TaxTMI 
TaxTMI 
2020 (9) TMI 467
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....Act. 3. That the Ld. CIT(A) erred in sustaining the penalty u/s 271D of the Income Tax Act made by the Ld. AO amounting Rs. 36,45,841/-. 4. That the Ld. CIT(A) erred in approving the penalty order u/s 271D of the Act, without appreciating the facts of the case and submission made before him. 5. That the Ld. CIT(A) erred in approving the penalty order u/s 271D of the Act, without appreciating the fact that Ld. AO was incorrect and unjustified in holding that there was no reasonable cause for not complying with the provision of section 269SS. 6. That the Ld. CIT(A)erred in maintaining the penalty order passed u/s 271D of the Income Tax Act, when the said order was time barred by limitation of time. 7. That the ld. CIT(A) and Ld. AO also erred in not following various judgments of High Court and ITAT. 8. That the appellant carves leave to add, alter, modify or delete any of the ground of appeal. Grounds of appeal raised in ITA No.1371/Del./2019 1. The appellant is the co-operative society registered under the cooperative societies act and is engaged in carrying on the business of providing credit facilities to its members. 2. The case was selected for scrutiny under C....
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....onically on various dates. 5. The Learned Senior Counsel of the assessee referred to Ground 1 of the appeals and submitted that the orders imposing penalty under section 271D and 271E of the Act are non-est, bad in law and without jurisdiction. He , at the outset, referred to the order of the assessment dated 26/12/2016 (placed on page 34 to 39 of the paper book) to show that there is no initiation /satisfaction in the order of the assessment to levy penalty under section 271D/271E of the Act and as such in absence of any satisfaction for violation of the provision of the 269SS as well as 269T having been recorded by the learned Assessing Officer in the order of the assessment, the penalties levied by the learned Additional CIT are without jurisdiction . 6. The learned DR interrupted and objected that the ground raised by the assessee is general in nature and no specific ground of satisfaction to be required by the Assessing Officer for initiating penalty, has been raised by the assessee before the Tribunal in appeal memo. He further submitted that this issue has been raised for the first time before the Tribunal, and thus, it should have been raised by way of additional ground o....
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....arned DR was given sufficient opportunity to respond the issue raised by the learned Counsel of the assessee. Both the parties were heard at length on this issue. 8. On the issue of recording satisfaction by the Assessing Officer for initiating penalty proceedings, the Learned Senior Counsel has cited number of decisions, but relied mainly on decision of the Hon'ble Supreme Court in the case of CIT vs. Jai Laxmi Rice Mils (379 ITR 521) and the decision of the Tribunal Delhi bench in the case of Narsi Iron and Steels P Ltd (ITA No. 2866/Del/2013). 9. In the case of Jai Laxmi Rice Mills (supra), while framing the assessment, the Assessing Officer observed that the assessee had contravened the provisions of Sec. 269T of the Act and because of this the Assessing Officer was satisfied that penalty proceedings Under Sec. 271E of the Act were to be initiated. The original assessment order was set aside by the Learned CIT(A) for passing a fresh assessment order de novo. The factual matrix and the question of law involved has been summarised by The Hon'ble Supreme Court as under: "After remand, the Assessing Officer passed a fresh assessment order. In this assessment order, however, no....
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....ed on 01.07.2020 11. On the contrary, the learned DR submitted that during assessment proceeding, the Assessing Officer raised query of violation of the provision of section 269SS and the assessee duly responded. He referred to submission of the assessee dated 13/12/2016 filed before the Assessing Officer. He submitted a copy of said reply of the assessee dated 13/12/2016 before us. On perusal of the said reply, it is found that the assessee filed detail of loan/deposits taken exceeding Rs. 20,000 during the year and submitted that provisions of section 269SS was not applicable in the case of the assessee as it was a cooperative bank within the meaning of Part V of Banking Regulation Act, 1949. 12. The learned DR further submitted that the fact of raising query during assessment proceeding of any violation under section 269SS/269T of the Act is also clear from the submission of the assessee filed before the Learned CIT(A). The Ld. CIT(A) has summarized submission of the assessee on page 4 of both the impugned orders. In the said submissions, the assessee submitted that with reference to the provisions of section 273B of the Act, the learned Assessing Officer did not consider to ....
