Income Tax Appellate Tribunal - Nagpur
Ito vs Ramnivas Agrawal on 29 December, 2003
Equivalent citations: (2004)89TTJ(NAG)795
ORDER
N.V. Vasudevan, J M. ITA No. 339/Nag/2001 is an appeal by the revenue and C.O. No. 3/Nag/2002 is a cross-objection by the assessee and both are against the order dated 25-5-2001 of the Commissioner (Appeals), Raipur, relating to the asst,. yr. 1997-98. We shall first take up ITA No. 339/Nag/2001 for consideration. The ground of appeal of the assessee (sic-Revenue) reads as follows : "On the facts and circumstances of the case the learned Commissioner (Appeals) was not justified in cancelling the penalty of Rs. 12,55,000 levied by the Addl. CIT, Range-I, Raipur under section 271D."
2. The facts and circumstances under which the penalty came to be levied under section 271D by the assessing officer are as follows:
The assessee is an individual carrying on the business of iron and steel tube, steel fittings, plastic tank, hand pump, spares, etc. In the course of the assessment proceedings for the assessment year 1997-98, the assessing officer noticed that the assessee had taken loans to the tune of Rs. 15,35,000. The assessee filed the confirmations from the various creditors. The assessing officer also examined some of the creditors. On such examination, it transpired that the loans to the extent of Rs. 12,55,000 were taken in cash and the loan taken in each case exceeded Rs. 20,000 thereby violating the provisions of section 269SS of the Income Tax Act. According to the provisions of section 269SS of the Income Tax Act, 1961, no person shall accept from any other person any loan otherwise than by a account-payee cheque or account payee draft if loan so availed together with loan already taken earlier and remaining unpaid exceeded a sum of Rs. 20,000. The violation of provisions of section 269SS attracts penalty and section 271D provides for imposition of penalty for violation of the provisions of section 269SS. It is in this context, the assessing officer, in para 7, in the order of assessment has observed as follows :
"Penalty proceedings under section 271D are initiated separately."
In concluding para of order of assessment, the assessing officer has also observed as follows "Issue penalty notice under section 271D of the Income Tax Act."
Before proceeding further, it is useful to mention that under the provisions of section 271D of the Act, a penalty could be imposed only by an officer of the rank of it Commissioner. The assessing officer, in the present case, therefore, was not competent to impose a penalty under section 271D and had, therefore, referred the case to the Additional Commissioner, Raipur Range. The Additional Commissioner, Range-I, Raipur, who is a competent officer to impose penalty under section 271D, issued a show-cause notice dated 2-5-2000, calling upon the assessee to show-cause as to why a penalty under section 271D should not be levied by him for violation of the provisions of section 269SS. The reply of the assessee to the show-cause notice may be summarised as follows :
"(I) That the assessee was not conversant with the provisions of section 269SS of the Act;
(II) That the money was borrowed and utilised for construction and partly for personal purposes.
(III) That levy of penalty is a discretion vested with the authorities under section 273B of the Income Tax Act and such discretion is to be exercised in a just and fair manner having regard to the entire relevant facts and material of the case."
The assessee also relied on certain case law and these case law, according to the assessee, supported his case that no penalty could be imposed in the case of the assessee. The Addl. Commissioner, however, rejected the contentions putforth by the assessee. The plea of ignorance of the provisions of section 269SS was rejected by the Additional Commissioner on the ground that he could have sought advice from his tax consultant and since the assessee failed to do so, he held that ignorance of provisions of law pleaded cannot be accepted. He also held that no reasonable cause had been made by the assessee for having availed of the loans in cash and, therefore, the provisions of section 273B were also not applicable to the case of the assessee. The Additional Commissioner distinguished all the case law relied upon by the learned counsel for the assessee and finally concluded that the assessee was liable to penalty under the provisions of section 271D of the Act and accordingly, imposed a penalty of Rs. 12,55,000 equal to the value of loans availed by the assessee in violation of the provisions of section 269SS of the Act.
