Pr. Commissioner Of Income Tax, Jaipur-Ii, Jaipur v. Shri Prashant Sharma, A

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 120/2018 Pr. Commissioner Of Income Tax, Jaipur-Ii, Jaipur. ----Appellant Versus Shri Prashant Sharma, A-34, Nehru Nagar, Jaipur ----Respondent D.B. Income Tax Appeal No. 122/2018 Pr. Commissioner Of Income Tax, Jaipur-Ii, Jaipur. ----Appellant Versus Shri Prashant Sharma, A-34, Nehru Nagar, Jaipur ----Respondent For Appellant(s) : Mr. Prateek Kedawat for Mr. R.B. Mathur HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS 09/04/2018 Judgment 1.In both these appeals, common question of law and facts are involved hence they are decided by this common judgment. 2.By way of these appeals, the appellant has assailed the judgment and order of the tribunal whereby tribunal has dismissedthe appeal of the department. 3.Counsel for the appellant has framed following substantialquestions of law:- Appeal No.120/2018 “(i) Whether in the facts and circumstances ofthe case the ITAT was justified in law inconfirming the cancellation of penalty ofRs.11704411/- u/s 271E computing thelimitation from the date of issuance of notice bythe Assessing Officer instead of Additional/ JointCommissioner who is the authority of imposingthe penalty. (ii) Whether on the facts and circumstances ofthe case the Hon’ble ITAT was justified incancelling the penalty of Rs.11704411/-imposed u/s 271E by computing the limitationfor the purpose of passing the order u/s 271E ofthe Act from the date of the notice issued bythe AO instead of the date of the notice issuedby the JCIT as clarified by the CBDT in Circularno.9/DV/2016 dated 26.04.2016.” Appeal No.122/2018 “(i) Whether in the facts and circumstances ofthe case the ITAT was justified in law inconfirming the cancellation of penalty ofRs.14822485/- u/s 271D computing thelimitation from the date of issuance of notice bythe Assessing Officer instead of Additional/ JointCommissioner who is the authority of imposingthe penalty. (ii) Whether on the facts and circumstances ofthe case the Hon’ble ITAT was justified incancelling the penalty of Rs.1,48,22,585/-imposed u/s 271D by computing the limitationfor the purpose of passing the order u/s 271Dof the Act from the date of the notice issued bythe AO instead of the date of the notice issuedby the JCIT as clarified by the CBDT in Circularno.9/DV/2016 dated 26.04.2016.” 4.The facts of the case are that during the course of scrutinyassessment u/s 143(3) the AO noticed that the assessee hasreceived cash on various dates in person as well as in bankaccount and subsequently paid the amount in cash to M/s MPPL which is in contravention of the provisions of section 269SS and269T of the Act. The AO called certain information from M/s MPPL,in response to which, the company had submitted that theassessee is having imprest account in the books of the company.The AO found that there was opening cash balance of Rs.19,85,495/- on 01.04.2008 in the hands of the assessee andduring the period the assessee has also received cash amountingto Rs. 1,48,22,585/- on various dates, the closing balance as on31. 03.2009 was at Rs. 51,03,669/-. Since the assesse hasreceived substantial amount in cash and also paid a substantialamount in cash, therefore, the AO initiated the penalty u/s 271Das well as 271E of the Act. The assessee raised objections beforethe AO including the issue of limitation that the limitation forpassing the penalty order u/s 271D and 271E would reckon fromthe date when the show cause notice was issued by the AO andnot from the date when the show cause notice was issued by theJoint Commissioner who is competent to pass the penalty orders. 5.Counsel for the appellant has relied upon the decision ofKerala High Court in Grihalakshmi Vision vs. The AdditionalCommissioner of Income Tax reported in (2015) 379 ITR 100(Ker) wherein it has been held as under:- “8. Insofar as these cases are concerned, theassessment order was passed on 6.11.2007 andthe assessment order concluded by stating thus:"Since the assessee has violated the provisionsof section 269SS and 269T of the IT Act byaccepting and repaying loans exceedingRs.20,000/- aggregating and otherwise at anypoint of time, as given above, penalty provisionsof Section 271D and 271E of the IT Act areattracted.Accordinglyinitiatedpenaltyproceedings under Section 271D and 271E." assessment order was passed on 6.11.2007 andthe assessment order concluded by stating thus:"Since the assessee has violated the provisionsof section 269SS and 269T of the IT Act byaccepting and repaying loans exceedingRs.20,000/- aggregating and otherwise at anypoint of time, as given above, penalty provisionsof Section 271D and 271E of the IT Act areattracted.Accordinglyinitiatedpenaltyproceedings under Section 271D and 271E." It was relying on the last sentence in theassessment order that "Accordingly initiatedpenalty proceedings under Section 271D and271E", the counsel for the assessee iscontending that the Assessing Officer havinginitiated the proceedings vide his order dated6.4.2007, the order passed by the JointCommissioner on 29.7.2008 levying penalty isbeyond the time permitted in Section 275(1)(c).It was to substantiate this contention that thelearned counsel placed reliance of the SupremeCourt judgment in D.M.Manasvi v. Commissionerof Income Tax, Gujarat II [1972] 86 ITR557andCommissioner of Income Tax v. Jitendra SinghRathore [2013] 352 ITR327(Raj). 