TMI Blog2005 (11) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... r Appellate Tribunal, and (ii) all other cases. It appears that the Legislature has not considered it necessary to provide for limitation for initiation of penalty proceedings under sections 271D and 271E. It becomes more probable when we consider the intention of the Legislature behind incorporation of provisions of sections 269SS and 269T. We have referred to the legislative intent behind incorporation of sections 269SS, 269T, 271D and 271E in the preceding paragraphs. The intention behind incorporation of these provisions was to counter the proliferation of black money, which when found in the course of search is sought to be explained by cash loans from various persons. As it is, there is no time-limit for conducting searches. When in the course of search, some information is found about cash loans or deposits or repayment of loans or deposits or such claims are made, the necessity for initiating proceedings under section 271D or 271E arises. If one were to compute the limitation with reference to the assessment proceedings, then in no case, penalty under sections 271D and 271E could be initiated in the cases where the information is gathered in the course of search. That would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are completed. - Member(s) : M. A. BAKSHI., JOGINDER PALL., N. K. SAINI. ORDER Per M.A. Bakshi, Vice President .- The above three appeals of the assessees, directed against the respective orders of the CIT(A), Rohtak, all dated 21-8-1998, confirming levy of penalty under section 271D of the Income-tax Act, 1961 on the assessees for having received loans and deposits in violation of provisions of section 269SS of the Act, 1961, had come up for hearing before the ITAT, Chandigarh Bench. 2. The main ground raised by the assessee against the levy of penalty was that the penalty orders were barred by limitation. The ITAT, Chandigarh Bench felt that there was divergence of opinion amongst various Benches of the Tribunal in regard to the computation of period of limitation. One view was that period of limitation for imposition of penalty under section 271D is to be calculated with reference to the notice issued by JCIT after recording his satisfaction. Another view is that the period of limitation commences from the date of issue of notice by the Assessing Officer. Accordingly, constitution of Special Bench was recommended. The Hon'ble President, ITAT was pleased to constitute the Spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Income-tax, Hissar Range, Hissar in the order passed under section 271D which is quoted hereunder: "The Inspector of his office was deputed to collect the copy of account of Shri Surinder Kumar, s/o Sh. Basant Lal, Bathinda from the books of account of the above assessee on 25-1-1995. But the above assessee has denied having any account of Sh. Surinder Kumar vide its letter dated 6-2-1995. Subsequently the books of account of the assessee were also impounded by his predecessor. It is pertinent to submit here that this letter has also been signed by Sh. Lalit Mohan, partner of the firm and apparently signatures of Sh. Lalit Mohan are tallying with those put on the receipt issued to Sh. Surinder Kumar. I am submitting herewith Income-tax return filed by the assessee for the assessment year 1994-95. This return of income has also been verified by Sh. Lalit Mohan and these signatures are also apparently tallying with those on the receipts. A letter was issued to the above assessee on 16-1-1996 and the assessee was asked to explain as to why his case should not be referred to DCIT for considering penalty under section 271D of the Income-tax Act. The assessee was required to sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show-cause notice on 13-5-1996. Limitation to pass penalty order is, therefore, to expire on 30-11-1996. This contention of the assessee is also rejected." 6. In the case of Shri Naresh Kumar, Prop. M/s. Punjab Ram Labh Chand, a similar receipt was found and seized from the premises of Shri Surinder Kumar in the course of search on 8-9-1993, in which it was indicated that a sum of Rs. 1 lakh had been received by the assessee in cash as loan. The Assessing Officer had made inquiries from the assessee. The report of the Assessing Officer has been reproduced by the DCIT in para 2 of his order which is quoted hereunder: "On receipt of the information necessary enquiry was made and the concerned parties were confronted with the photo copy of the receipt issued by them to Shri Surinder Kumar of Bathinda. The assessee as also required to show cause why the acceptance of deposit of in cash exceeding Rs. 20,000 should not be treated to be in contravention of the provisions of section 269SS of the Income-tax Act, 1961. The assessee was also required to intimate the utilization of the said amount and income if any earned therefrom. In response to the queries Sh. Naresh Kumar, Prop, attended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice dated 18-10-1996 was issued to the assessee by the DCIT, Hissar Range, Hissar. After considering the objections of the assessee, the DCIT has on the same grounds as in the case of M/s. Bhagwan Dass Lalit Mohan, imposed a penalty of Rs. 1 lakh vide order dated 29-11-1996. 