TMI Blog2013 (5) TMI 857X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Respondent : B.R. Popat ORDER D.K. Srivastava, Accountant Member Appeal bearing IT(SS)A No.01/Rjt/2007 filed by the Revenue is directed against the order passed by the CIT(A) on 18-10-2006 cancelling the penalty amounting to ₹ 14,29,81,658/- levied by the AO u/s 271D while the other appeal bearing IT(SS) No.02/Rjt/2007 filed by the Revenue is directed against another order passed by the CIT(A) on 18-10-2006 cancelling the penalty amounting to ₹ 10,97,67,135/- levied by the AO u/s 271E of the Income-tax Act. Both the penalties have been cancelled by the CIT(A) on the ground that their imposition is time barred as per section 275(1)(c). The issues in both these appeals are common and therefore they are being disposed of by a consolidated order. 2. Both the aforesaid appeals filed by the Revenue were earlier dismissed by this Tribunal by its common order dated 30-01-2009, which, on appeal by the Revenue, was set aside by the Hon'ble High Court vide its order dated 18-04-2011 in Tax Appeal No. 1379 and 1380 of 2009, with the following observations:- As a final fact finding authority, Tribunal's factual conclusions hold immense impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the premises of the assessee which led to recovery of incriminating materials. Block assessment u/s 158BC/143(3) was completed in June 2001 assessing the undisclosed income (being unexplained cash credits) of the assessee at ₹ 25,89,63,640/-. The aforesaid order of block assessment was challenged firstly before the CIT(A) and thereafter before this Tribunal. By its order dated 23-09-2010, this Tribunal has partly allowed the appeal filed by the assessee, with the following observations: 15. While appreciating about what has been mentioned above, we are still required to give justice to our role as the last fact finding authority wherein we have to try to impart justice on either sides. Appreciating the fact that the actual quantification of undisclosed income is an impossible task, in view of what has been mentioned above, we are still not very comfortable in fully accepting the contention of the assessees that their total income for the block period is running in negative (on provisional basis and relying on the date to the extent available with them, as interpreted by the AO), so as to justify the returned income of Rs. Nil in both the cases. We are at the same time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judication of the issue under appeal. It is therefore necessary to bring them out at the outset. They are as under: 08.06.1999: Search Seizure operations u/s 132 were carried out at the premises of the assessee and incriminating materials seized. 27.06.2001: Block assessment order was passed u/s 158BC. Action for the imposition of impugned penalties was initiated, vide Para 19 of the said order. As evident from the directions given at the end of the assessment order, show-cause notices were directed to be issued for levy of penalty u/s 271D and 271E. 15.01.2002: Taking cognizance of the block assessment order in which action for the imposition of impugned penalties was initiated and the reference received from the AO in this behalf, the then Joint Commissioner issued fresh show-cause notices for levy of impugned penalties. 03.09.2004: Appeal filed by the assessee against the aforesaid block assessment order was disposed off by the CIT(A). 30.03.2006: After hearing the assessee, orders were passed by the Additional Commissioner of Income-tax for levy of impugned penalties. 29.05.2006: The said order of block assessment dated 27.06.2001 was set aside by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the period of limitation laid down in Clause (c) of sub-section (1) of section 275. It was explained before the Additional Commissioner that the impugned penalties were not capable of being levied as the period of limitation laid down in section 275(1)(c) had already expired. The Additional Commissioner did not accept the aforesaid submission of the assessee and resultantly, in the absence of any reasonable cause shown by the assessee, levied the impugned penalties by his order dated 30.3.2006. He has given detailed reasons for rejecting the submissions of the assessee, which, in brief, are that the proceedings for levy of impugned penalties were initiated in the order of block assessment, which was also subject matter of appeal u/s 246A before the CIT(A), and therefore the period of limitation for levying the impugned penalties would be governed by section 275(1)(a) and not section 275(1)(c). 