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TMI Blog2006 (7) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... by virtue of the provisions of Section 275(1)(c) of the Act held to be applicable whereas the case of the assessee is covered under Section 275(1)(a) of the Act since the penalty proceedings pertained to the assessment order under appeal and Section 275(1)(c) was not applicable to it ? 2. Whether, on the facts and in the circumstances of the case the notice issued for initiating penalty proceedings and the penalty order passed pursuant thereto by the Joint Commissioner of Income Tax in accordance with the provisions of Section 271D(2) of the Act was bad and unlawful though passed within limitation ? 3. Whether, on the facts and in the circumstances of the case, the Assessing Officer was empowered to initiate proceedings and pass penalty order under Section 271D of the Act for the reason of issuing show cause to the assessee for referring the matter to the Joint Commissioner who else was empowered to impose penalty under Section 271D(2) of the Act ? 4. Whether, on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in holding that the assessee acted under bona fide belief and did have reasonable and sufficient cause as provided under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neither fall in the category of deposits under Section 269SS and repayment under Section 269T nor the penalty was otherwise justified because the Commissioner of Income Tax (Appeals) also found that the assessee has shown reasonable cause for non-adherence to the requirement of dealing through banks as per Sections 269SS and 269T. However, the Commissioner of Income Tax (Appeals) held some instances to be of cash credits as per annexure A totalling to Rs. 1,89,000. Transactions pertaining to three persons, namely, Shri Prem Prakash, Shri Gangaram and Shri Shivraj were held to be in the nature of deposit and violative of Section 269SS and in turn the repayment and withdrawals to be in violation to Section 269T and sustained penalty in respect thereof. 7. In respect of those transactions, the Commissioner of Income Tax (Appeals) found that for non-compliance of Sections 269SS and 269T there did not exist reasonable cause with the assessee. 8. The assessee's contention that the orders of penalty passed in each case for the assessment years 1993-94, 1994-95 and 1995-96 were barred by time in terms of Section 275(1)(c) was not accepted by the Assessing Officer as well as by the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered deposits. Consequently its remittance in part or full to the constituents or its utilisation by such constituents also does not fall within the purview of repayment of such deposits within the meaning of Section 269T. Coupled with this finding of fact about all transactions to be genuine and bona fide, looking to the practice prevailing and requirements of the farmers, the Tribunal was also of the opinion that the assessee had reasonable and sufficient cause for not complying with Sections 269SS and 269T even if the same were to be considered as deposit and repayment of deposits. About the additions sustained by the Commissioner of Income Tax (Appeals) in respect of alleged cash credit, the Tribunal found such transaction to be not outside the purview of the transactions carried out by the assessee as kachcha adhatiya. Hence, the penalty sustained by the Commissioner of Income Tax (Appeals) was also set aside. 12. We shall first deal with question No. 4. Question No. 4 reads as under: 4. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that the assessee acted under bona fide belief and did have reasona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be considered as a deposit when the money is retained by the kachcha adhatiya for remitting to the constituents and subsequent remittance or adjustment of such amount by discharging obligation of his constituents or remittance of such amount to the constituents are not considered to be repayment of the deposits or loan. The assessing authorities were bound by the general instructions contained in the circular issued by the Board so far as the dealings of kachcha adhatiya of the nature found by the Assessing Officer himself in the present case. Therefore, there was hardly any occasion for invoking Sections 269SS and 269T on the supposed omission on the part of the assessee to comply with the requirement of the said provisions for inviting application of penalty provisions of Sections 271D and 271E. 16. Therefore, we are in agreement with the Tribunal that the provisions of Sections 271D and 271E could not have been invoked in the present case. 17. Even assuming that the provisions of Sections 269SS and 269T could be invoked in the present case in the facts and circumstances, the findings of the Tribunal that reasonable cause existed for the assessee which resulted in failure to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the subject-matter of revision under Section 263, 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 re-heard 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. 22. It would not be out of pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified the 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 Appellate Assistant Commissioner remands the appeal against the assessment for further enquiry by the Income Tax Officer or deletes or reduces the addition made on account of concealed income and the Department takes up the matter in further appeal before the Appellate Tribunal. Sometimes, a final decision on the quantum of the concealed income becomes available only after the expiry of the two-year time limit. 25. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the assessment to which the proceedings for imposition of penalty relate is the subject-matter of an appeal to the Deputy Commissioner (Appeals) or the Commissioner (Appeals) under Section 246 or with effect from June 1, 2000 Section 246A or an appeal to the Appellate Tribunal 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). 29. 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 Deputy Commissioner (Appeals) or the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner whichever period expires later. 30. 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the case may be. The penalty proceedings could also be initiated during the appellate proceedings arising out of the relevant assessment proceedings. It is only where the assessment proceedings are independent and not directly linked to the assessment proceedings that the result of such proceedings 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. 36. 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 di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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