Full Judgment Text
$~8, 9, 10
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 577/2018
PRINCIPAL COMMISSIONER OF INCOME TAX-7 ..... Appellant
Through: Mr. Kunal Sharma, Senior Standing
Counsel for Revenue.
versus
RISHIKESH BUILDCON PVT. LTD. ..... Respondent
Through: Mr. Rajiv Saxena, Ms. Sumayla
Saxena and Mr. Shyam Sunder,
Advocates.
9
+ ITA 580/2018
PRINCIPAL COMMISSIONER OF INCOME TAX-7 ..... Appellant
Through: Mr. Kunal Sharma, Senior Standing
Counsel for Revenue.
versus
RISHIKESH PROPERTIES PVT. LTD. ..... Respondent
Through: Mr. Rajiv Saxena, Ms. Sumayla
Saxena and Mr. Shyam Sunder,
Advocates.
10
+ ITA 583/2018
PRINCIPAL COMMISSIONER OF INCOME TAX-7 ..... Appellant
Through: Mr. Sanjay Kumar, Senior Standing
Counsel for Revenue.
versus
RUPA PROMOTERS PVT. LTD., ..... Respondent
Through: Mr. Rajiv Saxena, Ms. Sumayla
Saxena and Mr. Shyam Sunder,
Advocates.
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:19.11.2022
18:23:55
ITA Nos. 577/2018, 580/2018 and 583/2018 Page 1 of 12
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% Reserved on : 18 October, 2022
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Date of Decision: 17 November, 2022
CORAM:
HON'BLE MR. JUSTICE MANMOHAN
HON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA
J U D G M E N T
MANMEET PRITAM SINGH ARORA, J:
1. By way of the present appeals, Revenue has assailed the common
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judgment and order of the Income Tax Appellate Tribunal (‘ITAT’) dated 24
October, 2017, in ITA Nos. 3178/Del/2010, 3150/Del/2010 and
3171/Del/2010 for the Assessment Year (‘AY’) 2006-07. This Court while
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admitting these appeals on 15 May, 2018, framed the following common
question of law: -
“Did the Income Tax Appellate Tribunal fall into error with respect to its
interpretation of Section 275(1)(c) of the Income Tax Act in the circumstances
of the case?”
2. The learned senior standing counsel for the Revenue has made the
following submissions: -
2.1. He states that in the present appeals, the Assessing Officer (‘AO’)
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passed the assessment order(s) on 17 December, 2008 and 18 December,
2008 and recorded that the penalty proceedings be initiated; and a reference
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was made by the AO to the prescribed authority on 18 March, 2009. The
prescribed authority had, thereafter, issued separate Show Cause Notice
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(‘SCN’) to the Respondent(s), Assessee(s), on 24 March, 2009, and
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consequently, the penalty order(s) were passed on 29 September, 2009.
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:19.11.2022
18:23:55
ITA Nos. 577/2018, 580/2018 and 583/2018 Page 2 of 12
2.2. He states that the aforesaid facts evidence that the penalty order(s) were
passed within six months from the end of the month in which the reference
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was made by the AO to the prescribed authority i.e., 18 March, 2009.
2.3. He states that in the facts of the present appeals, the penalty order(s)
were passed within six months from the end of the month in which the penalty
proceedings were initiated by the prescribed authority by issuance of SCNs
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dated 24 March, 2009.
2.4. He states that the ITAT erred in holding that the limitation under
Section 275(1)(c) of the Income Tax Act, 1961 (‘the Act’), commenced from
the date initiation of proceedings by the AO (December 2008) even though,
admittedly, the AO is not competent to levy penalty under Section 271D of
the Act. Therefore, he contends that the order of the ITAT holding that the
penalty order was passed after the expiry of the time limit laid down under
Section 275(1)(c) of the Act is erroneous.