11. Aggrieved by the penalty orders passed by the Additional Commissioner of Income-tax, the assessee carried the matter in appeal before the CIT(A). The ld. CIT(A) noted that the action for the imposition of impugned penalties was initiated in the block assessment order passed by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k period, was pending and was decided by the CIT(A) vide order dated 3/9/04, whereby the CIT(A) confirmed the order of the AO.S The impugned order in the case of the appellant was passed on 30/3/06, i.e. before the end of the financial year after the financial year in which the appellate order is received, the Addl. CIT's submission, therefore, is that the order passed u/s. 271E of the Act is not barred by limitation. 5.6 In my considered view, the proceedings u/s. 271E of the Act are independent of the assessment proceedings because an order u/s. 271E can also be passed prior to the assessment order and, therefore, the extended period available u/s. 275(1)(a) for passing the penalty order under chapter XXI of the Act are not available to the proceedings under the above section, and, because of this situation, an order passed u/s. 271E of the Act would fall under the category of 'any other case' not falling under clauses (a) and (b) of section 275(1) of the Act, i.e. to say, it would fall under clause (c) of section 275(1) of the Act. Besides, the proceedings initiated u/s. 271E of the Act have no relevance or dependent upon the outcome of the assessment order, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer Date/ Month 1 Search Action by the department DDIT(Inv.) June 1999 2 Completion of the Block Assessment DCIT, Investigation Circle, Jamnagar. June 2001 3 Initiation of the penalties, albeit without jurisdiction, by the DCIT, by issuing two separate notices under section 274 read with sections 271D 271E DCIT, Investigation Circle, Jamnagar. June 2001 4 Issuance of two separate notices under section 274 read with sections 271D 271E, initiating the penalties, subject matter of the present appeals JCIT, Range-1, Junagadh 15-01-02 5 Penalty order passed Addl. CIT, Range-3, Jamnagar 30-03-06 2.2 Specific attention is drawn to the provisions of section 275(1) of the Income-tax Act, prescribing limitation for imposing penalties. The relevant portion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T/2004, set aside the block assessment order with a direction to recalculate the undisclosed income, by taking into account, the ratio laid down by the Hon'ble Supreme Court in the case of Anantharam Veerasinghaliah Co. v. CIT, as reported at (1980) 123 ITR 457 (SC). Copy of the order of the Hon'ble ITAT, Rajkot is enclosed herewith, marked as Annexure-3, for the purpose. It will thus be appreciated that the cash credits have been considered as income even by the Hon'ble ITAT, albeit subject to re-quantification based on the principle of telescoping, relying on the aforesaid Supreme Court judgment. Since the penalties subject matter of the present appeals are related to all such cash credits and corresponding debits, the same cannot be sustained, as these are clearly not the transactions of acceptance of loans or deposits or of repayment of the deposits. 3.2 The appellant submits that while the additions can be made on protective basis, there is no way a penalty can be levied protectively. It is for this reason that the statute has not prescribed any limitation for initiation of penalties under sections 271D 271E, and has only provided that once initiated, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rading Hong Kong Ltd. [2011] 333 ITR 565/179 Taxman 309 (Delhi) 18. Subodh Kumar Bhargava v. CIT [2009] 309 ITR 31/[2008] 175 Taxman 520 (Delhi) 19. Asstt. CIT v. Jai Bharat Fruit Co. Ltd. [2005] 4 SOT 445 (Jp.) 20. CIT v. Chhajer Packaging Plastics (P.) Ltd. [2008] 300 ITR 180/[2007] 165 Taxman 109 (Bom.) 21. CIT v. Hissaria Bros. [2007] 291 ITR 244/[2008] 169 Taxman 262 (Raj.) 16. We have heard both the parties. Following facts have material bearing on the issue under appeal: (i) Search seizure operations were carried out by the Revenue officials u/s 132 leading to recovery of incriminating materials. Those materials were examined in the course of block assessment proceedings u/s 158BC. Facts revealing violations u/s 269SS/269T were also scrutinised in the course of block assessment proceedings and a finding to that effect was recorded in the block assessment order. There is no material on record to indicate that the violations u/s 269SS and 269T for which impugned penalties have been levied were detected by the AO or the Additional Commissioner in any proceeding or order other than the block assessment proceedings/order or independently of block a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licable as claimed by the assessee. 18. Sub-section (1) of section 275, which deals with Bar of limitation for imposition of penalties , reads as under: Bar of limitation for imposing penalties. 