Madhya Pradesh H.C : Show cause notice during the course of assessment proceedings u/s 153A

High Court Of MP (Indore Bench)

Nitin Agrawal vs. Joint Commissioner Of Income Tax

Section 271D, 271E

P.K. Jaiswal & Sunil Kumar Awasthi, JJ.

Writ Petition No.536/2018

1st March, 2018

Counsel Appeared:

Sumeet Nema, learned Sr Adv., with Manoj Munshi, learned counsel for the Petitioner. : Veena Mandlik, learned counsel for the Respondent.

P.K. JAISWAL, J:

By this writ petition under Article 226 of the Constitution of India, the petitioner is praying for quashment of show cause notice dated 22.9.2017, issued by the Joint Director of Income Tax under Section 271D / 271E, on the ground that, the same being without jurisdiction and barred by limitation as provided under Section 275(1)(C) of the Income Tax Act,1961, on the ground that the first notice was issued by the Deputy Commissioner of Income Tax on 20.12.2016 and thus, the second notice (dt.22.9.2017), was issued under Section 274 read with Section 271-D of the Income Tax Act, after a period of six months from the date of initiation of proceeding, is barred by time.

Brief facts of the case are that, the petitioner is an assessee of the respondent – department and a search was conducted by the Income Tax Authority under Section 132 of the Income Tax Act, in the residential premises of the petitioner and after conclusion of search notice under Section 153A of the Income Tax Act, was served upon the petitioner on 28.9.2015, for the block assessment for the Assessment Years 2009-10 to 2014-15. After receiving the reply from the petitioner on 26.3.2016, the Income Tax Authority commenced the assessment proceedings by issuing notice dated 2.5.2016 under Section 143(2) of the Income Tax Act. The Assessing Officer thereafter, sought information by making assessment of the assessment year 2009-10 to 2015-16 and issued notice dated 5.5.2016 under Section 142 of the Income Tax Act in the form of questionnaire.

It is not in dispute that during the pendency of the assessment proceedings, the Assessing Officer issued a show cause notice dated 20.12.2016 (Annexure P/5), noticing noncompliances of the provisions of Section 269-SS and 269-T of the Income Tax Act, seeking explanation as to why penalty for violation of provisions of Section 269-SS and 269-T shall not be attracted. The show cause notice Annexure P/5 reads as under :

“To,

Shri Nitin Agrawal 76, Mall Road,

Mhow, Distt. Indore 453441

Sub: Show cause notice during the course of assessment proceedings u/s 153A r.w.s. 143(3) for A.Y. 2009-10 to 2014-15 and u/s 143(3) for A.Y. 2015-16 – reg.

In connection with the pending proceedings mentioned above, you are hereby show caused on the issued mentioned below, the issue-wise reply is required vide this show cause failing which it shall be assumed that you have nothing to say on the issue/issue and addition will be made on the total income in the assessment year as per the issue. The issues on which you are show caused as mentioned hereunder :

1. On the basis of seized documents and in totality of the facts Tally account in Lenovo Laptop having “XYZ 0809 2” seized during the course of search and on the strength of show cause issued in case of PATH, it is clear that during A.Y. 2009-10 cash loan received by you is Rs.31,49,500/- from PATH show cause as to why penalty u/s 269SS shall not be attracted on this issue. Also during A.Y. 2009-10 cash loan repaid by you to PATH is Rs.15,75,700/-show cause as to why penalty u/s 269T shall not be attracted on this issue. Further it is clear that during A.Y. 2010-11 cash loan received by you is Rs.29,94,800/- from PATH show cause as to why penalty u/s 269SS shall not be attracted on this issue. Also during AY 2009-10 cash loan repaid by you to PATH is Rs.27,800/-show cause as to why penalty u/s 269T shall not be attracted on this issue.

You are required to attend my office on 26.12.2016 at 3.00 PM either in person or by a representative duly authorized in writing in this behalf or produce or cause there to be produced at the said time any document, accounts and any other evidence on which you may rely in support of the return filed by you.”

