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C.I.T., CENTRAL-III, KOLKATA Versus NARAYANI AND SONS (P) LTD.

2016 (9) TMI 449 - CALCUTTA HIGH COURT

Penalty u/s 271D - validity of notice - period of limitation - Held that:- Once it is realized that the proceedings were initiated on 26th December, 2006 when the notice was issued by the Assessing Officer, the period of limitation necessarily expired on 30th June, 2007 whereas the order imposing penalty was passed on 21st September, 2007. No elaborate reasoning is required to demonstrate that the order is hit by limitation. - In that view of the matter, the substituted question is answered .....

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he learned Tribunal dismissed an appeal preferred by the revenue. The aggrieved revenue has come up in appeal. The following question of law was formulated on 20th April, 2010. Whether on the facts and in the circumstances of the case the learned Tribunal has erred in law in dismissing the Appeal of the revenue by disregarding that the initiation of penalty proceeding under Section 271D of the Income Tax Act, 1961, is not related to the Assessment proceedings and it can be initiated at any time? .....

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Commissioner of Income Tax (Appeals) in view of Section 271D (2) read with Section 275(1) (c) of the Income Tax Act, 1961, by holding that the order of penalty was passed out of time taking into consideration the limitation period of six months from the date of issuance of notice by the Assessing Officer i.e. from 26.12.06 which was not pursued and by disregarding the notice dated 26.7.07 issued by the Addl. Commissioner of Income Tax who is the competent authority to initiate the penalty procee .....

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en found that you have been received cash of ₹ 30,00,000/- above ₹ 20,000/- at a time from a single person in the F.Yr.2002-03 relevant to A.Yr.2003-04. This is in violation to the provision U/s.269SS and attracts penalty U/s.271D(1). Therefore you are required to explain why the penalty U/s.271D(1) of the I.T.Act should not be imposed against you. Your reply must reach this office 19th February, 2007. The assessee replied stating, inter alia that there was no violation of section 26 .....

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ave received share application money amounting to ₹ 30,00,000/- received from 22 persons, each of the persons paying exceeding ₹ 20,000/- otherwise than by an account payee cheque or bank draft. Thus, you have violated the provisions of Sec.269SS of the I.T.Act. You are hereby requested to show cause why provisions of Sec. 271D would not be attracted and the penalty u/s.271D could not be imposed upon you. Your reply is expected by 31-07-2007. The Additional Commissioner was of the op .....

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ued by the assessing officer. Therefore, the order passed on 21st September, 2007 was hit by limitation. The revenue unsuccessfully challenged the order before the learned Tribunal and has now come up before this Court. Md. Nizamuddin, learned advocate appearing in support of the appeal drew our attention to a judgment of the Kerala High Court in the case of Grihalakshmi Vision Vs. Additional Commissioner of Income Tax reported in (2015) 379 ITR 100 (Kerala), wherein the following views were tak .....

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could not have been done by the Assessing Officer. The statement in the assessment order that the proceedings under section 271D and section 271E are initiated is inconsequential. On the other hand, if the assessment order is taken as the initiation of penalty proceedings, such initiation is by an authority who is incompetent and the proceedings thereafter would be proceedings without jurisdiction. If that be so, the initiation of the penalty proceedings is only with the issuance of the notice i .....

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d if that be so, the order levying penalty passed by the Joint Commissioner is within the time prescribed in section 275(1)(c). He, therefore, submitted that the views taken by the learned Tribunal should be reversed and the appeal should be allowed. Mr. Khaitan, learned senior advocate, appearing for the assessee drew our attention to a judgment of the Rajasthan High Court in the case of CIT Vs Jitendra Singh Rathore reported in (2013) 352 ITR 327 (Rajasthan), wherein the following views were t .....

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r of limitation and has rightly been set aside in the orders impugned. In view of the above, our answer to the formulated question of law is that even when the authority competent to impose penalty under section 271D was the Joint Commissioner, the period of limitation for the purpose of such penalty proceedings was not to be reckoned from the issue of the first show cause by the Joint Commissioner; but the period of limitation was to be reckoned from the date of issue of the first show cause fo .....

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the Kerala High Court did not give any reasons as to why was the view taken by Rajasthan High Court not acceptable to the Hon ble Division Bench of the Kerala High Court. We have considered the rival submissions advanced by the learned advocates appearing for the parties. Sub-section 2 of Section 271D provides that the jurisdiction of imposing penalty is vested in the Joint Commissioner. The Subsection 2 provides as follows:- Any penalty imposable under sub-section (1) shall be imposed by the Jo .....

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n, who is likely to come across the cases of concealment or violation of the provisions of law attracting penal provisions. Can the Assessing Officer, having come across a case of violation of law attracting penal provisions, issue a notice and in case he does so, would that be an act without jurisdiction ? This question has been answered by the Kerala High Court in the affirmative. A somewhat similar situation is contemplated or is bound to arise under Sub-Section 2 of Section 274 which provide .....

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tion (1) of section 271, if in a case falling under clause (c) of that sub-section, the minimum penalty imposable exceeds a sum of rupees one thousand, the Income-tax Officer shall refer the case to the Inspecting Assistant Commissioner who shall, for the purpose, have all the powers conferred under this Chapter for the imposition of penalty. A plain reading of Sub-Section 2 of Section 274, as it was, goes to show that before the said Act of 1975 was introduced, the Assessing Officer had jurisdi .....

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ourt in the affirmative. Their Lordships in the case of D.M. Manasvi vs. C.I.T., Gujarat, reported in [1972] 86 ITR 557, held as follows:- We are also not impressed by the argument advanced on behalf of the appellant that the proceedings for the imposition of penalty were initiated not by the Income-tax Officer but by the Inspecting Assistant Commissioner when the matter had been referred to him under section 274(2) of the Act. The proceedings for the imposition of penalty in terms of sub-sectio .....

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