1 Aggrieved by the order of the Additional Commissioner, the assessee preferred appeal before the Commissioner (Appeals). Before the Commissioner (Appeals), the assessee pleaded that the order imposing the penalty was barred by time. The assessee drew the attention of the Commissioner (Appeals) to the provisions of section 275(1)(c) of the Act and submitted that the period laid down therein would govern the case of the assessee. It was pointed out by the assessee that the assessing officer who passed the order of assessment on 7-3-2000, in the concluding portion of the order of assessment, has very clearly stated that the penalty proceedings are initiated under section 271D of the Income Tax Act. According to the assessee, the period of limitation would start running from 7-3-2000. It was pointed out by the assessee that a show-cause notice was issued by the Additional Commissioner on 2-5-2000, and an order of penalty was. passed on 16-11-2000. According to the assessee, the period of six months as contemplated in section 275(1)(c) would end on 30-9-2000, and the order of penalty was passed on 16-11-2000, which was barred by time. The Commissioner (Appeals) held as follows:
"I have carefully considered the submissions made with reference to the facts obtained from the record. There is no dispute with regard to the fact that for violation of provisions of section 269SS proceedings are to be initiated under section 271D by the assessing officer, but any penalty imposable shall be imposed by the Joint Commissioner. It is, therefore, very clear that if the assessing officer happens to be lower in rank than the, Jont Commissioner, he cannot impose the penalty. However, the power to initiate the proceedings under section 271D rests with the assessing officer. Now, the dispute arises as to the time available for passing of the penalty order and section 275(1)(c) is the exact section which specifies the time-limit for imposition of penalty. Section 275(1)(c) reads as under :
"No order imposing a penalty under this chapter shall be passed-
(c) In any other case, after the expiry of the financial year in which the proceedings in course of which, action for imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later."
'From the language of the section it is clear that :
(i) no penalty can be imposed after the expiry of the financial year in which the proceedings in course of which, action for the imposition of penalty has been initiated, are completed, or
(ii) no penalty can be imposed after the expiry of six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later.
The time-limit of six months as provided as an alternative has been allowed keeping in view the situation where proceedings are initiated towards the end of the financial year so that a reasonable time is available to the authority for imposition of penalty, the time-limit for which otherwise expires with the expiry of the financial year in which the proceedings were initiated.
In the instant case, as it is patently clear from the assessment order under section 143(3), dated 7-3-2000, for the assessment year 1997-98 passed by the Income Tax Officer Ward 1(1), Raipur, that proceedings were initiated under section 271D on 7-3-2000 for the alleged violation of the provisions of section 269SS. In other words, initiation of proceedings under section 271D on 7-3-2000, has been clearly indicated in para 7 of the said assessment order which reads as under:
"During the financial year 1996-97, the assessee had taken loans aggregating to Rs. 12.55 lakhs. Confirmations from different creditors were obtained and the statements of the loan creditors were also recorded. On -enquiry and verification, it was found that cash loans aggregating to Rs. 12,55,000 (exceeding Rs. 20,000) were taken by the assessee in contravention of provisions of section 269SS. Therefore, penalty proceedings under section 271D have been initiated." (translated from Hindi) Therefore, the date of initiation of the final proceedings under section 271D, in the instant case, is 7-3-2000. Accordingly, the proceedings are to be completed/disposed of within the time-limit prescribed under section 275(1)(c) by taking the date which expires later. The first date expires on 31-3-2000, being the last day of the financial year in which the proceedings, in course of which action for imposition of penalty has been initiated were completed and the second date is to be counted from the end of the month in which action for imposition of penalty is initiated and in the instant case the period of six months is to be counted from 31-3-2000, being the end of the month in which the proceedings for imposition of penalty were initiated. Counting from 31-3-2000, the period of six months expires on 30-9-2000, within which the proceedings were required to be completed/disposed of. But in the present case, the impugned order under section 271D was passed on 16-11-2000, i.e., after a delay of one month and sixteen days from the expiry of the period of six months as stated above. The issuance of show-cause notice on 2-5-2000, by the Addl. CIT, Range-I, Raipur, cannot be treated as the date of initiation of the penalty proceedings and, therefore, the period of six months cannot be counted from 31-5-2000, being the end of the month of issuance of the notice by the Addl. CIT, Range-I, Raipur, who, though, is the authority to impose penalty under section 271D is not the authority to initiate penalty proceedings under section 271D which power squarely rests only with the assessing officer only.