9. As we have already seen, although Section271D and E of the Income Tax Act provides forlevy of penalty for contravention of Sections269SS and 269T. As per sub section (2) to boththese sections any penalty imposable under subsection (1) of these provisions shall be imposedby the Joint Commissioner. It was, therefore,that the matter was referred to the JointCommissioner who passed orders on 29.7.2008levying penalty. 10. Question to be considered is whetherproceedings for levy of penalty, are initiated withthe passing of the order of assessment by theAssessing Officer or whether such proceedingshave commenced with the issuance of the noticeissued by the Joint Commissioner. Fromstatutory provision, it is clear that thecompetent authority to levy penalty being theJoint Commissioner. Therefore, only the JointCommissioner can initiate proceedings for levyof penalty. Such initiation of proceedings couldnot have been done by the Assessing Officer.The statement in the assessment order that theproceedings under Section 271D and E areinitiated is inconsequential. On the other hand, ifthe assessment order is taken as the initiation ofpenalty proceedings, such initiation is by anauthority who is incompetent and theproceedings thereafter would be proceedingswithout jurisdiction. If that be so, the initiationof the penalty proceedings is only with theissuance of the notice issued by the JointCommissioner to the assessee to which he hasfiled his reply. 11. The only case of the assessee is that if theperiod of limitation prescribed in Section 271(1)(c) is reckoned from the date of the assessmentorder dated 6.11.2007, the penalty order passed by the Joint Commissioner on 29.7.2008 isbeyond the time permitted in the above section.As we have already held, the initiation of thepenalty proceedings is not by the AssessingOfficer but by the Joint Commissioner and if thatbe so, the order levying penalty passed by theJoint Commissioner is within the time prescribedin Section 275(1)(c). 11. The only case of the assessee is that if theperiod of limitation prescribed in Section 271(1)(c) is reckoned from the date of the assessmentorder dated 6.11.2007, the penalty order passed by the Joint Commissioner on 29.7.2008 isbeyond the time permitted in the above section.As we have already held, the initiation of thepenalty proceedings is not by the AssessingOfficer but by the Joint Commissioner and if thatbe so, the order levying penalty passed by theJoint Commissioner is within the time prescribedin Section 275(1)(c). 12. Insofar as the judgment of the Apex Court inD.M.Manasvi v. Commissioner of Income Tax,Gujarat II [1972] 86 ITR557is concerned, thatwas a case where penalty was levied underSection 271(1)(c) and as is evident from theprovision itself, the proceedings under thatSection are to be initiated on the basis of thesatisfaction of the officers mentioned thereinincluding the Assessing Officer. Unlike theprovisions of Section 271(1)(c), under theprovisions of Section 271D and E, the exclusiveauthority is conferred on the Joint Commissioner.Therefore, the principles laid down in thejudgment of the Apex Court cannot be called inaid to impugn the concurrent findings of thelower authorities. Therefore, the first contentionraised by the learned counsel for the assesseedeserves to be rejected and we do so. 6.While considering the matter, the CIT(A) has observed asunder:- 3.3 I have perused the facts of the case, thepenalty order and the submissions of theappellant. The facts of the case are that theduring the course of assessment under section143(3) the Assessing Officer noticed that theassessee has received cash on various dates inperson as well as in bank account andsubsequently paid the amount in cash to M/s.MPPL which was in contraction to the provisionsof section 269ss and 269T of the l.T. Act, 1961. The Assessing Officer then referred the matterto the Additional Commissioner of Income Tax,Range-4 to initiate penalty under section 271E ofthe IT. Act, 1961 vide her letter No. W-4(1)/JPR/2011-12/1431 dated 29.02.2012 interms of provisions of section 269T. TheAdditional Commissioner of Income Tax issued ashow cause notice No. Addl CITR- 4/JPR/12-13/928 dated 10.09.2012 to explain the above. The Assessing Officer then referred the matterto the Additional Commissioner of Income Tax,Range-4 to initiate penalty under section 271E ofthe IT. Act, 1961 vide her letter No. W-4(1)/JPR/2011-12/1431 dated 29.02.2012 interms of provisions of section 269T. TheAdditional Commissioner of Income Tax issued ashow cause notice No. Addl CITR- 4/JPR/12-13/928 dated 10.09.2012 to explain the above. It was submitted during the penalty proceedingsthat the assessee was working as a director ofM/s Majestic Properties Pvt. Ltd. (MPPL) formaking payment for advances booked