275. (1) No order imposing a penalty under this Chapter shall be passed- (a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253, 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 the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later: Provided that in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A, and the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such appeal, an order imposing penalty sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, under clause (c) would apply only to those cases which do not fall under clauses (a) and (b) of sub-section (1) of section 275. There is no dispute that the case of the assessee does not fall under Second Category, i.e., under clause (b) of sub-section (1) of section 275. The dispute between parties is whether the case of the assessee falls under First Category, i.e., under clause (a) of sub-section (1) of section 275, as claimed by the Revenue or under Third Category, i.e., under clause (c) of sub-section (1) of section 275, as claimed by the assessee. Quite obviously, a case would fall under First Category, i.e., clause (a) of sub-section (1) of section 275 if the statutory conditions of that clause are fulfilled otherwise the case would fall under the residuary clause, i.e., clause (c) of sub-section (1) of section 275. Therefore, the applicability of clause (a) of sub-section (1) of section 275 to the matters under appeal needs to be examined. 20. Period of limitation for imposition of penalty as available under clause (a) of sub-section (1) of section 275 is generally longer than the one available under clause (c) thereof in that the period of limitation, which may other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, and, four, imposition of penalty. However, proceedings for levy of penalty under section 271(1) can be initiated by the AO only when he is satisfied in the course of any proceedings under this Act that a person has committed default as enumerated therein. The aforesaid requirement is specific to proceedings for imposition of penalty u/s 271 and to that extent the requirement of satisfaction would be additional requirement for levy of penalty in cases falling under section 271/275. The expression satisfied in the course of proceedings contemplated by section 271(1) is different in content and scope from the expression in the course of which action for the imposition of penalty has been initiated used in section 275(1)(a). The requirement of the AO being satisfied in terms of section 271 precedes the initiation of action for imposition under section 275(1)(a) of any of the penalties enumerated in Chapter XXI-Penalties imposable of the Income-tax Act. Initiation of action for the imposition of penalty under clause (a) of sub-section (1) of section 275 extends to all the penalties imposable under Chapter XXI of the Income-tax Act while satisfaction contempla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to examine the accounts and other records of the assessee. It is he who carries out survey, inquiries, inspections, etc., and also receives annual information data from various sources. It is he who scrutinises the seized materials and determines the true nature of transaction. It is he who records relevant findings in the assessment order including various violations committed by the assessee, completes the assessment and issues demand notice u/s 156. Thus it is the AO who is in possession of all relevant information the scrutiny of which may suggest violation of section 269SS/269T. The Joint Commissioner, on the other hand, may be completely unaware of those violations and resultantly may not be able to initiate proceedings for levy of penalty u/s 271D/271E unless reference is made by the AO to him. Recognising the aforesaid ground realities, section 275(1)(a) expressly authorises initiation of action for imposition of penalty in relevant assessment. It cannot therefore be held that that the AO has no power to refer the matter to the Joint Commissioner for levy of penalty u/s 271D/271E or action for imposition of any of the penalties enumerated in Chapter XXI of the Income-tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection (1) of section 275 shows that it applies to any other case , which means to all cases other than those falling under clause (a) or (b) of sub-section (1) of section 275. It's a residuary clause and therefore does not override clause (a) or (b) of sub-section (1) of section 275. Being a residuary clause, it operates in a field other than the one occupied by clauses (a) and (b) of sub-section (1) of section 275. Clause (c) comes into play when a case does not fall under preceding two clauses. This position is self evident on bare reading of clause (c). No authority is needed in its support. However, if any authority is at all needed in its support, reference can be made, for example, to the judgment of the Hon'ble Karnataka High Court in Shanbhag Restaurant's case (supra) itself on which heavy reliance has been placed by the assessee in support of his case. In the said judgment, the Hon'ble High Court has held as under: As it could be seen from clause (a) of section 275, the said provision provides for limitation in a case where the relevant assessment or other order is the subject matter of