8. In the case of M/s. Dewan Chand Amrit Lal also a receipt for Rs. 1 lakh on account of cash loan taken by the assessee from Shri Surinder Kumar was found on the date of search conducted on the residential premises on 8-9-1993. The information was passed on to the concerned Assessing Officer who made inquiry from the assessee. The report of the Assessing Officer has been reproduced by the DCIT in para 2 of his penalty order which is quoted hereunder: "On receipt of the information necessary enquiry was made and the concerned parties were confronted with the photo copy of the receipt issued by them to Shri Surinder Kumar of Bathinda. The assessee as also required to show cause why the acceptance of deposit of in cash exceeding Rs. 20,000 should not be treated to be in contravention of the provisions of section 269SS of the Income-tax Act, 1961. The assessee was also required to intimate the utilization of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s. Diwan Chand Amrit Lal, reproduced hereunder, rejected the contention advanced on behalf of the assessee: "5. I have carefully considered the conspectus of this matter and the facts on record. It is settled law that in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. Even if there be casus omissus, the defect can be remedied only by legislation and not by judicial interpretation. It is the duty of the adjudicating authority to give effect to the words used without scanning the wisdom or policy of the Legislature and without engrafting, adding or implying anything which is not congenial to or inconsistent with such express intent of the law-giver. If the statute is a taxing statute, it has to be assumed that the law-making authority does not commit a mistake or make an omission. To my mind, the legislative intent is manifest by the plain words used in section 271A, or for that matter, also in section 271D, on the one hand and, on the other, the provisions such as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. CIT [2001] 73 TTJ (Jodh.) 1. Reference has also been made to the decision of Rajasthan High Court in the case of CIT v. M.A. Presstressed Works [1996] 220 ITR 226 in support of the contention that the limitation for imposition of penalty starts from the completion of the proceedings in the course of which penalty proceedings have been initiated. According to the ld. counsel, in these cases, the penalty has been first initiated by the Assessing Officer and subsequently the penalty has been imposed by the DCIT. So the limitation starts from the date of issue of notice by the Assessing Officer. 11. The ld. counsel for the assessee has further contended that it cannot the intention of the Legislature to allow litigation to continue for indefinite period. Relying upon the decision of Patna High Court in the case of State of Bihar v. Puran Chandra Mahto 1999 (1) RCR (Civil) 630, the ld. Counsel contended that the object of limitation cannot be lost sight of and that the possibilities of the parties being dragged in Courts for an indefinite period is to be avoided. Reliance was also placed on the decision of Punjab Haryana High Court in the case of Smt Tarawanti v. State of Haryana 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order had not been passed within six months from the date of initiation. Reliance was also placed on the decision of Hyderabad Bench of the ITAT in the case of Dillu Cine Enterprises (P) Ltd. v. Addl. CIT [2002] 80 ITD 484, in support of the said contention. Reliance was also placed on the decision of Rajasthan High Court in the case of Nem Kumar Tholia v. Addl. CIT [1992] 194 ITR 371 (FB), wherein it was held that the IAC could act only on a reference made by the ITO and when the IAC exercised jurisdiction for imposing penalty, he was in fact exercising the jurisdiction conferred on the ITO. The ld. counsel contended that with the deletion of section 274(2) w.e.f. 1-4-1976, the entire jurisdiction in respect of imposition of penalty is now vested in the ITO. Reliance was also placed on the decision of the Supreme Court in the case of D.M. Mansvi v. CIT [1972] 86 ITR 557, to support the contention that recording of the satisfaction for initiation of penalty proceedings is necessary. According to the ld. counsel, penalty proceedings are necessarily to be initiated by the ITO or by the appellate authority. Reliance was also placed on the decision of the Jodhpur Bench of the ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of provisions of section 269SS are detected, since the assessment would have already been completed, there would be no time-limit for the imposition of penalty under section 271D or 271E. It was further contended that the Legislature in its wisdom has not prescribed any time-limit for initiation of penalty proceedings in certain cases and it is not open to the Tribunal or any Court to fill the gap left by the Legislature. The ld. D.R. relied upon the decision of the Kolkata Bench of the Tribunal in the case of Tata Tea Ltd v. Jt. CIT [2003] 87 ITD 351, to support the view that the job of the Tribunal and the Court is to interpret the law as legislated and no attempt should be made to fill in casus omissus of the Legislature. It was further contended that as per provisions of section 271D, the Legislature had specifically empowered the DCIT to impose the penalty under section 271D/271E. Subsequently, the JCIT has been empowered to levy the penalty. There is no power with the Assessing Officer either to initiate the penalty proceedings or to impose the penalty under the aforementioned provisions of the Act. The ld. D.R. placed reliance on the decision of Nagpur Bench of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 961. There are several provisions of the Act under Chapter XXI providing for penalty for various defaults. However, most of the litigation and the development of law are in regard to the provisions of section 271 of the Income-tax Act, 1961. It will be relevant to refer to section 271 as well as sections 271D and 271E so as to appreciate the distinction in the language of the aforementioned provisions of the Act which, in our view, is essential to be kept in mind in deciding the issue before us: "271.