Principal Commissioner Of Income Tax-7 v. Rishikesh Buildcon Pvt. Ltd

Signature Not Verified Digitally Signed By:PRAMODKUMAR VATSSigning Date:19.11.202218:23:55 $~8, 9, 10 IN THE HIGH COURT OF DELHI AT NEW DELHI+ITA 577/2018 PRINCIPAL COMMISSIONER OF INCOME TAX-7 ..... AppellantThrough:Mr. Kunal Sharma, Senior StandingCounsel for Revenue.Through:Mr. Kunal Sharma, Senior StandingCounsel for Revenue. versus RISHIKESH BUILDCON PVT. LTD...... RespondentThrough:Mr.RajivSaxena,Ms.SumaylaSaxenaandMr.ShyamSunder,Advocates.Through:Mr.RajivSaxena,Ms.SumaylaSaxenaandMr.ShyamSunder,Advocates. 9+ITA 580/2018 PRINCIPAL COMMISSIONER OF INCOME TAX-7 ..... Appellant Through:Mr. Kunal Sharma, Senior StandingCounsel for Revenue.Counsel for Revenue. versus RISHIKESH PROPERTIES PVT. LTD...... RespondentThrough:Mr.RajivSaxena,Ms.SumaylaSaxenaandMr.ShyamSunder,Advocates.Through:Mr.RajivSaxena,Ms.SumaylaSaxenaandMr.ShyamSunder,Advocates. 10+ITA 583/2018PRINCIPAL COMMISSIONER OF INCOME TAX-7 ..... Appellant+ITA 583/2018PRINCIPAL COMMISSIONER OF INCOME TAX-7 ..... Appellant Through:Mr. Sanjay Kumar, Senior StandingCounsel for Revenue.Counsel for Revenue. versus RUPA PROMOTERS PVT. LTD.,..... RespondentThrough:Mr.RajivSaxena,Ms.SumaylaSaxenaandMr.ShyamSunder,Advocates.Through:Mr.RajivSaxena,Ms.SumaylaSaxenaandMr.ShyamSunder,Advocates. ITA Nos. 577/2018, 580/2018 and 583/2018 Signature Not Verified %Reserved on: 18[th]October, 2022Date of Decision: 17[th]November, 2022 CORAM:HON'BLE MR. JUSTICE MANMOHANHON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA J U D G M E N T MANMEET PRITAM SINGH ARORA, J: 1.By way of the present appeals, Revenue has assailed the commonjudgment and order of the Income Tax Appellate Tribunal (‘ITAT’) dated 24[th]October,2017,inITANos.3178/Del/2010,3150/Del/2010and3171/Del/2010 for the Assessment Year (‘AY’) 2006-07. This Court whileadmitting these appeals on 15[th]May, 2018, framed the following commonquestion of law: - “Did the Income Tax Appellate Tribunal fall into error with respect to itsinterpretation of Section 275(1)(c) of the Income Tax Act in the circumstancesof the case?” 2.The learned senior standing counsel for the Revenue has made thefollowing submissions: - 2.1.He states that in the present appeals, the Assessing Officer (‘AO’)passed the assessment order(s) on 17[th]December, 2008 and 18[th]December,2008 and recorded that the penalty proceedings be initiated; and a referencewas made by the AO to the prescribed authority on 18[th]March, 2009. Theprescribed authority had, thereafter, issued separate Show Cause Notice(‘SCN’) to the Respondent(s), Assessee(s), on 24[th]March, 2009, andconsequently, the penalty order(s) were passed on 29[th]September, 2009. 2.2.He states that the aforesaid facts evidence that the penalty order(s) werepassed within six months from the end of the month in which the referencewas made by the AO to the prescribed authority i.e., 18[th]March, 2009. 2.3.He states that in the facts of the present appeals, the penalty order(s)were passed within six months from the end of the month in which the penaltyproceedings were initiated by the prescribed authority by issuance of SCNsdated 24[th]March, 2009. 2.4.He states that the ITAT erred in holding that the limitation underSection 275(1)(c) of the Income Tax Act, 1961 (‘the Act’), commenced fromthe date initiation of proceedings by the AO (December 2008) even though,admittedly, the AO is not competent to levy penalty under Section 271D ofthe Act. Therefore, he contends that the order of the ITAT holding that thepenalty order was passed after the expiry of the time limit laid down underSection 275(1)(c) of the Act is erroneous. 2.5.He states that the ITAT has failed to appreciate the factual matrix in thejudgment of this Court in Principal Commissioner of Income-Tax (Central)- 2.4.He states that the ITAT erred in holding that the limitation underSection 275(1)(c) of the Income Tax Act, 1961 (‘the Act’), commenced fromthe date initiation of proceedings by the AO (December 2008) even though,admittedly, the AO is not competent to levy penalty under Section 271D ofthe Act. Therefore, he contends that the order of the ITAT holding that thepenalty order was passed after the expiry of the time limit laid down underSection 275(1)(c) of the Act is erroneous. 