TMI Blog2001 (8) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... es under s. 271E cancelled by the learned CIT(A), Udaipur. 3.(i) The facts, in brief, as per the assessee, are that the assessee is a firm doing the business of Kachha Arhatiya, acting as agent for its farmer-constituents, who used to bring their crops to the assessee for sale, and the assessee in this relationship used to sell their crops and keep/retain the sale proceeds of crops so as to be adjusted against their time to time withdrawals and buying of goods. The assessee was catering to their needs like payment in cash, supply of goods like fertilizer (Khad) seeds, pesticides, etc. retaining sale proceeds of crops accepting amounts given by farmers for the purpose of meeting on their time to time needs. The nature of dealings between Kachha Arhatiya and the farmer were fast, frequent and of current nature. No stipulation ever existed in regard to amounts, if any, given by the fanner to the assessee for keeping it for the purpose of making out their time to time needs. The farmer-constituents were hesitant in having dealings through banks, due to time constraints, tedious formalities, etc., etc. The dealings between the assessee and the farmer-constituents were in cash, sometim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20,000 as also withdrawals therefrom being in excess of Rs. 20,000, held to be repayments, and thus liable for penalties on both the counts under ss. 271D and 271E. However, the learned CIT(A) directed the AO/Jt. CIT for allowing some relief after verification regarding the facts of extent of receipt. The learned CIT(A) did not accept the assessee's plea regarding the above receipts being not deposits, nor did he accept the assessee's plea regarding bona fide belief coupled with genuineness of transactions. (iv) In asst. yr. 1995-96, involved in assessee's appeals Nos. 432/Jdpr/2000 and 431/Jdpr/2000 and Revenue's appeals Nos. 502/Ju/2000 and 501/Ju/2000, the AO/Jt. CIT levied penalties for the instances mentioned in Annexure A, Annexure B and Annexure C to the penalty orders. However, the learned CIT(A) cancelled the penalties in respect of instances specified in Annexure A and Annexure C, accepting the assessee's plea of there being reasonable cause and bona fide belief. But the learned CIT(A) did not accept the assessee's contention regarding the receipts of instances mentioned in Annexure A not being in the nature of deposits. The learned CIT(A) sustained the penalties under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B) --------------------------------------------------------------------- 5. The assessee has been aggrieved against the penalty sustained by 5. The assessee has been aggrieved against the penalty sustained by the learned CIT(A) and has preferred its appeals Nos. 429 to 434/Ju/2000 for asst. yrs. 1993-94 to 1995-96 and the Revenue has been aggrieved against the relief accorded by the learned CIT(A) in respect of the penalties under ss. 271D and 271E (levied by the AO) and reflected above under the head of deletion of penalty by CIT(A), and so the Revenue has preferred its appeals bearing ITA Nos. 499 to 504/JU/2000. 6. First we take up assessee's ground relating to limitation, wherein the penalty orders under ss. 271D and 271E passed by Jt. CIT are stated to be barred by limitation under s. 275(1)(c). This issue is contained in ground No. 2 of assessee's appeals. The learned authorised representative of assessee has referred to p. 30 of his common w/s for asst. yrs. 1993-94 to 1995-96 being in respect of assessee's appeals (for short CW/s), being Annexure 1 therein and has contended that in the column third from last in the said chart, the last dates of limitation for i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty proceedings have been initiated. This is contained in paras, (ii) and (iii) in the assessment order for asst. yr. 1993-94. It has also been contended that the fact of initiation of penalty proceedings has also been recorded in para 2 on p. 1 of the penalty order under s. 271D for asst. yr. 1993-94 wherein the Jt. CIT observed that while passing the assessment order under s. 143(3), the AO has duly taken note of this and duly discussed the violation of provisions of s. 269SS and initiated penalty proceedings under s. 271D along with assessment order forming part of assessment proceedings; and that the Asstt. CIT issued penalty notice under s. 271D vide letter dt. 15th March 1996, served on 16th March, 1996. A copy of notice is placed on p. 2 of PB for asst. yr. 1993-94. It has been contended by the learned authorised representative of assessee that the penalty proceedings having been initiated on 15th March, 1996, by issuing specific notice for the purpose, as provided in law by AO, the period of six months from the end of the month in which the penalty notice was issued for initiation of penalty proceedings expired on 30th Sept., 1996. It has also been the contention of the auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stt. CIT vs. Madan Roller Flour Mills (2000) 66 TTJ (Asr) 452 : (1999) 71 ITD 275 (Asr). 