2.5. He states that the ITAT has failed to appreciate the factual matrix in the
judgment of this Court in Principal Commissioner of Income-Tax (Central)-
2 v. Mahesh Wood Products Pvt. Ltd., 2017 SCC OnLine Del 8214 , wherein
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a reference was made by the AO to the prescribed authority on 23 July, 2012
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and the SCN was issued on 28 August, 2012. Therefore, as per the date of
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reference, the limitation was to expire on 31 January, 2013 and as per the
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SCN, the limitation would’ve expired on 28 February, 2013. The penalty
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order was passed on 26 February, 2013. This Court in the facts of the said
case, held the same to be barred by limitation by reckoning the date of
initiation of penalty to be the date of making reference by the AO to the
prescribed authority. However, in the present case, the reference to the
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:19.11.2022
18:23:55
ITA Nos. 577/2018, 580/2018 and 583/2018 Page 3 of 12
prescribed authority and issuance of SCN, both were carried out in the month
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of March, 2009, and therefore the limitation would’ve expired on 30
September, 2009. He states in the present case the penalty orders were passed
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on 29 September, 2009, thus, within the limitation period.
2.6. He lastly, states that the ITAT erred in holding that the AO had initiated
the penalty proceedings in the assessment order itself and therefore, the
limitation period is to be reckoned from the end of the month of December,
2008, since the action for imposition of penalty was initiated vide the
assessment order(s) itself. He states that the ITAT failed to appreciate that
since the AO is not the prescribed authority under Section 271D of the Act,
the AO’s satisfaction with respect to initiation of penalty proceedings is not
relevant and the role of the AO was limited to bringing the fact of the violation
of Section 269SS of the Act, to the knowledge of the prescribed authority. He
states therefore, the limitation cannot be reckoned from the end of the month
of the assessment order(s) and the same can only start from the end of the
month on which the prescribed authority assumes jurisdiction by taking
cognizance of the reference made to it by the AO. He, thus, contends that the
date of reckoning limitation would be the date of issuance of the show cause
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notice i.e., 24 March, 2009. He states that the provision of Section 271D of
the Act does not have any nexus with the assessment proceedings.
3. In reply, the learned counsel for the Respondent(s), Assessee(s), states
that the facts arising for consideration in the present appeals are undisputed to
the extent that the penalty proceedings were initiated by the AO in his
assessment order(s) passed in December, 2008. Thus, the penalty order(s)
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passed on 29 September, 2009, were barred by limitation.
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:19.11.2022
18:23:55
ITA Nos. 577/2018, 580/2018 and 583/2018 Page 4 of 12
3.1. He states that the ITAT followed the judgment of this Court in the case
of Principal Commissioner of Income-Tax v. JKD Capital and Finlease
Ltd., 2015 SCC OnLine Del 14476 to conclude that the penalty proceedings
were initiated in the assessment order(s) itself and therefore, taking the same
to be the relevant date of initiation, the limitation period was to be calculated
from the end of the month of December, 2008, itself and not from the date on
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which the SCNs were issued i.e., 24 March, 2009.
3.2. He states that the legal principles for determining the date of initiation
and limitation for completing the penalty proceedings under Section 275(1)(c)
of the Act, have been well settled by this Court in its judgment of JKD Capital
and Finlease Ltd. (supra) and Mahesh Wood Products Pvt. Ltd. (supra) . The
ITAT has correctly followed the law laid down in the said judgments and
applied the same to the facts of the case in the present appeals. The ITAT has
not interpreted Section 275(1)(c) of the Act, as contended by the Revenue, but
correctly followed the interpretation of the said provision as propounded by
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this Court. He thus states that the question of law framed by this Court on 15
May, 2018, is not a substantial question of law as the interpretation of Section
275(1)(c) of the Act, is covered by the judgments of the predecessor bench of
this Court.
