TaxTMI 
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2025 (9) TMI 83
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....n ITA No. 268/JP/2025 for A.Y 2013-14 may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are identical except the difference in the amount of penalty levied. The ld. AR did not raise any specific objection against taking that case as a lead case. Therefore, for the purpose of the present discussions, the case of ITA No. 268/JP/2025 for A.Y 2013-14 is taken as a lead. 4. Before moving towards the facts of the case we would like to mention that the revenue has assailed the appeal for assessment year 2013-14 in ITA No. 268/JP/2025 on the following grounds; "1. (i) Whether on the facts and circumstances of the case the Id. CIT(A) has erred in deleting levy of penalty by JCIT/Addl.CIT only on technical ground without giving any finding on the merits of levy of penalty? (ii) Whether on the facts and circumstances of the case the Id. CIT(A) has erred in holding that the relevant date for determining the limitation period for imposing penalty u/s 271E is the date when the reference was made by the A.O to the JCIT/Addl.CIT and not....
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....ave to add, amend or withdraw any of the ground of appeal during the course of appeal proceeding. 4.2 In ITA No. 271/JP/2025, revenue has raised following grounds: - 1. (i) Whether on the facts and circumstances of the case, the Id.CIT(A) has erred in deleting levy of penalty by JCIT/Addl.CIT only on technical ground without giving any finding on the merits of levy of penalty? (ii) Whether on the facts and circumstances of the case, the Id.CIT(A) has erred in holding that the relevant date for determining the limitation period for imposing penalty u/s 271E is the date when the reference was made by the A.O to the JCIT/Addl.CIT and not the date when show cause notice issue by the JCIT/AddI.CIT ignoring the legal aspect that the A.O is not allowed to imposed penalty u/s 271E and therefore reference made by A.O has no bearing on deciding the limitation date for imposing penalty u/s 271E? (iii) Whether on the facts and circumstances of the case, the Id.CIT(A) has erred ignoring the decision of Hon'ble Kerla High Court in the case of Grihalaxmi Vision v Addl.Commissioner of Income Tax, Range-1, Kozhikode' in ITA No 83 & 86 of 2014. Where in it was h....
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....year under consideration. Further, the assessee has filed copy of loan confirmation account of M/s Mohit Jewellers which reveals that there was opening un-secured loan of Rs. 11,04,37,506/- and the assessee further took loans amounting to Rs. 71,35,275/- on different dates during the year and made re-payment of Rs. 71,35,275/- from 8 January, 2013 to 21 January, 2013 by cheques. In the confirmation account of M/s Mohit Jewellers it is found that re-payment of loan has been shown by way of sale amounting to Rs. 9,36,57,733/- on 31st March, 2013 against un-secured loan. Hence, it is evident that the assessee has repaid loan amounting to Rs. 9,36,57,773/- by other than account payee cheques which is contravention to the provisions of section 269T of the Act. The Assessing Officer, i.e., ACIT, Central Circle-2, Jaipur referred the matter to Addl. CIT, Central Range, Jaipur vide his office letter No. 3333 dated 20.01.2020 for initiation of penalty proceedings under section 271E of the Act. Accordingly, a notice under section 274 r.w.s. 271E of the Act was issued on 24.02.2022 fixing the case for hearing on 27.03.2022. But on the date of hearing neither any reply from the assessee ....
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....by passing journal entry of Rs. 9,36,57,733/ for the outstanding amount due from the said concern on account of sales, it is to be stated that such repayment is in clear contravention of the provisions of Section 269 T of the Act. Therefore, considering that provision of the section the contention of the assessee that the repayment of loan by way of adjustment through journal entries would not come within the ambit of Section 269T and the said contention was not acceptable as per his contention. As Section 269T requires the entities specified therein not to make repayment of loan/deposit together with interest, if any, otherwise than by, an account payee cheque/bank draft if the amount of loan/deposit with interest, if any, exceeds the limits prescribed therein. Therefore, the contention of the assessee that there is no violation of the loan has been repaid by debiting the account through journal entries was not considered as tenable. Ld. AO placed reliance on the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Triumph International Finance (I) Ltd ITA No.5746/2010 (Bom), wherein the Hon'ble High Court held that where the loan/deposit has been repaid by ....
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....imitation as the same have not been passed within after expiry of financial year in which the quantum proceedings were completed. In this regard it is noted in the penalty order that the penalty proceedings u/s 271E were initiated by the Id. Addl. Commissioner only on 24.02.2022 by issuance of show-cause notice. The penalty proceedings were being concluded within six months from the date of the show cause notice by the Addl. Commissioner and, therefore, the plea taken with regard to limitation was rejected. The penalty order has been passed on 30.08.2022. In the appeal the appellant has again taken this ground that the penalty order is barred by limitation as the penalty order has been passed after a delay of 30 months in imposing of the penalty after making a reference by the leamed AO. The appellant has relied upon and quoted several judgements in this regard. In the case of Jagdish Chandra Suwalka v. Joint Commissioner of Income-tax [2023] 154 taxmann.com 504 (Jaipur - Trib.) it is held as under:- "Thus, a penalty u/s 271D could not be imposed after the expiry of the larger period of limitation. In this case, we find that the Id. JCIT in the impugned p....