appeal before the higher authorities. Clause (b) of the said sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment of income and not to those which are independent of the assessment of income. He submits that the penalties contemplated by section 271D and 271E are imposed for accepting/repaying loans/deposits in cash and not for any default relating to assessment of income. He further submits that measure of penalty imposable under sections 271D and 271E has no connection with the quantum of income assessed in the assessment order and therefore they are, for this reason also, independent of assessment proceedings. Prima facie, the aforesaid submissions look not only attractive but also quite convincing. As far as the measure of levy of penalty u/ss 271D and 271E is concerned, the learned counsel for the assessee is perfectly right in his submission that computation of penalty u/s 271D and section 271E is not dependent on the assessment of income. In that sense, measure for levy of penalty u/s 271D/271E is completely independent of the assessment of income. His further submission that penalties contemplated by section 271D/271E are independent of the assessment would generally apply to a large number of cases of penalty but that cannot be accepted as Euclid's formula (Euclid of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Chapter XXI of the Income-tax Act can be initiated in the relevant assessment or other order if the initiation of action for imposition of penalty as contemplated by section 275(1)(a) is integrally related to the assessment or, in other words, dependent upon the findings recorded in the assessment order. There could be cases where not only action for initiation but also imposition of penalty would be independent of the assessment of income in which case they would fall under clause (c) of sub-section (1) of section 275. But then, there could also be cases where the initiation as well as imposition of penalty is integrally related to the tax treatment of the transactions as given in the assessment order or depends upon the fate of assessment order. An order of assessment not only assesses the income of the assessee but also records finding on the tax treatment of various transactions, which are agitated in quantum appeal against the assessment order. Therefore there cannot be a universal formula that initiation and imposition of any penalty under Chapter XXI of the Income-tax Act is always dependent or independent of the assessment. Section 275(1)(a) applies to a case where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him, section 275(1)(a) is not applicable to the case of the assessee for the reason that the proceedings for levy of penalty are independent of the assessment proceedings and also for the reason that the proceedings for assessment contemplated by clause (a) of sub-section (1) of section 275 refer to assessment u/s 143(3) and not to block assessment u/s 158BC. 30. As stated earlier, there can be no hard and fast rule that action for imposition of penalty u/s 271D/271E cannot be initiated either in the relevant assessment or independently of the assessment. It all depends on the facts of the case. On the facts of the case, action for initiation of impugned penalties, vide Para 19 of the assessment order, is integrally linked with the finding recorded and the tax treatment given by the AO in this behalf in the assessment order and hence it cannot be said that action for imposition of impugned penalties was initiated independently of the assessment. 31. Another reason given by the CIT(A) for inapplicability of section 275(1)(a) to the cases under appeal is that the assessment contemplated by section 275(1)(a) is assessment u/s 143(3) and therefore action for imposition of penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e open to the AO to record a finding as regards the violations of section 269SS/269T and also initiate action for imposition of penalty u/s 271D/271E in the order for block assessment. Unless he himself is a Joint Commissioner, he cannot however levy penalty under them as penalty can be levied only by a Joint Commissioner of Income-tax as defined in section 2(28C). 32. The ld. Authorised Representative for the assessee has relied upon a long list of authorities, most of which are the decisions of this Tribunal, for the proposition that the proceedings for levy of penalty are independent of assessment proceedings and therefore the bar of limitation as contained in clause (c) of sub-section (1) of section 275 would apply and not the bar of limitation contained in section 275(1)(a). The general principle is that similar cases should be decided so as to give similar and predictable outcomes, and the principle of precedent is the mechanism by which that goal is attained. Judicial minimalists (i.e., judicial minimalism refers to a philosophy in the United States Constitutional law which promotes itself as a politically moderate viewpoint.) argue