If in the instant case, the Addl. CIT, Range 1, Raipur, happened to be the assessing officer also, then the period of limitation of six months would have counted from 31-3-2000, being the end of the month in which the proceedings- for imposition of penalty were initiated. On the same analogy the period of limitation for passing penalty orders under section 271D will always remain the same whether or not the penalty. initiating authority is the penalty imposing authority. The law cannot set two different dates for counting the period of limitation in a case where the initiating and imposing authority are different.
For the sake of argument, it is assumed that the period of limitation of six months starts counting from the date of issuance of show-cause notice by the penalty imposing authority who is different from the penalty initiating authority, the period of limitation will never end inasmuch as the Jt. CIT (who is different from the assessing officer) can issue the show-cause notice even after the expiry of any length of time and count the period of six months from the end of the month in which the show-cause notice has been issued and get away by passing the order under section 271D before the expiry of the period of six months from the end of the month of issuance of show-cause notice. This way, the limitation period can be extended to any length at the sweetwill of the penalty imposing authority by issuing a show-cause notice at any point of time even after the expiry of the financial year or the period of six months from the end of the month of limitation of proceedings by the assessing officer.
In view of the ' detailed reasonings enumerated above, it is my strong conviction that the period of limitation for imposition of penalty under section 271D in the instant case expired on 30-9-2000, and, therefore, the order under section 271D passed on 16-11-2000, was barred by limitation and accordingly the same is bad in law. Therefore, the order under section 271D imposing penalty of Rs. 12,55,000 is cancelled."
Since the appeal of the assessee was allowed by the Commissioner (Appeals) on the preliminary point of limitation, the question of reasonable cause putforth by the assessee before the Commissioner (Appeals) was not considered by the Commissioner (Appeals). Aggrieved by the order of the Commissioner (Appeals), the revenue is in appeal before us.
4. We have heard the submissions of the learned Departmental Representative as well as the learned counsel for the assessee. The learned departmental Representative submitted that the observation in the order of assessment to initiate penalty proceedings under section 271D would not amount to initiation of the proceedings by the assessing officer. According to him, the assessing officer does not have power to initiate the penalty proceedings, because, he was not competent to impose the penalty as the assessing officer, in the present case, was not an officer of the rank of Joint Commissioner who alone is empowered to impose a penalty under section 271D of the Act. He further submitted that no show-cause notice whatsoever has been issued by the assessing officer and, therefore, it cannot be said that the penalty proceedings were initiated as early as on 7-3-2000, as concluded by the learned Commissioner (Appeals). According to him, without a show-cause notice, it cannot be said that penalty proceedings had been initiated. He brought to our notice that it was the Addl. CIT who issued a show-cause notice on 2-5-2000 and it was only on that date it could be said that there was an initiation of penalty proceedings. In short, his submission was that :
(a) The power of initiating and imposing penalty under section 271D clearly vests with the Addl. CIT only.
(b) There was no initiation of penalty proceedings in the order of assessment.
(c) Imposition of the penalty on 16-11-2000 was well within the time as per the provisions of section 275(1)(c).
5. The learned counsel for the assessee, on the other hand, relied on the order of the Commissioner (Appeals). In addition, it was submitted by him that the assessing officer by his letter dated 21-3-2000 referred the matter to the Additional Commissioner for levy of penalty under section 271D and the Additional CIT issued a show-cause notice dated 2-5-2000 and fixed hearing on 16-5-2000. The assessee filed the reply on 16-5-2000. Thereafter, the matter was kept pending and after a gap of six months, another letter dated 9-11-2000, fixing the case for hearing on 16-11-2000 and thereafter the order imposing the penalty was passed on 16-11-2000. His further submission was that the words in which the proceedings in course of which action for imposition of penalty has been initiated, are completed" used in section 275 indicate the proceedings in which IT authority is satisfied about the default which attracts the penalty and not with respect to any other proceeding in which the order like cancellation of registration has been passed. He further submitted that the assessing officer is the authority to initiate penalty proceeding because it is he who has detected the contravention of provision of section 269SS and his satisfaction is primary and vital before making any reference to Addl. CIT. Had he been satisfied not to levy, no question of any reference arises. He also referred to the Circular No. 551, dated 23-1-1990, of the CBDT which explains the scope of provisions of limitation and according to which the provisions are meant for disposing of penalty proceedings as expeditiously as possible. He also relied on the following decisions, some of which are in his favour. Some other decisions which are against him Decisions in favour of the assessee