2.5.He states that the ITAT has failed to appreciate the factual matrix in thejudgment of this Court in Principal Commissioner of Income-Tax (Central)- 2 v. Mahesh Wood Products Pvt. Ltd., 2017 SCC OnLine Del 8214, whereina reference was made by the AO to the prescribed authority on 23[rd]July, 2012and the SCN was issued on 28[th]August, 2012. Therefore, as per the date ofreference, the limitation was to expire on 31[st]January, 2013 and as per theSCN, the limitation would’ve expired on 28[th]February, 2013. The penaltyorder was passed on 26[th]February, 2013. This Court in the facts of the saidcase, held the same to be barred by limitation by reckoning the date ofinitiation of penalty to be the date of making reference by the AO to theprescribed authority. However, in the present case, the reference to the Signature Not Verified prescribed authority and issuance of SCN, both were carried out in the monthof March, 2009, and therefore the limitation would’ve expired on 30[th]September, 2009. He states in the present case the penalty orders were passedon 29[th]September, 2009, thus, within the limitation period. 2.6.He lastly, states that the ITAT erred in holding that the AO had initiatedthe penalty proceedings in the assessment order itself and therefore, thelimitation period is to be reckoned from the end of the month of December,2008, since the action for imposition of penalty was initiated vide theassessment order(s) itself. He states that the ITAT failed to appreciate thatsince the AO is not the prescribed authority under Section 271D of the Act,the AO’s satisfaction with respect to initiation of penalty proceedings is notrelevant and the role of the AO was limited to bringing the fact of the violationof Section 269SS of the Act, to the knowledge of the prescribed authority. Hestates therefore, the limitation cannot be reckoned from the end of the monthof the assessment order(s) and the same can only start from the end of themonth on which the prescribed authority assumes jurisdiction by takingcognizance of the reference made to it by the AO. He, thus, contends that thedate of reckoning limitation would be the date of issuance of the show causenotice i.e., 24[th]March, 2009. He states that the provision of Section 271D ofthe Act does not have any nexus with the assessment proceedings. 3.In reply, the learned counsel for the Respondent(s), Assessee(s), statesthat the facts arising for consideration in the present appeals are undisputed tothe extent that the penalty proceedings were initiated by the AO in hisassessment order(s) passed in December, 2008. Thus, the penalty order(s)passed on 29[th]September, 2009, were barred by limitation. Signature Not Verified 3.1.He states that the ITAT followed the judgment of this Court in the caseof Principal Commissioner of Income-Tax v. JKD Capital and FinleaseLtd., 2015 SCC OnLine Del 14476 to conclude that the penalty proceedingswere initiated in the assessment order(s) itself and therefore, taking the sameto be the relevant date of initiation, the limitation period was to be calculatedfrom the end of the month of December, 2008, itself and not from the date onwhich the SCNs were issued i.e., 24[th]March, 2009. 3.2.He states that the legal principles for determining the date of initiationand limitation for completing the penalty proceedings under Section 275(1)(c)of the Act, have been well settled by this Court in its judgment of JKD Capital Signature Not Verified 3.1.He states that the ITAT followed the judgment of this Court in the caseof Principal Commissioner of Income-Tax v. JKD Capital and FinleaseLtd., 2015 SCC OnLine Del 14476 to conclude that the penalty proceedingswere initiated in the assessment order(s) itself and therefore, taking the sameto be the relevant date of initiation, the limitation period was to be calculatedfrom the end of the month of December, 2008, itself and not from the date onwhich the SCNs were issued i.e., 24[th]March, 2009. 