(1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act is satisfied that any person- (a) omitted by the Direct Tax Laws (Amendment) Act, 1989 w.e.f. 1-4-1989, (b) has failed to comply with a notice under sub-section (2) of section 115WD or under sub-section (2) of section 115WE or under subsection (1) of section 142 or sub-section (2) of section 143 or fails to comply with a direction issued under sub-section (2A) of section 1420, or (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, The following clause (d) shall be inserted after clause (c) of sub-section (1) of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 shall be passed before 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, or within one year from the end of the financial year in which the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or reduced. Under the amended provisions of the Act, the limitation for imposing penalty under Chapter XXI ordinarily was for two years from the end of the financial year in which the proceedings in the course of which action for imposition of penalty are initiated, were completed. However, where the relevant assessment or other order was subject-matter of an appeal, the time-limit for completing the proceedings was either two years period as referred to earlier or period of six months from the end of the month in which the order of the appellate authority was received by the Commissioner, whichever period expired later. There were several amendments between 1975 and 1988 with which we are not concerned. However, there was an amendment by the Direct Tax Laws (2nd Amendment) Act, 1989 by virtue of which clause (c) was incorporated in section 275 w.e.f. 1-4-1989, which is relevant for the present controversy. 17. In nutshell, under section 275, the penalty order under Chapter XXI was required to be passed within two years from the date of completion of the proceedings in course of which the proceedings for imposition of penalty were commenced. From 1-4-1971 to 31-3-1989, section 275 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty has been initiated, arc completed, or - six months from the end of the month in which action for imposition of penalty is initiated. Whichever period expires later. It may be noted that in computing the period of limitation for purposes of section 275(1), certain period is to be excluded with which we are not concerned for the present controversy. Penalties under sections 271D and 271E are for failure to comply with the provisions of sections 269SS and 269T respectively. 18. In order to appreciate the necessity for incorporation of sections 269SS, 269T, 271D and 271E, it would be relevant to trace the legislative intend for incorporation of such provisions of the Act. Section 269SS was newly inserted by Finance Act, 1984 (21 of 1984) w.e.f. 1-4-1984. The provisions are effective from 1-7-1984. The scope and effect of section 269SS and section 276DD have been explained in the departmental Circular No. 387, dated 6-7-1984. The relevant portion is reproduced hereunder:- "(xxiv) Prohibition against taking or accepting certain loans and deposits in cash.- 32.1. Unaccounted cash found in the course of searches carried out by the Income-tax Department is often explained by taxpayers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat provisions of sections 269SS and 269T were necessitated to counter the serious threat to the national economy by proliferation of black money and the provisions had been incorporated to counter this major economic evil. There is a reference in the explanatory Circulars of the CBDT to the black money and the unaccounted cash found in the course of searches carried out by the Income-tax Department. When we look at the objective behind incorporation of sections 269SS and 269T, the contentions advanced on behalf of the assessees that penalty proceedings are necessarily to be initiated in the course of assessment proceedings loses its lusture. If it were so, then in search cases, where the unaccounted cash was sought to be explained with reference to cash loans and deposits would escape the levy of penalty under sections 271D and 271E as assessments in most of the cases would be completed before the date of search. This background, in our considered view, is important for getting us to take a pragmatic view in the matter of interpretation of section 275. Now, reverting to section 275, as pointed out earlier, there are three categories of cases for which a separate limitation has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 274(2) were in operation and they entitled the ITO to impose penalty in cases where the amount of income in respect of which particulars had been concealed were less than Rs. 25,000. It was held that since the concealed income was less than Rs. 25,000, the ITO had the jurisdiction to impose penalty and there was no need for him to have referred the matter to the IAC. Their Lordship further held as under: "Penalty for concealment of particulars of income or for furnishing inaccurate particulars of income can be imposed only when the assessing authority is satisfied that there has been such concealment or furnishing of inaccurate particulars. Proceedings for the