1. Straptex India (P) Ltd. v. Dy. CIT (2003) 84 ITD 320 (Mumbai).
2. Hissaria Brothers v. Jt. CIT (2001) 73 TTJ (Jd) 1.
3. Dillu Cine Enterprises (P) Ltd. v. Addl. CIT (2002) 80 ITD 484 (Hyd).
4. Artisan Press v. ITAT & Anr. (1958) 33 ITR 670 (Mad).
5. CIT v. M.A. Presstressed Works (1996) 220 ITR 226 (Raj).
Decisions against the assessee
1. Bhushan Chemicals v. Dy. CIT (1995) 54 ITD 5 (Pune).
2. Assistant Commissioner v. Shrinivas Chemicals (2003) 84 ITD 76 (Chd).
In the course of hearing, it was brought to the notice of the learned Departmental Representative as well as the learned counsel for the assessee that Tribunal, Pune Bench, had considered a similar issue in the case of Youth Development Co-op. Credit Society Ltd. v. Jt. CIT in ITA No. 1529/Pn/2002, wherein the Hon'ble Bench had considered the decisions relied upon by the learned counsel for the assessee and had come to the conclusion that in a given case where the assessing officer had merely observed in the order of assessment that the penalty proceedings are to be initiated and does not follow the said order with issue of show-cause notice, then it is not a case of initiation of penalty proceedings by the assessing officer. The Tribunal, Pune Bench, has clearly distinguished the decision in the case of Hissaria Brothers v. Jt. CIT (supra), in the case of Youth Development Co-op. Credit Society Ltd. (supra). The learned counsel for the assessee, however, filed before us a comparative chart of facts as they existed in the case of Youth Development Co-op. Credit Society (supra) and in the case of the assessee.
6. We have considered the rival submissions. At the outset, we wish to mention that factually there is no difference between the case decided by the Tribunal, Pune Bench, in Youth Development Co-op. Credit Society. (supra) and the case of the assessee. In both the cases, the assessing officer in the order of assessment made an observation which was to the effect that penalty proceedinqs are initiated under section 271D of the Income Tax Act. The Tribunal, Pune Bench, in the case of Youth Development Co-op. Credit Society (supra), held as follows:
"We have considered the rival submissions and also perused the relevant material on record. The facts which are not in dispute in the present context are that the penalty order under section 271D in the present case was passed on 26-8-2002, and that it is governed by the provisions of section 275(1)(c) so far as the limitation period for passing the order is concerned. The dispute however, relates to the date of initiation of penalty proceedings. According to the assessee, the assessing officer having recorded the observation in the assessment order passed for the year under consideration on 29-1-2001 to the effect that the provisions of section 269SS were contravened by the assessee and the proposal for initiation of penalty being submitted to the Addl. CIT, Range 3, Kolhapur, the action for imposition of penalty was initiated by the assessing officer on 29-1-2001 itself and the penalty order under section 271D having been passed on 26-8-2002 i.e., beyond six months from the initiation, it was barred by limitation as provided in section 275(1)(c). The revenue's stand, on the other hand, is that the assessing officer was not competent to impose the penalty and since the officer of the rank of Jt. CIT only was competent to impose such penalty in accordance with the provisions of sub-section (2) of section 271D, he alone was competent to initiate the penalty proceedings. The contention of the learned Departmental Representative, therefore, was that the penalty notice having been issued by the Jt. CIT, Sangli Range, Sangli, only on 7-2-2002, the penalty order passed in the present case on 26-8-2002 was within the time-limit prescribed in section 275(1)(c). As regards the assessing officer's competence to initiate the penalty proceedings under section 271D, the learned counsel for the assessee has relied on the decision of Jodhpur Bench of Tribunal in the case of Hissaria Bros. (supra), wherein the Tribunal has held that issuance of notice for initiation of penalty proceedings under sections 271D and 271E may appropriately and validly be done by the assessing officer and the Joint Commissioner competent to levy the penalty under sections 271D(2) and 272(2) can levy the penalty without insisting on further issuance of notice for the said penalty. Explaining further, the Tribunal observed that in such a situation, these penalty proceedings will have to be held as having been initiated during the course of assessment proceedings by the assessing officer when he completed the assessment proceedings