TaxTMI 
TaxTMI 
TaxTMI 
2023 (5) TMI 63
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....el/2019 1. That the Learned Joint Commissioner of Income Tax and Learned Commissioner of Income Tax (Appeals) have erred in not appreciating the facts of the appellant's case, properly. 2. That the Learned Joint Commissioner of Income Tax has erred is in imposing a penalty and Learned Commissioner of Income Tax (Appeals) has erred in confirming the penalty u/s 271D in contravention of 269SS after the expiry of limitation period provided u/s 275(1)(c) of the income tax Act, 1961. 3. That the Learned Joint Commissioner of Income Tax has erred in imposing a penalty of Rs. 16,71,24,134/- u/s 271D, of the Income Tax Act,1961 and Learned Commissioner of Income Tax (Appeals) has erred in confirming the same. 4. That the orders of the Learned Joint Commissioner of Income Tax and Learned Commissioner of Income Tax (Appeals) are bad in law as well as on the facts of the appellant's case. ITA No. 3108/Del/2019 1. That the Learned Joint Commissioner of Income Tax (JCIT) and Learned Commissioner of Income Tax (Appeals) have erred in not appreciating the facts of the appellant's case, properly. 2. That the Learned JCIT has erred in imposing a penalty u/s 271E in contravention of 26....
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....ersheet entry dated 23.02.2016 sought list of members of the assessee society from whom deposits have been accepted. On perusal, cash deposits of Rs. 16,71,24,134/- and repayment of deposits of Rs. 2,01,58,524/- were found to be in contravention of section 269SS and 269T respectively of the Act. In para 3.2, the Ld. JCIT noted from the assessee's reply dated 15.03.2017 the contention of the assessee that audit report under section 44AB of the Act obtained from an independent Chartered Accountant also confirmed that the provisions of section 269SS and 269T are not applicable to the society. The society is under bonafide belief that the deposits are made/repaid voluntarily by the members and are genuine. The case of the assessee is of mutually aided society for the benefit of its members. The penalty proceedings be kindly dropped. 5. The Ld. JCIT did not accept the contention of the assessee by observing that the Chartered Accountant mentioned against column 24(a) of the report 'nil'. So the Chartered Accountant tried to conceal the facts. According to Ld. JCIT genuineness of deposits in cash and repayment of deposits is not a criteria while considering the provisions of section 269....
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....'ble Supreme Court held that there was no satisfaction recorded regarding penalty proceedings under section 271E of the Act, though in that order the Assessing Officer wanted penalty proceedings to be initiated under section 271(1)(c) of the Act. Thus, in so far as penalty under section 271E is concerned, it was without any satisfaction and therefore no such penalty could be levied. The assessee also relied on the decision of Mumbai ITAT in Keshu Ramsay vs. JCIT (2006) 5 SOT 9 (Mumbai). 6.2 It was contended by the assessee that the impugned penalty order is barred by limitation as assessment under section 143(3) of the Act was made on 30.03.2016. The first penalty notice was issued on 04.05.2016 and the penalty order was passed on 24.04.2017 which is barred by limitation as provided under section 275(1)(c) of the Act. As per section 275(1)(c) no order of penalty can be passed 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. It was the submission of....
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....s. 6.8 Vide letter dated 25.03.2019 to the Ld. CIT(A), the assessee pointed out that during the penalty proceedings the Ld. JCIT had issued/served notice dated 04.05.2016, 26.07.2016 and 29.09.2016 at the correct address of the assessee fixing hearing on 16.05.2016, 05.08.2016 and 06.10.2016 respectively. In response to each notice the assessee submitted reply with correct name and PAN. Details called for relating to deposits received in cash, repayments made in cash, confirmation of account of members etc. were submitted which were verified by the Ld. JCIT. It was thus submitted that the Ld. JCIT erred in computing the time limit from 29.11.2016 as against from 28.04.2016 when the Ld. AO made reference for initiation of penalty proceedings on the basis of which notices dated 04.05.2016, 26.07.2016 and 29.09.2016 were issued. The assessee further pointed out that the Ld. JCIT sought to rely on decisions in which Revenue had issued notices to non existing entities and the courts unanimously held that such notice(s) contain jurisdictional defect and not procedural irregularity curable by invoking the provisions of section 292B of the Act. Therefore, the Ld. JCIT has incorrectly take....
