TMI Blog2003 (12) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... AO also examined some of the creditors. On such examination, it transpired that the loans to the extent of Rs. 12,55,000 were taken in cash and the loan taken in each case exceeded Rs. 20,000 thereby violating the provisions of s. 269SS of the IT Act. According to the provisions of s. 269SS of the IT Act, 1961, no person shall accept from any other person any loan otherwise than by a account-payee cheque or account payee draft if loan so availed together with loan already taken earlier and remaining unpaid exceeded a sum of Rs. 20,000. The violation of provisions of s. 269SS attracts penalty and s. 271D provides for imposition of penalty for violation of the provisions of s. 269SS. It is in this context, the AO, in para 7, in the order of assessment has observed as follows: "Penalty proceedings under s. 271D are initiated separately." In concluding para of order of assessment, the AO has also observed as follows: "Issue penalty notice under s. 271D of the IT Act." Before proceeding further, it is useful to mention that under the provisions of s. 271D of the Act, a penalty could be imposed only by an officer of the rank of Jt. CIT. The AO, in the present case, therefore, was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO who passed the order of assessment on 7th March, 2000, in the concluding portion of the order of assessment, has very clearly stated that the penalty proceedings are initiated under s. 271D of the IT Act. According to the assessee, the period of limitation would start running from 7th March, 2000. It was pointed out by the assessee that a show-cause notice was issued by the Addl. CIT on 2nd May, 2000, and an order of penalty was passed on 16th Nov., 2000. According to the assessee, the period of six months as contemplated in s. 275(1)(c) would end on 30th Sept., 2000, and the order of penalty was passed on 16th Nov., 2000, which was barred by time. The CIT(A) held as follows: "I have carefully considered the submissions made with reference to the facts obtained from the record. There is no dispute with regard to the fact that for violation of provisions of s. 269SS proceedings are to be initiated under s. 271D by the AO, but any penalty imposable shall be imposed by the Jt. CIT. It is, therefore, very clear that if the AO happens to be lower in rank than the Jt. CIT, he cannot impose the penalty. However, the power to initiate the proceedings under s. 271D rests with the AO. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 271D, in the instant case, is 7th March, 2000. Accordingly, the proceedings are to be completed/disposed of within the time-limit prescribed under s. 275(1)(c) by taking the date which expires later. The first date expires on 31st March, 2000, being the last day of the financial year in which the proceedings, in course of which action for imposition of penalty has been initiated were completed and the second date is to be counted from the end of the month in which action for imposition of penalty is initiated and in the instant case the period of six months is to be counted from 31st March, 2000, being the end of the month in which the proceedings for imposition of penalty were initiated. Counting from 31st March, 2000, the period of six months expires on 30th Sept., 2000, within which the proceedings were required to be completed/disposed of. But in the present case, the impugned order under s. 271D was passed on 16th Nov., 2000, i.e., after a delay of one month and sixteen days from the expiry of the period of six months as stated above. The issuance of show-cause notice on 2nd May, 2000, by the Addl. CIT, Range-I, Raipur, cannot be treated as the date of initiation of the pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as allowed by the CIT(A) on the preliminary point of limitation, the question of reasonable cause putforth by the assessee before the CIT(A) was not considered by the CIT(A). Aggrieved by the order of the CIT(A), the Revenue is in appeal before us. 4. We have heard the submissions of the learned Departmental Representative as well as the learned counsel for the assessee. The learned Departmental Representative submitted that the observation in the order of assessment to initiate penalty proceedings under s. 271D would not amount to initiation of the proceedings by the AO. According to him, the AO does not have power to initiate the penalty proceedings, because, he was not competent to impose the penalty as the AO, in the present case, was not an officer of the rank of Jt. CIT who alone is empowered to impose a penalty under s. 271D of the Act. He further submitted that no show-cause notice whatsoever has been issued by the AO and, therefore, it cannot be said that the penalty proceedings were initiated as early as on 7th March, 2000, as concluded by the learned CIT(A). According to him, without a show-cause notice, it cannot be said that penalty proceedings had been initiated. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2001) 73 TTJ (Jd) 1. 3. Dillu Cine Enterprises (P) Ltd. vs. Addl. CIT (2002) 80 ITD 484 (Hyd). 4. Artisan Press vs. ITAT Anr. (1958) 33 ITR 670 (Mad). 5. CIT vs. M.A. Presstressed Works (1996) 130 CTR (Raj) 206 : (1996) 220 ITR 226 (Raj). Decisions against the assessee : 1. Bhushan Chemicals vs. Dy. CIT (1995) 54 ITD 5 (Pune). 