Asst. CIT, Circle-1, Nashik V. Shri Chandrakant Sureshchand Lodha (HUF), Nashik

ITA 589/PUN/2013

• Counselvise Citation: 58924514 RSA 2013
• Duration Of Justice: 1 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 04-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S C SARANGI
• Keywords: Period of limitation; Initiation of penalty proceedings; Block assessment; Time period of passing order

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.589/PN/2013 (BLOCK PERIOD: 01.04.1990 TO 22.12.2000) ACIT, RANGE-1, NASHIK APPELLANT VS. SHRI CHANDRAKANT SURESHCHAND LODHA (HUF) FLAT NO.3 & 4, CHITRAKOOT SOCIETY, PETH ROAD, PANCHAVATI, NASHIK. PAN: AAAHL3927P RESPONDENT ITA NO.590/PN/2013 (BLOCK PERIOD: 01.04.1995 TO 27.12.2001) ACIT, RANGE-1, NASHIK APPELLANT VS. SHRI SHANTILAL MOTILAL CHORDIYA 1 & 2, GEETASHREE APARTMENT, CANADA CORNER, NASHIK. PAN: ADPPC3084N RESPONDENT APPELLANT BY : SHRI S.C. SA RANGI RESPONDENT BY : WRITTEN S UBMISSION DATE OF HEARING: 07.07.2014 DATE OF ORDER : 31.07.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: BOTH THE APPEALS HAVE BEEN FILED BY THE REVENUE ON ALMOST SIMILAR GROUNDS AGAINST THE RESPECTIVE ORDERS OF CO MMISSIONER OF INCOME TAX (APPEAL)-I, [IN SHORT CIT(A)] NASHIK. F OR THE SAKE OF CONVENIENCE, THEY ARE BEING DISPOSED OF BY THIS CON SOLIDATED ORDER. 2 ITA NO.589 & 590 OF 13 SHRI CHANDRAKANT S LODHA (HUF) & ANOTHER 2. IN ITA NO.589/PN/2013, THE REVENUE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS. 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A)-I, NASHIK IS JUSTIFIED IN DELE TING THE PENALTY OF RS.8,34,372/- LEVIED U/S 271D OF THE I. T. ACT, 1961. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A)-I, NASHIK IS JUSTIFIED IN HOLD ING THAT CASH LOAN RECEIVED BY ASSESSEE IS NOT CONTRAVENTION OF THE PROVISION OF SECTION 269SS OF THE INCOME TAX ACT. 3. THE APPELLANT PRAYS THE ORDER OF THE ASSESSING OFFI CER MAY BE RESTORED. 4. THE APPELLANT PRAYS TO ADDUCE SUCH FURTHER EVIDENCE TO SUBSTANTIATE HIS CASE. 5. THE APPELLANT PRAYS LEAVE TO ADD, ALTER, CLARIFY, A MEND AND OR WITHDRAW ANY GROUNDS OF APPEAL AS AND WHEN T HE OCCASION DEMANDS. 3. THE ASSESSEE IS AN HUF CARRYING ON THE BUSINESS OF WHOLESALER IN GROCERY ITEMS. THERE WAS A SEARCH AC TION IN THE BUSINESS AS WELL AS RESIDENTIAL PREMISES OF THE ASS ESSEE ON 22.12.2000. THE BLOCK ASSESSMENT FOR THE PERIOD 01 .04.1990 TO 22.12.2000 WAS COMPLETED ON 23.12.2002. THE REG ULAR ASSESSMENT FOR THE A.Y. 2001-02 WAS ALSO COMPLETED ON 22.03.2004. THE BOOKS OF ACCOUNT FOR THE YEAR RELE VANT TO A.Y. 2001-02 WERE AUDITED U/S.44AB OF THE I.T. ACT, 1961 . THE AUDITOR IN HIS REPORT IN FORM NO.3CD HAS REPORTED T HAT THE ASSESSEE HAS TAKEN LOAN IN CASH OF 