / RESPONDENT BY : SHRI R.S.ARAVINDAKSHAN,DR / DATE OF H EARING : 21.03.2018 / DATE OF PRONOUNCEMENT : 22 .03.2018 / O R D E R PER SHRI B.R. BASKARAN , ACCOUNTANT MEMBER : THE ASSESSEE HAS FILED T HIS APPEAL CHALLENGING THE ORDER DATED 19.11.2015 PASSED BY THE LD.COMMISSIONER OF INCOME - TAX (APPEALS) [CIT(A)] - 2, VISAKHAPATNAM CONFIRMING THE PENALTY OF 2 ITA NO. 54 /VIZ/201 6 M/S SRI PARAMESWARI PROJECTS PVT. LTD. SRIKAKULAM RS.6,45,000/ - LEVIED BY THE ADDL. COMMISSIONER OF INCOME TAX U/S 271D OF THE ACT FOR VIOLATION OF PROVISIONS OF SECTION 269SS OF THE I.T.AC T. 2. THE ASSESSEE IS CHALLENGING THE VALIDITY OF PENALTY ORDER PASSED BY THE ADDL. COMMISSIONER AND ALSO CONTESTING THE LEVY OF PENALTY OF RS.6,45,000/ - IMPOSED BY HIM. 3. THE FACTS RELATING TO THE ISSUE ARE DISCUSSED IN BRIEF. T HE ASSESSEE IS HAVING A PETROL BUNK, CINEMA HALL AND ALSO DEALING IN AUTOMOBILES. T HE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2006 - 07 WAS COMPLETED BY THE ASSESSING OFFICER (AO) ON 31.12.2008. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD RE CEIVED SHARE APPLICATION MONEY TO THE TUNE OF RS.97.17 LAKHS. THE AO MADE ENQUIRIES WITH REGARD TO THE SHARE APPLICANTS AND FINALLY MADE AN ADDITION OF RS.8,80,000/ - U/S 69 OF THE ACT. DURING THE COURSE OF ENQUIRY, THE AO ALSO EXAMINED CERTAIN PERSONS WH O HAVE APPLIED FOR SHARES IN THE ASSESSEE COMPANY. THE AGGRE GATE AMOUNT GIVEN BY THOSE PERSONS WAS RS.6,45,000/ - . THOUGH THE AO ACCEPTED THE CREDIT WORTHINESS OF TH OS E SHARE APPLICANTS, SINCE THE AMOUNT HAS BEEN 3 ITA NO. 54 /VIZ/201 6 M/S SRI PARAMESWARI PROJECTS PVT. LTD. SRIKAKULAM RECEIVED FROM THEM BY WAY OF CASH, THE AO OBSERVED IN THE ASSESSMENT ORDER THAT THE PENALTY PROCEEDINGS U/S 271D R.W.S. 269SS OF THE ACT ARE BEING INITIATED SEPARATELY. 4. SUBSEQUENTLY, ADDL. COMMISSIONER OF INCOME TAX ISSUED NOTICE U/S 274 R.W.S.271 OF THE ACT ON 25.06.2009. THE ASSESSEE S UBMITTED BEFORE THE ADDL.COMMISSIONER OF INCOME TAX THAT THE SHARE APPLICANTS MENTIONED BELOW ARE AGRICULTURISTS AND THEY DO NOT HAVE BANK ACCOUNTS , SINCE THEY DO NOT HAVE BANK IN THEIR VILLAGES. THE ADDL. COMMISSIONER OF INCOME TAX WAS NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE AND ACCORDINGLY LEVIED PENALTY OF RS.6,45,000/ - U/S 271D OF THE ACT FOR VIOLATION OF THE PROVISIONS OF SECTION 269SS. S.NO. NAME OF THE PERSON DATE AMOUNT 1. MAHANTI SATYAM NAIDU 1.6.2005 1,00,000 2. KANDI CHANDRA SHEKAR RAO 1.6.2005 1,00,000 3. MAHANTI BHASKARA RAO 1.7.2005 50,000 4. MAHANTI SANAKARA RAO 1.7.2005 50,000 5. PATIVADA GOPALA RAO 26.11.2005 50,000 6. KANDI JANARDHANA RAO 28.11.1005 60,000 7. MAHANTI CHANDRA BABU 28.11.1005 50,000 8. M.RAMANA 