2. Asstt. CIT vs. Shrinivas Chemicals (2003) 79 TTJ (Chd) 755 : (2003) 84 ITD 76 (Chd). In the course of hearing, it was brought to the notice of the learned Departmental Representative as well as the learned counsel for the assessee that Tribunal, Pune Bench, had considered a similar issue in the case of Youth Development Co-op. Credit Society Ltd. vs. Jt. CIT in ITA No. 1529/Pn/2002, wherein the Hon ble Bench had considered the decisions relied upon by the learned counsel for the assessee and had come to the conclusion that in a given case where the AO had merely observed in the order of assessment that the penalty proceedings are to be initiated and does not follow the said order with issue of show-cause notice, then it is not a case of initiation of penalty proceedings by the AO. The Tribunal, Pune Bench, has clearly distinguished the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as within the time-limit prescribed in s. 275(1)(c). As regards the AO s competence to initiate the penalty proceedings under s. 271D, the learned counsel for the assessee has relied on the decision of Jodhpur Bench of Tribunal in the case of Hissaria Bros., wherein the Tribunal has held that issuance of notice for initiation of penalty proceedings under ss. 271D and 271E may appropriately and validly be done by the AO and the Jt. CIT competent to levy the penalty under ss. 271D(2) and 271E(2) can levy the penalty without insisting on further issuance of notice for the said penalty. Explaining further, the Tribunal observed that in such a situation, these penalty proceedings will have to be held as having been initiated during the course of assessment proceedings by the AO when he completed the assessment proceedings after taking cognizance of the violations of the relevant provisions of law and the initiation of the penalty proceedings cannot be said to have been on the dates when the Jt. CIT issued notices again under s. 271D. The Departmental Representative, on the other hand, has relied on the decision of Ahmedabad Bench of Tribunal in the case of Harsiddh Construction (P) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02, was completed within the period of six months from the end of month in which action for imposition of penalty was initiated and this being so, the same, in our opinion, was done within the period specified in s. 275(1)(c). As such, considering the facts of the case and for the reasons given hereinabove, we are of the view that the penalty order passed under s. 271D was not barred by limitation and ground No. 2 challenging the validity of penalty order on this basis is liable to be dismissed." Now we shall refer to the decisions relied upon by the learned counsel for the assessee. The decision in the case of Hissaria Brothers, has already been distinguished in the aforesaid case of Youth Development Co-op. Credit Society Ltd. As far as the decision of the Mumbai Bench in the case of Straptex India is concerned, the question that has arisen in the present case was never before the Mumbai Bench. In the course of the assessment proceedings, the AO called upon the assessee to produce some details for satisfaction as to whether there was a violation of the provisions of s. 269SS and in the order of assessment, the AO initiated the penalty proceedings and within six month from the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contemplated anywhere in the Act. The time limitation should have been considered only from the date of initiation of penalty proceedings by the AO, i.e., 21st March, 1997. Hence, the penalty should have been levied on or before 30th Sept., 1997 and as the penalty was levied on 24th March, 1998, it was barred by limitation." As can be seen from the aforesaid decision, it was a case where the AO issued a show-cause notice and, therefore, the case is one similar to that of Hissaria case, which has already been distinguished in the case of Youth Development Co-op. Credit Society. The decision of the Hon ble Madras High Court in the case of Artisan Press, is again on different point. The Hon ble Madras High Court was not dealing with a case where the proceedings were initiated by an authority not vested with the powers to impose penalty. The question before the Hon ble High Court was as to at what point of time the proceeding had been initiated. The Hon ble Madras High Court came to the conclusion that the proceedings initiated in the course of disposing of an appeal was held to be a valid initiation. Such are not the facts in the present case. The decision in the case of M.A. Press ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued notices calling upon the assessee to show-cause why penalties under ss. 271D and 271E should not be imposed, would be the date when the proceedings can be said to have been initiated. The AO who has no authority to levy such penalties is not competent to initiate such proceedings at the time of completing the assessment. In the instant case, the AO had rightly referred the case to Dy. CIT on the same date, i.e., 30th Dec., 1994, for consideration and levy of penalties under ss. 271D and 271E. Sub-s. (1) of s. 274 imposes a condition that no order imposing a penalty shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard. Sec. 275(1)(c) imposes a time-limit for passing an order for penalty within a period of six months from the end of the month in which penalty proceedings were initiated. Now if one reckons the limitation from the date of initiation of such proceedings by the AO and the AO delays referring the case to Jt. CIT, this would hardly leave any time with the Jt. CIT to allow an effective opportunity to the assessee before imposing the penalty. Therefore, it is natural that it is the date when the authority competent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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