4. Thereafter, the Assessment Officer passed the assessment order on 28.12 2016, vide Annexure A/7. Para 8.8 of the order dated 28.12.2016 is relevant which reads as under

“On the basis of above sheet, it is clear that during A.Y. 2009-10 cash loan received by Shri Nitin Agrawal from PATH is Rs.31,49,500/-. Also during A.Y.2009-10 cash loan repaid by Shri Nitin Agrawal to PATH is Rs.15,75,700/-. Further it is clear that during A.Y. 2010-11 cash loan received by Shri Nitin Agrawal from PATH is Rs.29,94,800/-. Also during AY 2009-10 cash loan repaid by Shri Nitin Agrawal to PATH is Rs.27,800 Further, the matter is being referred to Joint Commissioner of Income Tax (Central), Indore for issuing notice and imposing p nalty u/s 271D and 271E of the ‘Act'”

From the notice Annexure P/5 as well as the assessment order dated 28.12.2016, nothing was mentioned about the initiation of the proceedings under Section 271-D and 271-E of the Act. The Assessment Officer has only show cause the petitioner under Section 269-SS and 269T to examine the violation of the above mentioned provisions of the Income Tax Act.

From the pleadings made in the writ petit on, it is also an admitted fact that the Deputy Commissioner of Income Tax was not competent authority in initiation of penalty proceeding under Section 271-D and 271-E of the Income Tax Act. The first notice under Section 271-D / 271-E read with Section 274 of the Income Tax Act have been issued by the Joint Director of Commissioner of Income Tax on 22.9.2017. Thus, the penalty proceedings under Section 271-D and 271-E have been initiated w.e.f. 22.9.2017.

Section 275(1) (C) of the Income Tax Act, 1961 provides that penalty can be levied only before completion of financial year in which assessment order was passed or six months from the end of month in which penalty proceeding is initiated, which ever period expired later. The stand of the respondent is that the show cause notice dated 20.12.2016, issued during the assessment proceedings by the Deputy Commissioner Income Tax, Indore, cannot be termed as notice under Section 271-D / 271-E of the Income Tax Act, in regard to initiation of penal proceeding under the aforesaid provision they Deputy Commissioner has no jurisdiction under this provision. The penalty under the aforesaid is independent from the assessment proceedings and both proceedings cannot be mixed up. The Deputy Commissioner of Income Tax, on the basis of Assessment Order, in the case of the petitioner under Section 153 A read with Section 143(3) of the Income Tax Act on 20.12.2016, referred the case to the respondent for initiation of penalty proceeding under Section 271-D and 271-E of the Act in Assessment Year 2009-10 and 2011, vide letter dated 27.4.2017, on receiving the information from the office by the Deputy Commissioner of Income Tax, the respondent issued first notice under Section 271-D and 271-E on 22.9.2017 to the petitioner. Hence, the penalty proceeding has been initiated w.e.f. 22.9.2017, which is getting barred on 31.3.2018. The Deputy Commissioner of Income Tax is not empowered to pass the order under Section 271-D and 271-E read with Section 275 of the Income Tax Act.

It is only Joint Commissioner of Income Tax who is empowered to initiate as well as impose the penalty under Section 271-D or 271-E of the Income Tax Act. Thus, the limitation period of six months to be reckoned from the end of month of initiation of the penalty proceeding by the Joint Commissioner of Income Tax and not from the date of assessment order.

Learned Senior counsel for the petitioner has drawn our attention to the contents of notice dated 20.12.2016, issued by the Deputy Commissioner of Income Tax during the assessment proceedings and Section 274, 269-SS, 269-T, 271-D, 274-E and 275 of the Income Tax Act and submitted that the limitation for initiation of penalty proceeding for imposition of penalty under Section 271D, 271E of the Income Tax Act start from 20.12.2016 and under Section 275(1) (C), the limitation of six months start from 20.12.2016. The second notice issued on 22.9.2017 is barred by time and the learned Joint Commissioner of Income Tax had no jurisdiction to issue the same. To support the aforesaid, he has placed reliance on the decision of the Calcutta High Court in the case of CIT Central – III V/s. Narayani & Sons (P) Ltd. reported as (CALHC) (2016) 289 CTR (Cal) 301 , decision of the Delhi High Court in the case of Commissioner of Income Tax -VI V/s. Worldwide Township Projects Ltd., 2014 (269) CTR 444 (Delhi), in the case of PCIT V/s. JKD Capital & Fin lease Ltd. (2015) 378ITR 640 (Del) , Commissinoer of Income Tax (Central) 2 V/s. Mahesh Wood Products Pvt. Ltd., (2017) 394 ITR 312 (Delhi) , the decision of the Apex Court in the case of Commissioner of Income Tax V/s. Hissaria Brothers, (2016) 386 ITR 719 (SC), and the decision of Delhi High court in the case of CIT V/s. JKD Capital & Finlease Ltd , (2015) 378 ITR 640 (Del).