after taking cognizance of the violations of the relevant provisions of law and the initiation of the penalty proceedings cannot be said to have been on the dates when the A. CIT issued notices again under section 271D. The Departmental Representative, on the other hand, has relied on the decision of Ahmedabad Bench of Tribunal in the case of Harsiddh Construction (P) Ltd. (supra) in which the Tribunal held that when no authority below the rank of the Dy. CIT or Dy. Director of IT could impose the penalty under section 272A(2)(g), Income Tax Officer was neither having jurisdiction nor was competent to initiate such penalty proceedings. Accordingly, the Tribunal held such proceedings initiated by the assessing officer to be untenable in the eye of law and upheld the penalty order passed on 22-12-1994, in pursuance of the penalty notice issued by the Dy. CIT on 24-1-1994, holding the same to be passed within the prescribed period of six months. It is thus clear that a contrary view on this issue has been expressed by the two Benches of the Tribunal. However, the fact remains to be seen is that in both these cases cited by the rival parties, a show-cause notice initiating the penalty proceedings was issued by the assessing officer whereas in the present case, no such notice was issued by the assessing officer. In this regard, the contention of the learned counsel for the assessee before us was that the observations of the assessing officer regarding the contravention of the provisions of section 269SS on the part of the assessee and the forwarding of proposal to the Addl. CIT for imposition of penalty, recorded in the assessment order tantamount to initiation of penalty proceedings irrespective of the fact that no show-cause notice was actually issued by the assessing officer. We find it difficult to accept this contention raised by the learned counsel for the assessee. In our opinion, such observations recorded by the assessing officer in his assessment, by no means, can be regarded as the valid initiation of penalty proceedings especially when no show-cause notice was issued by him to the assessee. The issue of show-cause notice is the starting point of penalty proceedings and the initiation in the absence of such notice assumes great importance especially in the context of time-limit prescribed under section 275. Since proper initiation of penalty proceeding is the foundation of jurisdiction in the matters of penalty, strict observance of the same is absolutely necessary. As no such notice was admittedly issued by the assessing officer in the present case, we have no hesitation to hold that there was no valid initiation of penalty proceedings by the assessing officer and it was only the Joint Commissioner who initiated the penalty proceedings validly by issuing a show-cause notice to that effect on 7-2-2002. Consequently, the penalty order having been passed on 26-8-2002, was completed within the period of six months from the end of month in which action for imposition of penalty was initiated and this being so, the same, in our opinion, was done within the period specified in section 275(1)(c). As such, considering the facts of the case and for the reasons given hereinabove, we are of the view that the penalty order passed under section 271D was not barred by limitation and ground No. 2 challenging the validity of penalty order on this basis is liable to be dismissed."
Now we shall refer to the decisions relied upon by the learned counsel for the assessee. The decision in the case of Hissaria Brothers (supra), has already been distinguished in the aforesaid case of Youth Development Co-op. Credit Society Ltd. (supra). As far as the decision of the Mumbai Bench in the case of Straptex India (supra) is concerned, the question that has arisen in the present case was never before the Mumbai Bench. In the course of the assessment proceedings, the assessing officer called upon the assessee to produce some details for satisfaction as to whether there was a violation of the provisions of section 269SS and in the order of assessment, the assessing officer initiated the penalty proceedings and within six month from the order of assessment, penalty was imposed. The assessee sought to canvass that the date on which the assessing officer called upon the assessee, in the course of the assessment proceedings, to furnish the details of loans to verify whether there was violation of the provisions of section 269SS was the date of initiation of penalty proceedings. This was rejected by the Mumbai Bench. The said decision is, therefore, not of any assistance to the case pleaded by the learned counsel for the assessee.