by thecompany during the financial year 2004-05 forproject at Jaipur, whatever deposits are comingin this bank account are in respect of repaymentof amount taken by company M/S MPPL inrespect of advance booking of plots at Jaipurand the company further claimed that when thetransactions was not completed the amount hasbeen returned back through Shri PrashantSharma and for this purpose company hasutilised the his bank account. It was alsosubmitted that Shri Prashant Sharma wasappointed on the board of the Company, a claimwhich is disputed by the assessing officer andAdditional commissioner of Income tax in theassessment order as well as the penalty orderand discussed in detail therein. The AdditionalCommissioner of Income Tax further opined thatthe assessee has received cash amounting to Rs.1,48,22,585/- and assessee has returned backRs. 51,03,669/-, thus the assessee has returnedback Rs. 1,17,04,411/- to MPPL in cash. It wasalso held that the amounts were to be treated asdeposits and a debtor and creditor relationshipexisted between the assessee and M/S MPPL andhence the provisions were applicable. Thus,penalty of Rs. 1,17,04,411/- was imposed underSection 271E for violation of provision of Section269T. In the present proceedings, the firstsubmission made is regarding the penalty orderbeing passed beyond limitation and bad in law.It was submitted that the assessment order waspassed by the ITO, ward-4(1), Jaipur on30.12.2011 and penalty proceedings wereinitiated by him code notice dated 30.12.2011.Subsequently, he referred the case to theadditional Commissioner of Income Tax to issuedthe show cause notice on 10.09.2012. Theauthorized representative further contended thatas per provisions of Sec.275, no order of penaltycould be passed beyond six months from theend of the month in which the additionalCommissioner of Income Tax initiates action forimposition of penalty and the assessing officerhad issued the notices on 30.12.2011 and orderpassed on 31.03.2013, the penalty was barredby limitation. Reliance was placed on theRajasthan High Court decisions in the case ofCIT vs. Jitendra Singh Rathore 352 ITR 327(Raj.) and CIT vs. Banshilal (DB Income TaxAppeal No. 119/2011)(Raj.). The submissions were forwarded to the Assessing Officer for hiscomments. The remand report and the rejoinderof the assessee are reproduced below: Assessee's case was selected for scrutiny underCASS System on the point of cash deposited inbank exceeding Rs.10 Lac. After collecting hiscopy of bank statement from ICICI bank ( u/s133(6) of the Act), assessee was asked toexplain the cash deposit withdrawals made byhim through his bank account. In reply to it,assessee had replied that the bank account wasoperated on behalf of M/s Majestic PropertiesPvt. Ltd., (Ms. MPPL a Delhi based Company, forwhom the bank account was utilized. Thereafter,a detailed reply was filed and the brief of thereply is reproduced as under:- were forwarded to the Assessing Officer for hiscomments. The remand report and the rejoinderof the assessee are reproduced below: Assessee's case was selected for scrutiny underCASS System on the point of cash deposited inbank exceeding Rs.10 Lac. After collecting hiscopy of bank statement from ICICI bank ( u/s133(6) of the Act), assessee was asked toexplain the cash deposit withdrawals made byhim through his bank account. In reply to it,assessee had replied that the bank account wasoperated on behalf of M/s Majestic PropertiesPvt. Ltd., (Ms. MPPL a Delhi based Company, forwhom the bank account was utilized. Thereafter,a detailed reply was filed and the brief of thereply is reproduced as under:- "Imp-rest Bank account on behalf of theCompany - We submit that Mr. Prashant Sharma(assessee) was appointed on the Board on3/1/2005 to look after the housing project atJaipur, since the company was new Jaipur andfor sake of convenient of local business. Mr.Prashant Sharma was appointed by the Board aswell granted the permission to open an bankaccount separately to make the transactions onbehalf of the company. Mr. Prashant Sharma waskey person to manage all the things related toproject and a general POA was granted for thesame. To make expenses and refund of bookingamount, a saving bank account No.001201557588 with ICICI bank Ltd. wasopened. Since the company was having so manyproject all over India and to make separateproject the account was opened . Further sincethe assessee was authorized to look after thedevelopment of project and refund of bookingamount only and not to authorize to collectbooking amount on his personal capacity. Hencein assessee account, there are creditsummations from the company only. Furthercopy of imp-rest cash & ICICI Bank account isenclosed herewith for your current reference &record. Reasons behind withdrawal & depositing of cash-Since the company was having the housingproject in which so many items consumed oncash basis, as well as there so many type ofGovernment duties & taxes which have to bedeposited in cash or DD only. Regardingdepositing of cash, some time, the cash is notutilized for the purpose for which withdrawal ismade as well all