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TMI Blog2024 (11) TMI 1310X X X X Extracts X X X X X X X X Extracts X X X X ..... hat, the Assistant CIT, Central-17, vide letter dated 07/06/2011 reported that the Assessee had entered into transaction in contravention of provision of Section 269T of the Income Tax Act,1961('Act' for short). Pursuant to the same, a penalty proceedings has been initiated against the Assessee by issuing a show cause notice dated 13/06/2011, 12/07/2011 and 19/12/2011. The Assessee filed a reply on 20/06/2011. An order of penalty came to be passed on 25-30/12/2011 u/s 271E of the Act by imposing penalty of Rs. 3,44,15,000/- i.e. equal to the amount paid contrary to provision Section 269T of the Act. Aggrieved by the order of the penalty, the Assessee preferred an Appeal before the CIT(A). The Ld. CIT(A) vide order dated 09/09/2016, allowed the Appeal for the Assessee by deleting the penalty. 4. Aggrieved by the order of the Ld. CIT(A), the Department of Revenue preferred the present Appeal on the grounds mentioned above. 5. The Ld. Departmental Representative vehemently argued that the Ld. CIT(A) has erred in law holding that order u/s 271E was barred by limitation without appreciating that the order was passed within six months of initiation of proceedings by Addl. CIT, who was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) were attracted in the case of assessee which read as under:- "(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" 9. It was therefore contended that the penalty order should have been passed on or before dated 30.6.2011 whereas the same had been passed on 30.12.2011 and therefore the penalty order was barred by time limitation. The appellant has placed reliance on judgment of Hon'ble Jurisdictional High Court in the case of PCIT vs. JKD Capital & Finlease Ltd. ITA No. 780/2015 dated 13.10.2015. It is seen that there is no ambiguity with regard to the fact that the AO at the time of passing of the assessment order for the year under consideration had recorded his satisfaction on the issue of payment of interest otherwise than by crossed payee cheque/draft and in consequence thereof penalty notice had been issued on 31.12.2010 requiring the assessee to explain as to why penalty u/s 271E should not be imposed. The period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 different period of limitation has been prescribed under Clause (c) as a separate category. In cases falling under Clause (c) penalty proceedings are to be completed within 6 months from the end of the month in whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th it at the instance of farmer constituents did not amount to repayment of loan or deposits within the meaning of Section 269SS or Section 269T and on the ground that limitation under Section 275(1)(c) applies to such proceedings we hold in favour of the respondents." The department went into appeal with the hon'ble apex court and vide its order dated 22.8.2016, the hon'ble apex court held as under:- "On perusing the judgment of the High Court, it is found that penalty imposed on the respondent herein was also set aside on the ground that the provisions of Section 271-D and 271-E of the Income Tax Act were invoked after six months of limitation and, therefore, such penalty could not have been imposed. Since the outcome of the judgment of the High Court can be sustained on this aspect alone, it is not even necessary to go into other aspects. Leaving the other questions of law open, the appeal is dismissed. There shall be no order as to costs. Pending application, if any, stands disposed of." 10. This issue had been further clarified by the Circular No. 10 of 2016 dated 26.4.2016 of CBDT as under:- "1. The issue whether the limitation for imposing of penalty under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO and not by the JCIT/AddI.CIT. The specific observations of the Hon'ble Court on the issue are reproduced as under:- "Mr. Kamal Sawhney, learned Senior standing counsel appearing for the Revenue submitted that the AO has no power to initiate the penalty proceedings under Section 271-E of the Act and it was only the Joint CIT who could have done so. Therefore, for the purpose of limitation under Section 275(1)(c), the relevant date should be the date on which notice in relation to the penalty proceedings were issued. In the present case, as the Additional CIT issued notice to the Assessee on 12th March 2012, the order of the Additional CIT passed on 20th March, 2012 was within limitation. We are unable to agree with the above submission of learned Standing counsel for the Revenue. Section 275(1)(c) reads as under: 275. (1) No order imposing a penalty under this Chapter shall be passed (a).....)...(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, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In that view of the matter, the order of the CIT (A) which has been affirmed by the impugned order of the ITAT does not suffer from any legal infirmity. No substantial question of law arises for determination. The appeal is dismissed." 12. It is further seen that circular has been issued by the CBDT No.9 dated 26.4.2016 as under: "1. It has been brought to the notice of the Central Board of Direct Taxes (hereinafter referred to as the Board) that there are conflicting interpretations of various High Courts on the issue whether the limitation for imposition of penalty under sections 271D and 271E of the Income Tax Act, 1961 (hereafter referred to as the Act) commences at the level of the Assessing Officer (below the rank of Joint Commissioner of Income-tax) or at level of the Range authority i.e., the Joint Commissioner of Income-tax/ Addl. Commissioner of Income-tax. 2. Some High Courts have held that the limitation commences at the level of the authority competent to impose the penalty, i.e., Range Head while others have held that even though the Assessing Officer is not competent to impose the penalty, the limitation commences at the level of the Assessing Officer where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court. However, the CCIT concerned should immediately bring the judgement to the notice of the Central Technical Committee. The CTC shall examine the said judgement on priority to decide as to whether filing of SLP to the Supreme Court will be adequate response for the time being or some legislative amendment is called for. 7. The above clarification may be brought to the notice of all officers." 13. The perusal of the circular no. 9 issued by the CBDT as reproduced above shows that the departmental view as expressed by the Hon'ble Kerala High Court in the case of Grahlaxmi Vision Ltd. vs. Addl.CIT would not be operative in the area falling in the jurisdictional High Court which has contrary view on the issue. It has already been highlighted that the Hon'ble Delhi High Court has held that the period of limitation to be starting from the date of issuance of notice by the assessing officer and not from the issuance of penalty notice issued by the JCIT/Addl.CIT. The facts of the case under consideration shows that the penalty notice had been issued by the AO on 31.12.2010. along with the passing of the assessment order and subsequent issue of another notice by the Add ..... X X X X Extracts X X X X X X X X Extracts X X X X
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