7. In the case of Dillu Cine Enteiprises (P) Ltd.. v. Addl. CIT (supra), the Hyderabad Bench had held as follows :
"On the issue of limitation, the penalty levied under section 271D has no rational nexus with the completion of the assessment under section 143(3) and the attainment of finality of such assessment. The levy of penalty under section 271D has nothing to do with the quantum of addition or disallowance under section 143(3), Section 275(1a) obviously refers to cases where the quantum assessment has a bearing on the penalty and the violation. The legislature amended section 275 through section 50 of Taxation Laws (Amendment) Act, 1970, prescribing a limitation period for imposition of penalty. It is stated in the departmental Circular No. 56, dated 9-3-1971, that practical difficulties on account of deletions or reduction of additions are the reasons for the extension of time-limit under section 275. The intent of the legislature was to give more time to such cases where penalty is related to quantum of additions to income. Otherwise, there is no reason why clause (c) of section 275(1) has nothing to do whatsoever with the quantum appeal, assessment year, previous year, etc. Hence, penalty under section 271D for violation of section 269SS is governed by section 275(1)(c) for the purpose of limitation.
Moreover, initiation of penalty could be done only once and that too during the course of assessment proceedings. In the instant case, the penalty had been initiated by the assessing officer on 21-3-1997 when he had issued a notice for levy of penalty. The argument of the department that the Additional Commissioner had initiated the penalty proceedings on 1-12-1997 on which date Additional Commissioner wrote a letter giving fresh opportunity to assessee was not correct, as the term 'initiation, means 'begin' or 'get going' and can be done only once. One cannot initiate proceedings again and again and such act can only be termed as re-initiation. And re-initiation is not contemplated anywhere in the Act. The time limitation should have been considered only from the date of initiation of penalty proceedings by the assessing officer, i.e., 21-3-1997. Hence, the penalty should have been levied on or before 30-9-1997 and as the penalty was levied on 24-3-1998, it was barred by limitation."
As can be seen from the aforesaid decision, it was a case where the assessing officer issued a show-cause notice and, therefore, the case is one similar to that of Hissaria case (supra), which has already been distinguished in the case of Youth Development Co-op. Credit Society (supra). The decision of the Hon'ble Madras High Court in the case of Artisan Press (supra), is again on different point. The Hon'ble Madras High Court was not dealing with a case where the proceedings were initiated by an authority not vested with the powers to impose penalty. The question before the Hon'ble High Court was as to at what point of time the proceeding had been initiated. The Hon'ble Madras High Court came to the conclusion that the proceedings initiated in the course of disposing of an appeal was held to be a valid initiation. Such are not the facts in the present case. The decision in the case of M.A. Presstressed (supra) is again on different point. In the aforesaid case, the appeal against refusal of registration was sought to be pleaded as the proceedings which will save limitation under section 275 of the Act and the Hon'ble High Court held that the proceedings in which the cancellation of registration was disputed and the assessment proceedings were different and, therefore, appellate proceedings relating to the cancellation of registration of firm cannot be linked with the penalty proceedings initiated in the course of the assessment proceedings. The aforesaid decisions will not be of any assistance to the case pleaded by the assessee. The decision of the Chandigarh Bench of the Tribunal in the case of Assistant Commissioner v. Shree Nivas Chemicals (supra) lays down the following legal position and the said decision reads as follows :
"Unlike the provisions of sections 271(1)(a), (b) and (c), sections 271D and 271B do not provide that such proceedings are to be initiated by the assessing officer or the Commissioner (Appeals) in the course of any proceedings under this Act. Thus, for the purpose of sections 271(1)(a), (b) and (c), it is the satisfaction of the assessing officer which is prerequisite for initiating penalty proceedings, even though the assessing officer may not be able to impose such penalty without, the approval of the Jt. CIT (then Dy. CIT) in view of the restrictions imposed under sub-section (2) of section 274 but there is no such requirement so far as initiation of penalty proceedings under sections 271D and 271E is concerned. Further, sections 271D and 271E clearly provide that penalties under these sections shall be imposed by the Joint Commissioner (then Dy. CIT) and it is not a case where only approval of the Joint Commissioner is required. This shows that penalty proceedings can be initiated by the authority competent to impose such penalty on a reference received from the assessing officer. Since the assessing officer has no authority to impose penalty under sections 271D and 271E, he cannot initiate penalty proceedings on his/her own as it is not his/her satisfaction which matters, rather it is the satisfaction of the authority who is competent to impose such penalties. It may, further be mentioned that quantum of penalties to be imposed under sections 271D and 271E is not dependent upon the quantum of income determined by the assessing officer. The same depends upon the amount of payments received/made in violation of provisions of sections 269SS and 269T respectively.