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....75-Computation-Penalty orders under ss. 271D and 271E passed beyond six months from the end of the month in which the assessments were completed were barred by limitation-CIT v. Hissaria Bros. (2007) 211 CTR (Raj) 156 affirmed." Similar view was taken again by the Hon'ble Rajasthan High Court in the CIT v. Jitendra Singh Rathore [2013] 31 taxmann.com 52/352 ITR 327 wherein it was held under: "Penalty under s. 271D-Limitation under s. 275-Applicability of d (a) or cl. (c) of s. 275(1)- Show-cause notice was served on the assessee by AO on 27th March, 2003-Thereafter, the matter was referred to the Jt. CIT on 22nd March, 2004-Penalty levied by Jt. CIT by order dt. 28th May, 2004 was clearly barred by limitation-Sec. 275(1)(c) was applicable to the case Even when the authority competent to impose penalty under s. 271D was the Jt. CIT, the period of limitation for the purpose of such penalty proceedings was not to be reckoned from the issue of show cause by the Jt. CIT, but the period of limitation was to be reckoned from the date of issue of first show cause for initiation of such penalty proceedings". Since there is no dispute on the facts stated above,....
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....ditional CIT for levy of penalty. Thus the limitation for passing the order for levy of penalty under section 271D would reckon from the end of the October, 2015 and shall expire on 30th April, 2016 being the period of 6 months from the end of the said month of October, 2015. The penalty order passed under section 271D in the case of assessee is dated 11-10-2017 which is barred by limitation and, therefore, the same is liable to be quashed. We make it clear that the subsequent search and seizure action under section 132 of the IT Act conducted in the case of assessee on 7th September, 2017 would not extend the period of limitation when the penalty proceedings were already initiated by issuing show cause notice dated 1-9-2017 which is based on the satisfaction vide letter dated 23rd October, 2015. It is not understandable as to why the AO has not initiated the proceedings under section 271D after receiving the said information and documents vide letter dated 23rd October, 2015 till he has made the reference on 9-8-2017. Accordingly, we hold that the impugned penalty order passed under section 271D dated 11-10-2017 is illegal being barred by limitation." It is held by the Ho....
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.... or not sustaining the penalty proceedings and, therefore, cl. (a) of sub-s. (1) of s. 275 cannot be attracted to such proceedings. If that were not so cl. (c) of s. 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 making payment through cheque or demand draft where it is so required to be made. Either of the contingencies does not affect the computation of taxable income and levy of correct tax on chargeable income; if cl. (a) was to be invoked, no necessity of cl. (c) would arise." (emphasis supplied) 11. In fact, when the AO recommended the initiation of penalty proceedings the AO appeared to be conscious of the fact that he did not have the power to issue notice as far as the penalty proceedings under Section 271-E was concerned. He, therefore, referred the matter concerning penalty proceedings under Section 271-E to....
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....rence was made by the Id. AO to the Id. Joint Commissioner / Addl. Commissioner and not the date when the show cause notice was issued by the Id. Addl. Commissioner. In the present case the reference was made by the Id. AO to the Id. Addl. Commissioner on the date of 20.01.2020. Accordingly considering the time period provided under section 275 of the Act, the penalty order should have been passed on or before 31.07. 2020. However the order has been passed on 30.08.2022 In view of the above, the penalty order is found to have been passed beyond the date of limitation and thus the same cannot be sustained and due to this position the penalty levied is directed to be deleted. Accordingly, ground no. 1 of the appeal is allowed. Further, with respect to the ground no. 2 of the appeal, since the penalty has been directed to be deleted on the technical ground that the order is passed after the date of limitation, the ground of appeal on the merits of such penalty is rendered academic and does not require detailed adjudication. Accordingly ground no. 2 of the appeal is hereby treated as disposed off 5. Ground of Appeal No. 3 is as under:- ....
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....t technical ground decision rendered is incorrect. Ground no. 4 is general. Having gone through the grievance of the revenue we would like to take up ground no. 2 & 3 first. The brief facts related to the dispute are that in this case for the A.Y. 2013-14 assessment was completed u/s 143 r.w.s. 153A of the Act on 30.12.2019. During the assessment proceedings it was found that the assessee company has received unsecured loan of Rs. 11,75,72,781/- from related party M/s Mohit Jewellers and made re- payment of Rs. 57,00,000/- during the year under consideration. Record reveals from the copy of loan confirmation filed of M/s Mohit Jewellers it reveals that there was opening un-secured loan of Rs. 11,04,37,506/- and the assessee further took loans amounting to Rs. 71,35,275/- on different dates during the year and made re-payment of Rs. 71,35,275/- from 8 January, 2013 to 21 January 2013 by cheques. In the confirmation account of M/s Mohit Jewellers it is found that re-payment of loan has been shown by way of sale amounting to Rs. 9,36,57,733/- on 31st March 2013 against un-secured loan. Hence, it is evident that the assessee has repaid loan amounting to Rs. 9,36,57,773/- by other th....
