2019 (12) TMI 1190

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....tc. Orders were passed by the ITO, TDS ward, Davangere dated 11.2.2013 holding the Assessee as an Assessee in default for not deducting tax at source u/s.201(1) of the Act and also levying interest on tax not deducted at source from the date on which tax ought to have paid to the credit of the Central Government till the date on which the payments are made u/s. 201(1A) of the Act. In the aforesaid orders, the ITO, TDS Ward, Davangere observed that penalty proceedings u/s. 271C will be initiated separately. The following were the relevant observations of the ITO, TDS Ward, Davangere:- "8. Penalty proceedings u/s.271C for failure to deduct the whole or any part of tax at source as required under chapter XVII-B will be initiated separately." The AO has also mentioned in the said order as follows:- "Penalty notice u/s.271-C is issued separately." 3. Section 271C of the Act provides for Penalty for failure to deduct tax at source and it lays down as follows:- "271C. (1) If any person fails to- (a ) deduct the whole or any part of the tax as required by or under the provisions of Chapter XVII-B; or (b ) pay the whole or any part of the t....

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....as not competent to levy penalty because the provisions of Sec.271C(2) lays down that penalty can be imposed only by Joint Commissioner of Income Tax, the date of initiation of penalty u/s.271C should be regarded as the date of passing of the order u/s.201(1) of the Act dated 11.2.2013 as in the said order there has been an observation that penalty notice u/s. 271C is issued separately. It was the plea of the Assessee before CIT(A) that in terms of Section 275(1)(c) of the Act, the penalty order could have only been passed on or before 31st August, 2013 and since the order imposing penalty u/s.271C was passed on 25.7.2016, the penalty order was barred by limitation. 7. The AO rejected the plea of existence of reasonable cause for failure to deduct tax at source and also rejected the plea of the Assessee that the order imposing penalty is barred by limitation u/s.275(1)(c) of the Act. The AO held that Assessee accepted the default and paid taxes and that itself showed that the Assessee was well versed with the relevant statutory provisions. On the plea of limitation, the AO held that penalty proceedings were initiated by issue of notice u/s.274 of the Act dated 22.1.2016 and t....

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....f limitation in terms of Sec.275(1)(c) of the Act. Reliance was also placed on the decision of the ITAT Bangalore 'B" Bench in the case of Kanakara Rajendra Prasad Reddy Vs. JCIT ITA No.1962/Bang/2017 order dated 2.8.2019 wherein it was held that date on which the default for which penalty is levied u/s. 271C of the Act is noticed, would be the starting point of time for limitation purpose under the second part of Sec.275(1)(c) of the Act. It was further held that the fact that the order noticing the default is not competent to initiate penalty proceedings and therefore the argument of the revenue that the date of issue of show cause by the competent officer should be reckoned as date of initiation of penalty proceedings for the purpose of Sec.275(1)(c) of the Act was not acceptable. 10. The learned DR submitted that the proceedings were not barred by time. He submitted that in the order u/s. 201(1) of the Act dated 11.2.2013, the AO has not initiated penalty proceedings u/s.271C of the Act and has merely made an observation that penalty proceedings u/s. 271C of the Act would be initiated separately. It was submitted by him that the JCIT issued show cause notice to the Assessee ....

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....ce which has been issued by the AO to the assessee. Secondly, the contention of the ld AR that the initiation of the penalty proceedings should be reckoned from the date when the reference was made by the AO to JCIT(TDS) cannot again be accepted as the initiation of such proceedings have to be by way of issuance of a notice to the assessee and not by mere reference from the AO to JCIT(TDS). The decision of the Hon'ble Supreme Court in case of Hissaria Brothers is in context of applicability of clause (c) to sub-section (1) to section 275 which is not in dispute as far as present case is concerned. Further, the decision of Coordinate Bench in case of Subhash Pareta doesn't support the case of the assessee as in that case also, the AO didn't initiate the penalty proceedings and the first notice was issued by Add. CIT only initiating the penalty proceedings and thereafter, the order was passed within the prescribed limitation period. In light of above discussions, we are of the considered view that the impugned order is not barred by limitation and the contentions so advanced by the ld AR in this regard are not found acceptable." 11. Reliance was also placed by him on a de....

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....by the Hon'ble Delhi High Court in the case of JKD Capital and Finlease Ltd. (supra) was that while finalising the assessment order dated 28th December 2007 the Assessing Officer ['AO'] in the concluding paragraph issued a direction to initiate proceedings against the Assessee under Section 271E of the Act. Admittedly, under section 271E of the Act, any penalty under Section 271E(1) can be imposed only by the Joint Commissioner of Income Tax ['Joint CIT']. Consequently, the AO referred the matter to the competent officer. The competent officer issued showcause notice dated 12.3.2012 initiating penalty proceedings under Section 271E. By order dated 20.3.2012 penalty was levied u/s.271E of the Act. The CIT (A) deleted the above penalty inter alia on the ground that, in terms of Section 275(1)(c) of the Act, the penalty order could have only been passed on or before 30th June 2008 reckoning the period of limitation from the date of AO's order i.e., 28.12.2007 and therefore, the penalty order passed on 20th March 2012 was barred by limitation. The Tribunal upheld the order of CIT(A). On further appeal by the Revenue, the Hon'ble Delhi High Court held as follows: ....

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....es a reference to the competent officer for imposition of penalty and therefore that view is preferable. We however notice that the Hon'ble Allahabad High Court did not express any such opinion and has in fact in paragraph-7 of its judgment held that it is not necessary to consider whether the period of six months should be calculated from the date of notice issued by the ITO or by the JCIT who was competent to levy penalty u/s.271-E of the Act. 15. In the case before the Hon'ble Allahabad High Court in the case of Gupta Mills Stores(supra), the facts were that ITO issued notice u/s.271-E on 1.8.2003 and the JCIT issued show cause notice u/s.271-E on 3.9.2004. The order imposing penalty u/s.271-E of the Act was passed by the JCIT on 29.3.2004 i.e., within 6 months from the end of the month in which the ITO issued notice u/s.271-E of the Act. Therefore it cannot be said that majority of High Courts have taken the view that initiation of penalty proceedings has to be reckoned from the date on which officer competent to impose penalty issue show cause notice and not when the AO who passed order u/s.201(1) of the Act, makes a reference to the competent officer for imposition of p....