that obeying precedent makes decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us cases to subsequent cases. They have been reiterated in several judgments and judicial opinions by our own Apex Court. Some of those principles are as under: (i) Reliance on the decision without looking into the factual background of the case before it is clearly impermissible. A decision is a precedent on its own facts. Each case presents its own features. It is not everything said by a Judge while giving a judgment that constitutes a precedent. (ii) Every judgment must be read as applicable to the particular facts proved or assumed to be proved, since the generality of the expressions which are found there are not intended to be exposition of the whole law but governed and qualified by the particular facts of the case in which such expressions are found and a case is only an authority for what it actually decides. (iii) Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases. One should avoid the temptation to decide cases by matching the colour of one case against the colour of another. To decide therefore, on which side of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of Courts are neither to be read as Euclid's theorems nor as provisions of the statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of Courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes. 35. In Padmasundara Rao v. State of Tamil Nadu [2002] 255 ITR 147 (SC), a Bench of 5 Judges of the Hon'ble Supreme Court has held as under: Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. There is always peril in treating the words of a speech or judgment as though they are words in a legislativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are always rendered in the context of facts. As Lord Steyn said, in law, context is everything: Milan Poddar v. CIT [2012] 24 taxmann.com 27 (Jharkhand). The decisions referred to by the ld. Authorized Representative for the assessee cannot be treated as a Euclid's formula so as to be universally applicable without having regard to the relevant and peculiar facts of a case. Those decisions will surely apply to cases where action for imposition of penalty is initiated outside the proceedings for assessment or independently of assessment or which is not subject matter of appeal u/s 246/246A. But they do not lay down any inflexible or universal proposition that all cases involving levy of penalty would always attract the bar of limitation laid down in section 275(1)(c) and not the one laid down in section 275(1)(a) even if they fall under section 275(1)(a). 39. The issue as to whether action for imposition of penalty has been initiated in the order of assessment or any other order , which is subject matter of appeal, is essentially a finding of fact. Similarly, the finding as to whether initiation of action for imposition of penalty in the order of assessment or any other or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the order of the Commissioner of Income-tax (Appeals), who held that the penalty orders were passed after the expiry of the period of limitation specified in section 275(1)(c) of the Income-tax Act, 1961? Two important aspects emerge from the aforesaid question raised before the Hon'ble High Court. One, the question raised before the Hon'ble High Court was to be decided on the facts and in the circumstances of that case. Therefore, the decision rendered on the facts and in the circumstances of that case would apply in identical fact situation and not de hors the facts. Two, the issue before the Hon'ble High Court was not as to whether section 275(1)(a) was applicable on the facts of that case. The only issue before the High Court was whether the penalties levied by the DCIT were barred by limitation u/s 275(1)(c) on the facts and in the circumstances of that case. It was not even the submission of the Revenue that levy of penalty was covered by section 275(1)(a). Therefore the entire judgment revolves around the issue as to whether penalties were barred by limitation as laid down in section 275(1)(c). It is in this factual background that the Hon'ble High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are initiated by the Jt. CIT? 43. The issue for consideration before the Special Bench was whether period of limitation for purposes of Section 275 of the Act is to be reckoned from the date when assessment proceedings are completed or from the date when penalty proceedings are initiated by the Jt. CIT whereas the issue in appeals under consideration is whether the action for the imposition of impugned penalties can be said, on the facts of the case, to have been initiated in the relevant assessment in terms of section 275(1)(a) and if so whether the impugned penalties initiated by the AO in the assessment order would fall under section 275(1)(a) or not. The factual matrix as well as the nature of issue in the present appeals is altogether different. After careful