8,34,372/- FROM MR. PARAS MADANLAL MODI. DURING THE COURSE OF HEARING FOR TH E REGULAR ASSESSMENT, THE AUDITED BOOKS OF ACCOUNT WERE PRODU CED BY THE ASSESSEE. IT WAS CONSISTENT STAND OF THE ASSESSEE THAT, HE HAS NEITHER TAKEN ANY SUCH LOAN FROM NOR HAD ANY TRANSA CTION OF WHATSOEVER NATURE WITH SO CALLED MR. PARAS MADANLAL MODI AND THE SAID REMARK IN THE AUDIT REPORT MIGHT HAVE BEEN APPEARED DUE TO MISTAKE IN USING CUT/PASTE/COPY COMMAND IN C OMPUTER SYSTEM WHILE PREPARING THE REPORT. HOWEVER, BASED ON THE 3 ITA NO.589 & 590 OF 13 SHRI CHANDRAKANT S LODHA (HUF) & ANOTHER REMARK OF THE AUDITOR, THE REFERENCE WAS MADE BY TH E ASSESSING OFFICER TO ADDL. COMMISSIONER OF INCOME-TAX, RANGE- 1, NASHIK FOR INITIATION OF PENALTY PROCEEDINGS U/S. 271D OF THE ACT AND ULTIMATELY THE ORDER LEVYING THE PENALTY U/S. 271D OF 8,34,372/- WAS PASSED BY HIM ON 31.03.2011. 4. THE MATTER WAS CARRIED BEFORE FIRST APPELLATE AU THORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) HAS GRAN TED RELIED TO THE ASSESSEE. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE, INTER ALIA, STATED THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE PENALTY OF 8,34,372/- LEVIED U/S 271D OF THE ACT. THE CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT CASH L OAN RECEIVED BY ASSESSEE IS NOT CONTRAVENTION OF THE PROVISION OF S ECTION 269SS OF ACT. ACCORDINGLY, THE ORDER OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, THE ASSESSEE HAS FILED HIS WRITTEN SUBMISSION TO SUPPORT HIS CAS E AND REQUESTED TO UPHELD THE ORDER OF CIT(A). 5. AFTER GOING THROUGH THE ARGUMENTS OF LEARNED DEP ARTMENTAL REPRESENTATIVE AND THE MATERIAL RECORD BY WAY OF WR ITTEN SUBMISSION BY THE ASSESSEE, WE FIND THAT THAT THE P ROCEEDINGS FOR LEVY OF PENALTY U/S. 271D OF THE ACT WERE INITIATED ONLY ON THE BASIS OF REMARK OF THE AUDITOR GIVEN IN ANNEXURE TO FORM NO. 3CD I.E. AUDIT REPORT ISSUED U/S.44AB OF THE ACT IN SPITE OF BOOKS OF ACCOUNT WERE PRODUCED BY THE ASSESSEE IN THE ASS ESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO CONTROVERT THE CLAIM OF THE ASSESSEE A S WELL AS CERTIFICATE FROM CHARTERED ACCOUNTANT THAT THERE WA S NO SUCH ACCOUNT OF THE NAME OF MR. PARAS MADANLAL MODI IN T HE BOOKS OF ACCOUNT OF THE ASSESSEE AND, THEREFORE, THE QUESTIO N OF TAKING LOAN FROM SUCH PERSON DOES NOT ARISE. THE PENALTY PROCEEDINGS ARE QUASI-CRIMINAL PROCEEDINGS AND, HENCE, THE ONUS WAS ON THE REVENUE TO BRING ON RECORD WITH COGENT MATERIAL REGARDING 4 ITA NO.589 & 590 OF 13 SHRI CHANDRAKANT S LODHA (HUF) & ANOTHER THE ALLEGED DEFAULT OF THE ASSESSEE. LEVY OF PENAL TY JUST ON THE BASIS OF REMARK OF THE AUDITOR IS NOT JUSTIFIED IN THE ABSENCE OF ANY EVIDENCE AND PARTICULARLY WHEN NO ANY SUCH LOAN WAS