8. The learned authorised representative of assessee has also theorised an analogy based on s. 272A(4) contending that the said section also provides for imposition of penalties under Chapter XXI and in that section other Revenue authorities have also been made competent to levy the penalty. He has contended that in s. 272A(4), it has been provided that no such penalty shall be levied unless an opportunity of being heard in the matter has been provided by such authority. He has contended that wherever the legislature deemed it proper to provide for issuing of notice by such other competent authority, they have made a specific provision in this Chapter itself as has been made in s. 272A(4), but no such provision has been made in ss. 271D(2) and 271E(2). He has contended that accordingly, the penalty proceedings in the appeals under consideration will have to be held as having been initiated during the course of assessment proceedings by the AO when he completed the assessment and took cognisance of the fact of violation and issued notices as prescribed under the relevant provisions. He has cit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... months from issue of notice (initiation of penalty proceedings) by Jt. CIT. He has contended that those penalty proceedings which have no relevance with assessment proceeding alone are needed to be completed within six months from initiation as per time-limit given in s. 275(1)(c) because in those cases the appeal against assessment have no effect on penalty proceedings. He has contended that the other category of penalty proceedings which have relevance with assessment proceedings, as quantum of such penalties is determinable only on the final outcome of assessment are governed by s. 275(1)(a). He has contended that the citation referred to by the learned authorised representative of assessee are distinguishable on facts and do not apply in the matter. 11. We have considered the rival contentions, the relevant material on record, as also the cited decisions. From the perusal of record, we find the fact-situation for all the three assessment years in respect of the date of issuance of notice for the levy of penalty by AO and by the Jt. CIT and last date for levy of penalty as per Department and as per the assessee as under: ----------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, are clubbed together in the same clause. Thus in our view, in the case before us, the limitation prescribed under cl. (c) of sub-s. (1) of s. 275 would be applicable". 13. In 23 TW 434, Tribunal Jaipur, while dealing with the matter of penalty under s. 271D, has held that the penalty proceedings under s. 271D can be initiated even after completion of assessment. The Tribunal also held that the period of six months can be reckoned from the end of the month during which penalty proceedings were initiated in case these were initiated after the completion of the assessment in view of s. 275(1)(c). In (1983) 37 CTR (Raj) 19 : (1984) 147 ITR 361 (Raj) the Hon'ble Rajasthan High Court has held as under: "While considering the accessibility or applicability of any beneficial provision or any interpretation of facts or inferences to be drawn from facts, if two views are possible, then, that view should be taken which may be beneficial to the assessee." 14. In our considered opinion, the matter is squarely covered by the decision of Tribunal, Jaipur, rendered in the case of Manoharlal vs. Dy. CIT (1995) 53 TTJ (Jp) 105 discussed above which is further supported by the decision of T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lace and if the interpretation regarding the initiation of proceedings for penalty under ss. 271D and 271E is taken otherwise, that is, depending on completion of assessment, the initiation of penalty proceedings may never take place at all. However, viewed as the initiation of penalty proceedings under s. 271D/271E to be independent of assessment, the penalty proceedings under ss. 271D and 271E can well be initiated whether the income of Y be taxable/assessable for the year or not. Again, the observation of Jt. CIT in para 5(ii) on p. 3 of the penalty order, as pointed out by the learned authorised representative of assessee in para. 1.9 on p. 6 of his w/s, that s. 275(1)(a) is applicable to the penalty proceedings initiated under Chapter XXI cannot be accepted as correct as rightly pointed out by the learned authorised representative of assessee in his w/s. If that were the situation, and the provision of s. 275(1)(a) were to apply to all the penalty proceedings initiated under Chapter XXI then the provisions of cls. (b) and (c) of s. 275(1) will be rendered redundant and inapplicable in any case. As such, considering all the facts and circumstances of the case, we respectfully f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii),(iv), page 16 page 16 17 (x) on pages 3 para 19(ii) para 19(iii) to 5, para 6 on page 17 page 17 page 5 --------------------------------------------------------------------- 16. We find force in the contention of the learned authorised representative of assessee that the issuance of notice of initiation of penalty under ss. 271D and 271E may appropriately and validly be by AO without necessitating further issuance of notice for the said penalties by Jt. CIT, the other authority, competent to levy the penalty. Sec. 272A also provides for imposing