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....Rs. 9,36,57,733/ for the outstanding amount due from the said concern on account of sales, it is to be stated that such repayment is in clear contravention of the provisions of Section 269 T of the Act. Therefore, considering that provision of the section the contention of the assessee that the repayment of loan by way of adjustment through journal entries would not come within the ambit of Section 269T and the said contention was not acceptable as per his contention. As Section 269T requires the entities specified therein not to make repayment of loan/deposit together with interest, if any, otherwise than by, an account payee cheque/bank draft if the amount of loan/deposit with interest, if any, exceeds the limits prescribed therein. Therefore, the contention of the assessee that there is no violation of the loan has been repaid by debiting the account through journal entries was not considered as tenable. For that contention he placed reliance on the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Triumph International Finance (I) Ltd ITA No.5746/2010 (Bom), wherein the Hon'ble High Court held that where the loan/deposit has been repaid by debiting the ac....
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....ioner of Income Tax, Range-1, Kozhikode' and submitted that the ld. CIT(A) has erred in directing to delete the penalty merely on the technical ground and thus as held Grihalaxmi Vision's case (Supra) he should not only decide the technical ground in revenue's favour but would have decided the merits also. The bench noted that the ld. DR relied on the decision in the case of Grihalaxmi Vision's case (Supra) wherein the Hon'ble Kerala High Court held that "Question to be considered is whether proceedings for levy of penalty, are initiated with the passing of the order of assessment by the Assessing Officer or whether such proceedings have commenced with the issuance of the notice issued by the Joint Commissioner. From statutory provision, it is clear that the competent authority to levy penalty being the Joint Commissioner. Therefore, only the Joint Commissioner can initiate proceedings for levy of penalty. Such 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 initiati....
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....63, after the expiry of six months from the end of the month in which such order of revision is passed; (c) in any other 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 is initiated whichever period expires later. (2) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any action initiated for the imposition of penalty on or before the 31st day of March, 1989. Explanation.-In computing the period of limitation for the purposes of this section,- (i) the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129; (ii) any period during which the immunity granted under section 245H remained in force; and (iii) any period during which a proceeding under this Chapter for the levy of penalty is stayed by an order or injunction of any Court." 15. It would not be out of place to conside....
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....e 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 time-limit has resulted in practical difficulties in cases where the AAC remands the appeal against the assessment for further enquiry by the ITO or deletes or reduces the addition made on account of concealed income and the Department takes up the matter in further appeal before the Tribunal. Sometimes, a final decision on the quantum of the concealed income becomes available only after the expiry of the two years time- limit. 18. Section 275 as substituted aims at obviating difficulties in such cases, reducing avoidable work and avoiding hardship to the assessees. It provides that the time-limit for making an order imposing a penalty under the provisions of Chapter XXI of the Income-tax Act will,....
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.... under section 246 or with effect from 1-6-2000, section 246A or an appeal to the Tribuna 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). 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 Dy. CIT(A) or the CIT(A) or, as the case may be, the Tribunal is received by the Chief CIT or CIT, whichever period expires later. 22. The period of limitation for the cases falling under category II is six months from the end of the month in which such order on revision is passed and the period of limitation for the cases falling under the above category III is the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are comp....
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....s 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. 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 and, therefore, for this type of cases where the penalty proceedings have been initiated in connection with the defaults for which no statutory mandate is there about any particular proceedings during the course of which only such penalty proceedings can be initiated, a different period of limitation has been prescribed under clause (c) as a separate category. In cases falling under clause (c), penalty proceedings are to be completed within six months from the end of the month in which the proceedings during which the action for imposition of penalty is initiat....
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....of section 269SS or section 269T, and on the ground that limitation under section 275(1)(c) applies to such proceedings, we hold in favour of the respondent. 29. Accordingly, these appeals fail and are hereby dismissed. No order as to costs. Since, we have binding precedent over the other High Court decision cited by the revenue and we are also of the considered view that our High Court view is further confirmed by the apex court and even the revenue has accepted this fact has changed the provision in the Act w.e.f. 01.04.2025 wherein the power to levy this penalty has been given to the assessing officer, the relevant amended provision reads as under: Penalty for failure to comply with the provisions of section 269SS. 271D. (1) 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. (2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner: ^14-18[Provided that any penalty under sub-section (1), on or after t....