10. He also placed reliance on the decision of the Rajasthan High court n the case of Commissioner of Income Tax V/s. Jitendra Singh Rathore, 2013 (352) ITR 327 (Raj), Grihalakshmi Vision V/s. The Additional Commissioner of Income Tax, 2015 379 UR 100 (Ker), Income Tax Officer V/s. Ramkishore Rewaram Tada, 2006 202 CTR (MP) 404 and the decision of the Supreme Court in the case of Commissioner of Income-taxf Panchkula V/s. Jai Laxmi Rice Mills Ambala City, 2015 (64) taxmann.com 75 (SC) and submitted that under Section 275(1 (C), the starting point would be “initiation of penalty proceedings”. In the case of CITf Central III V/s. Narayani & Sons (P) Ltd (supra) the assessment was completed on 26.12.2006 under Section 153A/143(3) of the Income Tax Act. After passing of assessment order on the same date, ie, 26.12.2016 itself, the Assessing Officer issued a notice for imposition of penalty under Section 271(D)(1), of the Income Tax Act. The Division Bench of Calcutta High Court relied on the judgment of Rajasthan High Court in the case of Commissioner of Income Tax V/s. Jitendra Singh Rathore, (supra) has held that the Assessing Officer issued a notice dated 26.12.2006 on assessee, for imposition of penalty under Section 271(D) and thereafter, he referred the matter to the Additional Commissioner for necessary action. The Additional Commissioner issued the assessee a fresh notice dated 26.7.2007 and by order dated 21.9.2007, the learned Additional Commissioner levied penalty under Section 271 (D) of the Income Tax Act and held that the period of limitation commenced on 26.12.2006, when notice under Section 271(D) was issued by the Assessing Officer and, therefore, the order passed on 21.9.2007 was hit by limitation. Reading of these judgments shows that these cases were decided on the documents, which were available before the court. In all those matters, the notice was issued by the Assessing Officer on the date of which the assessing order was passed or after passing of the assessment order. In the present case, the Assessing Officer issued show cause to the petitioner under Section 269- SS and 269(2) of the Income Tax Act to examine vide show cause notice dated 20.12.2016, ie., during the pendency of the assessment proceedings to examine the violation of these provisions of the Income Tax Act. No notice under Section 270-D or 279-E read with Section 279 of the Income Tax Act was ever issued by the Assessing Officer. The petitioner was wrongly attempted to establish the show cause notice dated 20.12.2016 as a legal notice under Section 271-D / 271-E read with Section 274 of the Income Tax Act.

11. Section 271-D and 271-E provide that levy of penalty in contravention of Section 269-SS and 269-T, as per subsection^) to both these sections in penalty imposition under sub-section (1) of these provisions shall be imposed by the Joint Commissioner of Income Tax. From the statutory provision, it is clear that the competent authority to levy the penalty is Joint Commissioner, therefore, only the Joint Commissioner can initiate proceeding for levy of penalty.

12. Insofar as the judgment of the Apex Court in D.M.Manasvi V/s. Commissioner of Income Tax, Gujarat II, [1972] 86 ITR 557 is concerned, that was a case, where penalty was levied under Section 271(1)(C) and as is evident from the provision itself, the proceedings under that Section are to be initiated on the basis of the satisfaction of the officers mentioned therein including the Assessing Officer. Unlike the provisions of Section 271(1)(c), under the provisions of Section 271D and E, the exclusive authority is conferred on the Joint Commissioner. Therefore, the principles laid down in the judgment of the Apex Court cannot be called in aid to impugned the present action. Therefore, the first contention raised by the learned counsel for the assessee deserves to be rejected and we do so.

13. Considering the aforesaid, we are of the view that first show cause notice, without initiating proceedings for imposition of penalty under Section 271-D (was issued on 22.9.2017). It is also well settled that a penalty under this provision is independent under assessment. The action inviting imposition of penalty is granting of loans above the prescribed limitation otherwise then through banking channels and as such infringement of Section 269-SS of the Income Tax Act is not related to the income that may be assessed or finally adjudicated. We find no force on the contention advanced by the learned Senior counsel for the petitioner. The writ petition has no merit and is, accordingly, dismissed. No costs.

[Citation : 412 ITR 309]

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