3.3. In this regard he relies upon the judgment of the Supreme Court in the
case of Sir Chunilal V. Mehta and Sons, Ltd. v. The Century Spinning and
Manufacturing Co., Ltd., AIR 1962 SC 1314, to contend that if the question
was practically covered by the decision of the highest Court or if the general
principles to be applied in determining the questions of law are well settled
and the only question was of applying the settled principles to the facts of the
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:19.11.2022
18:23:55
ITA Nos. 577/2018, 580/2018 and 583/2018 Page 5 of 12
case it would not be a substantial question of law. He, therefore, states that
there is no substantial question of law to be determined in the present appeals.
4. We have heard the learned counsel for the parties. The brief facts in
these appeals are as under: -
4.1. ITA No. 577/2018 –The said Respondent, Assessee, is engaged in the
business of carrying out land development work and had filed its Return of
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Income (‘ROI’) on 31 March, 2007, declaring a loss of Rs. 56,022/-. The
Assessee’s case was selected for scrutiny through CASS and Notice(s) were
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issued under Section 143(2) and 142(1) of the Act, on 20 February, 2008,
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and 10 March, 2008, respectively. During the Assessment proceedings, the
AO observed that the Assessee had received cash aggregating to Rs.
5,43,66,000/- from three companies. The AO in light of the aforesaid facts,
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passed the assessment order dated 17 December, 2008, holding that the
Assessee has violated the provisions of Section 269SS of the Act, as it had
received cash in excess of Rs. 20,000/- and consequently, proceeded to initiate
penalty proceedings, inter alia , under Section 271D of the Act.
4.2. ITA 580/2018 –The said Respondent, Assessee herein is also engaged
in the business of carrying out land development work and had filed its ROI
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on 31 March, 2007, declaring a loss of Rs. 58,957/-. The Assessee’s case was
selected for scrutiny through CASS and Notice was issued under Section
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143(2) of the Act, on 20 February, 2008. During the Assessment
proceedings, the AO observed that the Assessee had received cash
aggregating to Rs. 6,35,15,000/- from three companies. The AO in light of the
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aforesaid facts, passed the assessment order dated 18 December, 2008,
holding that the Assessee has violated the provisions of Section 269SS of the
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:19.11.2022
18:23:55
ITA Nos. 577/2018, 580/2018 and 583/2018 Page 6 of 12
Act, as it had received cash in excess of Rs. 20,000/- and consequently,
proceeded to initiate penalty proceedings, inter alia , under Section 271D of
the Act.
4.3. ITA 583/2018 – The said Respondent, Assessee, herein is also engaged
in the business of carrying out land development work and had filed its ROI
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on 31 March, 2007, declaring a loss of Rs. 66,279/-. The Assessee’s case was
selected for scrutiny through CASS and Notice was issued under Section
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143(2) of the Act, on 20 February, 2008. During the Assessment
proceedings, the AO observed that the Assessee had received cash
aggregating to Rs. 5,02,03,000/- from three companies. The AO in light of the
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aforesaid facts, passed the assessment order dated 17 December, 2008,
holding that the Assessee has violated the provisions of Section 269SS of the
Act, as it had received cash in excess of Rs. 20,000/- and consequently,
proceeded to initiate penalty proceedings, inter alia , under Section 271D of
the Act.
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5. The aforesaid assessment order(s) dated 17 December, 2008 and 18
December, 2008, were challenged by the Assessee(s) in appeal, wherein the
Commissioner of Income Tax (Appeals) [‘CIT(A)’] vide his separate order(s),
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all dated 31 March, 2010, deleted the penalty imposed by the AO, on merits.
6. The Revenue challenged the order(s) of CIT(A) before the ITAT. In the
proceedings conducted before the ITAT, the authorized representative of the
Assessee(s) raised a legal ground with respect to limitation and prayed that
the ITAT should first determine the said legal ground. The impugned order
records that the Revenue agreed to the said request of the Assessee(s) and
therefore, the legal issue of limitation was determined in the first instance.