The date on which the Deputy Commissioner recorded his satisfaction and issued notices calling upon the assessee to show-cause why penalties under sections 271D and 271E should not be imposed, would be the date when the proceedings can be said to have been initiated. The assessing officer who has no authority to levy such penalties is not competent to initiate such proceedings at the time of completing the assessment. In the instant case, the assessing officer had rightly referred the case to Deputy Commissioner on the same date, i.e., 30-12-1994, for consideration and levy of penalties under sections 271D and 271E.
Sub-section (1) of section 274 imposes a condition that no order imposing a penalty shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard. Section 275(1)(c) imposes a time-limit for passing an order for penalty within a period of six months from the end of the month in which penalty proceedings were initiated. Now if one reckons the limitation from the date of initiation of such proceedings by the assessing officer and the assessing officer delays referring the case to A. CIT, this would hardly leave any time with the Joint Commissioner to allow an effective opportunity to the assessee before imposing the penalty. Therefore, it is natural that it is the date when the authority competent to levy such penalty issues show-cause notice.
In the light of these facts and circumstances of the case, the date of initiation of penalty proceedings would be 13-1-1995, i.e., the date when the authority competent to impose such penalties had issued show-cause notice. Therefore, the orders passed by the Deputy Commissioner for imposing the impugned penalties were not barred by limitation."
The limited issue before us is as to whether or not there was initiation by the assessing officer when the order of assessment was framed. In our view, the date of initiation would be the date on which a show-cause notice is issued either by the assessing officer or the officer empowered to impose penalty under section 271D of the Income Tax Act. It is true that the object behind introducing the provisions of section 275 is that an assessee who faces penalty proceedings is entitled, as a matter of right, to have his fate adjudicated as early as possible. It is true that this interpretation adopted by us would also lead to a situation where an officer imposing penalty can initiate penalty even after an indefinite period of time. But in view of the language of the provisions, we have no other option but to uphold such a power. We, therefore, hold that the penalty proceedings were initiated only on 2-5-2000, when the Addl. CIT issued a show-cause notice. The period of six month from the end of the month in which the penalty proceedings were initiated would, therefore, expire by 30-11-2000 and the order of penalty passed on 6-11-2000 is well within the period of limitation. The decision of the Commissioner (Appeals) taking a contrary view is, therefore, reversed. The appeal of the revenue is allowed.
8. Since the Commissioner (Appeals) has not rendered any decision on merits of the submissions made by the learned counsel for the assessee, namely, existence of reasonable cause, we deem it proper to restore the file back to the Commissioner (Appeals) for a fresh adjudication on this aspect.
9. With the above directions, the appeal of the revenue is allowed.
C.0. 3/Nag/2002:
10. The grounds of cross-objection of the assessee read as follows :
"On the facts and in the circumstances of the case, the learned Commissioner (Appeals) erred in not adjudicating upon the following grounds raised before him :
1. That there is existence of reasonable cause with the respondent for taking/accepting deposits/loans and suo motu advances of Rs. 12,55,000 in cash in violation of section 269SS, therefore, imposition of penalty of Rs. 12,55,000 by Additional Commissioner, Range-I, is arbitrary and unwarranted.
2. Alternatively, the quantum of penalty of Rs. 12,55,000 under section 271D imposed by the Addl. CIT, Range-I, Raipur, is arbitrary and excessive which requires to be reduced."
Since the Commissioner (Appeals) has not rendered any specific finding on the plea of reasonable cause pleaded by the assessee, we deem it proper to restore the matter back to the file of the Commissioner (Appeals) to consider the plea raised by the assessee. The assessee will be at liberty to plead and prove his case of reasonable cause before the Commissioner (Appeals). With this direction, the cross-objection of the assessee is treated as allowed for statistical purposes.
11. In the result, the revenue's appeal is allowed whereas the assessee's crossobjection is treated as allowed for statistical purposes.