the transaction are recorded inthe books of company as well there is refund ofsmall amounts on instructions of the police department, here there is no question to un-justify cash transactions". After verification, the AO found that:- a) He was appointed as an Additional Director on7/2/2009. Thus during the period from 1-4-2008to 6/2/2009 he was not a Director of M/s MPPL b) As per Audit Report of M/s. MPPL, noremuneration was paid to Mr. Prashant Sharmafor the period under consideration as the nameof Shri Prashant Sharma was not reflected in thelist of Key persons and in the name of Directors.C) Cash in hand was declared at Rs. 98,48,191/-and in bank it was Rs. 1,20,44,229/- by theCompany. d) Accounting method declared by the companyas on "Accural basis". e) As per Audit Report of M/s MPPL, point No. 15, Key management personal with whom therewas transaction during the year was :- i) Rajat Gupta ii) Anurag Gupta iii)Sanjeev Jain iv) And the relative with the key managementperson were a) Jyoti Gupta b) Ms. Vastu Project c) Ms Vastunidhi f) The details with the key persons throughwhich transaction during the year and theamount having no reference of Mr.PrashantSharma as per Col. 11 of the Balance Sheet.However, there were having each detail inrespect of other key persons, their relative anddirectors. g) In respect of key person detailed in the ITR-VI submitted by M/s MPPL, there was noreference of Mr Prashant Sharma. d) Accounting method declared by the companyas on "Accural basis". e) As per Audit Report of M/s MPPL, point No. 15, Key management personal with whom therewas transaction during the year was :- i) Rajat Gupta ii) Anurag Gupta iii)Sanjeev Jain iv) And the relative with the key managementperson were a) Jyoti Gupta b) Ms. Vastu Project c) Ms Vastunidhi f) The details with the key persons throughwhich transaction during the year and theamount having no reference of Mr.PrashantSharma as per Col. 11 of the Balance Sheet.However, there were having each detail inrespect of other key persons, their relative anddirectors. g) In respect of key person detailed in the ITR-VI submitted by M/s MPPL, there was noreference of Mr Prashant Sharma. The AO was of the view & as mentioned in theassessment order that there was only anappointment letter in the name of PrashantSharma in Form No.32 and according to that hewas appointed as Director on 7/2/2009. All theother documents showed that he was not adirector during the period under consideration.Further the appointment letter was with effectfrom 27/2/2009 only just before the end of theFinancial Year. Finally, in the assessment order A.O hadconcluded that "Mr. Prashant Sharma wasneither a Director in the Company nor he was aKey person through which amount was rotatedto be claimed in the ICICI Bank account by theCompany. Further it is more important tomention here that the assessee was an obligation to return the amount so received asand when desired by the depositor", Hence theassessee violated the provisions of section269SS/269T". In these back ground the AO found that therewas violation of provision of section 269 SS and269T for which penalty provision u/s 271D & 271E were applicable. Later on the A.O referred thematter to the Addl. Commissioner of Income-tax, Range-4,Jaipur, vide letter dated 21/29-2-2012, for imposition of penalty u/s 271D de 271E as imposition of penalty under these sectionlies with the Addl. Commissioner as per section274. On receipt of reference from AO, the Additionalcommissioner of Income-tax, Range-4, Jaipur,vide letter dated 10-9-2012 fixed the date forhearing on 18-9-2012. The Addl Commissioner of Income-tax, Range-4,Jaipur, passed an order ws 27ID & 27IEimposing penalty of Rs 1,48,22,585 Rs.1,17,04,411/- respectively based on the imprestaccount as under: On the basis of amount transacted throughimprest account penalty worked out as under :- Against these penalty orders, assessee is inappeal before your good self.Assessee's submission that the penalty gotbarred by limitation is not acceptable in view ofHon'ble Allahabad High Court's decision in thecase of CIT. Faizabad Vs. Gupta Mills Storesreported in (2009) 184 Taxman 230 (Allahabad)/(2010)230 CTR 75(Allahabad). The gist of theorder is reproduced as under:- "Section 275, read with section 271E, of theIncome-tax Act, 1961 – Penalty-Bar of limitationfor imposition of – Assessment Year 2001-02-There was deposit in name of "D" with assessee-firm-Assessee had issued bearer cheques inname of 'D' for repayment of a part of aforesaiddeposit in year under consideration- Revenuealleged that assessee had defaulted because it had made repayment of deposit through bearercheques and not through bearer cheques and notthrough account payee cheques or account payeedrafts as required under section 269T –Therefore, Assessing Officer issued notice u/s271E on 1.8.2003. Thereafter, matter wasreferred to Joint Commissioner, who issued anotice dated 3.9.2003 to assessee fixing the dateof hearing vide order dated 29.3.2004, JointCommissioner imposed penalty under section271E. Whether, on facts, order passed by JointCommissioner on 29.3.2004 