D.b. Income Tax Appeal v. Shri Jitendra Singh Rathore

D.B. INCOME TAX APPEAL NO.90/2007Commissioner of Income Tax, Udaipur Vs. Shri Jitendra Singh Rathore. IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR : J U D G M E N T : D.B. INCOME TAX APPEAL NO.90/2007Commissioner of Income Tax, Udaipur Vs. Shri Jitendra Singh Rathore. DATE OF JUDGMENT 10[th]January 2013. P R E S E N T HON'BLE MR. JUSTICE DINESH MAHESHWARIHON'BLE MR. JUSTICE ARUN BHANSALI Mr. K.K. Bissa, for the appellant.None present for the respondent. ---- BY THE COURT: (PER HON'BLE BHANSALI, J.) This appeal under Section 260-A of the Income Tax Act,1961 ('the Act') has been preferred by the Revenue against thejudgment dated 22.09.2006 passed by the Income Tax AppellateTribunal, Jodhpur Bench, Jodhpur ('the Tribunal') relating to theassessment year 2001-02. The appeal was admitted on the following question of law:- “Whether on the facts and in the circumstancesof the case as well as in the law the learnedTribunal was justified in deleting the penaltyunder Section 271D holding that the penaltywas not imposed within the prescribed periodunder Section 275(i)(c) from the date ofinitiation by the AO ignoring the legal provisionthat the authority competent to impose penaltyunder Section 271D was Joint Commissioner Vs. Shri Jitendra Singh Rathore. and hence the period of limitation should bereckoned from the issue of first show cause bythe Joint Commissioner ?” Briefly stated the facts are that the assessee, anindividual, derives income from his two proprietary concerns.The assessment proceedings under Section 143(3) of the Actwere completed on 25.03.2003. The Assessing Officer ('the AO')noticed that the assessee had accepted cash loans exceeding thelimit specified under Section 269SS to the tune of Rs.4,00,000/-;and the same being in contravention of Section 269SS, initiatedthe penalty proceedings under Section 271D of the Act. Theshow cause notice in this regard was served on the assessee on27.03.2003. Thereafter, the matter was referred to the JointCommissioner of Income Tax, Range-2, Udaipur on 22.03.2004,who was the competent authority under Section 271D to imposesuch penalty. The Joint Commissioner of Income Tax came tothe conclusion, by his order dated 28.05.2004, that the assesseewas liable for penalty under Section 271D of the Act andimposed a penalty of Rs.4,00,000/- being the sum equal to theloan/deposit accepted in contravention of the provisions ofSection 269SS of the Act. Feeling aggrieved, the assessee preferred an appeal beforethe Commissioner of Income Tax (Appeals), Udaipur ['the CIT(A)'] who, by the order dated 29.03.2005, allowed the appealwhile holding that the penalty proceedings were barred bylimitation. The CIT(A) came to the conclusion that for penaltyproceedings under Section 271D of the Act, the period of D.B. INCOME TAX APPEAL NO.90/2007Commissioner of Income Tax, Udaipur Vs. Shri Jitendra Singh Rathore. limitation prescribed under Section 275(1)(c) was applicable andnot the limitation prescribed under Section 275(1)(a) becausethe penalty proceedings were not dependent on the assessmentand, therefore, the penalty proceedings stood barred bylimitation on 30.09.2003. Dissatisfied with the order dated 29.03.2005 so passed bythe CIT(A), the Revenue preferred an appeal before the Tribunal,who came to the conclusion that the matter called for nointerference and hence, dismissed the appeal by the impugnedorder dated 22.09.2006. D.B. INCOME TAX APPEAL NO.90/2007Commissioner of Income Tax, Udaipur Vs. Shri Jitendra Singh Rathore. limitation prescribed under Section 275(1)(c) was applicable andnot the limitation prescribed under Section 275(1)(a) becausethe penalty proceedings were not dependent on the assessmentand, therefore, the penalty proceedings stood barred bylimitation on 30.09.2003. Dissatisfied with the order dated 29.03.2005 so passed bythe CIT(A), the Revenue preferred an appeal before the Tribunal,who came to the conclusion that the matter called for nointerference and hence, dismissed the appeal by the impugnedorder dated 22.09.2006. Assailing the order impugned, it has been contended onbehalf of the appellant that the penalty proceedings underSection 271D of the Act could not have been taken as barred bylimitation because the authority competent to impose suchpenalty was the Joint Commissioner of Income Tax and theperiod of limitation would be reckoned only from the date ofissue of show cause notice by the Joint Commissioner. It issubmitted that in the present case, the Joint Commissionerissued the notice for the penalty proceedings after the matterwas referred to him on 22.03.2004; and hence, the orderpassed by him on 28.05.2004 could not have been consideredbarred by limitation. Nobody has appeared for the respondentdespite service. After having given thoughtful consideration to thesubmissions made on behalf of the appellant and havingexamined the record, we are clearly of the view that