The Commissioner Of Income Tax v. Shri Manohar Lal Thakral

ITA No. 812 of 2010 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH The Commissioner of Income Tax Versus Shri Manohar Lal Thakral ITA No. 812 of 2010 Date of Decision: 14.1.2011 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Advocate for the appellant. AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 2.2.2010 passed by the Income Tax Appellate Tribunal,Delhi Bench “E”, New Delhi (hereinafter referred to as “the Tribunal”) inITA No. 3826/Del/2008 for the assessment year 2003-04, claiming thefollowing substantial questions of law:- “(i) Whether on the facts and in the circumstances of thecase and in law, the Ld. ITAT was right in deletingthe penalty imposed u/s 271E of the I.T. Act, 1961 onthe ground that the deletion of penalty proceedingsitself was illegal as no proceedings were pendingbefore the AO, despite the fact that imposition ofcase and in law, the Ld. ITAT was right in deletingthe penalty imposed u/s 271E of the I.T. Act, 1961 onthe ground that the deletion of penalty proceedingsitself was illegal as no proceedings were pendingbefore the AO, despite the fact that imposition of penalty u/s 271E is not subject to pendency of any type of proceedings? (ii)Whether on the facts and in the circumstances of thecase and in law, the Ld. ITAT was right in acceptingthe contention of the assessee that the penalty noticewas issued when there were no proceedings pendingbefore the AO qua the assessee and the action ofpenalty may be permissible only after assessmentwithout taking into consideration the decision of Ld.ITAT, Vishakapatnam Bench in the case of AssistantCommissioner of Income-Tax, Circle 4(1) Vs. VinmanFinance and Leasing Limited, reported in 115 ITD115 (120 TTJ 426) wherein it has been held thatpenalty proceedings u/s 271E need not be initiatedduring the course of assessment proceedings? (iii)Whether on the facts and in the circumstances of thecase and in law, the Ld. ITAT was right in acceptingthe contention of the assessee that since the returnfiled by the assessee was processed under section143(1)(a) of the Income Tax Act, 1961 on 31.12.2003and notice under section 274 read with section 271Ewas issued on 12.06.2007, without taking intocognizance the decision of the ITAT, ChandigarhSpecial Bench in the case of Dewan Chand Amrit LalVs. DCIT reported in 98 TTJ 947 wherein it has beenheld that non-prescribing the time limit for initiation of penalty proceeding is conscious and there is neitherany necessity nor the Tribunal is empowered toprescribe any limitation for initiation of penaltyproceedings even assuming that there is anunintended omission by the legislature, casusomissus of the legislature cannot be provided?” penalty proceeding is conscious and there is neitherany necessity nor the Tribunal is empowered toprescribe any limitation for initiation of penaltyproceedings even assuming that there is anunintended omission by the legislature, casusomissus of the legislature cannot be provided?” 2.The facts necessary for adjudication as narrated in theinstant appeal are that the assessee, Manohar Lal Thakral, Karta HUFwas proprietor of the concern M/s Fancy Wool Enterprises and he filedthe return for the financial year 2002-03 relevant to the assessmentyear 2003-04 on 30.11.2003 declaring an income of ` 1,35,010/-. Thesaid return was processed under Section 143(1)(a) vide order dated31.12.2003. The assessee had old deposit of his wife, brought forward,as on 1.4.2002 amounting to ` 13,31,999/- in her account who furtherdeposited ` 11,66,000/- during the year and interest of ` 34,950/- wascredited to her account as on 31.3.2003. The assessee and his wifejointly purchased property against considerations of ` 17,00,000/- and `15,00,000/- from M/s Ansal Housing & Estate Pvt. Ltd. and BabyloanBuilders Pvt. Ltd. vide tripartite agreement dated 9.5.2001 to getprepared the building plans of raising of construction of a commercialcomplex. From the account of the wife of the assessee with M/s FancyWool Enterprises, a sum of ` 14,02,600/- was paid to M/s BabyloanBuilders Pvt. Ltd., Gurgaon from 21.5.2002 to 29.10.2002 throughcheques/DDs. During the course of assessment proceedings in thecase of Smt. Kusum Lata Thakral, wife of the assessee, it was foundthat instead of making payments to his wife, the assessee made payments to M/s Babyloan Builders Pvt. Ltd in contravention of theprovisions of Section 269T of the Act. The matter was referred to theAdditional Commissioner of Income Tax who vide order dated18.12.2007 imposed a penalty of ` 11,02,610/- under Section 271E ofthe Act. The assessee carried the matter in appeal before theCommissioner of Income Tax (Appeals) [in short “the CIT (A)”] who videorder dated 28.11.2008 upheld the order of penalty. On further appealby the assessee, the Tribunal vide its order dated 2.2.2010 allowed theappeal and set aside the order of the CIT (A). This gave rise to therevenue to approach this Court by way of present appeal. 