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.... sent to the Ld. JCIT vide letter dated 28.04.2016. However it was subsequently informed by the Ld. AO on 28.11.2016 to the Ld. JCIT that there was error in the said intimation/request as the name of the assessee was given wrong and fresh proposal to initiate penalty was sent to Ld. JCIT who vide ordersheet entry dated 29.11.2016 filed the notice(s) and stated that fresh notice is to be issued with correct name of the assessee along with PAN. 7.3 On page 65 of the appellate order, the Ld. CIT(A) observed and held as under: "The report of the A.O. dated 01.02.2019 was duly provided to the appellant. It is noted by me that the penalty proceedings which had been initiated by issue of notice dated 04.05.2016 stood nullified, as were other notices issued till 29.11.2016. This is for the reason that the earlier notices issued did not carry the name of the appellant and did not carry the PAN of the appellant. It is noted that when the notice for levy of penalty itself does not specify the name (or even the PAN) the same is liable to be treated as invalid. The appellant has challenged that the notices issued prior to 29.11.2016 were not bad and were actually proper notices as per provis....
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....is without jurisdiction. He referred to Jai Laxmi Rice Mills's case (supra). He further submitted that penalty is not leviable for technical/venial breach of statutory provision as held by the Hon'ble Supreme Court in Hindustan Steel vs. State of Orissa 83 ITR 26 (SC). 9.2 It was pointed out by the Ld. AR that as per section 273B, penalty under sections mentioned therein is not exigible if there is reasonable cause. On identical facts in the case of Mamurpur Co-operative Thrift and Credit Society Ltd. vs. Addl. CIT, Delhi Bench of the Tribunal in its order dated 10.09.2020 in ITA Nos. 1370 & 1371/Del/2019 for AY 2014-15, held that considering the bonafide and genuine transaction reasonable cause in terms of section 273B of the Act did exist for not complying with the provisions of section 269SS and 269T and cancelled the penalties levied under section 271D and 271E of the Act. Our attention was also drawn to the CBDT Circular No. 415/6/2000-17(Inv I) dated 25.03.2004 wherein the Board took note of the fact that, in the cases of the Credit Co-operative Societies, penalties under section 271D and 271E are being imposed without appreciating the genuine difficulties faced by them in c....
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.... been done in the case of the assessee. Decision of Hyderabad Bench of the Tribunal in Dillu Cine Enterprises P. Ltd. vs. Addl. CIT (2002) 80 ITD 484 (Hyd.) was relied upon. 9.7 Impugned penalties were also assailed on the ground that no proceedings were pending on the date of initiation of penalty proceedings. So the orders passed are void and without jurisdiction as held in CIT vs. Rajinder Kumar Somani (1980) 4 Taxman 549 (Delhi). 10. The Ld. DR strongly supported the order of the Ld. CIT(A). He submitted that recording of satisfaction in assessment order is not required for initiation of proceedings under section 271D and 271E of the Act. Due satisfaction was recorded by the Ld. AO while referring the issue to Ld. JCIT for initiation of penalty proceedings. Scanned copies of Ld. AO's letter may be seen in the order of the Ld. CIT(A). 10.1 The Ld. DR pointed out that the initial SCN was treated as invalid and penalty proceedings initiated by such notice stood nullified. Fresh SCN was issued by the Ld. JCIT after making an ordersheet entry dated 29.11.2016. The Ld. CIT(A) has therefore observed that original proceedings were brought to end. Wrong notice without name and PAN do....
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....e light of the decision of Hon'ble Delhi High Court in CIT vs. Worldwide Township Projects Ltd. in ITA No. 232/2014 dated 21.05.2014 and the CBDT Circular F. No. 279/Misc./M-140/2015-ITJ dated 26th April, 2016 stating therein that the period of limitation of penalty proceedings under section 271D and 271E of the Act is governed by the provisions of section 275(1)(c) of the Act, we proceed further. 12.2. For ready reference, section 275 of the Act which falls under "Chapter XXI. Penalties Imposable", is reproduced below:- "275.(1) No order imposing a penalty under this chapter shall be passed - (a) xxx (not applicable) (b) xxx (not applicable) (c) in any 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 initiated whichever period expire later." 12.3. In Sharma & Sons (JP) vs. CIT 151 ITR 333 (Raj.) the Hon'ble Rajasthan High Court held that the language of section 275 is clear and explicit. It is mandatory. It embodies a rule of limitation which is strictly enforceable. An order....
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....he letter F. No. ITO/W-60(5)/2016-17/13 dated 28.04.2016 of the Ld. AO referring the case for initiation of the impugned penalty proceedings for contravention by the assessee of the provisions of section 269SS and 269T to the Ld. JCIT which formed the basis of issuance of SCN dated 04.05.2016 is at page 56 of the Ld. CIT(A)'s order. It is observed therefrom that in this reference letter the Ld. AO has mentioned the names of the assessee as M/s. Delhi Taxi Co-op. Thrift & Credit Society. This reference letter dated 28.04.2016 is issued by the same Ld. AO who had framed assessment in the case of the assessee for AY 2013-14 on 30.03.2016 barely 28 days earlier in the name of M/s. Delhi State Taxi Operators Co-operative Thrift Credit & Service Society Ltd. Even assuming for a moment but not admitting that it was a case of human error on the part of the Ld. AO to make a little mistake in reference letter in writing the name of the assessee correctly but admittedly there was no mistake at all in the address of the assessee in SCN(s) issued by the Ld. JCIT(s) as pointed out above. It is not the case of the Revenue that SCN issued to the assessee by the Ld. JCIT on 04.05.2016 was not serve....
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....ing the impugned penalty under section 271D and 271E of the Act. 14.7 The assessee submitted before the Ld. CIT(A) that the assessment under section 143(3) for AY 2013-14 was made on 30.03.2016 and the first penalty notice under section 271D and 271E was issued on 04.05.2016 and the penalty orders have been passed on 24.04.2017 in violation of section 275(1)(c) of the Act and thus are barred by limitation. Reliance among others was placed on the decisions of Hon'ble Delhi High Court in ITO vs. Dinesh Jain (2014) 53 taxman.com 108 (Delhi) and Hon'ble Supreme Court's decision in Hissaria Brothers (2016) 74 taxman.com 22 (SC) wherein it is held that period of limitation for purpose of penalty is to be reckoned from date of first show cause notice issued for imposing penalty. 14.8 Strangely enough the impugned penalty orders passed by the Ld. JCIT on 24.04.2017 do not even mention the fact of issuance of first SCN dated 04.5.2016 followed by subsequent notices dated 26.07.2016 and 29.09.2016. The Ld. CIT(A), however observes at page 65 of his appellate order that the penalty proceedings which had been initiated by issue of notice dated 04.05.2016 stood nullified as were other notices....
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....hrift and credit facilities to its members who are the taxi operators. The assessee claimed deduction under section 80P amounting to Rs. 4,96,78,980/- which the Ld. AO allowed to the assessee. However, income of Rs. 1,40,000/- from house property and miscellaneous income of Rs.5,980/- were brought to tax. This assessment was completed on total income of Rs. 1,45,980/- as against income declared at Nil. It is observed that there is no initiation/satisfaction in the order of assessment to levy penalty under section 271D and 271E of the Act. The submission of the Ld. AR before us is that in the absence of any finding/satisfaction for violation of the provisions of section 269SS and 269T recorded by the Ld. AO in the order of assessment passed under section 143(3) of the Act which is a condition precedent, even the initiation of penalty proceedings is without jurisdiction. Before the Ld. CIT(A) as also before us the reliance was placed on the decision of Hon'ble Supreme Court in CIT vs. Jai Lakshmi Rice Mils (2015) 64 taxmann.com 75 (SC) and the decision of Hon'le Delhi High Court in CIT vs. Rajender Kumar Somani (1980) 125 ITR 756 (Delhi) and decision of Bombay Tribunal in Kushu Ramsa....
