Opinion Of Eminent Legal Luminaries On Controversial Issues

Penalty – Takes or accepts any loan or deposit – Farmer’s co-op. society

QUERY: A farmer's co-op. society, situated in a remote area which works for the benefit of farmers such as to get them seeds, fertilizers etc., the society received some amounts from some members as cash deposits exceeding ` 20,000/- which were subsequently repaid by account payee cheques by the society.
The case was under scrutiny for the A.Y. 2010-11, the Assessing Officer did not discuss anything or issue any notice to the assessee till the order passed under Section 143(3) on March 01, 2013. The Joint Commissioner of Income tax thereafter issued notice under Section 271D of the Act, on January, 2014 i.e., after 11 months.
The objection was taken for the proceedings as barred by limitation as per provision of Section 275(1)(c) of the Act along with the submission but the penalty under Section 271D of the Act was levied and order was passed. Whether JCIT was justified?
ANSWER: From the query, it is not clear, when the Joint Commissioner of Income tax levied the penalty under Section 271D. However, it is presumed that it is within the time prescribed under section 275(1)(c) of the Act.
Similar question arose before the Special Bench of Chandigarh in Dewan Chand Amrit Lal v. DCIT [283 ITR (AT) 203], wherein the Tribunal has held that:
“The Legislature has not considered it necessary to provide for limitation for intimation of penalty proceedings under Section 271D and 271E of the Income tax Act, 1961. The intention behind incorporation of the provisions of Sections 269SS, 269T, 271D and 271E 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. 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 and 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 defeat the very purpose of legislating the provisions of Sections 271D and 271E. The limitation has been prescribed for imposition after its initiation by the competent authority.
Further, 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 proceeding”.
In Grihalakshmi vision v. ADIT [379 ITR 100 (Ker.)], the assessee challenged penalty order contending that if period of limitation prescribed in Section 275(1)(c ) was reckoned from the date of the assessment order dated November 6,2007, penalty order passed by the Joint Commissioner on July 29, 2008 was beyond time permitted
The Kerala High Court held that in the instant case, the assessment order was passed on November 6, 2007. It was relying on the last sentence in the assessment order that “Accordingly initiated penalty proceedings under Sections 271D and 271E”, the assessee contends that the Assessing Officer having initiated the proceedings vide his order dated November 6,2007, the order passed by the Joint Commissioner on July 29, 2008 levying penalty is beyond the time permitted in Section 275(1)(c). The Court observed, as already seen, although sections 271D and 271E provide, for levy of penalty for contravention of Sections 269SS and 269T, as per sub-section (2) of both these sections, any penalty imposable under sub section (1) of these provisions shall be imposed by the Joint Commissioner. The matter was referred to the Joint Commissioner who passed an order on July 29, 2008 levying penalty.
As already held, that the initiation of the penalty proceedings is not by the Assessing Officer but by the Joint Commissioner and if that be so, the order levying penalty passed by the Joint Commissioner is within the time prescribed in section 275(1)(c ).
On the basis of above decisions, the action of Joint Commissioner was justified.
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