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Pr. Commissioner Of Income Tax vs Thapar Homes Limited on 8 February, 2021

Author: Rajiv Sahai Endlaw

Bench: Rajiv Sahai Endlaw, Sanjeev Narula

$~23
*    IN THE HIGH COURT OF DELHI AT NEW DELHI
+      ITA 19/2021 & CM APPL. 4377/2021
       PR. COMMISSIONER OF INCOME TAX          ..... Appellant
                    Through: Mr. Raghvendra Kumar Singh, Senior
                              Standing Counsel

                          versus

       THAPAR HOMES LIMITED                                    ..... Respondent
                   Through: None

       CORAM:
       HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
       HON'BLE MR. JUSTICE SANJEEV NARULA
               ORDER

%              08.02.2021

[VIA VIDEO CONFERENCING]

1. The substantial question of law raised in this appeal is, the meaning to be ascribed to the words (i) ".....end of the month in which action for imposition of penalty is initiated....." in Section 275(1)(c); and, (ii) ".....penalty..... shall be imposed by the Joint Commissioner" in Section 271E(2), of the Income Tax Act, 1961.

2. The factual matrix in which the aforesaid question is raised is, that (i) the Assessing Officer, vide order dated 31st December, 2010, while making addition of Rs.3,00,65,000/- on account of certain entries in the documents, initiated penalty proceedings under Section 271E [for repaying the interest on loans otherwise than by crossed cheques / drafts]; (ii) notice under Section 274 read with Section 271E was also issued on 31 st December, ITA 19/2021 Page 1 of 4 2010; (iii) the Assessing Officer, vide letter dated 7th June, 2011 intimated the matter to the Joint Commissioner, for finalization of penalty proceedings; (iv) the Joint Commissioner issued notice dated 13th June, 2011 to the assessee and to which reply dated 20 th June, 2011 was submitted by the assessee; and, (v) Order under Section 271E of the Act was passed on 30th December, 2011, levying penalty of Rs.3,00,65,000/-.

3. Section 271E(1) of the Act provides that if a person repays loan or deposit or specified advance referred to in Section 269T of the Act, otherwise than in accordance with the provisions of that Section i.e. by cheques or by bank drafts, such person shall be liable to pay, by way of penalty, sum equal to the amount of the loan or deposit or specified advance so repaid. Section 271E(2) of the Act provides that any penalty imposable under Section 271E(1) of the Act shall be imposed by the Joint Commissioner.

4. Section 275 lays down the bar of limitation for imposing penalty and Clause (c) of Sub-Section (1) thereof provides that no order imposing penalty shall be passed after the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty was initiated, are completed or six months from the end of the month in which the action for imposition of penalty is initiated, whichever period expires later.

5. The penalty proceedings pertain to the assessing year 2008-09 and assessment as aforesaid was completed on 31st December, 2010 and the Assessing Officer, while raising the demand, also intimated that penalty proceedings were being initiated. However since penalty, per Section 271E(2) of the Act could be imposed only by the Joint Commissioner, the ITA 19/2021 Page 2 of 4 Assessing Officer forwarded the file to the Joint Commissioner, who as aforesaid issued the show cause notice on 13th June, 2011.

6. The Commissioner of Income Tax (CIT) and the Income Tax Appellate Tribunal (ITAT) accepted the contention of the assessee that since the Assessing Officer, vide notice dated 31st December, 2010 intimated the assessee that penalty proceedings were being initiated, the period of six months had to be counted therefrom and expired on 30th June, 2011 and the penalty imposed on 30th December, 2011 was beyond the limitation prescribed in Section 275(1)(c) of the Act.

7. The contention of the counsel for the appellant is that since under Section 271E(2) the power to levy penalty is of the Joint Commissioner and not of the Assessing officer, the words in Section 275(1)(c), "six months from the end of the month in which action for imposition of penalty is initiated" have to mean the date the Joint Commissioner issues the show cause notice i.e. 13th June, 2011 and penalty imposed on 30th December, 2011 was within time.

8. We have considered the aforesaid contention. While Section 275(1)(c) of the Act inter alia makes "initiation of action" for imposition of penalty, the starting point, Section 271E(2) of the Act only prescribes that the imposition of penalty shall be by the Joint Commissioner. The same does not provide that initiation of penalty proceedings would also be by the Joint Commissioner. It thus prima facie appears that the word "initiation" would include intimation by the Assessing Officer to the assessee that penalty proceedings are being initiated or even the action of the Assessing Officer of forwarding the file to the Joint Commissioner for imposing penalty.

9. The counsel for the appellant however contends that since before imposing penalty, issuance of show cause notice is mandatory, the relevant date would be the date the authority having jurisdiction to levy penalty issues the show cause notice and not the date when the Assessing Officer forwards the file to such authority for imposing penalty.

10. The matter requires consideration.

11. Issue notice to the respondents by all modes.

12. The appellant is permitted to file additional documents which formed part of the assessment proceedings.

13. List on 8th April, 2021.

RAJIV SAHAI ENDLAW, J SANJEEV NARULA, J FEBRUARY 8, 2021 Ms/gsr..