23.11.2005 50,000 9. MAHANTI VENKATAPPALA NAIDU 24.11.1005 75,000 10. VEMPATAPU TATI NAIDU 23.12.2005 60,000 TOTAL 6,45,000 4 ITA NO. 54 /VIZ/201 6 M/S SRI PARAMESWARI PROJECTS PVT. LTD. SRIKAKULAM THE APPEAL FILED BEFORE THE LD.CIT(A) CHALLENGING THE PENALTY ORDER WAS DISMISSED BY THE LD.CIT(A). HENCE THE ASSESSEE HAS FILED APPEA L BEFORE US. 5. THE ASSESSEE HAS RAISED A LEGAL ISSUE CONTESTING THE VALIDITY OF THE PENALTY ORDER ON THE GROUNDS OF LIMITATION. THE LD.AR SUBMITTED THAT THE PROCEEDINGS U/S 271D OF THE ACT WAS INITIATED SEPARATELY BY THE ADDL. COMMISSIONER OF INCOME TAX ON 25.06.2009 AS PER THE PROVISIONS OF SECTION 275(1)(C) OF THE ACT. HE SUBMITTED THAT T HE ORDER IMPOSING PENALTY SHOULD HAVE BEEN PASSED WITHIN SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ACTION FOR IMPOSITION OF PENALTY WAS INITIATED. ACCORD INGLY, THE TIME LIMIT FOR PASSING THE ORDER U/S 271D OF THE ACT WAS AVAILABLE UPTO 31.12.2009. SINCE THE IMPUGNED PENALTY ORDER WAS PASSED ON 30.03.2010, THE LD.AR CONTENDED THAT THE SAME IS BARRED BY LIMITATION. 6 . THE LD.DR ON THE CONTRARY, SUPPORTED THE ORDERS PASSED BY THE TAX AUTHORITIES. 5 ITA NO. 54 /VIZ/201 6 M/S SRI PARAMESWARI PROJECTS PVT. LTD. SRIKAKULAM 7 . HAVING HEARD THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE CONTENTIONS OF THE ASSESSEE. WE HAVE NOTICED EARLIER THAT THE AO HAS STATED IN THE ASSESSMENT ORDER THAT THE PENALTY PROCEEDIN GS U/S 271D OF THE ACT ARE BEING INITIATED SEPARATELY . THE ASSESSING OFFICER , IN THE PRESENT CASE, IS ASSISTANT COMMISSIONER OF INCOME - TAX. AS PER SEC. 271D(2) OF THE ACT, THE PENALTY U/S 271D(1) SHALL BE IMPOSED BY THE JOINT COMMISSIONER, MEANING THEREBY , THE ASSESSING OFFICER, BEING AN ASSISTANT COMMISSIONER, DOES NOT HAVE THE POWER TO IMPOSE PENALTY U/S 271D OF THE ACT. IN ANY CASE, THERE IS NO MATERIAL ON RECORD TO SHOW THAT THE ASSESSING OFFICER ISSUED ANY NOTICE U/S 271D OF THE ACT TO THE ASSESSEE. 8. AT THE INSTANCE OF THE AO, THE ADDL.COMMISISONER OF INCOME TAX HAS INITIATED THE PENALTY PROCEEDINGS SEPARATELY BY ISSUING NOTICE TO THE ASSESSEE U/S 274 OF THE ACT ON 25.06.2009. IN TH AT CASE, AS PER THE PROVISIONS OF SECTION 275(1)(C) OF THE ACT, THE PENALTY ORDER SHOULD HAVE BEEN PASSED WITHIN SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ACTION FOR IMPOSITION OF PENALTY IS INITIATED , M EANING, THEREBY THE PENALTY ORDER SHOULD HAVE BEEN PASSED BY THE ADDL.COMMISSIONER OF INCOME 6 ITA NO. 54 /VIZ/201 6 M/S SRI PARAMESWARI PROJECTS PVT. LTD. SRIKAKULAM TAX ON OR BEFOR E 31.12.2009. SINCE THE IMPUGNED ORDER HAS BEEN PASSED ON 30.03.2010, THE SAME IS BARRED BY LIMITATION AND HENCE LIABLE TO BE QUASHED. 