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:19.11.2022
18:23:55
ITA Nos. 577/2018, 580/2018 and 583/2018 Page 7 of 12
The ITAT after taking note of the admitted facts concluded that since the
penalty proceedings were initiated in the assessment order(s) itself, therefore,
the limitation period will begin to run from end of the month of December,
2008 and not from March, 2009, that is the date on which the SCNs under
Section 271D of the Act were issued. The ITAT in concluding as above,
followed the judgment of this Court in JKD Capital and Finlease Ltd. (supra)
and Mahesh Wood Products Pvt. Ltd. (supra).
7. The relevant admitted facts for determining the controversy in the
present appeals are:
a. The quantum proceedings with respect to the three Assessee(s) were
completed in December, 2008 and the penalty proceedings against
the Assessee(s), inter alia under Section 271D of the Act for
violating the provision of Section 269SS of the Act, had been
initiated by the AO at the time of the completion of the said
assessment.
b. The SCNs under Section 271D of the Act were issued by prescribed
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authority on 24 March, 2009.
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c. The penalty order(s) were passed on 29 September, 2009.
8. The contention of the learned senior standing counsel for the Revenue
that the date of the issuance of the SCNs would be the relevant starting point
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i.e., 24 March, 2009, was specifically noted and rejected by this Court in the
Mahesh Wood Products Pvt. Ltd. (supra). The relevant portion of the said
judgment reads as follows:-
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:19.11.2022
18:23:55
ITA Nos. 577/2018, 580/2018 and 583/2018 Page 8 of 12
“ 7. Mr. Sanjay Kumar, learned counsel for the Revenue has sought to place
reliance on the decision of this Court in Commissioner of Income Tax (TDS)
v. IKEA Trading Hong Kong Ltd., [2011] 333 ITR 565 (Del) to urge that it is
the date of issuance of the Show Cause Notice (‘SCN’) that would be the
relevant starting point. Accordingly he submits that the date of issuance of
the SCN by the ACIT being 28 August, 2012, limitation would expire on 28
February, 2013. Therefore, the penalty orders having been passed on 26
February, 2013 would not barred by limitation. He also sought to distinguish
the decision of this Court in PCIT-5 v. JKD Capital & Finlease Ltd. (supra) by
stating that in the said case, the gap between the intimation send by the AO
recommending initiation of penalty proceedings and the action taken by the
ACIT was nearly five years, whereas in the present case, it was slightly over
one month.
xxx xxx xxx
9. However, this question came up for consideration in PCIT v. JKD Capital
& Finlease Ltd. (supra). The date on which the AO recommended the
initiation of penalty proceedings was taken to be the relevant date as far as
Section 275(1)(c) was concerned. There was no explanation for the delay of
nearly five years in the ACIT acting on the said recommendation. The Court
held that the starting point would be the ‘initiation’ of penalty proceedings.
Given the scheme of Section 275(1)(c) it would be the date on which the AO
wrote a letter to the ACIT recommending the issuance of the SCN. While it is
true that the ACIT had the discretion whether or not to issue the SCN, if he did
decide to issue a SCN, the limitation would begin to run from the date of letter
of the AO recommending ‘initiation’ of the penalty proceedings.”
(Emphasis Supplied)
9. The legal principle for determining the date of initiation of penalty
proceedings has been settled by the predecessor bench of this Court in its
decision of JKD Capital and Finlease Ltd. (supra) which reads as under: -
“2… While finalising the assessment order dated December 28, 2007 the
Assessing Officer (“the AO”) in the concluding paragraph issued a direction
to initiate proceedings against the assessee under sections 271(1)(c) and
271E of the Act. Admittedly, under section 271E(2) of the Act, any penalty
under section 271E(1)can only be imposed by the Joint Commissioner of
Income-tax (“the Joint CIT”). Consequently, the Assessing Officer referred
the matter to the Additional Commissioner of Income-tax.