this appealremains meritless and the formulated question deserves to be answered against the appellant particularly for the view alreadytaken by this Court in the case of Commissioner of Income TaxVs. Hissaria Bros., reported at 2007 291 ITR 244 (Raj.),wherein, this Court has specifically held as under:- “38.We are, therefore, of the opinion that sincepenalty proceedings for default in not havingtransactions through the bank as required underSections 269SS and 269T are not related to theassessment proceeding but are independent of it,therefore, the completion of appellateproceedings arising out of the assessmentproceedings or the other proceedings duringwhich the penalty proceedings under Sections271D and 271E may have been initiated has norelevance for sustaining or not sustaining thepenalty proceedings and, therefore, Clause (a) ofSub-section (1) of Section 275 cannot beattracted to such proceedings. If that were notso Clause (c) of Section 275(1) would beredundant because otherwise as a matter of factevery penalty proceeding is usually initiated whenduring some proceedings such default is noticed,though the final fact finding in this proceedingmay not have any bearing on the issues relatingto establishing default e.g. penalty for notdeducting tax at source while making payment toemployees, or contractor, or for that matter notmaking payment through cheque or demand draftwhere it is so required to be made. Either of thecontingencies does not affect the computation oftaxable income and levy of correct tax onchargeable income; if Clause (a) was to beinvoked, no necessity of Clause (c) would arise.” In the present case, the notice for issuance of the penaltyproceedings under Section 271D of the Act for the allegedcontravention of provisions of Section 269SS was issued to theassessee, of course by the AO, on 25.03.2003. Even if thematter had otherwise been in appeal before the CIT(A) againstthe original assessment order and the appeal was decided on13.02.2004, the same was hardly of relevance so far the penalty D.B. INCOME TAX APPEAL NO.90/2007Commissioner of Income Tax, Udaipur Vs. Shri Jitendra Singh Rathore. In the present case, the notice for issuance of the penaltyproceedings under Section 271D of the Act for the allegedcontravention of provisions of Section 269SS was issued to theassessee, of course by the AO, on 25.03.2003. Even if thematter had otherwise been in appeal before the CIT(A) againstthe original assessment order and the appeal was decided on13.02.2004, the same was hardly of relevance so far the penalty D.B. INCOME TAX APPEAL NO.90/2007Commissioner of Income Tax, Udaipur Vs. Shri Jitendra Singh Rathore. proceedings under Section 271D were concerned. As held bythis Court in Hissaria Bros. (supra), completion of appellateproceedings arising out of assessment proceedings has norelevance over sustaining such penalty proceedings. As heldclearly by this Court, in such a matter, clause (c) of Section 275(1) would be applicable. Section 275(1)(c) could be noticed asunder:- “275. Bar of limitation for imposing penalties. (1) No order imposing a penalty under this Chaptershall be passed-....... (c) in any other case, after the expiry of the financialyear in which the proceedings, in the course ofwhich action for the imposition of penalty has beeninitiated, are completed, or six months from the endof the month in which action for imposition ofpenalty is initiated, whichever period expires later.” In the present case, the first show cause notice forinitiation of proceedings was issued by the AO on 25.03.2003and was served on the assessee on 27.03.2003. Obviously, thelater period also expired on 30.09.2003 when six monthsexpired from the end of the month in which the action forimposing the penalty was initiated. The order as passed by theJoint Commissioner of Income Tax for the penalty under Section271D on 28.05.2004 was clearly hit by the bar of limitation andhas rightly been set aside in the orders impugned. In view of the above, our answer to the formulatedquestion of law is that even when the authority competent toimpose penalty under Section 271D was the Joint Commissioner,the period of limitation for the purpose of such penalty D.B. INCOME TAX APPEAL NO.90/2007Commissioner of Income Tax, Udaipur Vs. Shri Jitendra Singh Rathore. proceedings was not to be reckoned form the issue of first showcause by the Joint Commissioner; but the period of limitationwas to be reckoned from the date of issue of first show cause forinitiation of such penalty proceedings. For the purpose ofpresent case, as observed hereinabove, for the proceedingshaving been initiated on 25.03.2003, the order passed by theJoint Commissioner under Section 271D on 28.05.2004 was hitby the bar of limitation. The CIT(A) and the Tribunal have, thus,not committed any error in setting aside the order of penalty. Consequently, the appeal fails and is, therefore, dismissed. (ARUN BHANSALI), J. (DINESH MAHESHWARI), J.