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.... He submitted that in the case of Narsi Iron and Steel P Ltd. (supra), the satisfaction was recorded after the passing of the assessment order and therefore, the said case is distinguishable on facts. 15. The second issue which was raised by the learned Senior Counsel is that no notice under section 271D or 271E of the Act has been issued by the Assessing Officer and the only notice which was issued was in respect of 271(1)(c) of the Act, which is a specific notice for an alleged default. According to him, there was no initiation of the proceeding under section 271D or 271E of the Act by the AO. The learned Counsel submitted that finding of the Ld. CIT(A) in his order at page 19 that the AO was not authorized to initial penalty proceeding, is misconceived in law and contrary to the judgment of the Hon'ble Supreme Court in the case of CIT vs Jai Laxmi Rice Mills (supra). 16. The learned DR supported the finding of the Learned CIT(A). He also referred to the decision of the Hon'ble Madhya Predesh High Court in the case of Nitin Agrawal Vs JCIT reported in 412 ITR 309, wherein it is held that the DCIT is not competent for initiation of the penalty proceedings under section 271D of ....
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....nth of initiation of the penalty proceeding by the Joint Commissioner of Income Tax and not from the date of assessment order. 9. Learned Senior counsel for the petitioner has drawn our attention to the contents of notice dated 20.12.2016, issued by the Deputy Commissioner of Income Tax during the assessment proceedings and Section 274, 269-SS, 269-T, 271- D, 274-E and 275 of the Income Tax Act and submitted that the limitation for initiation of penalty proceeding for imposition of penalty under Section 271D, 271E of the Income Tax Act start from 20.12.2016 and under Section 275(1) (C), the limitation of six months start from 20.12.2016. The second notice issued on 22.9.2017 is barred by time and the learned Joint Commissioner of Income Tax had no jurisdiction to issue the same. To support the aforesaid, he has placed reliance on the decision of the Calcutta High Court in the case of CIT Central - III V/s. Narayani& Sons (P) Ltd. reported as (CALHC) (2016) 289 CTR (Cal) 301 , decision of the Delhi High Court in the case of Commissioner of Income Tax -VI V/s. Worldwide Township Projects Ltd., 2014 (269) CTR 444 (Delhi), in the case of PCIT V/s. JKD Capital & Fin lease Ltd. (2015) ....
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....present case, the Assessing Officer issued show cause to the petitioner under Section 269- SS and 269(2) of the Income Tax Act to examine vide show cause notice dated 20.12.2016, ie., during the pendency of the assessment proceedings to examine the violation of these provisions of the Income Tax Act. No notice under Section 270-D or 279-E read with Section 279 of the Income Tax Act was ever issued by the Assessing Officer. The petitioner was wrongly attempted to establish the show cause notice dated 20.12.2016 as a legal notice under Section 271-D / 271-E read with Section 274 of the Income Tax Act. 11. Section 271-D and 271-E provide that levy of penalty in contravention of Section 269-SS and 269-T, as per subsection^) to both these sections in penalty imposition under sub-section (1) of these provisions shall be imposed by the Joint Commissioner of Income Tax. From the statutory provision, it is clear that the competent authority to levy the penalty is Joint Commissioner, therefore, only the Joint Commissioner can initiate proceeding for levy of penalty. 12. Insofar as the judgment of the Apex Court in D.M.Manasvi V/s. Commissioner of Income Tax, Gujarat II, [1972] 86 ITR 557....
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....tent and the proceedings thereafter would be proceedings without jurisdiction. If that be so, the initiation of the penalty proceedings is only with the issuance of the notice issued by the Joint Commissioner to the assessee to which he has filed his reply. 11. The only case of the assessee is that if the period of limitation prescribed in Section 271(1)(c) is reckoned from the date of the assessment order dated 6.11.2007, the penalty order passed by the Joint Commissioner on 29.7.2008 is beyond the time permitted in the above section. As we have already held, the initiation of the penalty proceedings is not by the Assessing Officer but by the Joint Commissioner and if that be so, the order levying penalty passed by the Joint Commissioner is within the time prescribed in Section 275(1)(c). 12. Insofar as the judgment of the Apex Court in D.M.Manasvi v. Commissioner of Income Tax, Gujarat II [1972] 86 ITR 557is concerned, that was a case where penalty was levied under Section 271(1)(c) and as is evident from the provision itself, the proceedings under that Section are to be initiated on the basis of the satisfaction of the officers mentioned therein including the Assessing Offic....