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:19.11.2022
18:23:55
ITA Nos. 577/2018, 580/2018 and 583/2018 Page 9 of 12
3. A perusal of the order dated March 20, 2012, of the Additional
Commissioner of Income-tax shows that a show-cause notice initiating penalty
proceedings under section 271E was issued to the assessee on March 12, 2012,
requiring it to explain as to why penalty should not be levied on it under section
271E 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
Commissioner of Income-tax proceeded to confirm the penalty in the sum of
Rs. 17,90,000.
xxx xxx xxx
6.Mr. Kamal Sawhney, learned senior standing counsel appearing for the
Revenue, submitted that the Assessing Officer has no power to initiate the
penalty proceedings under section 271E of the Act and it was only the Joint
Commissioner of Income-tax 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 Commissioner of Income-tax issued
notice to the assessee on March 12, 2012, the order of the Additional
Commissioner of Income-tax passed on March 20, 2012, was within limitation.
7. 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…
(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.”
8. 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 Assessing Officer, the
quantum proceedings was completed on December 28, 2007. Going by this
date, the penalty order could not have been passed later than March 31, 2008 .
The second possible date is the expiry of six months from the month in which
the penalty proceedings were initiated. With the Assessing Officer having
initiated the penalty proceedings in December 2007, the last date by which
the penalty order could have been passed is June 30, 2008. The later of the
two dates is June 30, 2008.”
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:19.11.2022
18:23:55
ITA Nos. 577/2018, 580/2018 and 583/2018 Page 10 of 12
(Emphasis Supplied)
10. The contentions urged by the learned counsel for the Revenue in the
present appeals are therefore reiteration of pleas which have been
categorically rejected by the predecessor bench of this Court in the aforesaid
judgments.
11. In the present appeals, a perusal of the assessment order(s) shows that
the penalty proceedings were initiated by the AO in the assessment order(s)
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itself. Illustratively, the direction contained in the assessment order dated 17
December, 2008, pertaining to ITA No. 577/2018, Rishikesh Buildcon Pvt.
Ltd. may be referred to, which reads as under:-
“… Initiate penalty proceedings u/s, 271(1)(c) for concealment of income &
27l(1)(b) for non-compliance of statutory notices, & 271 D for violating the
provisions of Section 269 SS as discussed above.”
12. The predecessor bench of this Court in the aforesaid judgments has held
that where the AO has initiated the penalty proceedings in his/her assessment
order, the said date is to be taken as the relevant date as far as the Section
275(1)(c) of the Act is concerned. In these cases, the quantum proceedings
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were completed by the AO on 17 /18 December, 2008, and the AO initiated
the penalty proceedings in December, 2008, thus, the last date by which the
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penalty order could have been passed is 30 June, 2009. The six months from
the end of the month from which action of imposition of penalty was initiated
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would expire on 30 June, 2009. However, in this case, admittedly, the
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penalty order(s) were passed on 29 September, 2009, and therefore, the
ITAT rightly concluded that the order(s) were barred by limitation.
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:19.11.2022
18:23:55
ITA Nos. 577/2018, 580/2018 and 583/2018 Page 11 of 12
13. Consequently, we answer the question of law against the Revenue and
in favour of the Assessee by holding that, in the facts and circumstances of
the present appeals, the ITAT was correct in law in deleting the penalty
imposed by the Additional Commissioner of Income Tax, under Section 271D
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of the Act, on the ground that the penalty order(s) dated 29 September, 2009,
was passed beyond the time period prescribed by Section 275(1)(c) of the Act,
the same having been passed after the lapse of six months from the end of the
month in which the penalty proceedings were initiated by the AO.
14. Accordingly, the present appeals are dismissed.
MANMEET PRITAM SINGH ARORA, J
MANMOHAN, J
NOVEMBER 17, 2022
msh/aa
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:19.11.2022
18:23:55
ITA Nos. 577/2018, 580/2018 and 583/2018 Page 12 of 12