9. WE HAVE EARLIER OBSERVED THAT THERE IS NO MATERIAL ON RECORD TO SHOW THAT THE ASSESSING OFFICER HAS ISSUED ANY NOTICE U/S 271D OF THE ACT. EVEN IF IT IS ASSUMED THAT THE ASSESSING OFFICER HAS ISSUED A NOTICE U/S 271D ON THE DATE OF ASSESSMENT ORDER , I.E., ON 31 - 12 - 2008 , THE SAME WOULD BECOME TIME BARRED BY 30 - 06 - 2009 , I.E., WITHIN SIX MONTHS FROM THE END OF THE MO NTH IN WHICH ACTION FOR IMPOSITION OF PENALTY IS INITIATED, FOR THE REASON THAT THE PENALTY PROCEEDINGS U/S 271D OF THE ACT CANNOT BE CONSIDERED TO BE AN ACTION INITIATED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. FOR THIS PROPOSITION , WE RELY UPON THE DECISION RENDERED BY HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. HISSARIA BROS (291 ITR 244) , WHICH HAS BEEN REFERRED BY THE VERY SAME HIGH COURT IN THE CASE OF CIT VS. JITENDRA SINGH RATHORE (I.T APPEAL NO.90 OF 2007 DATED 10 - 01 - 2014) AS UNDER: - 7. AFTER HAVING GIVEN THOUGHTFUL CONSIDERATION TO THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT AND HAVING EXAMINED THE RECORD, WE ARE CLEARLY OF THE VIEW THAT THIS APPEAL REMAINS MERITLESS AND THE FORMULATED QUESTION 7 ITA NO. 54 /VIZ/201 6 M/S SRI PARAMESWARI PROJECTS PVT. LTD. SRIKAKULAM DESERVES TO BE ANSWERED AGAINST THE APPELLANT PARTICULARLY FOR THE VIEW ALREADY TAKEN BY THIS COURT IN THE CASE OF CIT V. HISSARIA BROS. [2007] 291 ITR 244 , WHEREIN, THIS COURT HAS SPECIFICALLY HELD AS UNDER: - 38. WE ARE, THEREFORE, OF THE OPINION THAT SINCE PENALTY PROCEEDINGS FOR DEFAUL T 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 F ACT 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 DE MAND 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. 10. IN VIEW OF THE FOREGOING DISCUSSIONS, WE HOLD THAT THE PENALTY ORDER PASSED BY ADDL. COMMISSIONER OF INCOME TAX ON 30 - 03 - 2010 IS BARRED BY LIMITATION. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE LD.CIT(A) AND QUASH THE PENALTY ORDER PASSED BY THE ADDL .COMMISSIONER OF INCOME TAX. 8 ITA NO. 54 /VIZ/201 6 M/S SRI PARAMESWARI PROJECTS PVT. LTD. SRIKAKULAM 11 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. T HE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 22 ND M AR18 . SD/ - SD/ - ( . . . ) ( . . ) ( DUVVURU R.L. REDDY ) ( B.R. BASKARAN ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 22 .03.2 018 L.RAMA, SPS / COPY OF THE ORDER FORWARDED TO : - 1. / THE APPELLANT M/S SRI PARAMESWARI PROJECTS PVT. LTD., REGIDI VILLAGE, SRIKAKULAM 2 . / THE RESPONDENT ADDL.COMMISSIO N E R OF INCOME TAX, RANGE - 4, V ISAKHAPATNAM 3 . / THE CIT - 2, VISAKHAPATNAM 4 . ( ) / THE CIT (A) - 2, VISAKHAPATNAM 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM