Income Tax Appellate Tribunal - Delhi
M/S. All Grace Developers Pvt. Ltd., ... vs Acit, Gurgaon on 31 January, 2018
INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "A": NEW DELHI
BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER
AND
SHRI O.P. KANT, ACCOUNTANT MEMBER
ITA No. 4358/Del/2016
Assessment Year: 2011-12
ACIT, All Grace Developers Pvt. Ltd.
Circle-1(1) F-12/03,
Gurgaon Vs. Basement DLF Phase-1
Gurgaon
PAN AAFCA6919G
(Appellant) (Respondent)
CO No. 19/Del/2018
Arising out of ITA 4358/DEL/2016
Assessment Year 2011-12
M/s. All Grace Developers Pvt. ACIT,
Ltd. Vs. Circle-1(1)
F-12/03, Gurgaon
Basement DLF Phase-1
Gurgaon
PAN AAFCA6919G
(Appellant) (Respondent)
Department by: Shri Ravi Kant Gupta, Sr.DR
Assessee by : Shri Sandeep Sapra, Advocate
Date of Hearing 30/01/2018
Date of 31/01/2018
pronouncement
ORDER
ITA No. 4358/DEL/2016
ACIT vs. M/s. All Grace Developers Pvt. Ltd.
& CO No. 19/DEL/2018
M/s. All Grace Developers Pvt. Ltd. vs. ACIT
PER AMIT SHUKLA, J.M.
The aforesaid appeal as well as the cross objection has been filed by the revenue and by the assessee against impugned order dated 15.6.2016, passed by Ld. CIT(Appeals)-1, Gurgaon in relation to the penalty proceedings u/s 271D. The revenue is mainly aggrieved by deletion of penalty of Rs. 50 lacs imposed by Ld. ACIT, Range- I, Gurgaon u/s 271D, in violation of section 269SS; whereas in the cross objection the assessee has challenged the penalty order dated 29.1.2015 on the ground that it is barred by limitation in terms of section 275(1)(c).
2. Since the grounds raised in cross objection raises the point of limitation and goes to the route of the matter, therefore, we are adjudicating the issue of limitation first.
3. Before us the Ld. Counsel for the assessee submitted that, herein this case the AO who is an Additional Commissioner of Income Tax, Range No. 1, Gurgaon, while framing the assessment u/s 143(3) for the impugned assessment year 2011-12, recorded that assessee has received share application money amounting to Rs. 50 lacs which was in violation of section 269SS and accordingly, he has recorded his satisfaction that penalty proceedings u/s 271D should be simultaneously initiated. The said assessment order was completed 2 ITA No. 4358/DEL/2016 ACIT vs. M/s. All Grace Developers Pvt. Ltd.
& CO No. 19/DEL/2018M/s. All Grace Developers Pvt. Ltd. vs. ACIT vide order dated 21.1.2014. Ld. Counsel submitted that on the same date the show cause notice was also issued by the Ld. Additional CIT, whereby he required the assessee as to why penalty proceedings u/s 271D for sum amounting to Rs. 50 lacs should not be initiated. After initiating the penalty proceedings on the date of the assessment itself, the penalty u/s 271(D) has been levied by the AO vide order dated 29.1.2015, which he pointed out that it is clearly barred by limitation in terms of section 275(1)(c). He submitted that, under the said provision two limitation has been provided when penalty cannot be imposed; firstly, after the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated are completed, which here in this case should be 31.3.2014; or secondly, after six months from the end of the month in which action for imposition of penalty is initiated which here in this case would come to 31st July, 2014. Since the later period is 31st July, 2014, therefore, the order dated 29.1.2015 is clearly barred by limitation. In support, he relied upon following judgments:-
300 ITR 180, CIT Chhajer Packaging and Plastics P Ltd.
(Bombay H.C.), copy enclosed at pages 15-21.
394 ITR 312, Pr. CIT vs. Mahesh Wood Products Pvt. Ltd. (Delhi H.C.).
352 ITR 328, CIT vs. Jitendra Singh Rathore (Rajasthan H.C.).
287 ITR 239, ITO vs. Ramkishore Rewaram Tada (MP. H.C.). 3 ITA No. 4358/DEL/2016
ACIT vs. M/s. All Grace Developers Pvt. Ltd.
& CO No. 19/DEL/2018M/s. All Grace Developers Pvt. Ltd. vs. ACIT 266 ITR 393, Shanbhag Restaurant vs. Dy. CIT (Karnataka H.C.).
4. Apart from that, he also relied upon the judgment of Hon'ble Delhi High Court of PCIT vs, Mahesh Wood Products Pvt. Ltd. in ITA No. 786/787/2016, judgment dated 5.5.2017, wherein the Hon'ble High Court held that the date on which the AO wrote a letter to ACIT recommending the issuance of the penalty u/s 271E should be the starting point of the initiation. Here in this case when Additional CIT himself is the competent authority to levy the penalty u/s 271D and has initiated the penalty proceedings himself at the time of assessment, then same should be taken as the date of initiation.
5. On the other hand, Ld. Sr. DR, submitted that here in this case another show cause notice was issued by the Ld. Additional CIT on 22.7.2014 and it was this notice which states that this is the notice u/s 274 r.w.s 271D; and therefore, such a notice should be reckoned as point of initiation of penalty proceedings. He submitted that this issue was also raised before the Ld. CIT(A) and Ld. CIT(A) has called for remand report of the AO, which were for the sake of ready reference, relevant portion of which is reproduced :- 4 ITA No. 4358/DEL/2016
ACIT vs. M/s. All Grace Developers Pvt. Ltd.& CO No. 19/DEL/2018
M/s. All Grace Developers Pvt. Ltd. vs. ACIT "Kindly refer to your office letter No. CIT(A)-1IGGNIR.R No. 61/2015-16/1B44 dated 3.12.2015, wherein the comments of this office have been sought on the reply filed by the assessee before your goodself on the imposition of Penalty u/s 271 D of the Income Tax Act, 1961, wherein the assessee has challenged the imposition of Penalty u/s 27 ID of the Income Tax act, 1961 by stating that the said Penalty order passed by the then AO i.e. Addl CIT ,Range 1 on 291112015 was time barred on 31/7/2014 on the ground that the first notice was issued by the then AO i.e. Addl CIT, Range 1 on 24/112014.
In this regard the report is as under:
It is brought to your kind notice that the assumption drawn the assessee is totally misplaced and without merits. The first notice U/S 274 read with section 271 D of the Income Tax Ac 1 for imposition of Penalty u/s 271 D was issued to the assessee on 22/7/2014. For the respective notice of initiation of penalty proceedings the time barring shall be governed by Sec 275(1)c of the Income Tax Act, 1961 which reads as under:
(c) in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the 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.
Hence it can be seen that the time barring for the aforesaid proceedings u/s 271 D of the Income Tax Act, 1961 was 31/3/2015 and not31/7/20 14."
5 ITA No. 4358/DEL/2016
ACIT vs. M/s. All Grace Developers Pvt. Ltd.
& CO No. 19/DEL/2018M/s. All Grace Developers Pvt. Ltd. vs. ACIT
5. Ld. CIT(A), held that the notice dated 24.1.2014 was merely a show cause before initiation of penalty proceedings and it was not a notice which has kick started the penalty proceedings. The first notice which was served upon the assessee in this regard was on 22.7.2014, which was the proper notice and point of initiation of penalty proceedings if this date is taken for consideration this penalty order is clearly within the statutory time limit. Thus, Ld. Sr. DR strongly relied upon the Ld. CIT(A). He further relied upon the order of ITAT Mumbai Bench in the case of M/s. Dighi Port Ltd. vs. ITO in ITA No. 576/Mum/2010 order dated 25.4.2012, wherein in the context of 271B, the Tribunal held that the show cause notice which just asked the assessee as to why penalty proceedings should not initiated cannot be taken as the notice but only when AO is not satisfied with the explanation of the assessee and he issues show cause notice as to why penalty should not be imposed, then that notice should be taken into consideration for the purpose of calculating the limitation.
6. We have heard the rival submissions and also perused the relevant facts qua the issue of limitation. As stated above here in this case the assessment order has been passed by Ld. Additional Commissioner of Income Tax, Range -1, Gurgaon, wherein in the 6 ITA No. 4358/DEL/2016 ACIT vs. M/s. All Grace Developers Pvt. Ltd.
& CO No. 19/DEL/2018M/s. All Grace Developers Pvt. Ltd. vs. ACIT course of the assessment proceedings, he has recorded following satisfaction for initiation of penalty proceedings u/s 271D:-
"The receipt of share application money of Rs. 50 Lacs in cash from some Smt. Seema Aggarwal (as confirmed by Smt. Seema Aggarwal herself) is not allowable under the provisions of Section 269SS of the Income Tax Act, 1961. I am therefore satisfied that the assessee has violated the provisions of Section 269SS of the Income Tax Act, 1961. Penalty proceedings u/s 271D of the Income Tax Act, 1961 is simultaneously initiated."
Thereafter at the end of the assessment order, he mentions: issue notice for initiation of penalty u/s 271D. On the same date, she issues the following notice:-
To, M/s. All Grace Developers Pvt. Ltd.
F-12/3, Basement DLF Phase-1, Gurgaon Sir/Madam, Subject: Penalty Proceedings u/s 271D of the Income Tax Act, 1961 - regarding Please refer to the Assessment proceedings u/s 143(3) for the A.Y. 2011-12 completed on 21.01.2014.
It has been noticed that following amounts towards Share Application money in the nature of deposits have not been received through Cheque/Bank Draft, which is a non-compliance of Section 269SS of the Income Tax Act, 1961 :-7 ITA No. 4358/DEL/2016
ACIT vs. M/s. All Grace Developers Pvt. Ltd.
& CO No. 19/DEL/2018
M/s. All Grace Developers Pvt. Ltd. vs. ACIT
Sl. No. Date Amount
1. 15.04.2010 50,00,000/-
In this regard you are requested to show cause as to why penalty proceedings u/s 271D of the Income Tax Act, 1961 may not be initiated in your case. In this connection, you are requested to attend the office of the undersigned on 10.02.2014 at 12.30 PM, failing which it will be assumed that you have nothing to say in this regard.
Yours faithfully, (Mamta Bansal) Addl. Commissioner of Income Tax, Range-1, Gurgaon
7. Under the provision of section 271D, the competent authority to impose the penalty is 'Joint Commissioner'. Since Additional CIT is higher in hierarchy and both Joint Commissioner of Income Tax and Additional Commissioner are interchangeable in terms of section 2(7A), therefore, Additional CIT was the competent authority to impose the penalty. Here in this case not only the 'satisfaction' has been recorded by the Additional CIT, but also initiated by him not only in the assessment order but also in terms of aforesaid notice which was issued on 21.1.2014. The case of the revenue before us is that, there is another show cause notice issued on 22.7.2014, whereby the AO has mentioned notice issued u/s 274 r.w.s 271D, which should be 8 ITA No. 4358/DEL/2016 ACIT vs. M/s. All Grace Developers Pvt. Ltd.
& CO No. 19/DEL/2018M/s. All Grace Developers Pvt. Ltd. vs. ACIT reckoned as a notice on which initiation of penalty proceedings has been done by the AO and earlier notice is mere intimation to the assessee as to why penalty may not be initiated. Thus, there is a difference in the two notices. We are unable to appreciate such a contention of the revenue, especially when the provision of section 275(1)(c) categorically states as under :-
(c) in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the 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.
The key phrases used are; "in the course of which action of imposing of penalty has been initiated" or "action of imposition of penalty is initiated". The action has to be seen qua the satisfaction of the AO during the course of the action in which he has reached to his conclusion that penalty should be initiated and moment he issues the show cause notice to the assessee, the penalty said to have been initiated. If the argument of the revenue is accepted then in every case the plea would be taken that the first notice which succeeds the satisfaction of the AO should not be taken as point of initiation but only when a notice which mentions 274/271D or penalty imposable in any other section, that alone should be taken as initiation of penalty proceedings. If the AO issues such notice after two years then under which course of action such penalty has been initiated or which is the 9 ITA No. 4358/DEL/2016 ACIT vs. M/s. All Grace Developers Pvt. Ltd.
& CO No. 19/DEL/2018M/s. All Grace Developers Pvt. Ltd. vs. ACIT cause of action for imposition of penalty is initiated. Whether it can be said that the limitation is open to the AO at his choice, even when course of action or cause of action has elapsed? Whether it is open for the AO to initiate action at any time he chooses? In our humble opinion it cannot be the intention of legislature that point of initiation is left open to the AO when the course of action or cause of action for imposing the penalty has elapsed. Here once again it is reiterated that penalty has been initiated in the assessment proceedings and simultaneously show cause notice has been issued, which is the starting point for the limitation period as envisaged u/s 275(1)(c). Since the later period of six months has to be seen for the time limit of completion of such a penalty order, which here in this case was expiring on 31st July, 2014. We find that the Hon'ble Jurisdictional High Court in the case of PCIT vs. JKD Capital and Finlease Ltd. the Hon'ble High Court in the context of penalty u/s 271E have incorporated the provision of penalty u/s 271B in the following manner :-
"In terms of the above provision, there are two distinct periods of limitation for passing a penalty order, and one that expires later will apply. One is the end of the financial year in which the quantum proceedings are completed in the first instance. In the present case, at the level of the Assessing Officer, the quantum proceeding was completed on December 28, 2007. Going by this 10 ITA No. 4358/DEL/2016 ACIT vs. M/s. All Grace Developers Pvt. Ltd.& CO No. 19/DEL/2018
M/s. All Grace Developers Pvt. Ltd. vs. ACIT date, 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 which the penalty proceedings were initiated. With the Assessing Officer having initiated the penalty proceedings in December 2007, the last date by which the penalty order could have been passed is June 30, 2008. The later of the two dates is June 30, 2008.
