Delhi High Court
Pr. Commissioner Of Income Tax -5 vs Jkd Capital & Finlease Ltd on 13 October, 2015
Author: S. Muralidhar
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
4.
+ ITA 780/2015
PR. COMMISSIONER OF INCOME TAX -5 ..... Appellant
Through: Mr. Kamal Sawhney, Senior standing
counsel with Mr. Raghvendra K. Singh, Junior
standing counsel.
versus
JKD CAPITAL & FINLEASE LTD ..... Respondent
Through: Ms. Poonam Ahuja with Mr. Rohit
Kumar Gupta, Advocates.
CORAM:
DR. JUSTICE S.MURALIDHAR
MR. JUSTICE VIBHU BAKHRU
ORDER
% 13.10.2015
1. This appeal by the Revenue under Section 260A of the Income Tax Act,
1961 ('Act') is directed against the impugned order dated 27 th March 2015
passed by the Income Tax Appellate Tribunal ('ITAT') in ITA No.
5443/Del/13 for the Assessment Year ('AY') 2005-06.
2. By the impugned order the ITAT affirmed the order of the Commissioner
of Income Tax ['CIT (A)'] quashing the penalty imposed on the Assessee,
JKD Capital and Finlease Limited, under Section 271-E of the Act by an
order dated 20th March 2012 of the Additional Commissioner of Income Tax
['Additional CIT'].
3. While finalising the assessment order dated 28th December 2007 the
Assessing Officer ['AO'] in the concluding paragraph issued a direction to
initiate proceedings against the Assessee under Sections 271 (1) (c) and 271-
E of the Act. Admittedly, under Section 271-E (2) of the Act, any penalty
under Section 271-E (1) can only be imposed by the Joint Commissioner of
Income Tax ['Joint CIT']. Consequently, the AO referred the matter to the
Additional CIT.
4. A perusal of the order dated 20th March 2012 of the Additional CIT shows
that a show-cause notice initiating penalty proceedings under Section 271-E
was issued to the Assessee on 12th March 2012 requiring it to explain as to
why penalty should not be levied on it under Section 271-E on account of
violation or the provisions of Section 269T of the Act. With the Assessee
having failed to furnish the required information, the Additional CIT
proceeded to confirm the penalty in the sum of Rs. 17,90,000.
5. The Assessee challenged the above order before the CIT (A). In the order
dated 22nd July 2013, the CIT (A) deleted the above penalty inter alia on the
ground that, in terms of Section 275 (1) (c) of the Act, the penalty order
could have only been passed on or before 30th June 2008 and therefore, the
penalty order passed on 20th March 2012 was barred by limitation.
6. The ITAT has, in the impugned order dated 27 th March 2015, affirmed the
above order of the CIT (A) by referring to the decision of this Court in CIT
v. Worldwide Township Projects Limited (2014) 269 CTR 444. The ITAT
has observed that the date on which the CIT (A) had passed the order in the
quantum proceedings had no relevance as it did not have any bearing on the
issue of penalty.
7. 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.
8. 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)....
(b).....
(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. In terms of the above provision, there are two distinct periods of limitation
for passing a penalty order, and one that expires later will apply. One is the
end of the financial year in which the quantum proceedings are completed in
the first instance. In the present case, at the level of the AO, the quantum
proceedings was completed on 28th December 2007. Going by this date, the
penalty order could not have been passed later than 31st March 2008. The
second possible date is expiry of six months from the month in which the
penalty proceedings were initiated. With the AO having initiated the penalty
proceedings in December 2007, the last date by which the penalty order
could have been passed is 30th June 2008. The later of the two dates is 30th
June 2008.
10. Considering that the subject matter of the quantum proceedings was the
non-compliance with Section 269 T of the Act, there was no need for the
appeal against the said order in the quantum proceedings to be disposed of
before the penalty proceedings could be initiated. In other words, the
initiation of penalty proceedings did not hinge on the completion of the
appellate quantum proceedings. This position has been made explicit in the
decision in CIT v. Worldwide Township Projects Limited (supra) in which
the Court concurred with the view expressed in Commissioner of Income-
Tax v. Hissaria Bros. (2007) 291 ITR 244(Raj) in the following terms:
"The expression other relevant thing used in s. 275(1)(a) and cl. (b) of
Sub-s. (1) of S. 275 is significantly missing from cl. (c) of s. 275(1) to
make out this distinction very clear. We are, therefore, of the
opinion that since penalty proceedings for default in not having
transactions through the bank as required under ss. 269SS and
269T are not related to the assessment proceeding but are
independent of it, therefore, the completion of appellate
proceedings arising out of the assessment proceedings or the other
proceedings during which the penalty proceedings under ss. 271D
and 271E may have been initiated has no relevance for sustaining
or not sustaining the penalty proceedings and, therefore, cl. (a) of
sub-s. (1) of s. 275 cannot be attracted to such proceedings. If that
were not so cl. (c) of s. 275(1) would be redundant because otherwise
as a matter of fact every penalty proceeding is usually initiated when
during some proceedings such default is noticed, though the final fact
finding in this proceeding may not have any bearing on the issues
relating to establishing default e.g. penalty for not deducting tax at
source while making payment to employees, or contractor, or for that
matter not making payment through cheque or demand draft where it
is so required to be made. Either of the contingencies does not affect
the computation of taxable income and levy of correct tax on
chargeable income; if cl. (a) was to be invoked, no necessity of cl. (c)
would arise." (emphasis supplied)
11. In fact, when the AO recommended the initiation of penalty proceedings
the AO appeared to be conscious of the fact that he did not have the power
to issue notice as far as the penalty proceedings under Section 271-E was
concerned. He, therefore, referred the matter concerning penalty proceedings
under Section 271-E to the Additional CIT. For some reason, the Additional
CIT did not issue a show cause notice to the Assessee under Section 271-E
(1) till 20th March 2012. There is no explanation whatsoever for the delay of
nearly five years after the assessment order in the Additional CIT issuing
notice under Section 271-E of the Act. The Additional CIT ought to have
been conscious of the limitation under Section 275 (1) (c), i.e., that no order
of penalty could have been passed under Section 271-E after the expiry of
the financial year in which the quantum proceedings were completed or
beyond six months after the month in which they were initiated, whichever
was later. In a case where the proceedings stood initiated with the order
passed by the AO, by delaying the issuance of the notice under Section 271-
E beyond 30th June 2008, the Additional CIT defeated the very object of
Section 275 (1) (c).
12. 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.
13. No substantial question of law arises for determination.
14. The appeal is dismissed.
S.MURALIDHAR, J
VIBHU BAKHRU, J
OCTOBER 13, 2015
Rk