3.2.He states that the legal principles for determining the date of initiationand limitation for completing the penalty proceedings under Section 275(1)(c)of the Act, have been well settled by this Court in its judgment of JKD Capital and Finlease Ltd. (supra) and Mahesh Wood Products Pvt. Ltd. (supra). TheITAT has correctly followed the law laid down in the said judgments andapplied the same to the facts of the case in the present appeals. The ITAT hasnot interpreted Section 275(1)(c) of the Act, as contended by the Revenue, butcorrectly followed the interpretation of the said provision as propounded bythis Court. He thus states that the question of law framed by this Court on 15[th]May, 2018, is not a substantial question of law as the interpretation of Section275(1)(c) of the Act, is covered by the judgments of the predecessor bench ofthis Court. 3.3.In this regard he relies upon the judgment of the Supreme Court in thecase of Sir Chunilal V. Mehta and Sons, Ltd. v. The Century Spinning andManufacturing Co., Ltd., AIR 1962 SC 1314, to contend that if the questionwas practically covered by the decision of the highest Court or if the generalprinciples to be applied in determining the questions of law are well settledand the only question was of applying the settled principles to the facts of the case it would not be a substantial question of law. He, therefore, states thatthere is no substantial question of law to be determined in the present appeals. 4.We have heard the learned counsel for the parties. The brief facts inthese appeals are as under: - 4.1.ITA No. 577/2018 –The said Respondent, Assessee, is engaged in thebusiness of carrying out land development work and had filed its Return ofIncome (‘ROI’) on 31[st]March, 2007, declaring a loss of Rs. 56,022/-. TheAssessee’s case was selected for scrutiny through CASS and Notice(s) wereissued under Section 143(2) and 142(1) of the Act, on 20[th]February, 2008,and 10[th]March, 2008, respectively. During the Assessment proceedings, theAO observed that the Assessee had received cash aggregating to Rs.5,43,66,000/- from three companies. The AO in light of the aforesaid facts,passed the assessment order dated 17[th]December, 2008, holding that theAssessee has violated the provisions of Section 269SS of the Act, as it hadreceived cash in excess of Rs. 20,000/- and consequently, proceeded to initiatepenalty proceedings, inter alia, under Section 271D of the Act. 4.2.ITA 580/2018 –The said Respondent, Assessee herein is also engagedin the business of carrying out land development work and had filed its ROIon 31[st]March, 2007, declaring a loss of Rs. 58,957/-. The Assessee’s case wasselected for scrutiny through CASS and Notice was issued under Section143(2) of the Act, on 20[th]February, 2008. During the Assessmentproceedings, the AO observed that the Assessee had received cashaggregating to Rs. 6,35,15,000/- from three companies. The AO in light of theaforesaid facts, passed the assessment order dated 18[th]December, 2008,holding that the Assessee has violated the provisions of Section 269SS of the Act, as it had received cash in excess of Rs. 20,000/- and consequently,proceeded to initiate penalty proceedings, inter alia, under Section 271D ofthe Act. 4.2.ITA 580/2018 –The said Respondent, Assessee herein is also engagedin the business of carrying out land development work and had filed its ROIon 31[st]March, 2007, declaring a loss of Rs. 58,957/-. The Assessee’s case wasselected for scrutiny through CASS and Notice was issued under Section143(2) of the Act, on 20[th]February, 2008. During the Assessmentproceedings, the AO observed that the Assessee had received cashaggregating to Rs. 6,35,15,000/- from three companies. The AO in light of theaforesaid facts, passed the assessment order dated 18[th]December, 2008,holding that the Assessee has violated the provisions of Section 269SS of the Act, as it had received cash in excess of Rs. 20,000/- and consequently,proceeded to initiate penalty proceedings, inter alia, under Section 271D ofthe Act. 4.3.ITA 583/2018 –The said Respondent, Assessee, herein is also engagedin the business of