could be said tobarred by limitation held, no." had made repayment of deposit through bearercheques and not through bearer cheques and notthrough account payee cheques or account payeedrafts as required under section 269T –Therefore, Assessing Officer issued notice u/s271E on 1.8.2003. Thereafter, matter wasreferred to Joint Commissioner, who issued anotice dated 3.9.2003 to assessee fixing the dateof hearing vide order dated 29.3.2004, JointCommissioner imposed penalty under section271E. Whether, on facts, order passed by JointCommissioner on 29.3.2004 could be said tobarred by limitation held, no." Further the Hon'ble Supreme Court in the case ofAssistant Director of Inspection V. Kum. A.B.Shanti reported in (2002) 122 Taxman 574(SC)/(2002)255 ITR 258(SC)/(2002)174 CTR 513(SC)held Section 269 SS in any way not violative ofarticle 14 of the Constitution. As there are different opinion of one High Court to another on the point of limitation, with duerespect, it is submitted that the decision of Rsj.High Court in the case of Commissioner ofIncome-tax Vs.Jitender Singh Rathore (againstDB ITA No.90/2007) may not be considered asapplicable in this case. In the case of Jitender Singh Rathore i.e. thecase decided by the Hon'ble Rajasthan HighCourt,penaltyimposedu/s271DwasRs.4,00,000/- that was less than the monitorylimit prescribed for filing SLP before the Hon'bleSupreme Court, probably, no SLP might havebeen filed considering the quantum of penaltyamount. The penalty u/s 271D & 271E are different fromother penalties. In the other penalties initiationdate starts from finalization of asstt. Order, incase no appeal preferred against the said order.Where as the power to impose penalty u/s 271D& 271E as per section 274 lies with Joint/Addl.Commissioner, the date of limitation starts fromthe notice issued by the Joint/Addl.Commissioner. Thus the assessee's submissiondeserves to be rejected."The rejoinder to the remand submitted by theAuthorized Representative is reproduced below:1. "That the reply of the A.O. in the RemandReport is against all principles of legaljurisprudence. The A.O. has requested yourHonour not to follow the Jurisdictional RajasthanHigh Court Decisions in the case of CIT v/sJitendra Singh Rathore 352 ITR 327(Raj.) andCIT v/s Banshilal without even differentiatingwhy the above cases are not applicable in thefacts of the present case. The assessee's case is squarely covered by the Jurisdictional High CourtDecisions which is of a Binding Nature. 2. Without Prejudice to above, even on Merits, nopenalty is leviable in the facts of case as per ourwritten submissions dt. 16.12.2014, 05.01.2015submissions filed during the appellateproceedings. In the reply the A.O. has not evenreplied to basic issues like how there is anyviolation of Section 269SS on the amountwithdrawn by the appellant from his Bank SB A/cand how there is violation of Section 269T ondepositing cash in his Bank SB A/c. The earliersubmissions of the appellant be treated as part ofthis reply." In the case of CIT Vs Jitendra Singh Rathore, ithas been held as follows: - The notice for issuance of the penaltyproceedings under Section 27 ID for the allegedcontravention of provisions of section 269SS wasissued to the assessee by the Assessing Officer on25.03.2003. - Even if the matter had otherwise been in appealbefore the Commissioner (Appeals) against theoriginal assessment order and the appeal wasdecided on 13.02.2004, the same was hardly ofrelevance so far the penalty proceedings undersection 271D were concerned. As held by the HighCourt in CIT v. Hissaria Bros. [2007] 291 ITR 244/[2008] 169 Taxman 262 (Raj), completion ofappellate proceedings arising out of assessmentproceedings has no relevance over sustainingsuch penalty proceedings. In such matter, clause(c) of section 275(1) would be applicable. [para8] - The notice for issuance of the penaltyproceedings under Section 27 ID for the allegedcontravention of provisions of section 269SS wasissued to the assessee by the Assessing Officer on25.03.2003. - Even if the matter had otherwise been in appealbefore the Commissioner (Appeals) against theoriginal assessment order and the appeal wasdecided on 13.02.2004, the same was hardly ofrelevance so far the penalty proceedings undersection 271D were concerned. As held by the HighCourt in CIT v. Hissaria Bros. [2007] 291 ITR 244/[2008] 169 Taxman 262 (Raj), completion ofappellate proceedings arising out of assessmentproceedings has no relevance over sustainingsuch penalty proceedings. In such matter, clause(c) of section 275(1) would be applicable. [para8] -In the present case, the first show cause noticefor initiation of proceedings was issued by theAssessing Officer on 25.03.2003 and was servedon the assessee on 27.03.2003. Obviously, thelater period also expired on 30.09.2003 when sixmonths expired from the end of the month inwhich the action for imposing the penalty wasinitiated. The order as passed by the JointCommissioner for the penalty under section 271Don 28.5.2004 was clearly hit by the bar oflimitation and has rightly been set aside in theorders impugned. [para 