penalty under Chapter XXI and therein other Revenue authorities have also been made competent for the levy of penalty. In s. 272A, however, provision has been made in sub-s. (4) for the essential issuance of notice by such other competent authority. The said provision of law may, for convenience, be quoted as under: "Sec. 272A(4) No order under this section shall be passed by any IT authority referred to in sub-s. (3) unless the person on whom the penalty is proposed to be imposed is given an opportunity of being heard in the matter by such aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n various grounds in various assessment years is tabulated below: --------------------------------------------------------------------- Asst. yr. 271D 271E --------------------------------------------------------------------- 1993-94 Ground 5 Ground 5 Bona fide act reasonable and Bona fide act reasonable and sufficient cause under s. 273B sufficient cause under s. + transaction genuine 273B + transaction genuine 1994-95 Ground 6 Ground 7 Bona fide belief genuineness Bona fide belief genuineness of transaction and sufficient of transaction and sufficient cause under s. 273B cause under s. 273B 1995-96 Ground 6 Ground 5 Reasonable and sufficient Reasonable cause and bona cause regarding Annexure 'B' fide belief regarding Annexure 'B' under s. 273B Note: CIT(A) accepted Note: CIT(A) accepted reasonable and sufficient reasonable and sufficient ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne hundred and seventy-five agriculturists. CIT(A) has deleted the penalties in respect of whole amount of Annexure 'B' and in respect of Rs. 75,000 out of Rs. 2,64,000 of Annexure 'A', and thus sustained in respect of Rs. 1,89,000 of Annexure 'A' only. Similarly as regards asst. yr. 1994-95, the Jt. CIT levied penalties in respect of amounts of Annexures 'A', 'B', 'C 'D'. The amount of Annexure 'A' pertains to sale of wheat by 14 agriculturists to FCI amounts of Annexure 'B' stated to be cash deposits by six farmers amounts of Annexure 'C represent sale of crops by farmers. In respect of tallying credit entries. The learned CIT(A) has sustained penalties in respect of amount of Annexure 'B' and 'C being Rs. 7,20,443 (Rs. 2,30,536 + 4,89,907) under s. 271D and Rs. 8,30,247 (3,01,931 + 5,28,316 under s. 271E. In the same manner, the Jt. CIT levied penalties in respect of amounts of Annexure 'A', 'B' 'C'. The amounts of annexure 'A' represent deposit by farmers of cash receipts from FCI, being sale proceeds of wheat; the amounts of Annexure 'B' represent non-tallied credit entries pertaining to farmers in notebook A-1/11; and the amount of Annexure 'C' represent tallying credit e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed traded practice, which had been in all bona fides, and so followed. (v) Unobjected past conduct without there being change in facts and law has to be accepted, and principle of res judicata applies Radha Soami Satsang vs. CIT (1991) 100 CTR (SC) 267 : (1992) 193 CTR 321 (SC), Sardar Kehar Singh vs. CIT (1991) 92 CTR (Raj) 88 : (1992) 195 ITR 769 (Raj) and Pukhraj Rikhabdas vs. CWT (1993) 203 ITR 770 (Raj) been referred. (vi) The assessee has bona fide belief of permissibility of transactions by R.A. with farmers. Harpal Singh Jaswant Singh vs. ITO (1996) 51 TTJ (Asr) 383 has been cited. Even mistaken belief about the provision constitutes reasonable cause for cancellation of penalty under s. 271D ITO vs. Babu Lal Singhvi 23 T.W. 223 (Jodhpur-ITAT) has been cited. (vii) When transactions are not impeached as bogus, no penalty can be levied under ss. 271D and 271E. M.M. George Brothers (1993) 47 TTJ (Coch) 434, Industrial Enterprises vs. Dy. CIT (2000) 68 TTJ (Hyd) 373 : (2000) 73 ITD 252 (Hyd), Vir Sales Corpn. vs. Asstt. CIT (1994) 50 TTJ (Ahd) 130 and Dr. Deepak Muchala vs. ITO (1997) 58 TTJ (Bom) 524 have been referred to. 22.(i) In (1991) 100 CTR (SC) 267 : (1992) 193 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the matter we find the penalties under ss. 271D and 271E as not sustainable/ tenable. 24. However, we may make it clear that in view of our above conclusions/findings we are not discussing the other niceties/details of rival contentions on merits each itemwise for the reason that we do not consider the same to be needed in the circumstances. 25. As such in view of our above discussions/conclusions we find all the penalties under ss. 271D and 271E, levied by Jt. CIT for asst. yrs. 1993-94, 1994-95 and 1995-96 to be barred by limitation and so not tenable in law, and also due to the assessee having reasonable and sufficient cause, the said penalties are not sustainable. In the situation the question as to which item of alleged loan/deposit/repayment the penalty under ss. 271D/271E deserves to be sustained/restored/deleted on merits loses significance, and the issue pertaining thereto gets lost. This finding of ours disposes of all the appeals of assessee as also those of Revenue, under consideration. Accordingly, in view of our above findings that the orders of penalties passed under ss. 271D and 271E for asst. yrs. 1993-94, 1994-95 and 1995-96 are not tenable/sustainable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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