carrying out land development work and had filed its ROIon 31[st]March, 2007, declaring a loss of Rs. 66,279/-. The Assessee’s case wasselected for scrutiny through CASS and Notice was issued under Section143(2) of the Act, on 20[th]February, 2008. During the Assessmentproceedings, the AO observed that the Assessee had received cashaggregating to Rs. 5,02,03,000/- from three companies. The AO in light of theaforesaid facts, passed the assessment order dated 17[th]December, 2008,holding that the Assessee has violated the provisions of Section 269SS of theAct, as it had received cash in excess of Rs. 20,000/- and consequently,proceeded to initiate penalty proceedings, inter alia, under Section 271D ofthe Act. 5.The aforesaid assessment order(s) dated 17[th]December, 2008 and 18[th]December, 2008, were challenged by the Assessee(s) in appeal, wherein theCommissioner of Income Tax (Appeals) [‘CIT(A)’] vide his separate order(s),all dated 31[st]March, 2010, deleted the penalty imposed by the AO, on merits. 6.The Revenue challenged the order(s) of CIT(A) before the ITAT. In theproceedings conducted before the ITAT, the authorized representative of theAssessee(s) raised a legal ground with respect to limitation and prayed thatthe ITAT should first determine the said legal ground. The impugned orderrecords that the Revenue agreed to the said request of the Assessee(s) andtherefore, the legal issue of limitation was determined in the first instance. Signature Not Verified The ITAT after taking note of the admitted facts concluded that since thepenalty proceedings were initiated in the assessment order(s) itself, therefore,the limitation period will begin to run from end of the month of December,2008 and not from March, 2009, that is the date on which the SCNs underSection 271D of the Act were issued. The ITAT in concluding as above,followed the judgment of this Court in JKD Capital and Finlease Ltd. (supra)and Mahesh Wood Products Pvt. Ltd. (supra). 7.The relevant admitted facts for determining the controversy in thepresent appeals are: a. The quantum proceedings with respect to the three Assessee(s) werecompleted in December, 2008 and the penalty proceedings againstthe Assessee(s), inter alia under Section 271D of the Act forviolating the provision of Section 269SS of the Act, had beeninitiated by the AO at the time of the completion of the saidassessment.completed in December, 2008 and the penalty proceedings againstthe Assessee(s), inter alia under Section 271D of the Act forviolating the provision of Section 269SS of the Act, had beeninitiated by the AO at the time of the completion of the saidassessment. b. The SCNs under Section 271D of the Act were issued by prescribedauthority on 24[th]March, 2009.authority on 24[th]March, 2009. c. The penalty order(s) were passed on 29[th]September, 2009. 8.The contention of the learned senior standing counsel for the Revenuethat the date of the issuance of the SCNs would be the relevant starting pointi.e., 24[th]March, 2009, was specifically noted and rejected by this Court in theMahesh Wood Products Pvt. Ltd. (supra). The relevant portion of the saidjudgment reads as follows:- b. The SCNs under Section 271D of the Act were issued by prescribedauthority on 24[th]March, 2009.authority on 24[th]March, 2009. c. The penalty order(s) were passed on 29[th]September, 2009. 8.The contention of the learned senior standing counsel for the Revenuethat the date of the issuance of the SCNs would be the relevant starting pointi.e., 24[th]March, 2009, was specifically noted and rejected by this Court in theMahesh Wood Products Pvt. Ltd. (supra). The relevant portion of the saidjudgment reads as follows:- Signature Not Verified “7. Mr. Sanjay Kumar, learned counsel for the Revenue has sought to placereliance on the decision of this Court in Commissioner of Income Tax (TDS)v. IKEA Trading Hong Kong Ltd., [2011] 333 ITR 565 (Del) to urge that it isthe date of issuance of the Show Cause Notice (‘SCN’) that would be therelevant starting point. Accordingly he submits that the date of issuance ofthe SCN by the ACIT being 28 August, 2012, limitation would expire on 28February, 2013. Therefore, the penalty orders having been passed on 26February, 2013 would not barred by limitation. He also sought to distinguishthe decision of this Court in PCIT-5 v. JKD Capital & Finlease Ltd. (supra) bystating that in the said case, the gap between the intimation send by the AOrecommending initiation of penalty proceedings and the action taken by theACIT was nearly five years, whereas in the present case, it was slightly overone month. 