analysis of the facts as available on record, a finding of fact has been recorded earlier in this order that the initiation of action for levy of impugned penalties is integrally related to assessment and also dependent upon the fate of assessment and therefore the case falls under clause (a) of sub-section (1) of section 275 and not under section 275(1)(c). Surely, the judgment of the Special Bench would apply to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided the issue of levy of impugned penalties on merits. The assessee has placed a copy of written submissions filed by him in this behalf (Para 3 and 4 of his written submissions, as reproduced earlier in this order) before the CIT(A). It is the case of the assessee that impugned loans/deposits have been treated as income of the assessee, being unexplained cash credits, by the AO and therefore impugned penalties cannot be levied. On perusal of the order passed by this Tribunal in quantum appeal, it is noticed that the addition made by the AO on account of unexplained cash credits has been reduced to ₹ 28 lakhs. There are several issues that need consideration for decision on merits. They are: one, whether the sum taxed by the AO as unexplained income of the assessee represent loans and deposits within the meaning of section 269SS/269T; two, whether the remaining sum (i.e., the sum taxed by the AO as unexplained cash credits being impugned loans/deposits as reduced by the addition confirmed by this Tribunal) represents loans and deposits within the meaning of section 269SS/269T; three, whether cash credits taxed by the AO are transactions of acceptance of loans or deposits or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty order passed u/s 271D and 271E were passed on 30.6.2006 i.e. before the end of the Financial Year and after financial year in which the appellate orders were received, therefore, penalty orders passed u/s 271D and 271E of the Act are not barred by limitation. 3. Shri N.P. Sony, the ld.DR appeared on behalf of the Revenue and pointed out that the case of the assessee is covered by the provisions of section 275(1)(a) and not by provision of section u/s 275(1)(c) of the Act as held by the ld. CIT(A) in the impugned orders. He further pointed out that in this case, the Block assessment order is dated 27.6.2001 which was a subject matter of appeal before the ld. CIT(A). The ld. CIT(A) vide order dated 3.9.2004 confirmed the order of the AO. Both the penalty orders passed u/s 271D and 271E were passed in this case on 30.6.2006 i.e. before the end of the Financial Year and after financial year in which the appellate orders were received, therefore, penalty orders passed u/s 271D and 271E are not barred by limitation. As against this, Shri B.R. Popat, the ld. Counsel appeared on behalf of the assessee vehemently supported the order passed by the ld. CIT(A). The ld. Counsel of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich are mentioned by the ld.CIT(A) in paragraph 5 of the impugned order which are as under : (i) Muthoot George Bankers v. Asstt. CIT [1993] 46 ITD 10 (Coch.) (supra) (ii) Hissaria Brothers (supra) (iii) Swagat Motors General Finance Co. (supra) (iv) Shanbhag Restaurant (supra) (v) Ramkishore Revaram Tada (supra) (vi) Dewan Chand Amrit Lal (supra) The ld. Counsel of the assessee pointed out that in the aforesaid cases, it has been held that having regard to provisions of Section 271D and 271E, the period of limitation for the purpose of Section of 275 is to reckon from the date when penalty proceedings are initiated by Dy. CIT (Joint CIT) and not from the date on which assessment proceedings are completed. In support of this ld. Counsel of the assessee finally relied on the decision of the Hon'ble Karnataka High Court in the case of Shanbhag Restaurant (supra), wherein it has been held that for the purpose of counting limitation u/s 275(1) in respect of penalty order u/s 271D and 271E, clause (c) of section 275(1) is relevant and not clause (a) of Section 275(1) of the Act. The ld. Counsel of the assessee also drew our attention to this seque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 272BBB or clause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall be imposable on the person or the assessee as the case may be, for any, failure referred to in the said provisions if he proves that there was reasonable cause for the said failure 275. Bar of limitation for imposing penalties.