TaxTMI 
TaxTMI 
TaxTMI 
2021 (9) TMI 982
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...., if,- (a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or (b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or (c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more: 3. In terms of the provisions of Sec.271-D of the Act, if a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted. 4. In the case of the Assessee in the course of assessment proceedings for AY 2009- 10 to 2011-12, the AO noticed that the Assessee had taken cash loans in violation of the provisions of Sec.269SS and hence penalty proceedings u/s.271-D were intiated in the Assessment orders for AY ....
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.... 2010-11 & 2011- 12 by orders of assessments both dated 3.11.2014. By order dated 13.11.2014 for AY 2009-10 and orders dated 4.12.2015 for AY 2010-11 & 2011-12, orders imposing penalty were passed imposing penalty on the Assessee of a sum of Rs. 7,26,00,000, 9,40,80,000 and 13,84,46,711/- respectively for AY 2009-10 to 2011-12. 8. Against the aforesaid orders imposing penalty u/s.271D and 271E of the Act, the Assessee preferred six appeals before the CIT(A). The contention of the Assessee in the appeals before CIT(A) was that the assessment orders in which the penalty proceedings u/s.271D and 271E of the Act were initiated were quashed and hence the orders imposing penalty u/s.271D and 271E of the Act should also be quashed. The CIT(A) accepted the contention and quashed the orders imposing penalty by observing as follows: Order relating to penalty u/s.271E, the following were the observations of the CIT(A): 10. Perusal of assessment orders for AYs 2009-10 to 2011-12 reveal that notices were issued for initiating penalty proceedings u/s 271E on 30/09/2014. It may be noted that assessment orders u/s 144 rws 147 were passed on 03/11/2014 in respect of AYs 2009-10 to 2011-12. 1....
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....'s submission that assessment orders for AYs 2009-10, 2010-11 & 2011-12 have been found to be unsustainable in law in as much as the same were passed without following the due process of law, and that these penalty orders which stem out of the same assessments orders which have been nullified also ought to be quashed, is also seen to be reasonable. 13. In view of the fact that the assessment orders for impugned assessment years have been found to be unsustainable in law, and also in view of the fact tilat appellant had not been afforded sufficient opportunity to explain the nature of transaction and nature of receipts during assessment proceedings, Penalty levied u/s 271D in respect of all three assessment years 2009-10, 2010-11 & 2011-12 are also found to be unsustainable and also opposed to principles of natural justice. 14. In the result the assessee's appeals are allowed." 9. Aggrieved by the orders of the CIT(A), the Revenue is in appeal before the Tribunal. The grounds of appeal of the Revenue in so far as it relates to penalty u/s.271D reads thus: 1. The order of the CIT (Appeals) is opposed to law and the facts and circumstances of the case. 2. On the facts....
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.... the Ld CIT(A) is justified in holding that the appellant was not afforded reasonable opportunity during assessment stage to represent his case, overlooking the facts that the assessment order itself records more than eight opportunities to the assessee over a period of more than six months and that the assessee was given sufficient opportunity in the penalty proceedings? 4. On the facts and circumstances of the case, whether the Ld CIT(A) is justified in holding that the penalty order stems out of the corresponding nullified assessment order and that such penalty order stemming out of such nullified assessment order is also unsustainable, whereas, it is established law that penalty proceedings are independent of assessment proceedings. 5. On the facts and circumstances of the case, the Ld. CIT(A) is erred in omitting to recognize that the basis for the penalty u/s 271E is cash repayments reflected by the assessee himself and it is the failure of the assessee to explain the same satisfactorily which has resulted the Range Head levying the pelanty. The fact of cash advance received, which is in fact admitted by the assessee himself, and application of section 269T 6. For these....
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....the assessment orders during the course of which penalty proceedings were initiated was irrelevant. On further appeal by the Revenue, the Hon'ble Rajasthan High Court held that penalty proceedings for default in not having transactions through the bank as required under Sections 269SS and 269T are not related to the assessment proceeding but are independent of it, therefore, the completion of appellate proceedings arising out of the assessment proceedings or the other proceedings during which the penalty proceedings under Sections 271D and 271E may have been initiated has no relevance for sustaining or not sustaining the penalty proceedings and, therefore, Clause (a) of Sub-section (1) of Section 275 cannot be attracted to such proceedings. If that were not so Clause (c) of Section 275(1) would be redundant because otherwise as a matter of fact every penalty proceeding is usually initiated when during some proceedings such default is noticed, though the final fact finding in this proceeding may not have any bearing on the issues relating to establishing default e.g. penalty for not deducting tax at source while making payment to employees, or contractor, or for that matter not maki....
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....d by the Taxation Laws (Amendment) Act, 1970 which came into effect with effect from April 1, 1971. The change was explained by the Board vide circular 56 dated March 19, 1971. Significantly, it postulated that Section 275 of the Income-tax Act which specified the time-limit for completion of penalty proceedings has been substituted by a new section. Under the existing section, penalty proceedings for concealment of income or defaults in furnishing the return or accounts called for by notice or failure to pay advance tax on the taxpayer's own estimate, etc., are required to be completed within two years from the date of completion of the proceedings in the course of which the penalty proceedings were commenced. The operation of this timelimit has resulted in practical difficulties in cases where the Appellate Assistant Commissioner remands the appeal against the assessment for further enquiry by the Income-tax Officer or deletes or reduces the addition made on account of concealed income and the Department takes up the matter in further appeal before the Appellate Tribunal. Sometimes, a final decision on the quantum of the concealed income becomes available only after the expir....
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....nt of it. 28. By substituting Section 275(1), which became operative from April 1, 1989, the provision divided cases for the purpose of prescribing limitation for completing penalty proceedings into three categories: (i) Category I covers cases where the assessment to which the proceedings for imposition of penalty relate is the subject-matter of an appeal to the Deputy Commissioner (Appeals) or the Commissioner (Appeals) under Section 246 or with effect from June 1, 2000 Section 246A or an appeal to the Appellate Tribunal under Section 253; (ii) Category II covers cases where the relevant assessment is the subject-matter of revision under Section 263 ; and (iii) Category III covers all other cases not falling within Category I and Category II which is governed by Clause (c). 29. By dividing into three categories the period of limitation for cases falling under category (i) i.e. Clause (1)(a) is 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 the order of the Deputy Commissioner (Appeals) or the Commissioner (Appeals) or, as the case ....
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....gs are required to be initiated. 35. We have also noticed that Sections 271 and 273 were the two original penalty provisions, which require the penalty proceedings to be initiated during the course of relevant assessment proceedings or the other relevant proceedings as the case may be. The penalty proceedings could also be initiated during the appellate proceedings arising out of the relevant assessment proceedings. It is only where the assessment proceedings are independent and not directly linked to the assessment proceedings that the result of such proceedings in the course of which the penalty proceedings were initiated does not affect the levy of penalty. On such penalty proceedings, independent of the assessment proceedings Clause (c) has been made applicable. In this category the period of limitation for completing the penalty proceedings is linked with the initiation of the penalty proceedings itself. 36. In such cases, the penalty proceedings can be initiated independent of any proceedings but obviously, the penalty proceedings can be initiated only when the default is brought to the notice of the concerned authority which may be during the course of any proceedings an....