9. However, this question came up for consideration in PCIT v. JKD Capital& Finlease Ltd. (supra). The date on which the AO recommended theinitiation of penalty proceedings was taken to be the relevant date as far asSection 275(1)(c) was concerned. There was no explanation for the delay ofnearly five years in the ACIT acting on the said recommendation. The Courtheld that the starting point would be the ‘initiation’ of penalty proceedings.Given the scheme of Section 275(1)(c) it would be the date on which the AOwrote a letter to the ACIT recommending the issuance of the SCN. While it istrue that the ACIT had the discretion whether or not to issue the SCN, if he diddecide to issue a SCN, the limitation would begin to run from the date of letterof the AO recommending ‘initiation’ of the penalty proceedings.” (Emphasis Supplied) 9.The legal principle for determining the date of initiation of penaltyproceedings has been settled by the predecessor bench of this Court in itsdecision of JKD Capital and Finlease Ltd. (supra) which reads as under: - “2…While finalising the assessment order dated December 28, 2007 theAssessing Officer (“the AO”) in the concluding paragraph issued a directionto initiate proceedings against the assessee under sections 271(1)(c) and271E of the Act. Admittedly, under section 271E(2) of the Act, any penaltyunder section 271E(1)can only be imposed by the Joint Commissioner ofIncome-tax (“the Joint CIT”).Consequently, the Assessing Officer referredthe matter to the Additional Commissioner of Income-tax. Signature Not Verified 3. A perusal of the order dated March 20, 2012, of the AdditionalCommissioner of Income-tax shows that a show-cause notice initiating penaltyproceedings under section 271E was issued to the assessee on March 12, 2012,requiring it to explain as to why penalty should not be levied on it under section271E on account of violation or the provisions of section 269T of the Act. Withthe assessee having failed to furnish the required information, the AdditionalCommissioner of Income-tax proceeded to confirm the penalty in the sum ofRs. 17,90,000. xxx xxx Signature Not Verified 3. A perusal of the order dated March 20, 2012, of the AdditionalCommissioner of Income-tax shows that a show-cause notice initiating penaltyproceedings under section 271E was issued to the assessee on March 12, 2012,requiring it to explain as to why penalty should not be levied on it under section271E on account of violation or the provisions of section 269T of the Act. Withthe assessee having failed to furnish the required information, the AdditionalCommissioner of Income-tax proceeded to confirm the penalty in the sum ofRs. 17,90,000. xxx xxx 6.Mr. Kamal Sawhney, learned senior standing counsel appearing for theRevenue, submitted that the Assessing Officer has no power to initiate thepenalty proceedings under section 271E of the Act and it was only the JointCommissioner of Income-tax who could have done so. Therefore, for thepurpose of limitation under section 275(1) (c), the relevant date should bethe date on which notice in relation to the penalty proceedings were issued.In the present case, as the Additional Commissioner of Income-tax issuednotice to the assessee on March 12, 2012, the order of the Additional-Commissioner of Incometax passed on March 20, 2012, was within limitation. 7. We are unable to agree with the above submission of learned standingcounsel for the Revenue. Section 275(1)(c) reads as under:“275. (1) No order imposing a penalty under this Chapter shall bepassed… (c) in any other case, after the expiry of the financial year in which theproceedings, in the course of which action for the imposition of penalty hasbeen initiated, are completed, or six months from the end of the month in whichaction for imposition of penalty is initiated, whichever period expires later.” 