-(1) No order imposing penalty under this Chapter shall be passed- (a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253, 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 the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later : Provided that in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1980] 123 ITR 457. On the basis of this decision of the Tribunal, the counsel of the assessee pointed out that cash credits were considered as income even by the Tribunal, albeit subject to re-quantification based on the principle of telescoping, relying on the aforesaid judgment of the Hon'ble Supreme Court. Therefore, as both the penalties relates to such cash credit and corresponding debits, the same cannot be sustained, as these are clearly not transaction of acceptance of repayment of the deposits within the meaning of section 269SS and 269T of the Act. To sum up, the ld. Counsel of the assessee contended that while additions can be made on protective basis, there is no way a penalty can under sections 271D and 271E of the Act can be levied protectively. For this reasons, the Income Tax Act has not prescribed any limitation for initiation of penalty, u/s 271D and 271E, and has only provided that once initiated, same has to be disposed of within the prescribed time limit as specified u/s 275(1)( c ) of the Act. On the strength of this argument, the ld. Counsel submitted that on merits also penalty levied under these two sections be cancelled. 8. In rejoinder, the ld. DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made in cases which do not fall under section 275(1)(a) and (b) after the expiry of the financial year in which the proceedings in the course of which action for imposition of penalty has been initiated are completed. The second part relates to the cases which prohibits passing of an order imposing penalty after the expiry of six months from the end of the month in which action for imposition of penalty is initiated. However, the section further provides that when proceedings for imposition of penalty is initiated, whichever period expires later, would endure to the benefit of the revenue. In the instant case, as noticed by us earlier, the assessment order was passed on 25th February, 1994. The financial year in which the proceedings in the course of which action for imposition of penalty has been initiated is required to be understood as the proceedings relating to the assessment year. The financial year in which the proceedings, in the course of which action for imposition for penalty had been initiated, could be understood as the proceedings relating to imposition of penalty. The financial year in the first part of section 275(1)(c) must be understood as the financial year wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tually correct in cancelling the penalty levied u/s 271D and 271E of the Act following the judgment of the Hon'ble Karnataka High Court in the case of Shanbaug Restaurant (supra). I, therefore, inclined to upheld the order of the ld. CIT(A) in cancelling both the penalties levied by the ld. JCIT, Range-1, Junagadh. 13. Without prejudice to the above, the scheme of block assessment as contained in Chapter XIVB of the Act clearly indicates that same is to assess under undisclosed income and in the said Chapter interest and penalty is to be levied for the undisclosed income as specifically provided u/s 158BFA of the Act. Therefore, section 158BH of the Act is not applicable for levy of penalty other than what is provided under Chapter XIVB of the Act. In other words, the order u/s 271D or 271E is relevant only when assessment is framed u/s 143(3) of the Act and not for block assessment framed u/s 158BC of the Act. For these reasons, the order of penalty u/s 271D and 271E is also not sustainable. 14. Even on merits also I find considerable force in the contention of the ld. Counsel for the assessee that whom the credit are considered as income in the assessment framed u/s 158 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iating action for imposition of other penalties enumerated under Chapter XXI of the Income-tax Act also? 2. Whether section 275(1)(a) debars initiation of action in the relevant assessment for imposition of penalties u/s 271D/271E even if such action is integrally related to assessment? 3. Whether, on the facts and in the circumstances of the case, the Assessing Officer has, vide Para 19 of the block assessment order, initiated action for the imposition of impugned penalties in the relevant assessment, which was subsequently subject matter of appeal before the Commissioner (Appeals) and the Income Tax Appellate Tribunal and, if so, whether the cases under appeal would fall under section 275(1)(a)? 4. Whether all the conditions laid down in clause (a) of sub-section (1) of section 275 of the Income-tax Act for its applicability are satisfied on the facts and in the circumstances of the case under appeal and, if so, whether the case falls under that clause for the purpose of limitation? 