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2020 (9) TMI 467
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....ed in invoking provisions of section 269SS of the Income Tax 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 carryin....
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....learned Counsel of the assessee filed a paper-book containing pages 1 to 234, case law paperbooks and other documents physically as well as electronically 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 furthe....
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....ing heard on that ground." 7. In view of the above decision, the issue raised by the learned Counsel of the assessee by way of the oral submission was admitted and the Learned 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 la....
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....isions: a) Shri T. Shiju Vs. JCIT (ITA No. 2829/Chny/2018) (see Page 11-15 of PB) b) Smt. S.B. Patil Vs. JCIT (ITA No.1053 & 1054/Bng./2014) files on 01.07.2020 c) M/s. KS Chawla & Sons vs. JCIT filed 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....
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....proceedings. According to him, in the said case, the satisfaction was not recorded by the Assessing Officer, who passed the fresh assessment order and issue was not that the satisfaction was to be recorded only in the assessment order. 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 r....
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....ection 275 of the Income Tax Act. 8. It is only Joint Commissioner of Income Tax who is empowered to initiate as well as impose the penalty under Section 271-D or 271-E of the Income Tax Act. Thus, the limitation period of six months to be reckoned from the end of month 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 ....
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.... Reading of these judgments shows that these cases were decided on the documents, which were available before the court. In all those matters, the notice was issued by the Assessing Officer on the date of which the assessing order was passed or after passing of the assessment order. In the 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 ....
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....ch initiation of proceedings could not have been done by the Assessing Officer. The statement in the assessment order that the proceedings under Section 271D and E are initiated is inconsequential. On the other hand, if the assessment order is taken as the initiation of penalty proceedings, such initiation is by an authority who is incompetent 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 ....
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....ch has now been increased to Rs. 300/- per month). A Copy of Bye-laws have been placed at pages 1 -10 of paper book and Bye-law XI is at Page 7 of Paper Book. Thus in view of the fact, there is no provisions in the bye-laws of the society, the allegation that the assessee has accepted any deposits is untenable, since it is the beyond the scope of its object. It is submitted 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 p....
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....ela High Court in the case of Grihlakshmi Vision (supra) wherein the money received from the partners/sister concern was also held in the nature of the loan or deposit, as under: "15. The third contention that was raised by the assessee was that if money is taken from partners or sister concerns, it could not be treated as loans or deposits. In support of this contention, 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 w....
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....expires after expiry of six-month from the end of the financial year in which the proceedings, in the course of which action for imposition of the penalty has been initiated are completed or the six-month from the end of the month in which the penalty initiated by the joint/additional Commissioner of the income tax, whichever period expires later. 25. The Learned Counsel in support 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 th....
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.... directed to be cancelled. 28. Lastly it is re-emphasized and without prejudice that the assessee was labouring under misconception of law, as it was of the opinion that the amounts credited is not an acceptance of a deposit or was any return of loan or deposit, when amounts were withdrawn by the members. It is submitted thus there being a reasonable cause, no penalty could have been levied, as is provided 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....
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....ans/deposits) in excess of Rs. 20,000/- the Appellant stated that provisions do not apply as in the case of a Cooperative bank. This argument has already been discussed earlier. 4.11 Finally the appellant has also said that they were under the bonafide belief that they did not have to follow this provision. This argument also carries no weight. The appellant claims to be a society established in the year 1989 which was over 25 years old at the time of filing 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 Aud....