9] -Even when the outhority competent to imposepenalty under section 271D, was the JointCommissioner, the period of limitation for thepurpose of such penalty proceedings was not tobe reckoned from the issue of first show cause bythe Joint Commissioner; but the period oflimitation was to be reckoned from the date of issue of first show cause for initiation of suchpenalty proceedings. -The proceedings having been initiated on25.03.2003, the order passed by the JointCommissioner under section 271D on 28.05.2004was hit by the bar of limitation and theCommissioner (Appeals) and the Tribunal had,thus, not committed any error in setting aside theorder of penalty. [Para 10] 10. In view of the above, our answer to theformulated question of law is that even when theauthority competent to impose penalty underS.271D was the Jt. CIT, the period of limitation forthe purpose of such penalty proceedings was notto be reckoned from the issue of first show causeby the Jt. CIT, but the period of limitation was tobe reckoned from the date of issue of first showcause for initiation of such penalty proceedings.For the purpose of present case, as observedhereinabove, for the proceedings having beeninitiated on 25[th] March, 2003, the order passed bythe Jt. CIT under s. 271D on 28[th] May, 2004 washit by the bar of limitation. The CIT(A) and theTribunal have, thus, not committed any error insetting aside the order of penalty. Consequentlythe appeal fails and is, D.B. Income Tax AppealNo.119/2011 The Commissioner of Income Tax,Ajmer vs. Shri Banshilal Rathi therefore,dismissed". The present appeal is, accordingly, dismissed forthe same reasons, which have been assigned inCommissioner of Income Tax vs. Jitendra SinghRathore (supra). A circular No.9/DV/2016 dated 26.4.2016regarding clarification on limitation for penaltyproceedings under section 271D and 271E hastaken a view based on the Kerala High Courtdecision and the same is reproduced below: "It has been brought to the notice of the CentralBoard of Direct Taxes (hereinafter referred to asthe Board that there are conflicting interpretationsof various High Courts on the issue whether thelimitation for imposition of penalty under sections271D and 271E of the Income tax Act, 1961(hereafter referred to as the Act) commences atthe level of the Assessing Officer (below the rankof Joint Commissioner of Income Tax) or at levelof the Range authority i.e. the Joint Commissionerof Income Tax /Addl. Commissioner of IncomeTax. A circular No.9/DV/2016 dated 26.4.2016regarding clarification on limitation for penaltyproceedings under section 271D and 271E hastaken a view based on the Kerala High Courtdecision and the same is reproduced below: "It has been brought to the notice of the CentralBoard of Direct Taxes (hereinafter referred to asthe Board that there are conflicting interpretationsof various High Courts on the issue whether thelimitation for imposition of penalty under sections271D and 271E of the Income tax Act, 1961(hereafter referred to as the Act) commences atthe level of the Assessing Officer (below the rankof Joint Commissioner of Income Tax) or at levelof the Range authority i.e. the Joint Commissionerof Income Tax /Addl. Commissioner of IncomeTax. Some High Courts have held that the limitationcommences at the level of the authoritycompetent to impose the penalty i.e. Range Headwhile others have held that even though theAssessing Officer is not competent to impose thepenalty, the limitation commences at the level ofthe Assessing Officer where the Assessing Officerhas issued show cause notice or referred to theinitiation of proceedings in assessment order. 2. On careful examination of the matter, theBoard is of the view that for the sake of clarityand uniformity, the conflict needs to be resolvedby way of a "Departmental View". 3. The Hon'ble Kerala High Court in the case ofGrihalaxmi Vision v. Addl. Commissioner ofIncome Tax. Range 1. Kozhikode, vide its orderdated 8.7.15 in ITA Nos. 83&86 of 2014, observedthat, "Question to he considered is whetherproceedings for levy of penalty, are initiated withthe Missing of the order of assessment by theAssessing Officer or whether such proceedingshave commenced with the issuance of the. noticeissued by the Joint Commissioner. From statutoryprovision, it is clear that the competent authorityto levy penalty being the Joint Commissioner.Therefore, only the .Joint Commissioner caninitiate proceedings for levy of penalty. Suchinitiation of proceedings could not have been doneby the Assessing Officer. The statement in theassessment order that the proceedings underSection 271D and E are initiated isinconsequential. On the other hand, if theassessment order is taken as the initiation ofpenalty proceedings, such initiation is by anauthority who is incompetent and the proceedingsthereafter would be proceedings withoutjurisdiction. If that he so, the initiation of thepenalty proceedings is only with the issuance ofthe notice issued by the Joint Commissioner tothe assessee to which he has filed his reply". 