4.We have heard learned counsel for the appellant. 5.The only point for consideration in this appeal is whetherthe assessee had contravened the provisions of Section 269T of the Actby making repayment of loan/deposits of Smt. Kusum Lata Thakral,through account payee cheque or account payee drafts to M/s BabyloanBuilders Pvt. Ltd., Gurgaon and, therefore, penalty under Section 271Ewas leviable. 6.The Assessing Officer had levied the penalty amounting toRs.11,02,610/- which has been deleted by the Tribunal. The Tribunalwhile deleting the penalty recorded that the return of the assessee wasprocessed as on 31.12.2003 and the notice u/s 274 read with section271E of the Act was issued on 12.06.2007. Such notice was issuedwhen there was no proceedings pending before the Assessing Officer.Relying upon Delhi High Court judgment in Commissioner of IncomeTax v. Standard Brands Ltd. (2006) 285 ITR 295, the Tribunal furtherobserved that action for penalty may be permissible only after regular assessment has been framed and since no regular assessment orderhad been passed in this case, the recourse to penalty proceedingsunder Section 271E were not justified. The findings recorded by theTribunal read thus:- 6.The Assessing Officer had levied the penalty amounting toRs.11,02,610/- which has been deleted by the Tribunal. The Tribunalwhile deleting the penalty recorded that the return of the assessee wasprocessed as on 31.12.2003 and the notice u/s 274 read with section271E of the Act was issued on 12.06.2007. Such notice was issuedwhen there was no proceedings pending before the Assessing Officer.Relying upon Delhi High Court judgment in Commissioner of IncomeTax v. Standard Brands Ltd. (2006) 285 ITR 295, the Tribunal furtherobserved that action for penalty may be permissible only after regular assessment has been framed and since no regular assessment orderhad been passed in this case, the recourse to penalty proceedingsunder Section 271E were not justified. The findings recorded by theTribunal read thus:- “Having heard the parties and having perused thematerial on record, we find the grievance of theassessee to be correct. In this case, the return of theassessee was processed u/s 143(1)(a) of theIncome-tax Act, on 31.12.2003. Notice u/s 274 readwith 271E of the Act was issued to the assessee on12.06.2007. It being a case of processing the returnof income, there is no finding in the AO's order withregard to the applicability or otherwise of section269T of the IT Act to the assessee's case. It waswithin the purview of the AO to bring the assessee'scase to scrutiny and to make regular assessment u/s143(3) of the Act. It was also within the power of theAO at the appropriate stage to initiate proceedingsu/s 147 of the Act against the assessee. No suchaction was taken. Rather, the penalty was imposedon the basis of the finding in the case of assessee'swife.” 6.No error or perversity could be shown in the aforesaidfindings recorded by the Tribunal. Moreover, the assessee had taken aplea before the Assessing Officer that there was a reasonable cause forthe assessee to have made direct payment of Rs.14,02,600/- to M/s ITA No. 812 of 2010 -6- Babyloan Builders Private Ltd., Gurgaon. It was pleaded that some ofthe repayments made by the assessee were inter company transfer forgroup housing and purchase of flat and at times payments were madeafter closure of banking hours. It was further submitted that thepayments made were genuine and no tax evasion was involved and thedefault, if any, was of technical nature. The explanation beingplausible one, it cannot be said that there was no reasonable causewithin the meaning of Section 273B of the Act. No substantial questionof law arises in this appeal. 7.Accordingly, the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE January 14, 2011gbs (ADARSH KUMAR GOEL)JUDGE