8. In terms of the above provision, there are two distinct periods of limitationfor passing a penalty order, and one that expires later will apply. One is theend of the financial year in which the quantum proceedings are completed inthe first instance. In the present case, at the level of the Assessing Officer, thequantum proceedings was completed on December 28, 2007. Going by thisdate, the penalty order could not have been passed later than March 31, 2008.The second possible date is the expiry of six months from the month in whichthe penalty proceedings were initiated. With the Assessing Officer havinginitiated the penalty proceedings in December 2007, the last date by whichthe penalty order could have been passed is June 30, 2008. The later of thetwo dates is June 30, 2008.” Signature Not Verified (Emphasis Supplied) 10.The contentions urged by the learned counsel for the Revenue in thepresent appeals are therefore reiteration of pleas which have beencategorically rejected by the predecessor bench of this Court in the aforesaidjudgments. 11.In the present appeals, a perusal of the assessment order(s) shows thatthe penalty proceedings were initiated by the AO in the assessment order(s)itself. Illustratively, the direction contained in the assessment order dated 17[th]December, 2008, pertaining to ITA No. 577/2018, Rishikesh Buildcon Pvt.Ltd. may be referred to, which reads as under:- “… Initiate penalty proceedings u/s, 271(1)(c) for concealment of income &27l(1)(b) for non-compliance of statutory notices, & 271 D for violating theprovisions of Section 269 SS as discussed above.” (Emphasis Supplied) 10.The contentions urged by the learned counsel for the Revenue in thepresent appeals are therefore reiteration of pleas which have beencategorically rejected by the predecessor bench of this Court in the aforesaidjudgments. 11.In the present appeals, a perusal of the assessment order(s) shows thatthe penalty proceedings were initiated by the AO in the assessment order(s)itself. Illustratively, the direction contained in the assessment order dated 17[th]December, 2008, pertaining to ITA No. 577/2018, Rishikesh Buildcon Pvt.Ltd. may be referred to, which reads as under:- “… Initiate penalty proceedings u/s, 271(1)(c) for concealment of income &27l(1)(b) for non-compliance of statutory notices, & 271 D for violating theprovisions of Section 269 SS as discussed above.” 12.The predecessor bench of this Court in the aforesaid judgments has heldthat where the AO has initiated the penalty proceedings in his/her assessmentorder, the said date is to be taken as the relevant date as far as the Section275(1)(c) of the Act is concerned. In these cases, the quantum proceedingswere completed by the AO on 17[th]/18[th]December, 2008, and the AO initiatedthe penalty proceedings in December, 2008, thus, the last date by which thepenalty order could have been passed is 30[th]June, 2009. The six months fromthe end of the month from which action of imposition of penalty was initiatedwould expire on 30[th]June, 2009. However, in this case, admittedly, thepenalty order(s) were passed on 29[th]September, 2009, and therefore, theITAT rightly concluded that the order(s) were barred by limitation. Signature Not Verified 13.Consequently, we answer the question of law against the Revenue andin favour of the Assessee by holding that, in the facts and circumstances ofthe present appeals, the ITAT was correct in law in deleting the penaltyimposed by the Additional Commissioner of Income Tax, under Section 271Dof the Act, on the ground that the penalty order(s) dated 29[th]September, 2009,was passed beyond the time period prescribed by Section 275(1)(c) of the Act,the same having been passed after the lapse of six months from the end of themonth in which the penalty proceedings were initiated by the AO. 14.Accordingly, the present appeals are dismissed. MANMEET PRITAM SINGH ARORA, J MANMOHAN, J NOVEMBER 17, 2022msh/aa