PR. COMMISSIONER OF INCOME TAX -5 v. JKD CAPITAL & FINLEASE LTD
[Citation -2015-LL-1013]

Citation 2015-LL-1013
Appellant Name PR. COMMISSIONER OF INCOME TAX -5
Respondent Name JKD CAPITAL & FINLEASE LTD
Court HIGH COURT OF DELHI AT NEW DELHI
Relevant Act Income-tax
Date of Order 13/10/2015
Assessment Year 2005-06
Judgment View Judgment
Keyword Tags imposition of penalty • initiation of penalty proceedings • substantial question of law
Bot Summary: 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. The ITAT has observed that the date on which the CIT had passed the order in the ITA 780/2015 Page 2 of 6 quantum proceedings had no relevance as it did not have any bearing on the issue of penalty. No order imposing a penalty under this Chapter shall be passed .... .... 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. 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. 269SS and 269T are not related to the assessment proceeding but are independent of it the completion of appellate proceedings arising out of the assessment proceedings or the other proceedings during which the penalty proceedings under ss. 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 ITA 780/2015 Page 4 of 6 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. The Additional CIT ought to have been conscious of the limitation under Section 275, 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 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 Revenue under Section 260A of Income Tax Act, 1961 ( Act ) is directed against impugned order dated 27 th March 2015 passed by Income Tax Appellate Tribunal ( ITAT ) in ITA No. 5443/Del/13 for Assessment Year ( AY ) 2005-06. 2. By impugned order ITAT affirmed order of Commissioner of Income Tax [ CIT (A) ] quashing penalty imposed on Assessee, JKD Capital and Finlease Limited, under Section 271-E of Act by order dated 20th March 2012 of Additional Commissioner of Income Tax [ Additional CIT ]. ITA 780/2015 Page 1 of 6 3. While finalising assessment order dated 28th December 2007 Assessing Officer [ AO ] in concluding paragraph issued direction to initiate proceedings against Assessee under Sections 271 (1) (c) and 271- E of Act. Admittedly, under Section 271-E (2) of Act, any penalty under Section 271-E (1) can only be imposed by Joint Commissioner of Income Tax [ Joint CIT ]. Consequently, AO referred matter to Additional CIT. 4. perusal of order dated 20th March 2012 of Additional CIT shows that show-cause notice initiating penalty proceedings under Section 271-E was issued to 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 provisions of Section 269T of Act. With Assessee having failed to furnish required information, Additional CIT proceeded to confirm penalty in sum of Rs. 17,90,000. 5. Assessee challenged above order before CIT (A). In order dated 22nd July 2013, CIT (A) deleted above penalty inter alia on ground that, in terms of Section 275 (1) (c) of Act, penalty order could have only been passed on or before 30th June 2008 and therefore, penalty order passed on 20th March 2012 was barred by limitation. 6. ITAT has, in impugned order dated 27 th March 2015, affirmed above order of CIT (A) by referring to decision of this Court in CIT v. Worldwide Township Projects Limited (2014) 269 CTR 444. ITAT has observed that date on which CIT (A) had passed order in ITA 780/2015 Page 2 of 6 quantum proceedings had no relevance as it did not have any bearing on issue of penalty. 7. Mr. Kamal Sawhney, learned Senior standing counsel appearing for Revenue submitted that AO has no power to initiate penalty proceedings under Section 271-E of Act and it was only Joint CIT who could have done so. Therefore, for purpose of limitation under Section 275 (1) (c), relevant date should be date on which notice in relation to penalty proceedings were issued. In present case, as Additional CIT issued notice to Assessee on 12th March 2012, order of Additional CIT passed on 20th March, 2012 was within limitation. 8. We are unable to agree with above submission of learned Standing counsel for Revenue. Section 275 (1) (c) reads as under: 275. (1) No order imposing penalty under this Chapter shall be passed (a).... (b)..... (c) in any other case, after expiry of financial year in which proceedings, in course of which action for imposition of penalty has been initiated, are completed, or six months from end of month in which action for imposition of penalty is initiated, whichever period expires later. 9. In terms of above provision, there are two distinct periods of limitation for passing penalty order, and one that expires later will apply. One is end of financial year in which quantum proceedings are completed in first instance. In present case, at level of AO, quantum proceedings was completed on 28th December 2007. Going by this date, ITA 780/2015 Page 3 of 6 penalty order could not have been passed later than 31st March 2008. second possible date is expiry of six months from month in which penalty proceedings were initiated. With AO having initiated penalty proceedings in December 2007, last date by which penalty order could have been passed is 30th June 2008. later of two dates is 30th June 2008. 10. Considering that subject matter of quantum proceedings was non-compliance with Section 269 T of Act, there was no need for appeal against said order in quantum proceedings to be disposed of before penalty proceedings could be initiated. In other words, initiation of penalty proceedings did not hinge on completion of appellate quantum proceedings. This position has been made explicit in decision in CIT v. Worldwide Township Projects Limited (supra) in which Court concurred with view expressed in Commissioner of Income- Tax v. Hissaria Bros. (2007) 291 ITR 244(Raj) in 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 opinion that since penalty proceedings for default in not having transactions through bank as required under ss. 269SS and 269T are not related to assessment proceeding but are independent of it, therefore, completion of appellate proceedings arising out of assessment proceedings or other proceedings during which penalty proceedings under ss. 271D and 271E may have been initiated has no relevance for sustaining or not sustaining 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 matter of fact every penalty proceeding is usually initiated when during some proceedings such default is noticed, though final fact ITA 780/2015 Page 4 of 6 finding in this proceeding may not have any bearing on 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 contingencies does not affect 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 AO recommended initiation of penalty proceedings AO appeared to be conscious of fact that he did not have power to issue notice as far as penalty proceedings under Section 271-E was concerned. He, therefore, referred matter concerning penalty proceedings under Section 271-E to Additional CIT. For some reason, Additional CIT did not issue show cause notice to Assessee under Section 271-E (1) till 20th March 2012. There is no explanation whatsoever for delay of nearly five years after assessment order in Additional CIT issuing notice under Section 271-E of Act. Additional CIT ought to have been conscious of limitation under Section 275 (1) (c), i.e., that no order of penalty could have been passed under Section 271-E after expiry of financial year in which quantum proceedings were completed or beyond six months after month in which they were initiated, whichever was later. In case where proceedings stood initiated with order passed by AO, by delaying issuance of notice under Section 271- E beyond 30th June 2008, Additional CIT defeated very object of Section 275 (1) (c). 12. In that view of matter, order of CIT (A) which has been affirmed by impugned order of ITAT does not suffer from any legal ITA 780/2015 Page 5 of 6 infirmity. 13. No substantial question of law arises for determination. 14. appeal is dismissed. S.MURALIDHAR, J VIBHU BAKHRU, J OCTOBER 13, 2015 Rk ITA 780/2015 Page 6 of 6 PR. COMMISSIONER OF INCOME TAX -5 v. JKD CAPITAL & FINLEASE LTD
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