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TMI Blog2011 (11) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... ted after inordinate delay of three years and six months from the date of knowledge by the department of the alleged default committed by the appellant assessee u/s 269SS of the I.T. Act, 1961, the impugned penalty is barred by limitation and bad in law and therefore the same may please be annulled." 3. The relevant facts of the case are that this is a case which is covered u/s 132 of the Income-tax Act (hereinafter called as an `Act'). The date of search was 29.7.2003. During the search and seizure proceedings, it is mentioned that the department came to know of the violation of the provisions of section 269SS relating to 'mode of taking or accepting certain loans and deposits'. Investigation wing of the Income tax Department sent the said information to the concerned assessing authorities (Addl. CIT Central Range-2) as per the set procedure and the said Addl. CIT, Central Range 2 intern sent the relevant information to the AO of the assessee. At this point of time, the re-assessment proceedings were initiated u/s 148 of the Act thereafter and the reassessment was completed on 8.12.2006. subsequently, on 23.1.2007, the penalty proceedings u/s 271D of the Act were initiated for v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e done only after completion of the assessment proceedings. 4. In the instant case this office received information from Addl. CIT, Central Range-2, Pune on the basis of which proceedings u/s 147 of the Act was initiated and completed by the then A.O. on 8.12.2006 wherein due mention was made of violation of provisions of section 269SS and section 269T. The matter with regard to the violation of sections 269SS and 269T was referred to the then Addl. CIT Range-3, Pune on 8.12.2006. Accordingly the then Addl. CIT initiated penalty proceedings u/s 271D and 271E of the Act on 23.1.2007 and levied penalties u/s 271D and 271E on 26.6.2007. Thus it is clear that the initiation and subsequent levy of penalties were absolutely in order and not barred by limitation of time as contended by the assessee." 6. Thus, the issue is about the timing of the initiation of the penalty proceedings u/s 271D of the Act. AO's stand includes (i) law is silent on the timing of the initiation of such proceedings; and (ii) knowledge of information on the violation is not the correct timing but the end of the relevant assessment proceedings. AO initiated on 23.1.2007 the impugned penalty proceedings u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to May 1967 i.e. almost 6 years, still the Hon'ble High Court refused to quash the penalty on ground of long gap between the date of assessment order and the date of imposing penalty. Further, in that case the showcause notice for penalty was issued in July 1961 and the penalty was levied in May 67. Therefore, the decision of hon'ble Bombay High Court does not help the appellant at all. The other case cited by the appellant of CIT Vs. Harinagar Sugar Mills Ltd. (1989) 176 ITR 289 related to initiation of action provided under the Excess Profit Tax Act 1940, and therefore, was not related to the matter at hand and was thus distinguishable. 3.5 In view of the above discussion, though penalty proceedings u/s 271D and 271E could be initiated at any time, in this case it was initiated in the assessment order u/s 143(3) r.w.s. 147 dated 8.12.2006 and, therefore, was levied within the time limit prescribed u/s 275(1) i.e. on 26.6.2007. The appellant's additional ground of appeal is therefore, dismissed." 8. Thus, the CIT (A) passively relied on the AO's reasoning in the matter. Further, regarding the delay of period of 45 days, as understood by us, the CIT (A) relied on the citation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legally not sustainable for following reasons: i. It is a well settled law that penalty proceedings u/s 271D are independent of assessment proceedings and the same need not be initiated during assessment proceedings (Please refer decision of Hon. Rajasthan High court in the case of CIT Vs. Hissaria Brothers reported in 291 ITR page 244) ii. The knowledge of the department as one unit is important and not knowledge of the concerned Assessing Officer having jurisdiction over the case of the assessee. The officer acquiring the knowledge of the alleged default is duty bound to immediately communicate the same to the officer having jurisdiction over the case of the defaulter. iii. Even in remand report submitted by the Ld. Assessing Officer to the learned CIT (A) during the appellate proceedings, a concession was made by the ld. Assessing Officer that it may be a fact that the department came to know of the cash loans on 29.7.2003 [please refer page no.3 of the impugned order passed by the Ld. CIT(A)] iv. Without prejudice to above, it is pertinent to note that in the paper book submitted by the department on 16.9.2011 a copy of letter dated 24.3.2006 written by the Ld. Add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould not be the starting point for counting the delay in initiation of the penalty proceedings. In this regard, he read out the contents of the remand report cited above. As per the DR, the delay if any, should start only from the date of completion of the re-assessment proceedings during the time the satisfaction of the A.O. becomes conclusive with regard to the said alleged violation. In terms of initiation, the penalties belongs the posterity of the assessment. Therefore, the re-assessment was completed on 18.12.2006 and initiation of the penalty proceedings u/s 271D of the Act on 26.6.2007 are in order. The very fact that this penalty proceedings were completed within the time prescribed in clause (c) of the section 275(1) of the Act. Therefore, the same is in order. 