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....ubmitted the Hon'ble Supreme Court in the case of CIT vs. Bajpur Co-operative Sugar Factory Ltd. reported in 172 ITR 321 have held that, the credits appearing in the account of its customers, cannot be regarded as deposit within the meaning of "deposit", despite the fact such amounts were reflected in the accounts as deposits. A copy of the aforesaid judgment is placed at pages 74 - 83 of Paper book. In this very judgment it was held that in the absence of any bye-law, empowering the society to receive deposits, the amounts of credits in the account of its customers cannot be held to be a deposit. It is thus submitted the findings of the learned Addl. CIT is wholly erroneous in law and is also in conflict with its own stand in the preceding and later assessment year. 20. It is further submitted that the appellant at para 11.3 at page 12 of its written submissions had also submitted that clause (iii) of the Explanation to section 269T of the Act specifically provides that 'loan or deposit' means any loan or deposit of money which is repayable after notice or repayable after a period. In the instant case it is submitted, there is a complete absence of any such stipulation of the dep....
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....n, counsel for the assessee relied on judgments in Commissioner of Income Tax v. T.Perumal (Indul.) [2015] 370 ITR 313 (Mad) and Commissioner of Income Tax v. Muthoot Financiers and another [2015] 371 ITR 408 (Delhi).Reading of these judgments show that these cases were decided on the basis of the documents that were available before the Court. On the other hand, insofar as these cases are concerned, though it is the admitted case that amounts were received from partners and other sister concerns of the assessee and were repaid, there is no material whatsoever to infer that these receipts were anything other than loans or deposits. There is no law that every receipt from a partner or a sister concern cannot, in all circumstances, be treated as a loan or deposit. On the other hand, the nature of the receipt would depend upon the agreement between the parties and the evidence that is produced. As we have already stated, there is no material whatsoever to accept the case of the assessee that these are loan or deposit. In such circumstances, the findings of the Assessing Officer confirmed by the Appellate Commissioner and the Tribunal that it was a loan or deposit that was received by ....
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.... of ground No. 5 submitted that the assessee was under bonafide belief that amounts deposited and withdrawn by the member were not in contravention of section 269SS and 269T of the Act. He submitted that Revenue in the preceding or later years, had never alleged that the amount credited to the accounts of the member was a sum accepted by the assessee as deposit or an amount received as loan. Thus, there was a reasonable cause when the assessee held in view that it had neither accepted the deposit nor had repaid any loan. The assessee has also placed before us the complete ledger account of the member in the preceding and later assessment years, wherein similar amounts reflected as credits in cash. In fact, even the statutory auditor (Tax Auditor) had never made any adverse comment in their report as they were also of the belief that the assessee had not accepted any deposit so as to attract violation of provision of section 269SS/269T of the Act. 26. He further submitted that in the interest of the justice no penalty should be levied as assessee was under bonafide belief that it has not accepted any deposits nor has it repaid any loans or deposit in violation of the statutory prov....
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....vided u/s 273B of the Act. Further it is submitted that it is well settled rule of law that ignorance of law is an excuse. In fact, there is no concept that ignorance of law is no excuse as has been held by the Apex Court in the case of Motilal Padampat Sugar Mills Co. Vs. State of Uttar Pradesh & Others, 118 ITR 326 at Pg. 329 (SC). 29. The learned DR, on the other hand, relied on the order of the Learned CIT(A) to support that no reasonable cause under section 273B exist in the case of the assessee. 30. We have heard rival submission of the parties on various issues raised before us and also perused the relevant material on record. First of all, we would like to adjudicate on the ground No. 5 related to whether reasonable cause for not complying with the provision of section 269SS or 269T exist in the case of the assessee. Before the learned Additional Commissioner of Incometax, no reply was filed on behalf of the assessee and he held that there was no reasonable because for not complying with the provisions of the 269SS/269T. Before the Ld. CIT(A), the assessee contended that the society is situated in the remote area which is known as Narela Village and most of the members ar....
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....the return of the relevant assessment year. The society has been dealing in financial, monetary and banking matters, complying with various rules laws and statutes, also guided and represented by legal and accounting professionals at various forums. Hence ignorance of law /rules is no alibi for the appellant assessee." 30.1 Before us, the Learned Counsel has submitted that the assessee is in existence for last many years and filing return of income but no such penalty has been levied in the case of the assessee and it is for the first time violation of the section 269SS/269T has been pointed out in the case of the assessee. He also mentioned that even the TAX Auditor has not made any remark in their Tax Audit Reports regarding violation of section 269SS or 269T in the instant year or in the earlier years. It is claimed by the Learned Counsel that in view of the past history of the case, the assessee was under bonafide belief that alleged loan or deposit accepted or repayment thereof was not in violation of section 269SS or 269T. It has been also emphasized that the society is operating in rural area and depositors are illiterate persons. In our opinion, belief on the part of the a....