4. The above judgment reflects the "DepartmentalView". Accordingly, the Assessing Officers (belowthe rank of Joint Commissioner of Income Tax)may be advised to make a reference to the RangeHead, regarding any violation of the provisions ofsection 269SS and section 269T of the Act, as thecase may be, in the course of the assessmentproceedings (or any other proceedings under theAct). The Assessing Officer, below the rank, ofJoint Commissioner of Income Tax) shall not issuethe notice in this regard. The Range Head willissue the penalty notice and shall dispose/complete the proceedings within the limitationprescribed u/s 275(1) (c) of the Act. 5. Where any High Court decides this issuecontrary to the "Departmental View", theDepartmental View" thereon shall not beoperative in the area falling in the jurisdiction ofthe relevant High Court. However, the CITconcerned should immediately bring the judgmentto the notice of the Central Technical Committee.The CTC shall examine the said judgment onpriority to decide as to whether filing of SLP to theSupreme Court will be adequate response for thetime being or some legislative amendment iscalled for." 5. Where any High Court decides this issuecontrary to the "Departmental View", theDepartmental View" thereon shall not beoperative in the area falling in the jurisdiction ofthe relevant High Court. However, the CITconcerned should immediately bring the judgmentto the notice of the Central Technical Committee.The CTC shall examine the said judgment onpriority to decide as to whether filing of SLP to theSupreme Court will be adequate response for thetime being or some legislative amendment iscalled for." In light of the facts and judicial decisions asabove, it is clear that in this particular case thepenalty order is passed beyond six months fromthe end of the financial year in which the noticewas issued by the Assessing officer. However, ifthe notices issued by the Additional Commissionerof Income Tax is taken into consideration then thepenalty order passed is within time. However, inview of the two of the jurisdictional High Courtdecisions as cited above, which are binding andalso in view of the exception to the departmentalview wherein if the High Court decides the issuecontrary to the departmental view, thedepartmental view shall not be operative in thearea of jurisdiction of the relevant High Court, thepenalty in this case is barred by limitation.Since, the penalty order passed has been held tobe barred by limitation and the order not beingsustainable on that ground itself, the quantum ofpenalty is not being adjudicated. 6.1Thereafter, the tribunal has observed as under:- “5. We have considered the rival submission aswell as relevant material on record. There is nodispute that there are two show cause noticesissued u/s 274 of the Act for initiation of penaltyu/s 271D and 271E of the Act. The first showcause notice was issued by the ITO on30.12.2011 at the time of completion of theassessment and the second show cause noticewas issued thereafter by the additional/JointCommissioner on 10.09.2012. The assessee hasraised the question of validity of the orderspassed u/s 271D and 271E being barred bylimitation as these orders dated 25.03.2013 asper the assessees were beyond the period of 6months from the date of the first show causenotice dated 30.11.2011 the limitation asprovided u/s 275(1)(c) of the Act. So far as the “5. We have considered the rival submission aswell as relevant material on record. There is nodispute that there are two show cause noticesissued u/s 274 of the Act for initiation of penaltyu/s 271D and 271E of the Act. The first showcause notice was issued by the ITO on30.12.2011 at the time of completion of theassessment and the second show cause noticewas issued thereafter by the additional/JointCommissioner on 10.09.2012. The assessee hasraised the question of validity of the orderspassed u/s 271D and 271E being barred bylimitation as these orders dated 25.03.2013 asper the assessees were beyond the period of 6months from the date of the first show causenotice dated 30.11.2011 the limitation asprovided u/s 275(1)(c) of the Act. So far as the fact of issuing two show cause notices one bythe ITO on 30.12.2011 and another by theAdditional/Joint Commissioner on 10.09.2012,the same is not disputed by the Revenue.Therefore question arises whether the limitationfor the purpose of levy of penalty u/s 271D and271E would reckon from the date of show causenotice issued by the ITO. Though he was notcompetent the passed the order u/s 271D and271E or from the date on which the show causenoticeissuedbytheAdditional/JointCommissioner on 10.09.2012. The ld. AR hasplaced reliance on the decision of the Hon’blejurisdiction High Court in case of CIT vs. JitendraSingh Rathore (supra) where as the ld. DR hasrelied upon the decision of Hon’ble Kerala HighCourt in case of Girhlaxmi Vs. AIT (supra). Wefind that there are divergent view on this pointof reckoning of limitation from the date ofissuing the notice by the ITO or by the JCIT. TheHon’ble jurisdiction High Court has taken a viewthat even though the AO was not competent topass order u/s 271D and 271E the limitationwould reckon