12. We heard both the parties, perused the orders of the revenue and the written submissions made by the assessee's counsel before us. We take up the issues raised in the additional ground first. The said issue relates to if the delay of 3½ years in matters of initiation of the penalty proceedings u/s 271D of the Act constitutes ordinary delay; and there exists legally sustainable explanation from the depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in (1989) 3 SCC 483 = (2002-TIOL-680-SC-CX) ruled that "In the absence of any period of limitation it is settled that every authority is to exercise the power within a reasonable period. What would be reasonable period, would depend upon the facts of each case….".(para 6) 2. ACIT (Inv.) Vs. Kum. A.B. Shanthi 255 ITR 258 (SC): 13. It is important to note that another provision, namely, s. 273B was also incorporated which provides that notwithstanding anything contained in the provisions of s. 271D, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision if he proves that there was reasonable cause for such failure and if the assessee proves that there was reasonable cause for failure to take a loan otherwise than by account-payee cheque or account-payee demand draft, then the penalty may not be levied. Therefore, undue hardship is very much mitigated by the inclusion of s. 273B in the Act. If there was a genuine and bona fide transaction and if for any reason the taxpayer could not get a loan or deposit by account-payee cheque or demand draft for some bona fide reasons, the authority vested w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a settled position of law that while interpreting a statute, nothing could be added or subtracted when the meaning of the section is clear and unambiguous. If the legislature intended to provide for any period of limitation or intended to apply the said provision of Article 137 into Section 46(4), the legislature would have specifically said so in the Act itself. When the language of the legislature is clear and unambiguous, nothing could be read or added to the language, which is not stated specifically. Therefore, Section 46(4) of the BFT Act. It is trite that if no period of limitation has been prescribed, statutory authority must exercise its jurisdiction within a reasonable period. What, however, shall be the reasonable period would depend upon the nature of the statute, rights and liabilities there under and other relevant factors. Three years period cannot be said to be a very long period and the power was exercised within a reasonable period of time. CIT Vs. Harinagar Sugar Mills Ltd. 176 ITR 289 (Bom): Although the income-tax proceedings were earlier completed, they were reopened and these proceedings (after reopening) were also completed in December 1962. Thereafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process, he imposed the issue for determination and did not adjudicate the legal ground raised by the assessee in accordance with the provisions of sub-section 6 of the section 250 of the Act. 16. From the above extracts from various citations, it is clear that, in the circumstances of no express provision for proceedings to commence, more so when the taxpayers is hit adversely, there is a requirement of fixing of reasonable period and the length of the period is ought to be case specific and it differs from one case to as held by the Apex Court. There is no dispute on the fact that there are no express provisions for initiation of the proceedings u/s 271D of the Act in the instant case. Further, it is also clear from the above, there is need for explanation for the said delay if it constitutes delay or inordinate delay and such explanation has to be given by the person or authority responsible for the delay/inordinate delay. When this is the settled law at the level of the Apex Court, we have perused the orders of the revenue for details of delay or inordinate delay or explanation of the revenue etc. The revenue authorities in general, the CIT (A) in particular has not determined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion that legal issues must be set aside to the files of the CIT (A) with the direction to him to decide the issue afresh after considering the above referred cited decisions. The CIT (A) shall endeavor to bring in any explanations for the said delay of both the kinds before passing a speaking order. Accordingly, the legal issue is set aside to the files of the CIT(A). 18. Regarding the merits of the reasonable cause and the sustaining of the penalty imposed by the AO, we refrain from adjudicating the same at this point of time, where the legal issue is still under adjudication. Reasons for the same include the nexus of the outcome on the said legal issue to that of the merits of the impugned reasonable cause and its effects of sustaining of the penalty. In toto, we set aside all the issues raised in all the grounds/additional grounds to the files of the CIT (A) for fresh proceedings. He shall grant reasonable opportunity of being heard to the assessees in accordance with the principles of natural justice. Accordingly, the grounds/additional grounds are set aside. 19. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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