imposition of penalty can, therefore, be initiated only after an assessment order has been made which finds such concealment or furnishing of inaccurate particulars. Who, at this point of time has the authority is what is relevant. Whoever this authority may be, he is obliged to impose such penalty as was permissible under the law in that behalf on the date on which the offence of concealment was committed, that is to say, on the date of the offending return. The two aspects must be firmly borne in mind, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... competent authority to be satisfied that assessee had committed the default was the Assessing Officer but the authority for imposition of penalty was given to the IAC for which a reference was required to be made to him. This system has since been withdrawn. As per the modified section 274, the authority for imposition of penalty is vested with the concerned officers. However, where the penalty exceeds the specified limits, prior approval of the Jt. Commissioner is required. 20. Another factor that deserves consideration is the requirement of recording of satisfaction in the course of any proceedings. When the language of provisions of sections 271, is compared with bsection 271D/271E, the distinction is prominently visible. Under section 271, recording of satisfaction before initiation of penalty in the course of proceedings is a condition precedent for imposition of penalty for specified defaults. Under sections 271D and 271E, there is no such requirement of recording of satisfaction in the course of any proceedings. Moreover, the authority for imposition of penalty under section 271 is the Assessing Officer or the CIT(A), as the case may be. On the other hand, the authority for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the date of initiation by the DCIT. We may gainfully refer to the decision of the Karnataka High Court in the case of Shanbagh Restaurant v. Dy. CIT [2004] 266 ITR 393 wherein their Lordships had the occasion to consider the issue relating to limitation under section 271D. In that case, the assessee-firm was carrying on restaurant business. For assessment year 1991-92, for which the previous year ended on 31-3-1991, the return of income filed by the assessee had been taken up for scrutiny by the Assessing Officer. In the course of scrutiny of accounts, the Assessing Officer found that assessee had received loans and deposits in cash in contravention of provisions of section 269SS of the Income-tax Act, 1961 and also made payments of loans and deposits in cash. The Assessing Officer had completed the assessment on 25-2-1994. The DCIT issued a notice dated 8-6-1994 asking the assessee to show cause as to why penalty under sections 271D and 271E may not be imposed. The assessee filed reply. The DCIT after considering the explanation of the assessee imposed the penalty under sections 271D and 271E vide order dated 28-3-1995. On appeal against the imposition of penalty, the CIT(A) hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a limitation for initiation of penalty proceedings which are initiated in the course of assessment proceedings. So, however, it may be relevant to point out that even under section 271, the CIT(A) has the power lo enhance the penalty and also the additional power to initiate penalty proceedings for concealment of income, etc., in the proceedings before him. Though there is limitation for filing of appeals to the CIT(A) yet there is no limitation prescribed for the CIT(A) to dispose of the appeal. Therefore, it is implied that the CIT(A) does not have any limitation for initiation of penalty proceedings except that these are to be initiated in the course of proceedings before him. In other words, the limitation starts from the point of initiation. So, however, for initiation of penalty proceedings, in certain cases there is no limitation. 24. In the case of Food Corpn. of India v. CST [1998] 109 STC 131 (SC), the issue relating to limitation within which a penalty order could be passed by the appellate authority/Commissioner of Madhya Pradesh General Sales Tax Act, 1958 arose before the Hon'ble Supreme Court. Their Lordships explaining similar provisions under the M.P. General Sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce to the assessment proceedings, then in no case, penalty under sections 271D and 271E could be initiated in the cases where the information is gathered in the course of search. That would defeat the very purpose of the legislating the provisions of sections 271 and 271E. Looking from the background which gave rise to incorporation of sections 269SS, 269TT, 271D and 271E, we are of the considered view that the Legislature has consciously not prescribed any limitation for initiation of penalty proceedings under sections 271D and 271E. The limitation of course has been prescribed for imposition after its initiation by the competent authority. 26. Assuming for argument's sake that there is an unintended omission by the Legislature in not providing limitation for initiation of penalty proceedings under sections 271D and 271E, even in that case, it is not for us to provide for the casus omissus of the Legislature. In the case of Prukash Nath Khanna v. CIT [2004] 266 ITR 1 at page 9, their Lordships of the Supreme Court held, "It is a well-settled principle in law that the Court cannot read anything into a statutory provision which is plain and unambiguous. A statute is an edict of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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