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....owed. We deliberated. In our opinion, it is imperative to keep in mind the legislative intent in order to judicially appreciated a fact situation wherein the loans/deposits brought in by the assessee were not to explain its unaccounted cash and there was no material on record to suggest that by way of accepting loans/deposits in cash the assessee had introduced its unaccounted cash in books of account in the garb of loans. There is no allegation at all against the assessee that by accepting loans/deposits in cash its intention ever was to avoid payment of tax or to defraud Revenue. 18. The case of the assessee has along been that it is a co-operative society engaged in the business of banking by providing credit facility to its members and as such neither section 269SS nor section 269T of the Act is applicable to it. Since inception 63 years ago the assessee was under a bonafide and genuine belief that it being a credit thrift society could accept from its members sums in cash and advance to them such sums in cash and that there is no prohibition to do so. The assessee pleaded before the Ld. JCIT and the Ld. CIT(A) that for its default there existed reasonable cause within the mea....
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....nd 271E shall be imposable on the person or the assessee if he proves that there was reasonable cause for the failure. During penalty proceedings before the Ld. JCIT, the assessee vide reply dated 15.03.2017 submitted that the audit report under section 44AB of the Act obtained from an independent Chartered Accountant confirmed that the provisions of section 269SS and 269T are not applicable to the society; the provisions of section 269SS and 269 have no application to the facts of the case and the society is under bonafide belief, the deposits are made/repaid are voluntarily by the members and are genuine; it is a case of mutually aided society for the benefit of its members and the proceedings for imposing penalty under section 271D and 271E may kindly be dropped. The explanation was not acceptable to the Ld. JCIT. In the statement of facts filed by the assessee before the Ld. CIT(A) it stated that the society works on the concept of mutuality and engaged in thrift and credit business, welfare activities of its members and employees and accepting deposits from its members and redeploying the funds by way of advancing loans to its members. It was further stated that as the nature ....
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....relied upon the decision of Hon'ble Supreme Court (supra) to justify levy of impugned penalty upon the assessee but he failed to appreciate that none of the observations of the Hon'ble Supreme Court apply to the facts of the assessee's case. It is not a case of search operations conducted on the assessee. There is no allegation levelled by the Revenue that false explanation at any point of time has been given by the assessee. Neither any false entry was ever detected by the Revenue in the books of account of the assessee. We are at pains to say that further observations made by the Hon'ble Supreme Court in the decision (supra) escaped the attention of the Ld. JCIT/CIT(A). The Hon'ble Supreme Court further observed in para 19 that it is important to note that another provision, namely section 273B of the Act was also incorporated which provides that notwithstanding anything contained in the provisions of section 271D no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision if he proves that there was reasonable cause for failure to take a loan otherwise than by account payee cheque or account payee demand draf....
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....easonable cause for having committed that lapse. 24. We may also refer to the decision of the co-ordinate bench of Delhi Tribunal in the Mamurpur Co-operative Thrift and Credit Society Ltd. vs. Addl. CIT rendered on 10.09.2020 in ITA No. 1370 & 1371/Del/2019. In this case also the assessee is a co-operative society registered under the Co-operative Society Act and is engaged in carrying on the business of providing credit facilities to its members. The assessment year involved is 2014-15 in which for the first time violation of section 269SS/269T has been pointed out. Even the tax auditor has not made any remark in their Tax Audit Report regarding violation of section 269SS or 269T in this year or in earlier years. In view of past history of the case the assessee was under bonafide belief that alleged loan or deposit accepted or repayment hereof was not in violation of section 269SS or 269T. On these facts which are akin to the case under consideration before us the Tribunal recorded the following findings and cancelled the penalty levied under section 271D and 271E of the Act :- "In our opinion, belief on the part of the assessee in view of the past history of the case that dep....