from the date of show cause noticewas issued by the AO whereas, the Hon’bleKerala High Court held that the proceedings forlevy of penalty u/s 271D and 271E are initiatedwith issuance of notice by Joint Commissionerand not by the Assessing Officer. Therefore theHon’ble Kerala High Court held that thelimitation would reckon from the date of theshow cause notice issues by the JointCommissioner. Thus it is clear that two differentHigh Courts have taken the views contrary toeach other however, for the Jaipur Benches ofthis Tribunal the decision of the jurisdiction HighCourt is binding precedent. The Hon’ble HighCourt in case of CIT Vs. Jitendra Singh Rathore(supra) has held in para 8 to 10 as under:- 8. In the present case, the notice for issuance ofthe penalty proceedings under Section 271D ofthe Act for the alleged contravention ofprovisions of Section 269SS was issued to theassessee, of course by the AO, on 25.03.2003.Even if the matter had otherwise been in appealbefore the CIT(A) against the originalassessment order and the appeal was decidedon 13.02.2004, the same was hardly ofrelevance so far the penalty proceedings underSection 271D were concerned. As held by thisCourt in Hissaria Bros. (supra), completion ofappellate proceedings arising out of assessmentproceedings has no relevance over sustainingsuch penalty proceedings. As held clearly by this Court, in such a matter, clause (c) of Section275 (1) would be applicable. Section 275(1)(c)could be noticed as under:- "275. Bar oflimitation for imposing penalties. (1) No orderimposing a penalty under this Chapter shall bepassed..... (c) in any other case, after the expiryof the financial year in which the proceedings, inthe course of which action for the imposition ofpenalty has been initiated, are completed, or sixmonths from the end of the month in whichaction for imposition of penalty is initiated,whichever period expires later." Court, in such a matter, clause (c) of Section275 (1) would be applicable. Section 275(1)(c)could be noticed as under:- "275. Bar oflimitation for imposing penalties. (1) No orderimposing a penalty under this Chapter shall bepassed..... (c) in any other case, after the expiryof the financial year in which the proceedings, inthe course of which action for the imposition ofpenalty has been initiated, are completed, or sixmonths from the end of the month in whichaction for imposition of penalty is initiated,whichever period expires later." 9. In the present case, the first show causenotice for initiation of proceedings was issued bythe AO on 25.03.2003 and was served on theassessee on 27.03.2003. Obviously, the laterperiod also expired on 30.09.2003 when sixmonths expired from the end of the month inwhich the action for imposing the penalty wasinitiated. The order as passed by the JointCommissioner of Income Tax for the penaltyunder Section 271D on 28.05.2004 was clearlyhit by the bar of limitation and has rightly beenset aside in the orders impugned. 10. In view of the above, our answer to theformulated question of law is that even when theauthority competent to impose penalty underSection 271D was the Joint Commissioner, theperiod of limitation for the purpose of suchpenalty proceedings was not to be reckonedform the issue of first show cause by the JointCommissioner; but the period of limitation wasto be reckoned from the date of issue of firstshow cause for initiation of such penaltyproceedings. For the purpose of present case, asobserved hereinabove, for the proceedingshaving been initiated on 25.03.2003, the orderpassed by the Joint Commissioner under Section271D on 28.05.2004 was hit by the bar oflimitation. The CIT(A) and the Tribunal have,thus, not committed any error in setting asidethe order of penalty. We further note that the Hon’ble jurisdictionHigh Court has reiterated this view in case ofCIT Vs. Banshi Lal Rathi vide order dated17.05.2013 ITA No. 119 of 2011 following thedecision in case of CIT Vs Jitendra Singh Rathorerespectively following the decision of Hon’blejurisdiction High Court. We do not find anyreason to interfere with the impugned orders bythe ld. CIT(A). “ 6.In our considered opinion, in view of the decision of thiscourt in CIT vs. Jitendra Singh Rathore 352 ITR 327 (Rajasthan)and CIT vs. Banshilal Tax Appeal No.119/2011, no substantialquestion of law arises. 7.The judgment of Kerala High Court in Grihalakshmi Vision(supra) will not apply as there is jurisdictional High Courtjudgment. Even otherwise, the interpretation put forward by thecounsel for the appellant that it should be completed within sixmonths from the date of notice cannot be accepted. Such periodcan limit the power of the Joint Commissioner to initiateproceedings at any time. The basic object of the section is tocomplete the initial proceedings within six month show that theassessee has not to undergo trauma for six months. In that viewof the matter, the interpretation is to be looked into with thesought to be achieved. 8.In that view of the matter, no substantial question of lawarises. 9.The appeals stand dismissed. (VIJAY KUMAR VYAS),J(K.S.JHAVERI),JBrijesh 133-134.