APPEARING IN THE BALANCE SHEET AND ALSO NO ANY REPA YMENT OF SUCH LOAN WAS APPEARED TO HAVE BEEN MADE BY THE ASS ESSEE DURING THE RELEVANT YEAR. THE ASSESSING OFFICER HA S ALSO NOT BROUGHT ON RECORD THE DATE OF TAKING SUCH LOAN. TH E CIT(A) HAS ALSO FOUND THAT THE ORDER PASSED LEVYING PENALTY U/ S.271D OF THE ACT IS BAD IN LAW AS THE SAME IS PASSED BEYOND THE TIME LIMIT PROVIDED IN SECTION 275(1)(C) OF THE ACT. ACCORDIN G TO WHICH, NO ORDER IMPOSING A PENALTY SHALL BE PASSED AFTER EXPI RY OF THE FINANCIAL YEAR IN WHICH THE PROCEEDINGS IN THE COUR SE OF WHICH ACTION FOR THE IMPOSITION OF PENALTY HAS BEEN INITI ATED, ARE COMPLETED, OR SIX MONTHS FROM THE END OF THE MONTH IN WHICH ACTION FOR IMPOSITION OF PENALTY IS INITIATED, WHIC HEVER PERIOD EXPIRES LATER. IN THE INSTANT CASE THE ASSESSING O FFICER HAS ERRED IN HOLDING THAT THE FIRST LIMB OF LIMITATION OF END OF FINANCIAL YEAR IS IN RESPECT OF THE YEAR OF INITIATION OF THE PENA LTY PROCEEDINGS. THE ASSESSEE WAS JUSTIFIED TO POINT OUT THAT THE SA ID FIRST LIMB OF LIMITATION OF END FINANCIAL YEAR IS THE YEAR IN WHI CH THE PROCEEDINGS DURING WHICH THE ASSESSING OFFICER CAME TO KNOW THE RELATED DEFAULT ARE COMPLETED AND IN THE INSTANT CA SE, THE RELEVANT PROCEEDINGS ARE THE ASSESSMENT PROCEEDINGS FOR A.Y. 2001-02 WHICH WERE COMPLETED ON 22.03.2004 BECAUSE DURING THE SAID PROCEEDINGS, THE ASSESSING OFFICER CAME TO KNOW ABOUT THE ALLEGED DEFAULT OF THE ASSESSEE. THE LIMITATIO N AS PER SAID FIRST LIMB OF THE PROVISIONS OF SECTION 275(1)(C) E XPIRES ON 31.03.2004. NOW AS REGARDS THE SECOND LIMB OF THE LIMITATION, WHICH SAYS, THAT THE LIMITATION IS ALSO AVAILABLE F OR SIX MONTHS FROM THE END OF THE MONTH, IN WHICH, PROCEEDINGS FO R IMPOSITION OF PENALTY ARE INITIATED. IN THE INSTANT CASE, THE PROCEEDINGS FOR IMPOSITION OF PENALTY U/S.271D OF THE ACT ADMITTEDL Y HAVE BEEN INITIATED ON 13.07.2010. THEREFORE, THE LIMITATION FOR LEVY OF 5 ITA NO.589 & 590 OF 13 SHRI CHANDRAKANT S LODHA (HUF) & ANOTHER PENALTY AS PER THIS SECOND LIMB OF SECTION 275(1)(C ) OF THE ACT IS 31.01.2011. THEREFORE, THE PENALTY WAS IMPOSED ON 31.03.2011 I.E. BEYOND SUCH LIMITATION AS PROVIDED IN SECTION 275(1)(C) OF THE ACT, THE SAME IS BAD IN LAW AND LIABLE TO BE QUASHE D. THEREFORE, THE PENALTY IN QUESTION WAS RIGHTLY QUASHED BY CIT( A) ON MERIT AS WELL AS ON LEGAL GROUND. THIS VIEW IS FORTIFIED BY ITAT, PUNE B BENCH IN THE CASE OF MANOJ SHANTILAL CHORDIYA VS. A CIT IN ITA NOS.725 & 726/PN/2012, WHEREIN, THE TRIBUNAL HAS DE CIDED THE SAME RATIO BY OBSERVING AS UNDER: 9. WE HAVE CONSIDERED BOTH THE PERIODS OF LIMITATI ON PRESCRIBED IN SECTION 275(1)(C) OF THE ACT. IF ONE IS TO CONSIDER THAT THE IMPUGNED CASES OF PENALTY ARE COV ERED BY THE