Considering that the subject matter of the quantum proceedings was the non-compliance with section 269T of the Act, there was no need for the appeal against the said order in the quantum proceedings to be disposed of before the penalty proceedings could be initiated. In other words, the initiation of penalty proceedings did not hinge on the completion of the appellate quantum proceedings. This position has been made explicit in the decision in QT v. Worldwide Township Projects Ltd. (supra) in which the court concurred with the view expressed in CIT v. Hissaria Bros. [2007] 291 ITR 244 (Raj) in the following terms (page 257 of 291 ITR) :
"The expression other relevant thing used in section 275(l)(a) clause (b) of sub-section (1) of section 275 is significantly missing from clause (c) of section 275(1) to make out this distinction v clear. We are, therefore, of the opinion that since penalty proceedings for default in not having transactions through the bank as required under section 269SS and section 269T are not related to the as ment proceeding but are independent of it, therefore, the completion: appellate proceedings arising out of the assessment proceedings or other proceedings during which 11 ITA No. 4358/DEL/2016 ACIT vs. M/s. All Grace Developers Pvt. Ltd.& CO No. 19/DEL/2018
M/s. All Grace Developers Pvt. Ltd. vs. ACIT the penalty proceedings under se 271D and section 271E may have been initiated has no relevance sustaining or not sustaining the penalty proceedings and, therefore clause (a) of sub-section (1) of section 275 cannot be attracted to > proceedings. If that were not so clause (c) of section 275(1) would redundant because otherwise as a matter of fact every penalty proceeding is usually initiated when during some proceedings default is noticed, though the final fact finding in this proceeding not have any bearing on the issues relating to establishing default penalty for not deducting tax at source while making payment employees, or contractor, or for that matter not making pa through cheque or demand draft where it is so required to be Either of the contingencies does not affect the computation of t income and levy of correct tax on chargeable income; if clause (a to be invoked, no necessity of clause (c) would arise." (emphasis supplied) 11 In fact, when the Assessing Officer recommended the initiation of alty proceedings the Assessing Officer appeared to be conscious of the fact that he did not have the power to issue notice as far as the penalty proceedings under section 271E was concerned. He, therefore, referred the matter concerning penalty proceedings under section 271E to the Additional Commissioner of Income-tax. For some reason, the Additional Commissioner of Income-tax did not issue a show-cause notice to the assessee under section 271E (1) till March 20, 2012. There is no explanation whatsoever for the delay of nearly five years after the assessment order Additional Commissioner of Income-tax issuing notice under section of the Act. The Additional Commissioner of Income-tax ought t been 12 ITA No. 4358/DEL/2016 ACIT vs. M/s. All Grace Developers Pvt. Ltd.& CO No. 19/DEL/2018
M/s. All Grace Developers Pvt. Ltd. vs. ACIT conscious of the limitation under section 275(l)(c), i.e., that no order of penalty could have been passed under section 271E after the expiry of the financial year in which the quantum proceedings were completed or beyond six months after the month in which they were initiated, whichever was later. In a case where the proceedings stood initiated with the order passed by the Assessing Officer, by delaying the issuance of the notice under section 271E beyond June 30, 2008, the Additional Commissioner of Income-tax defeated the very object of section 275(1)(c). This judgment has been reiterated by the Hon'ble Jurisdictional High Court in the case of PCIT vs. Mahesh Wood Products Pvt. Ltd. (supra). Following the principle laid down by the Hon'ble Jurisdictional High Court in the aforesaid cases, we hold that when the Additional CIT initiated the penalty proceedings in the assessment order and also issued a show cause notice on the same date, i.e., 21.1.2014, then it is the date from which limitation period of six months should be counted, which here in this case was up till 31st July, 2014. Ostensibly the impugned order dated 29.1.2014 is clearly barred by limitation and hence same is quashed. Since we have already quashed the penalty on the ground of limitation the revenue's appeal on merits has become purely an academic.
In the result cross objection is allowed and appeal of the revenue is dismissed.
13 ITA No. 4358/DEL/2016
ACIT vs. M/s. All Grace Developers Pvt. Ltd.
& CO No. 19/DEL/2018M/s. All Grace Developers Pvt. Ltd. vs. ACIT Order pronounced in the open court on 31st January, 2018.
sd/- sd/-
(O.P. KANT) (AMIT SHUKLA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 31/01/2018
Veena
Copy forwarded to
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR:ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi
14