5. Whether clause (c) of sub-section (1) of section 275 can be invoked in those cases also in which action for imposition of penalty has been initiated in the relevant assessment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ramed the following point of difference for disposal by the Third Member: Whether on the facts and circumstances of the case, the ld. JM is correct in upholding the order of the ld. CIT(A) cancelling the penalty levied under section 271D of ₹ 14,29,81,658/- and u/s.271E of ₹ 10,97,67,135/- or the ld.AM in restoring both the appeals to the file of the learned CIT(A) for examining the character of loan/deposits in the light of material available on record and thereafter decide the issue of levy of penalty on merits. The learned AM has framed the following point of difference as under: 1. Whether the scope of section 275(1)(a) is limited, in terms of the language employed therein, to initiating action for imposition of penalties in the relevant assessment to those cases alone which fall u/s 271 or extends to initiating action for imposition of other penalties enumerated under Chapter XXI of the Income-tax Act also? 2. Whether section 275(1)(a) debars initiation of action in the relevant assessment for imposition of penalties u/s 271D/271E even if such action is integrally related to assessment? 3. Whether, on the facts and in the circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. He submitted that the case of the assessee falls under the provision of Section 275(1)(a) of the Act. He submitted that it was an admitted position that in case, the case of the assessee falls under Section 275(1)(a), the penalty orders passed by the AO were well within the time limit prescribed under the Act. He referred to various relevant dates as recorded by the learned AM in his order at page no.5 of the order. He submitted that in fact the proviso to section 275(1)(a) applies to the case of the assessee. He submitted that the decision of the Hon'ble Karnataka High Court in Shanbhag Restaurant (supra) relied upon by the learned JM is distinguishable on facts since relates to the applicability of provision of section 275(1)(c) only and not with respect to provision of section 275(1)(a) or Section 275(1)(b) of the Act. He referred to para 34 of the learned AM's order wherein the decision of Hon'ble Supreme Court in Government of Karnataka (supra) was cited, and referred to along with certain other decisions of the Hon'ble Courts. He submitted that the order of the penalty has to be linked with the assessment order, and therefore, proviso to Section 275(1)(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein the Revenue can impose the penalty within a period of six months from the end of the month, in which the action for imposition of penalty is initiated or before the expiry of financial year in which the proceedings in the course of which action for the imposition of penalty has been initiated, whichever period expires later. He submitted that the decision of ITAT, Hyderabad Bench in Dillu Cine Enterprises (P.) Ltd. (supra) clearly applies to the case of the assessee wherein held that in the case of penalty levied under Section 271D of the Act, the provision of section 275(1)(c) shall be applicable and limitation for levy of penalty has to be worked out accordingly. The learned counsel for the assessee submitted that now the controversy stands settled in favour of the assessee with the latest decision of the Rajasthan High Court in Jitendra Singh Rathore (supra), wherein the issue has been decided in favour of the assessee, and there is no contrary decision of any other High Court on the issue, and therefore has the binding effect on the Tribunal. 5. The learned CIT-DR in his rejoinder submitted that decision of the Hon'ble Rajasthan High Court in Jitendra Singh Rathore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 clause (a) was to be invoked, no necessity of clause (c) would arise. Before me, no contrary decision of any other Hon'ble High Court or of the Hon'ble Supreme Court has been cited at the bar. In these facts of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so not been dealt with in the opinion of the Hon'ble Third Member. In support of the aforesaid, the ld. Departmental Representative has filed written submissions, which read as under: On account of the difference in opinion between the two Members, the case was referred to the third member which was heard on 3/5/2013. Both the Members had framed different questions in respect of points of difference between then, While the Accountant Member had framed 8 questions, the Judicial Member framed one general question. The Hon'ble Third Member vide his order dtd. 13/05/2013 has reproduced the question framed by the Accountant Member but has not dealt with them in his order. He has passed an order dealing with the facts of the case in general and has failed to answer the specific and pointed questioned framed by the Accountant Member. During the proceeding before the third Member the Ld. Counsel of the assessee had filed an unreported judgment of the Hon'ble Rajasthan High Court in the case of CIT vs. Jitendra Singh Rathore in IT Appeal No. 90/2007 dtd. 10/1/2013. When confronted to the undersigned it was pointed out, that in the case of Jitendra Singh Rathore that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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