FIRST CATEGORY OF LIMITATION PRESCRIBED IN SUB- CLAUSE (C) THEN THE APPLICABLE PERIOD OF LIMITATION WOULD BE R ELATABLE EITHER TO THE DATE OF INITIATION OF PROCEEDINGS OR TO THE DATE OF COMPLETION OF PROCEEDINGS IN THE COURSE OF WHICH THE ACTION FOR IMPOSITION OF PENALTY HAVE BEEN INITIATE D. IN SUCH A SITUATION, IT WOULD BE THE PERIOD WHICH EXPIRES L ATER THAT WOULD DETERMINE THE LIMITATION PERIOD. CONSIDERED IN THAT LIGHT, WE HAVE ANALYZED ABOVE AND FOUND THAT THE PE NALTY IS BARRED BY LIMITATION. 10. ON THE OTHER HAND, IF THE PRESENT CASE IS TO BE CONSIDERED A CASE WHERE THE INITIATION OF ACTION OF PENALTY IS NOT IN THE COURSE OF SOME OTHER PROCEEDINGS, THEN A S PER THE HONBLE DELHI HIGH COURT IN THE CASE OF SUBODHKUMAR BHARGAWA VS. CIT, 309 ITR 31 (DEL), IN SUCH A SITUA TION THE FIRST PART OF LIMITATION PRESCRIBED IN SUB-CLAUSE ( C) OF SECTION 275(1) OF THE ACT WOULD NOT APPLY AND IT IS ONLY TH E PERIOD OF LIMITATION PRESCRIBED IN THE SECOND PART WHICH WOUL D APPLY. CONSIDERED IN THIS LIGHT TOO, AS PER OUR AFORESAID FACTUAL ANALYSIS, THE IMPUGNED ORDER IS BEYOND LIMITATION. OSTENSIBLY, IN SUCH A SITUATION THE EXPRESSION WHICHEVER PERIOD EXPIRES LATER CONTAINED IN SECTION 275(1)(C) OF THE ACT HAS BEEN UNDERSTOOD BY THE HONBLE DELHI HIGH COURT TO MEAN AS THAT VERY PERIOD OF LIMITATION , MEANING THAT THE ORDER IMPOSING PENALTY SHALL NOT BE PASSED AFTER SI X MONTHS FROM THE END OF THE MONTH IN WHICH ACTION FOR IMPOS ITION OF PENALTY IS INITIATED. 11. IN VIEW OF THE AFORESAID DISCUSSION AND THE FAC TUAL MATRIX, IN OUR VIEW, THE ORDERS PASSED BY THE ADDL. COMMISSIONER DATED 30.03.2011 IMPOSING PENALTY UNDE R SECTIONS 271D AND 271E OF THE ACT ARE HIT BY THE BA R OF 6 ITA NO.589 & 590 OF 13 SHRI CHANDRAKANT S LODHA (HUF) & ANOTHER LIMITATION PRESCRIBED IN SECTION 275(1)(C) OF THE A CT, AND THE SAME ARE ACCORDINGLY CANCELLED. THUS, ASSESSEE SUC CEEDS IN ITS BOTH APPEALS. 12. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. 6. FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASO NING, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDING OF CIT(A ), WHO HAS RIGHTLY QUASHED THE PENALTY IN QUESTION. A SIMILAR ISSUE AROSE IN ITA NO.590/PN/2013. FACTS BEING SIMILAR, SO FOLLOW ING THE SAME REASONING, WE ARE NOT INCLINED TO INTERFERE WITH TH E FINDING OF CIT(A), WHO HAS RIGHTLY QUASHED THE SIMILAR PENALTY . 7. IN THE RESULT, BOTH THE APPEALS FILED BY THE REV ENUE ARE DISMISSED AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 31 ST OF JULY, 2014. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 31 ST JULY, 2014 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-I, NASHIK 4) THE CIT-I, NASHIK 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE