ITAT RAJKOT BENCH (THIRD MEMBER)

IT (SS) Nos. 1 & 2 (Rajkot) of 2007
[BLOCK PERIOD 8-6-1996]

G.C. GUPTA, VICE-PRESIDENT (AS A THIRD MEMBER) T.K. SHARMA, JUDICIAL MEMBER AND D.K. SRIVASTAVA, ACCOUNTANT MEMBER

Ankur Garg for the Appellant.
B.R. Popat for the Respondent.

D.K. Srivastava, Accountant Member - Appeal bearing IT(SS)A No.01/Rjt/2007 filed by the Revenue is directed against the order passed by the CIT(A) on 18-10-2006 cancelling the penalty amounting to Rs.14,29,81,658/- levied by the AO u/s 271D while the other appeal bearing IT(SS) No.02/Rjt/2007 filed by the Revenue is directed against another order passed by the CIT(A) on 18-10-2006 cancelling the penalty amounting to Rs.10,97,67,135/- levied by the AO u/s 271E of the Income-tax Act. Both the penalties have been cancelled by the CIT(A) on the ground that their imposition is time barred as per section 275(1)(c). The issues in both these appeals are common and therefore they are being disposed of by a consolidated order.

2. Both the aforesaid appeals filed by the Revenue were earlier dismissed by this Tribunal by its common order dated 30-01-2009, which, on appeal by the Revenue, was set aside by the Hon'ble High Court vide its order dated 18-04-2011 in Tax Appeal No. 1379 and 1380 of 2009, with the following observations:—

"As a final fact finding authority, Tribunal's factual conclusions hold immense importance in Tax Appeal carried before us. Being a specialized Tribunal, it's appreciation on legal questions also holds considerable importance to us. When a Tribunal's judgment is bereft of any discussion either on facts or in law, it besides being an unreasoned order of a quasi-judicial tribunal, also increases our burden to gather facts from other record and to verify whether the ultimate conclusion that the Tribunal arrived at, calls for any interference or not. In absence of any discussion on facts or on law by the Tribunal, we are left to imagine what must have weighed with the tribunal to arrive at a particular conclusion.

"Under the circumstances, the impugned order is set aside. Proceedings are remanded to the Tribunal for fresh consideration and disposal in accordance with law after giving its reasons. We have not expressed any opinion on merits of the issue decided by the CIT(A)."

3. Pursuant to the aforesaid directions given by the Hon'ble High Court, both the appeals have been heard afresh. Defects in appeal were removed on 5.2.2013.
4. In IT(SS)A No.01/Rjt/2007, the Revenue has taken the following grounds of appeal:

5. In IT(SS)A No.02/Rjt/2007, the Revenue has taken the following grounds of appeal:

6. Facts of the case, in brief, are that search and seizure operations were carried out by the Revenue authorities in June 1999 at the premises of the assessee which led to recovery of incriminating materials. Block assessment u/s 158BC/143(3) was completed in June 2001 assessing the undisclosed income (being unexplained cash credits) of the assessee at Rs. 25,89,63,640/-. The aforesaid order of block assessment was challenged firstly before the CIT(A) and thereafter before this Tribunal. By its order dated 23-09-2010, this Tribunal has partly allowed the appeal filed by the assessee, with the following observations:

"15. While appreciating about what has been mentioned above, we are still required to give justice to our role as the last fact finding authority wherein we have to try to impart justice on either sides. Appreciating the fact that the actual quantification of undisclosed income is an impossible task, in view of what has been mentioned above, we are still not very comfortable in fully accepting the contention of the assessees that their total income for the block period is running in negative (on provisional basis and relying on the date to the extent available with them, as interpreted by the AO), so as to justify the returned income of Rs. Nil in both the cases. We are at the same time not in agreement with the view of CIT-DR that the order of the CIT(A) is required to be reveres in so far as he has deleted the additions made by the AO. In view of this, we deem it proper to restrict the overall total addition at Rs. 28,00,000/- in the case of Deepak Takwani and at Rs.17,00,000/- in the case of Smt. Lata Takwani on lump sum basis, which work out to approximately 10% of the main addition sustained by CIT(A). We deleted all other additions made by the AO, referable to various grounds subject matter of these appeals. Regarding the other grounds taken by both the parties, who do not result in any addition per say, we do not find it necessary to separately adjudicate the same in view of what has been mentioned above and the same stand disposed off accordingly.

16. Before parting, we may add that the aforesaid income being confirmed by us in both the cases is completely on estimate basis and we are forced to resort to such adhoc estimation at the clear failure on the part of the department in various matters as discussed in this order."

7. During the course of block assessment proceedings, the action for the imposition of impugned penalties was initiated by the AO in the block assessment order as a result of which reference was made by him to the Joint Commissioner of Income-tax for levy of penalty u/s 271D/271E. Pursuant thereto, penalty amounting to Rs.14,29,81,658/- being equal to the amount of loan/deposit taken in cash has been levied by the Additional Commissioner of Income-tax u/s 271D for the detailed reasons given by him in his order dated 30.3.2006. Details of loans/deposits accepted by the assessee in cash in contravention of the provisions of section 269SS are given in the Annexure to the order passed by the Additional Commissioner of Income-tax. Another penalty amounting to Rs.10,97,67,135/-being the amount equal to the amount of loans/deposits repaid in cash in contravention of section 269T has been levied by the Additional Commissioner u/s 271E for the detailed reasons given by him in his order dated 30.3.022. Details of loans/deposits repaid by the assessee in cash in contravention of the provisions of section 269T are given in the annexure to the order passed by the Additional Commissioner of Income-tax.

8. Chronology of events leading to initiation and levy of impugned penalties is relevant for adjudication of the issue under appeal. It is therefore necessary to bring them out at the outset. They are as under:

9. As regards the assessment of undisclosed income, the order passed by the CIT(A) on 3.9.2004 in quantum appeal was set aside by this Tribunal, vide its order dated 29.05.2006, and the matter restored to the file of the AO for passing a fresh block assessment order pursuant to which fresh order of block assessment was passed u/s 158BC read with section 254 by the AO on 31.12.2008 in which proceedings for levy of impugned penalties were once again initiated, vide Para 19 of the said order. The said order of block assessment passed by the AO was subject matter of appeal firstly before the CIT(A) and thereafter before this Tribunal. By order dated 23.09.2010, this Tribunal confirmed addition to the extent of Rs. 28,00,000/- in the hands of the assessee, which, as stated by the parties, is now subject matter of appeal before the Hon'ble High Court. As regards the fate of penalty initiated by the AO once again u/s 271D/271E in his second order of block assessment, the case of the assessee before the AO was that penalty cannot be levied twice for the same default, i.e., once in consequence of proceedings initiated in the course of original assessment proceedings and the other in consequence of proceedings initiated again in the course of assessment proceedings taken in pursuance of the directions of this Tribunal.

10. Perusal of the penalty orders passed by the Additional Commissioner shows that the case of the assessee before him was that the impugned penalties were barred by limitation and therefore the AO was not competent to levy the impugned penalties. The assessee pleaded before the Additional Commissioner that the penalties contemplated by section 271D/271E were independent of assessment proceedings and hence they were required to be disposed off within the period of limitation laid down in Clause (c) of sub-section (1) of section 275. It was explained before the Additional Commissioner that the impugned penalties were not capable of being levied as the period of limitation laid down in section 275(1)(c) had already expired. The Additional Commissioner did not accept the aforesaid submission of the assessee and resultantly, in the absence of any reasonable cause shown by the assessee, levied the impugned penalties by his order dated 30.3.2006. He has given detailed reasons for rejecting the submissions of the assessee, which, in brief, are that the proceedings for levy of impugned penalties were initiated in the order of block assessment, which was also subject matter of appeal u/s 246A before the CIT(A), and therefore the period of limitation for levying the impugned penalties would be governed by section 275(1)(a) and not section 275(1)(c).

11. Aggrieved by the penalty orders passed by the Additional Commissioner of Income-tax, the assessee carried the matter in appeal before the CIT(A). The ld. CIT(A) noted that the action for the imposition of impugned penalties was initiated in the block assessment order passed by the AO u/s 158BC and not in the course of assessment proceedings u/s 143(3). He, i.e., the CIT(A), accepted the plea of the assessee that the period of limitation as given in section 275(1)(a) would not apply to the impugned penalties for two reasons. One, the proceedings for the imposition of impugned penalties u/s 271D/271E were independent of assessment proceedings and therefore the period of limitation laid down in section 275(1)(a) would not apply to the penalties leviable u/s 271D/271E. Two, section 275(1)(a) does not cover block assessment order in which action for the imposition of penalty u/s 271D/271E could be initiated. According to him, section 275(1)(a) applies where the action for the imposition of penalty u/s 271D/271E has been initiated in the course of assessment proceedings u/s 143(3) and not to a case where the action for the imposition of penalties has been initiated in the course of block assessment proceedings u/s 158BC. He therefore held that the period of limitation as given in section 275(1)(c) would govern both the penalties. Since both the orders of penalty were passed after expiry of period of limitation as laid down in section 275(1)(c), he cancelled both the penalties. Operative part of his appellate order reads as under:

"5.4 The appellant's contention is that proceedings u/s 271E are independent of the assessment and has no relation with the assessment order. I this regard, he has relied on the decision of the Karnataka High Court on the case of Shanbhag Restaurant. As there is no contrary judgment against the said decision the appellant has stated that the said decision is binding on the lower authorities. In the said decision, the Court held that the orders passed u/ss. 271D & 271E were barred by limitation period prescribed u/s.275(1)(c) of the Act, because the orders passed after the expiry of six months from the end of the month in which the proceeds were initiated were barred by limitation.

5.5. The Addl. CIT R-3 Jamnagar in his reply has stated that the above judgment and the other decisions relied upon by the appellant are distinguishable on the facts, as all these cases are covered u/s. 275(1)(c), whereas in the instant case the provisions of sec. 275(1)(a) of the Act are relevant. The Addl. CIT has, therefore, argued that in the appellant's case appeal against the assessment order dtd. 27-6-01 for the block period, was pending and was decided by the CIT(A) vide order dated 3/9/04, whereby the CIT(A) confirmed the order of the AO.S The impugned order in the case of the appellant was passed on 30/3/06, i.e. before the end of the financial year after the financial year in which the appellate order is received, the Addl. CIT's submission, therefore, is that the order passed u/s. 271E of the Act is not barred by limitation.

5.6 In my considered view, the proceedings u/s. 271E of the Act are independent of the assessment proceedings because an order u/s. 271E can also be passed prior to the assessment order and, therefore, the extended period available u/s. 275(1)(a) for passing the penalty order under chapter XXI of the Act are not available to the proceedings under the above section, and, because of this situation, an order passed u/s. 271E of the Act would fall under the category of 'any other case' not falling under clauses (a) and (b) of section 275(1) of the Act, i.e. to say, it would fall under clause (c) of section 275(1) of the Act. Besides, the proceedings initiated u/s. 271E of the Act have no relevance or dependent upon the outcome of the assessment order, therefore, the same would not fall under clause (a) of sub-sec.(1) of sec. 275 of the Act."

12. Aggrieved by the orders passed by the CIT(A) cancelling the impugned penalties on the ground that they were barred by limitation as laid down in section 275(1)(c), the Revenue filed the present appeals before this Tribunal.

13. In support of appeal, the ld. Departmental Representative took us through the penalty orders and the provisions of section 275 and submitted that the impugned penalties were initiated in the block assessment order, which was also subject matter of appeal u/s 246A before the CIT(A) and hence the period of limitation as laid down in section 275(1)(a) would apply. He submitted that the period of limitation as laid down in section 275(1)(c) would apply to those cases alone which do not fall u/s 275(1)(a).

14. In reply, the ld. Authorized Representative for the assessee supported the orders passed by the CIT(A). He has filed a copy of common written submissions filed by the assessee before the CIT(A) in support of his case. He has fully relied upon those submissions, which read as under:
"Common Written Submission for both the Appeals

1.1 The captioned appeals arise from out of two separate penalty orders passed by the Hon'ble Commissioner of Income tax, Range-3, Jamnagar under sections 271D & 271E of the Income-tax Act, levying penalties of Rs.14,29,81,658/- and Rs.10,97,67,135/- respectively. Vide separate grounds in both the appeals, the appellant has challenged the levy of penalties both on facts and on legality/enforceability. The written submissions in support of the grounds in both the appeals are contained in the succeeding paragraphs. The appellant also appears before your honour in person, in the company of Shri Bharat R. Popat of M/s. B. R. Popat & Co., Chartered Accountants, our Authorized Representative.

1.2 For the sake of abundant caution, the Appellant makes it clear that the alternative arguments being advanced in these appeals are mutually exclusive and same assume existence of certain facts without admitting as to the same.

2. Regarding the order being barred by limitation (Ground No. 2 in both the appeals):
2.1 The sequence of events which are relevant in the present appeals is as given hereunder.

2.2 Specific attention is drawn to the provisions of section 275(1) of the Income-tax Act, prescribing limitation for imposing penalties. The relevant portion of the section is reproduced here below for the sake of convenience.

"Bar on limitation for imposing penalties.
No order imposing a penalty under this chapter shall be passed-

2.3 The appellant submits that the initiation of penalties in respect of the so-called violation of sections 269SS & 269T is clearly independent of the assessment and its resultant litigation. The same is thus clearly covered by the provisions of section 275(1(c) of the Income-tax Act. Reliance is placed in this regard to a number of judgments of various High courts and Tribunals, a representative list is separately enclosed herewith, cumulatively marked as Annexure-1.
2.4 From the facts as mentioned above, the appellant submits that the penalties having been initiated by the competent authority in the month of January 2002, the same could not have been levied after 31st July, 2002, which was clearly the last date for levying these penalties under the limitation imposed under section 275(1)(c) of the Income-tax Act. Since the penalties have been levied as late as on 30th March 2006, i.e. after three full years and eight months of the period of limitation, the same are clearly barred by limitation and the same have to be treated as bad in law. The penalty orders are thus clearly required to be quashed.

2.5 The appellant had filed detailed letter of August 07, 2002, while appearing before the Joint Commissioner of Income-tax, Junagadh Range-1, Junagadh in this connection (the jurisdiction of the cases vested with him at the relevant point of time). The copy of the same is enclosed herewith, marked as Annexure-2. The same forms integral part of this submission.

3. Regarding non-leviability of penalties on facts of the case (Ground No.1 in both the appeals):
3.1 Without prejudice to what has been mentioned above and assuming though not admitting about the penalties having been levied within the period of limitation, the appellant submits that these penalties relate to certain transactions of cash credits (and corresponding debits with regard thereto), which have already been considered by the AO in block assessment order. In fact, all these cash credits are considered as income in the order under section 158BC passed by the AO. In the subsequent development also, the Hon'ble Tribunal has, in IT(SS) No. 72/RJT/2004, set aside the block assessment order with a direction to recalculate the undisclosed income, by taking into account, the ratio laid down by the Hon'ble Supreme Court in the case of Anantharam Veerasinghaliah & Co. v. CIT, as reported at (1980) 123 ITR 457 (SC). Copy of the order of the Hon'ble ITAT, Rajkot is enclosed herewith, marked as Annexure-3, for the purpose. It will thus be appreciated that the cash credits have been considered as income even by the Hon'ble ITAT, albeit subject to re-quantification based on the principle of telescoping, relying on the aforesaid Supreme Court judgment. Since the penalties subject matter of the present appeals are related to all such cash credits and corresponding debits, the same cannot be sustained, as these are clearly not the transactions of acceptance of loans or deposits or of repayment of the deposits.

3.2 The appellant submits that while the additions can be made on protective basis, there is no way a penalty can be levied protectively. It is for this reason that the statute has not prescribed any limitation for initiation of penalties under sections 271D & 271E, and has only provided that once initiated, the same has to be disposed off within the prescribed time limit, as specified under section 275(1)(c). The representative list of the citations in this regard is enclosed herewith, marked as Annexure-1.

4. The appellant further submits that in so far as the penalty under section 271E is concerned, the same is referable to the violation of section 269T of the Income-tax Act. This penalty at the relevant point of time could have been levied only in respect of repayment of deposits otherwise than by crossed account payee cheque or bank draft and had thus clearly no application with regard to repayment of loan. Section 271E prescribing penalty in respect of repayment of any deposit was amended w.e.f. 01st June 2003, wherein even repayment of loan was covered. Since the penalty has been levied for the period much prior to the prospective amendment which was brought in the statute book, the penalty under section 271E could not have been levied in respect of repayment of loans, even if the same was made otherwise than by crossed Account Payee Cheque or Bank Draft."

15. In support of his submissions, he relied upon the following decisions which have also been referred to in the appellate order passed by the CIT(A).

16. We have heard both the parties. Following facts have material bearing on the issue under appeal:

17. The case of the Revenue is that the impugned penalties, on the aforesaid facts of the case, fall u/s 275(1)(a) and hence are not time barred. On the other hand, the case of the assessee, which has also been accepted by the ld. CIT(A), is that the impugned penalties fall u/s 275(1)(c) and hence are time barred. The Revenue would succeed only if the impugned penalties are covered by section 275(1)(a) and not otherwise. Therefore the relevant question in both the appeals is whether the bar of limitation as prescribed u/s 275((1)(a) is applicable as claimed by the Revenue or the bar of limitation as prescribed u/s 275(1)(c) is applicable as claimed by the assessee.

18. Sub-section (1) of section 275, which deals with "Bar of limitation for imposition of penalties", reads as under:

"Bar of limitation for imposing penalties.
275. (1) No order imposing a penalty under this Chapter shall be passed-

19. As evident from the marginal note, section 275 creates bar of limitation for imposition of penalties. Sub-section (1) of section 275 divides cases of penalties in three distinct categories. None of the categories overlaps with the other. The distinction created by three clauses of sub-section (1) of section 275 is absolute and clear. First Category, i.e., clause (a) of sub-section (1) of section 275, covers a case where the "relevant assessment order" or "other order" is the subject-matter of appeal by the assessee to the Commissioner (Appeals) or by the Department to the Appellate Tribunal. In such cases, imposition of penalty is barred 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 the order of the appellate authority is received by the Chief Commissioner or Commissioner, whichever period expires later. Second Category, i.e., clause (b) of sub-section (1) of section 275, covers a case where the relevant assessment order or other order is the subject-matter of revision under section 263. In such cases, imposition of penalty is barred after the expiry of six months from the end of the month in which such order of revision is passed. Third Category, i.e., clause (c) of sub-section (1) of section 275, applies "in any other case", i.e., to cases other than those falling under First or Second Category. In other words, under clause (c) would apply only to those cases which do not fall under clauses (a) and (b) of sub-section (1) of section 275. There is no dispute that the case of the assessee does not fall under Second Category, i.e., under clause (b) of sub-section (1) of section 275. The dispute between parties is whether the case of the assessee falls under First Category, i.e., under clause (a) of sub-section (1) of section 275, as claimed by the Revenue or under Third Category, i.e., under clause (c) of sub-section (1) of section 275, as claimed by the assessee. Quite obviously, a case would fall under First Category, i.e., clause (a) of sub-section (1) of section 275 if the statutory conditions of that clause are fulfilled otherwise the case would fall under the residuary clause, i.e., clause (c) of sub-section (1) of section 275. Therefore, the applicability of clause (a) of sub-section (1) of section 275 to the matters under appeal needs to be examined.

20. Period of limitation for imposition of penalty as available under clause (a) of sub-section (1) of section 275 is generally longer than the one available under clause (c) thereof in that the period of limitation, which may otherwise expire earlier, gets extended under section 275(1)(a) till six months from the end of the month in which the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later. Quite often, assessment orders passed by the AO and the findings recorded in them are modified or vacated or set aside by the CIT(A) and the ITAT. The Legislature therefore thought it appropriate to link the period of limitation in such penalty cases with the disposal of quantum appeal by the CIT(A)/ITAT else it would lead to multiplicity of proceedings and avoidable litigation even while the findings recorded in the assessment order on the basis of which penalties could be levied were still under consideration before the CIT(A)/ITAT. The policy seems to be that it is better to wait till the disposal of appeal by the CIT(A)/ITAT against the assessment order and the findings recorded therein instead of hurrying up the disposal of penalty in cases where those findings in the assessment order which gave rise to penalty were yet to disposed off by the CIT(A)/ITAT. For the reasons as aforesaid, longer period of limitation has been deliberately provided under clause (a) of sub-section (1) of section 275. The bar of limitation as contained in section 275(1)(a) would therefore apply to all cases where action for imposition of penalty has been initiated in the relevant assessment or other order provided the said assessment or other order was subject matter of appeal before CIT(A)/ITAT.

21. At the time of hearing, it was submitted by the learned counsel for the assessee that the AO is neither legally competent nor otherwise authorised to initiate action for levy of penalties in the assessment order except those specified in section 271. Therefore, one of the issues for consideration at the outset is whether section 275(1)(a) authorises the Assessing Officer to initiate action for imposition of any penalty enumerated under "Chapter XXI-Penalties imposable" of the Income-tax Act or it authorises him to initiate action for levy of penalty specified under section 271 alone. There are four stages in imposition of penalty: one, initiation of action for imposition of penalty; two, issue of show-cause notice u/s 274 before imposition of penalty; three, consideration of explanation furnished by the assessee, and, four, imposition of penalty. However, proceedings for levy of penalty under section 271(1) can be initiated by the AO only when he is "satisfied in the course of any proceedings under this Act" that a person has committed default as enumerated therein. The aforesaid requirement is specific to proceedings for imposition of penalty u/s 271 and to that extent the requirement of "satisfaction" would be additional requirement for levy of penalty in cases falling under section 271/275. The expression "satisfied in the course of proceedings" contemplated by section 271(1) is different in content and scope from the expression "in the course of which action for the imposition of penalty has been initiated" used in section 275(1)(a). The requirement of the AO being "satisfied" in terms of section 271 precedes the initiation of action for imposition under section 275(1)(a) of any of the penalties enumerated in "Chapter XXI-Penalties imposable" of the Income-tax Act. Initiation of action for the imposition of penalty under clause (a) of sub-section (1) of section 275 extends to all the penalties imposable under Chapter XXI of the Income-tax Act while "satisfaction" contemplated by section 271 extends to penalties imposable under section 271 alone. Therefore there is no warrant for the proposition that section 275(1)(a) applies to those penalties alone which are specified in section 271. There are five principal reasons for coming to the aforesaid conclusion:

22. In view of the foregoing analysis, it is held that (i) the scope of section 275(1)(a) is neither limited to nor otherwise linked with the penalties imposable under section 271 alone; "Penalty" in section 275(1)(a) does not mean those penalties alone which are imposable u/s 271; (ii) the scope of section 275(1)(a) extends to all the penalties imposable under Chapter XXI of the Income-tax Act if they otherwise fall under section 275(1)(a); and (iii) the AO is competent to refer the matter to the Joint Commissioner for imposition of penalty u/s 271D/271E. However the AO himself cannot levy penalty in cases of violations u/s 269SS/269T. For levy of penalty, he has to refer the matter to the Joint Commissioner. Merely because the law gives power to the Joint Commissioner to levy penalty u/s 271D/271E, it does not ipso facto mean that the action for imposition of penalty cannot be initiated in the relevant assessment. However, the AO, if he himself is not a Joint Commissioner, cannot impose penalty u/s 271D/271E. He has to refer the matter to the Joint Commissioner for imposition of penalty. The legal position would however be quite different if the AO or the Joint/Additional Commissioner himself initiates the action for imposition of penalty independently of the assessment or not in the "relevant assessment" or "other order" in which case the bar of limitation as contained in section 275(1)(c) would apply.

23. Bare perusal of clause (c) of sub-section (1) of section 275 shows that it applies to "any other case", which means to all cases other than those falling under clause (a) or (b) of sub-section (1) of section 275. It's a residuary clause and therefore does not override clause (a) or (b) of sub-section (1) of section 275. Being a residuary clause, it operates in a field other than the one occupied by clauses (a) and (b) of sub-section (1) of section 275. Clause (c) comes into play when a case does not fall under preceding two clauses. This position is self evident on bare reading of clause (c). No authority is needed in its support. However, if any authority is at all needed in its support, reference can be made, for example, to the judgment of the Hon'ble Karnataka High Court in Shanbhag Restaurant's case (supra) itself on which heavy reliance has been placed by the assessee in support of his case. In the said judgment, the Hon'ble High Court has held as under:

"As it could be seen from clause (a) of section 275, the said provision provides for limitation in a case where the relevant assessment or other order is the subject matter of appeal before the higher authorities. Clause (b) of the said section provides for limitation for making an order imposing penalties in cases where the relevant assessment or other order is the subject matter of revision. However, clause (c) of the said sub-section provides for contingencies in cases other than those which fall under clauses (a) and (b) of section 275(1) of the Act."

24. It is therefore quite clear that clause (c) of sub-section (1) of section 275 applies to a case which does not fall under clause (a) or (b) of section 275(1). Once a case is found to fall under clause (a), the question of invoking clause (c) does not arise at all. The judgment of the Hon'ble High Court is equally emphatic in its observation that clause (a) of section 275(1) applies where the "relevant assessment or other order" is subject matter of appeal before the higher authorities while there is no such requirement for the applicability of clause (c) of sub-section (1) of section 275.

25. In CIT v. M.A. Presstressed Works [1996] 220 ITR 226 (Raj.), assessment of the assessee-firm was completed on 30.7.1983. In the course of assessment proceedings, notice for levy of penalties under various sections, e.g., section 273(b), was issued. The appeal filed by the assessee challenging the assessment was dismissed on 24.2.1984. Thereafter, the registration of the firm was cancelled by order dated 20.11.1984. The appeal against the cancellation was dismissed on 25.9.1987. Penalties were imposed by orders dated 24.3.1988. The CIT(A) and the Tribunal held that the orders imposing penalties were barred by limitation. On reference, the Hon'ble High Court has held as under:

'The words "in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed" used in section 275 indicate the proceedings in which the income-tax authority is satisfied about the default which attracts the penalty and not with respect to any other proceeding in which the order like the cancellation of the registration, etc., has been passed. It is the assessment order or any other order passed in the proceeding in the course of which it is found that the assessee has brought himself within the mischief of the penalty proceedings.'

26. The learned counsel for the assessee however contends that the bar of limitation u/s 275(1)(a) applies to initiation of those penalties alone which are dependent on the assessment of income and not to those which are independent of the assessment of income. He submits that the penalties contemplated by section 271D and 271E are imposed for accepting/repaying loans/deposits in cash and not for any default relating to assessment of income. He further submits that measure of penalty imposable under sections 271D and 271E has no connection with the quantum of income assessed in the assessment order and therefore they are, for this reason also, independent of assessment proceedings. Prima facie, the aforesaid submissions look not only attractive but also quite convincing. As far as the measure of levy of penalty u/ss 271D and 271E is concerned, the learned counsel for the assessee is perfectly right in his submission that computation of penalty u/s 271D and section 271E is not dependent on the assessment of income. In that sense, measure for levy of penalty u/s 271D/271E is completely independent of the assessment of income. His further submission that penalties contemplated by section 271D/271E are independent of the assessment would generally apply to a large number of cases of penalty but that cannot be accepted as Euclid's formula (Euclid of Alexandria, was a Greek mathematician, often referred to as the "Father of Geometry") capable of being applied in all the circumstances. There can be no hard and fast rule that action for imposition of penalty u/s 271D/271E cannot be initiated either in the relevant assessment or independently of the assessment. There can be a situation where relevant details suggesting violation of section 269SS/269T are readily available on the surface with the concerned officer and he, on that basis, decides to proceed with the levy of penalty. He is free to do so. In such a situation, the action for imposition of penalty u/s 271D/271E need not be initiated in the course of assessment and therefore the bar of limitation as prescribed in section 275(1)(a) would not apply but the bar of limitation as laid down in section 275(1)(c) would apply. There can be another situation where section 275(1)(a) would not apply, i.e., in a case where action for imposition of penalty is initiated in the relevant assessment but the assessment is not challenged in appeal, as in the case of Shanbhag Restaurant (supra), in which case the bar of limitation as per section 275(1)(c) would apply. There can be third category of cases where action for imposition of penalty is initiated but the said action is not integrally related to assessment in which case the bar of limitation as per section 275(1)(c) would apply. But then there can also be cases where such details are not available on the surface but are deeply buried in the voluminous seized materials. Such seized materials are examined in the course of proceedings for assessment which may lead to a finding in the assessment order suggesting violations u/s 269SS/269T and also initiation of action for levy of penalty u/s 271D/271E. Violations, in such cases, would not only emerge from the assessment order but also depend upon the tax treatment given in the assessment order to the transactions indicating violations of section 269SS/269T and therefore initiation as well as imposition of such penalties would be integrally related to assessment as a result of which such cases would fall under section 275(1)(a) if the order of assessment has been subject matter of appeal before the CIT(A) and not under section 275(1)(c).

27. The principle that emerges from the aforesaid analysis is that the action for imposition of any of the penalties imposable under Chapter XXI of the Income-tax Act can be initiated in the "relevant assessment or other order" if the initiation of action for imposition of penalty as contemplated by section 275(1)(a) is integrally related to the assessment or, in other words, dependent upon the findings recorded in the assessment order. There could be cases where not only action for initiation but also imposition of penalty would be independent of the assessment of income in which case they would fall under clause (c) of sub-section (1) of section 275. But then, there could also be cases where the initiation as well as imposition of penalty is integrally related to the tax treatment of the transactions as given in the assessment order or depends upon the fate of assessment order. An order of assessment not only assesses the income of the assessee but also records finding on the tax treatment of various transactions, which are agitated in quantum appeal against the assessment order. Therefore there cannot be a universal formula that initiation and imposition of any penalty under Chapter XXI of the Income-tax Act is always dependent or independent of the assessment. Section 275(1)(a) applies to a case where initiation of action for imposition of penalty is integrally related to the assessment or, in other words, dependent upon the assessment which obviously includes not only the assessment of income but also the finding and tax treatment given in the assessment order to the transactions giving rise to penalties.

28. Turning to the facts of the case under appeal, it is clear that the block assessment order in which the action for imposition of penalty was initiated was passed on 27.06.2001, which was subjected to appeal u/s 246A before the CIT(A) and the appeal was disposed of by him on 03.09.2004. It is in the course of block assessment proceedings and the order passed in pursuance thereof that it was found by the AO that the assessee has brought himself within the mischief of the penalty proceedings. The finding recorded by the AO and the tax treatment given by him in the assessment order to the transactions in this behalf are inextricably interlinked with the impugned penalties and therefore initiation of action for levy of penalties is not independent of assessment. This finding is confirmed by the assessee's own submission that impugned loans/deposits have been assessed as income of the assessee by the AO and therefore penalties are not leviable. The true character of impugned loans/deposits, i.e., whether they represent income of the assessee as held by the AO or they are mere loans and deposits, can be determined in quantum appeal filed against the assessment order. It is the block assessment order and the proceedings related thereto in the course of which it was found that the assessee has brought himself within the mischief of penalty proceedings u/s 271D/271E. Action for initiation of impugned penalties has emerged from the findings recorded in the assessment order. Their imposition is also dependent on the final outcome in quantum appeal. The cases under appeal squarely fall under clause (a) of sub-section (1) of section 275 and therefore clause (c) thereof cannot be applied. It is accepted by both the parties that the impugned orders were passed well before the expiry of the time limit specified in section 275(1)(a) and therefore it cannot be held that they are barred by limitation.

29. It may now be useful to turn to the reasoning given by the ld. CIT(A) for not applying the bar of limitation as provided in section 275(1)(a). According to him, section 275(1)(a) is not applicable to the case of the assessee for the reason that the proceedings for levy of penalty are independent of the assessment proceedings and also for the reason that the proceedings for assessment contemplated by clause (a) of sub-section (1) of section 275 refer to assessment u/s 143(3) and not to block assessment u/s 158BC.

30. As stated earlier, there can be no hard and fast rule that action for imposition of penalty u/s 271D/271E cannot be initiated either in the relevant assessment or independently of the assessment. It all depends on the facts of the case. On the facts of the case, action for initiation of impugned penalties, vide Para 19 of the assessment order, is integrally linked with the finding recorded and the tax treatment given by the AO in this behalf in the assessment order and hence it cannot be said that action for imposition of impugned penalties was initiated independently of the assessment.

31. Another reason given by the CIT(A) for inapplicability of section 275(1)(a) to the cases under appeal is that the assessment contemplated by section 275(1)(a) is assessment u/s 143(3) and therefore action for imposition of penalty can be initiated only in the course of assessment u/s 143(3) and not in the course of block assessment u/s 158BC. Assessment is a term of wide import. It includes computation of income and tax thereon. It includes not only regular assessment but also summary assessment, best judgment assessment, re-assessment and block assessment. While assessment is genus, its various forms are its species. In section 143, the expression "assessment" signifies mere computation of income. In section 147, it signifies computation of escaped income. In section 158BC, it signifies computation of undisclosed income. An assessment is called block assessment for the reason that it seeks computation of undisclosed income for the block period. Simply because it seeks to compute the undisclosed income of the block period instead of total income of the previous year, it does not cease to be "assessment" as contemplated by section 275(1)(a). Besides, the expression used in section 275(1)(a) is "relevant assessment" and not assessment. Relevant assessment means an assessment by which income of the assessee and tax thereon is determined by the AO in accordance with the provisions of the IT Act. The language of section 275(1)(a) shows nothing to warrant that the term "relevant assessment" used therein refers to assessment u/s 143(3). In this view of the matter, assessment in which action for imposition of penalty can be initiated in terms of section 175(1)(a) includes all forms of assessments including block assessments. Without prejudice to the aforesaid, the language of section 275(1)(a) refers not only to "relevant assessment" but also to "other order" in which action for imposition of penalty can be initiated. Order of block assessment is not only relevant assessment but also an order which is appellable u/s 246/246A and therefore it cannot be held that section 275(1)(a) applies only when action for imposition of penalty is initiated in an assessment made u/s 143(3). It applies also to a case where action for imposition of penalty is initiated in assessment or any other order, which is appellable u/s 246/246A. Perusal of section 158BH shows that, save as otherwise provided in Chapter XIV-B of the Income-tax Act, all other provisions of the Income-tax Act apply to block assessments, which would obviously include provisions of section 269SS/269T, 271D/271E and 275(1)(a). It is therefore open to the AO to record a finding as regards the violations of section 269SS/269T and also initiate action for imposition of penalty u/s 271D/271E in the order for block assessment. Unless he himself is a Joint Commissioner, he cannot however levy penalty under them as penalty can be levied only by a Joint Commissioner of Income-tax as defined in section 2(28C).

32. The ld. Authorised Representative for the assessee has relied upon a long list of authorities, most of which are the decisions of this Tribunal, for the proposition that the proceedings for levy of penalty are independent of assessment proceedings and therefore the bar of limitation as contained in clause (c) of sub-section (1) of section 275 would apply and not the bar of limitation contained in section 275(1)(a). The general principle is that similar cases should be decided so as to give similar and predictable outcomes, and the principle of precedent is the mechanism by which that goal is attained. Judicial minimalists (i.e., judicial minimalism refers to a philosophy in the United States Constitutional law which promotes itself as a politically moderate viewpoint.) argue that obeying precedent makes decisions "predictable." Reliance upon precedent also promotes the expectation that the law is just. The idea that like cases should be treated alike is anchored in the assumption that one person is the legal equal of any other. Thus, persons in similar situations should not be treated differently except for legally relevant and clearly justifiable reasons. Precedent promotes judicial restraint and limits a judge's ability to determine the outcome of a case in a way that he or she might choose if there were no precedent. This function of precedent gives it its moral force. Precedent also enhances efficiency. Reliance on the accumulation of legal rules helps guide judges in their resolution of legal disputes. If judges had to begin the law anew in each case, they would add more time to the adjudicative process and would duplicate their efforts. The use of precedent has resulted in the publication of law reports that contain case decisions. Lawyers and judges conduct legal research in these reports seeking precedents. They try to determine whether the facts of the present case precisely match previous cases. If so, the application of legal precedent may be clear. If, however, the facts are not exact, prior cases may be distinguished and their precedents discounted. It therefore follows that a decision operates as binding precedent only when the inferential facts in both the cases (i.e., decided case and the case to be decided) are similar.

33. The term "precedent" by its very nature refers to an adjudged case or decision of a competent court, considered as furnishing an example or authority for an identical or similar case afterwards arising or a similar question of law: Black's Law Dictionary. "A judicial precedent attaches a specific legal consequence to a detailed set of facts in an adjudged case or judicial decision, which is then considered as furnishing the rule for the determination of a subsequent case involving identical or similar material facts and arising in the same court or a lower court in the judicial hierarchy." (Allegheny General Hospital v. National Labor Relations Board (NLBR) [Nos. 77-2090 & 79-1085, dated 7-11-1979] (3rd Cir. 1979), as quoted in United States Internal Revenue Service v. Osborne [No. 94-55890, dated 12-2-1996] paragr. 50,185 (9th Cir. 1996). There are well-settled principles for application of decisions rendered in previous cases to subsequent cases. They have been reiterated in several judgments and judicial opinions by our own Apex Court. Some of those principles are as under:

34. The aforesaid principles have been extracted from several judgments, some of which are being referred to here. In Government of Karnataka v. Gowramma AIR 2008 SC 863, the Hon'ble Supreme Court has observed as under:

"Reliance on the decision without looking into the factual background of the case before it is clearly impermissible. A decision is a precedent on its own facts. Each case presents its own features. It is not everything said by a Judge while giving a judgment that constitutes a precedent. The only thing in a Judge's decision binding a party is the principle upon which the case is decided and for this reason it is important to analyse a decision and isolate from it the ratio decidendi. According to the well-settled theory of precedents, every decision contains three basic postulates (i) findings of material facts, direct and inferential. An inferential finding of facts is the inference which the Judge draws from the direct, or perceptible facts; (ii) statements of the principles of law applicable to the legal problems disclosed by the facts; and (iii) judgment based on the combined effect of the above. A decision is an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein nor what logically flows from the various observations made in the judgment. The enunciation of the reason or principle on which a question before a Court has been decided is alone binding as a precedent. (See: State of Orissa v. Sudhansu Sekhar Misra and Ors. (AIR 1968 SC 647) and Union of India and Ors. v. Dhanwanti Devi and Ors. (1996 (6) SCC 44). A case is a precedent and binding for what it explicitly decides and no more. The words used by Judges in their judgments are not to be read as if they are words in an Act of Parliament. In Quinn v. Leathem (1901) AC 495 (H.L.), Earl of Halsbury LC observed that every judgment must be read as applicable to the particular facts proved or assumed to be proved, since the generality of the expressions which are found there are not intended to be exposition of the whole law but governed and qualified by the particular facts of the case in which such expressions are found and a case is only an authority for what it actually decides. Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of Courts are neither to be read as Euclid's theorems nor as provisions of the statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of Courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes."

35. In Padmasundara Rao v. State of Tamil Nadu [2002] 255 ITR 147 (SC), a Bench of 5 Judges of the Hon'ble Supreme Court has held as under:

"Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case, said Lord Morris in Herrington v. British Railways Board (1972) 2 WLR 537. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases."
36. The following words of Lord Denning in the matter of applying precedents have become locus classicus. They have often been quoted with approval in several judgments of the Hon'ble Supreme Court some of which are (i) Gowramma (supra) and (ii) Bihar School Examination Board v. Suresh Prasad Sinha [2009] 8 SCC 483.

"Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases. One should avoid the temptation to decide cases (as said by Cardozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive.

Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it."

37. In Bhavnagar University v. Palitana Sugar Mills (P.) Ltd. [2003] 2 SCC 111 (vide paragraph 59), the Hon'ble Supreme Court has observed:

"It is well settled that a little difference in facts or additional facts may make a lot of difference in the precedential value of a decision."

38. The aforesaid decisions and the principles laid down therein are being referred to because decisions are often cited de hors the facts. As observed by a Bench of five Judges of the Hon'ble Supreme Court in Padmasundara Rao (supra), circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Though the decisions cited by the assessee have been rendered in the context of levy of penalties u/s 271D/271E, the factual setting in those cases is materially different from those before us. It is the factual setting of a case that will ultimately decide as to whether clause (a) or (b) or (c) of section 275(1) applies to it. Decisions are always rendered in the context of facts. As Lord Steyn said, in law, context is everything: Milan Poddar v. CIT [2012] 24 taxmann.com 27 (Jharkhand). The decisions referred to by the ld. Authorized Representative for the assessee cannot be treated as a Euclid's formula so as to be universally applicable without having regard to the relevant and peculiar facts of a case. Those decisions will surely apply to cases where action for imposition of penalty is initiated outside the proceedings for assessment or independently of assessment or which is not subject matter of appeal u/s 246/246A. But they do not lay down any inflexible or universal proposition that all cases involving levy of penalty would always attract the bar of limitation laid down in section 275(1)(c) and not the one laid down in section 275(1)(a) even if they fall under section 275(1)(a).

39. The issue as to whether action for imposition of penalty has been initiated in the order of assessment or any "other order", which is subject matter of appeal, is essentially a finding of fact. Similarly, the finding as to whether initiation of action for imposition of penalty in the order of assessment or any other order, which is subject matter of appeal, is integrally related to assessment or independent of the assessment proceedings is again a finding of fact. Once it is found as a matter of fact that initiation of action for imposition of penalty in the assessment order is integrally related to the assessment or other order, which was subsequently subjected to appeal u/s 246/246A before the CIT(A), the bar of limitation as contained in section 275(1)(a) would automatically apply. On plain reading of section 275(1), such cases would be clearly covered by section 275(1)(a) and not by section 275(1)(c). On the facts available on record, it is quite clear that the matters under appeal are squarely covered by section 275(1)(a) and therefore the question of applying the bar of limitation as contained in section 275(1)(c) does not arise. The decisions referred to by the ld. Authorised Representative for the assessee are inapplicable to the facts of the case before us.

40. At the time of hearing, the learned counsel for the assessee has heavily relied upon two decisions, namely, the judgment of the Hon'ble Karnataka High Court in Shanbhag Restaurant (supra) and decision of a Special Bench of this Tribunal in Dewan Chand Amrit Lal (supra).

41. In Shanbhag Restaurant (supra), the Assessing Officer, on verification of accounts, held in the assessment order dated 25th February 1994 that the assessee had violated the provisions of section 269SS and 269T and therefore penalty was required to be levied u/s 271D and 271E. He therefore referred the matter to the DCIT (now Joint/Additional Commissioner) upon which the DCIT issued two notices dated 08.06.1994. Order was passed by the DCIT on 28.3.1995 imposing penalties under the aforesaid sections. From the facts stated in the said judgment, it seems that no appeal was filed before the first appellate authority against the assessment order in which action for imposition of penalty was initiated. On the face of it, the conditions for the applicability of section 275(1)(a) were not satisfied. In this factual background, the substantial question of law raised before the Hon'ble High Court was "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the penalty orders u/s 271D and 271E had been passed within the period of limitation and whether the Tribunal was right in reversing the order of the Commissioner of Income-tax (Appeals), who held that the penalty orders were passed after the expiry of the period of limitation specified in section 275(1)(c) of the Income-tax Act, 1961?" Two important aspects emerge from the aforesaid question raised before the Hon'ble High Court. One, the question raised before the Hon'ble High Court was to be decided "on the facts and in the circumstances" of that case. Therefore, the decision rendered on the facts and in the circumstances of that case would apply in identical fact situation and not de hors the facts. Two, the issue before the Hon'ble High Court was not as to whether section 275(1)(a) was applicable on the facts of that case. The only issue before the High Court was whether the penalties levied by the DCIT were barred by limitation u/s 275(1)(c) on the facts and in the circumstances of that case. It was not even the submission of the Revenue that levy of penalty was covered by section 275(1)(a). Therefore the entire judgment revolves around the issue as to whether penalties were barred by limitation as laid down in section 275(1)(c). It is in this factual background that the Hon'ble High Court has held that the penalties levied by the DCIT were time barred under section 271(1)(c). There was no issue as to the applicability of clause (a) of sub-section (1) of section 275 before the Hon'ble High Court. Therefore the aforesaid judgment cannot be read as laying down a proposition that the bar of limitation as contained in clause (c) of sub-section (1) of section 275 would apply even to penalties falling under clause (a) or (b) of sub-section (1) of section 275. The fact that clause (c) of sub-section (1) of section 275 does not apply to cases falling under clauses (a) and (b) of sub-section (1) of section 275 is evident from the observations extracted from the said judgment and reproduced earlier in this order.

42. Decision of a Special Bench of this Tribunal in Dewan Chand Amrit Lal's case (supra) was cited in support of the proposition that the AO has no power to initiate action for imposition of penalty u/s 271D and 271E in the assessment order and that the bar of limitation as contained in section 275(1)(c) would always apply to penalties imposable under sections 271D and 271E. In order to appreciate the decision, it is necessary to bring out the issue that was referred to the Special Bench for its consideration. In Para 2 of the order of the Special Bench, the position is stated as under:

"2. The main ground raised by the assessee against the levy of penalty was that the penalty orders were barred by limitation. The Tribunal, Chandigarh Bench, felt that there was divergence of opinion amongst various Benches of the Tribunal in regard to the computation of period of limitation. One view was that period of limitation for imposition of penalty under section 271D is to be calculated with reference to the notice issued by Jt. CIT after recording his satisfaction. Another view is that the period of limitation commences from the date of issue of notice by the AO. Accordingly, constitution of Special Bench was recommended. The Hon'ble President, Tribunal was pleased to constitute the Special Bench for the purposes of a decision in regard to the following issue :

Having regard to the provisions of Sections 27ID and 27IE and Section 275 of the IT Act, whether period of limitation for purposes of Section 275 of the Act is to be reckoned from the date when assessment proceedings are completed or from the date when penalty proceedings are initiated by the Jt. CIT?"

43. The issue for consideration before the Special Bench was whether period of limitation for purposes of Section 275 of the Act is to be reckoned from the date when assessment proceedings are completed or from the date when penalty proceedings are initiated by the Jt. CIT whereas the issue in appeals under consideration is whether the action for the imposition of impugned penalties can be said, on the facts of the case, to have been initiated in the relevant assessment in terms of section 275(1)(a) and if so whether the impugned penalties initiated by the AO in the assessment order would fall under section 275(1)(a) or not. The factual matrix as well as the nature of issue in the present appeals is altogether different. After careful analysis of the facts as available on record, a finding of fact has been recorded earlier in this order that the initiation of action for levy of impugned penalties is integrally related to assessment and also dependent upon the fate of assessment and therefore the case falls under clause (a) of sub-section (1) of section 275 and not under section 275(1)(c). Surely, the judgment of the Special Bench would apply to cases which are not covered by section 275(1)(a).

44. The issue under appeal is covered against the assessee by the judgment of the Hon'ble Karnataka High Court in Shanbhag Restaurant (supra). As held by the Hon'ble High Court, clause (a) of sub-section (1) of section 275 provides for "limitation in case where the relevant assessment or other order is the subject matter of appeal before the higher authorities." The said judgment also says that clause (c) of the said sub-section provides for contingencies in cases other than those which fall under clauses (a) and (b) of section 275(1) of the Act. In the matters under appeal, the action for imposition of impugned penalties was initiated in the block assessment, which was subject matter of appeal before the CIT(A). The fact that the impugned penalties are inextricably interlinked with quantum appeal is evident from the very submission of the assessee that impugned loans/deposits represented undisclosed income taxed by the AO. The issue of penalties cannot be divorced from the finding in the assessment order and its ultimate treatment in the quantum appeal. Initiation of impugned penalties is not only integrally related to assessment but their imposition is dependent on the outcome in quantum appeal. The case of the assessee squarely falls under clause (a) of sub-section (1) of section 275. As held by the Hon'ble Karnataka High Court, section 275(1)(c) does not apply to cases falling under section 275(1)(a).

45. For the reasons as aforesaid, it is held that the cases under appeal fall under section 275(1)(a). Both the orders of penalty have been passed well within the period of limitation laid down therein. The order of the CIT(A) cancelling the impugned penalties on the ground that they were time barred in terms of clause (c) of sub-section (1) of section 275 is unsustainable in law for the reason that bar of limitation as contained in clause (c) of section 275(1) applies only in those cases which do not fall under clauses (a) and (b) of section 275(1). The impugned orders passed by the CIT(A) cancelling the impugned penalties as time barred u/s 275(1)(c) are therefore liable to be set aside and they are accordingly set aside. Appeal filed by the Revenue is allowed to that extent.

46. Having set aside the impugned orders passed by the CIT(A), it is noticed that the learned CIT(A) has not decided the issue of levy of impugned penalties on merits. The assessee has placed a copy of written submissions filed by him in this behalf (Para 3 and 4 of his written submissions, as reproduced earlier in this order) before the CIT(A). It is the case of the assessee that impugned loans/deposits have been treated as income of the assessee, being unexplained cash credits, by the AO and therefore impugned penalties cannot be levied. On perusal of the order passed by this Tribunal in quantum appeal, it is noticed that the addition made by the AO on account of unexplained cash credits has been reduced to Rs.28 lakhs. There are several issues that need consideration for decision on merits. They are: one, whether the sum taxed by the AO as unexplained income of the assessee represent loans and deposits within the meaning of section 269SS/269T; two, whether the remaining sum (i.e., the sum taxed by the AO as unexplained cash credits being impugned loans/deposits as reduced by the addition confirmed by this Tribunal) represents loans and deposits within the meaning of section 269SS/269T; three, whether cash credits taxed by the AO are transactions of acceptance of loans or deposits or of repayment of the deposits; four, whether impugned penalties have been initiated/levied on protective basis and, if so, whether such course of action is permissible in law; and, five, whether penalty was imposable u/s 271E on repayment of deposits, and, if no, the amount of repayment of deposit on which penalty u/s 271E was levied would need to be excluded from the overall penalty which has been levied u/s 271E for repayment of both loans and deposits. All these matters need proper consideration after bringing the relevant materials on record. Reasonableness of explanation offered by the assessee, if any, in the matter also needs to be considered and adjudicated upon by the CIT(A). The CIT(A) has not adjudicated upon the correctness of levy of impugned penalties on merits as he has quashed both the orders of penalty on the ground that they were hit by the bar of limitation contained in section 275(1)(c). None of the issues raised by the assessee before the CIT(A) on the leviability of penalties on merits can be disposed of by this Tribunal firstly for want of relevant materials on record and decision thereon by the CIT(A) and secondly for want of any ground of appeal in that behalf before this Tribunal. In this view of the matter, the ld. CIT(A) is directed to decide the issue of levy of penalty on merits after giving reasonable opportunity of hearing to both the parties. For this limited purpose, the issue is restored to the file of the CIT(A).

47. In view of the foregoing, both the appeals filed by the Revenue shall be treated as allowed for statistical purposes subject to the observations made above.

T. K. Sharma, Judicial Member - I have carefully gone through the proposed order of learned brother and I have not been able to agree with the reasoning and conclusion, therefore, I proposed to write my separate order.

2. At the time of hearing before us, Shri N.P. Sony, the ld. DR appeared on behalf of the Revenue and pointed out that the case of the assessee is covered by the provisions of section 275(1)(a) and not by provision of section u/s 275(1)(c) of the Act as held by the ld. CIT(A) in the impugned order. The ld.DR further pointed out that in this case, the Block assessment order is dated 27.6.2001 which is a subject matter of appeal before the ld. CIT(A). The ld. CIT(A) vide order dated 3.9.2004 confirmed the order of the AO. The penalty order passed u/s 271D and 271E were passed on 30.6.2006 i.e. before the end of the Financial Year and after financial year in which the appellate orders were received, therefore, penalty orders passed u/s 271D and 271E of the Act are not barred by limitation.

3. Shri N.P. Sony, the ld.DR appeared on behalf of the Revenue and pointed out that the case of the assessee is covered by the provisions of section 275(1)(a) and not by provision of section u/s 275(1)(c) of the Act as held by the ld. CIT(A) in the impugned orders. He further pointed out that in this case, the Block assessment order is dated 27.6.2001 which was a subject matter of appeal before the ld. CIT(A). The ld. CIT(A) vide order dated 3.9.2004 confirmed the order of the AO. Both the penalty orders passed u/s 271D and 271E were passed in this case on 30.6.2006 i.e. before the end of the Financial Year and after financial year in which the appellate orders were received, therefore, penalty orders passed u/s 271D and 271E are not barred by limitation. As against this, Shri B.R. Popat, the ld. Counsel appeared on behalf of the assessee vehemently supported the order passed by the ld. CIT(A). The ld. Counsel of the assessee pointed out that proceedings u/s 271D and 271E of the Act are independent of the assessment proceedings because the orders under these two sections can also be passed prior to the assessment order and therefore, the extended period available u/s 275(1) (a) for passing the penalty order under Chapter XXI of the Act is not available to the proceedings under the above two sections, and, because of this situation, the order passed u/s 271D and 271E of the Act would fall under the category of 'any other case' not falling under clauses (a) and (b) of section 275(1) of the Act, i.e. to say it would fall under clause (c) of Section 275(1)(c) of Act. The ld. Counsel for the assessee further pointed out that the proceedings initiated u/s 271D and 271E have no relevance or dependent upon the outcome of the assessment order, therefore, the same would not fall under clause (a) of sub-section (1) of section 275 of the Act.

4. The second contention raised by the ld. DR is that the assessment framed under Chapter XIV B of the Act is also a regular assessment, therefore, the penalty u/s 271D or 271E of the Act can also be levied in case of assessment is framed u/s 158BC of the Act.

5. On the other hand, Shri B.R. Popat, the ld. Counsel appeared on behalf of the assessee vehemently supported the order passed by the ld. CIT(A). He pointed out that proceedings u/s 271D and 271E of the Act are independent than the assessment proceedings because the orders under these two sections can also be passed prior to the assessment order and therefore, the extended period available u/s 275(1)(a) for passing the penalty order under Chapter XXI of the Act is not available to the proceedings under the above two sections, and, because of this situation, the order passed u/s 271D and 271E of the Act would fall under the category of 'any other case' not falling under clauses (a) and (b) of section 275(1) of the Act, i.e. to say it would fall under clause (c) of Section 275(1)(c) of Act. The ld. Counsel for the assessee further pointed out that the proceedings initiated u/s 271D and 271E have no relevance or dependent upon the outcome of the assessment order, therefore, the same would not fall under clause (a) of sub-section (1) of section 275 of the Act. In support of this proposition of law the ld. Counsel of the assessee relied on the ratio of various decisions which are mentioned by the ld.CIT(A) in paragraph 5 of the impugned order which are as under :

The ld. Counsel of the assessee pointed out that in the aforesaid cases, it has been held that having regard to provisions of Section 271D and 271E, the period of limitation for the purpose of Section of 275 is to reckon from the date when penalty proceedings are initiated by Dy. CIT (Joint CIT) and not from the date on which assessment proceedings are completed. In support of this ld. Counsel of the assessee finally relied on the decision of the Hon'ble Karnataka High Court in the case of Shanbhag Restaurant (supra), wherein it has been held that for the purpose of counting limitation u/s 275(1) in respect of penalty order u/s 271D and 271E, clause (c) of section 275(1) is relevant and not clause (a) of Section 275(1) of the Act. The ld. Counsel of the assessee also drew our attention to this sequence of events which are relevant in the present appeals are as under :

The ld. Counsel of the assessee also drew our attention to Specific provisions of section 275(1) of the Income Tax Act, prescribing limitation for imposing penalties.

Bar on limitation for imposing penalties.
No order imposing a penalty under this chapter shall be passed.

For the convenience it is useful to refer sections 271E, 273B and 275(1)(c). 271E.

"Penalty for failure to comply with the provisions of section 269T.-(1) If a person repays any loan or deposit referred to in section 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so repaid.(2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner. 273B. Penalty not to be imposed in certain cases. Notwithstanding anything contained in the provisions of clause (b) of sub-section (1) of section 271, section 271A, section 271AA, section 271B, section 271BA, section 271BB, section 271C, section 271CA, section 271D, section 271E, section 271F, section 271FA, section 271FB, section 271G, clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA or section 272B or sub-section (1) or sub-section (1A) of section 272BB or sub-section (1) of section 272BBB or clause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall be imposable on the person or the assessee as the case may be, for any, failure referred to in the said provisions if he proves that there was reasonable cause for the said failure 275. Bar of limitation for imposing penalties.-(1) No order imposing penalty under this Chapter shall be passed-

(a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253, 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 the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later :

Provided that in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A, and the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Commissioner (Appeals) is received by the Chief Commissioner or Commissioner, whichever is later;

(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."

6. After referring to the aforesaid chart, and provisions of section 275(1) of the Act, the counsel for the assessee pointed out that in this case the block assessment was completed in June 2001 by the DCIT who also issued two separate notices u/s 274 r.w.s. 271D and 271E of the Act. Further notices were also issued u/s 274 r.w. section 271D and 271E by JCIT, Range-(1), Junagadh. The penalty orders under both the sections were passed on 30.3.2006 by Additional CIT, Junagadh. The penalty orders passed by the Add. CIT, Range-1, Junagadh are barred by limitation as per the provisions of section 275(1)(c) of the Act from the first penalty notice issued in June 2001 by DCIT (Inv), Junagadh as well as penalty notices issued by JCIT Range (1), Junagadh.

7. Without prejudice to the above and assuming though not admitting about that both the penalties under both these sections were levied within the period of limitation, the ld. Counsel of the assessee contended that these penalties related to certain transactions of cash credits (and corresponding debits with regard thereto), which was considered by the AO in block assessment order. He submitted that all these credits are considered as income in the assessment order u/s 158BC passed by the AO and in subsequent development also, the Tribunal in IT(SS)A No.72/Rjt/2004 set aside the block assessment order with a direction to re-calculate the undisclosed income, by taking into account, ratio laid down by the Hon'ble Supreme Court in the case of Anantharam Veerasinghaiah & Co.v. CIT [1980] 123 ITR 457. On the basis of this decision of the Tribunal, the counsel of the assessee pointed out that cash credits were considered as income even by the Tribunal, albeit subject to re-quantification based on the principle of telescoping, relying on the aforesaid judgment of the Hon'ble Supreme Court. Therefore, as both the penalties relates to such cash credit and corresponding debits, the same cannot be sustained, as these are clearly not transaction of acceptance of repayment of the deposits within the meaning of section 269SS and 269T of the Act. To sum up, the ld. Counsel of the assessee contended that while additions can be made on protective basis, there is no way a penalty can under sections 271D and 271E of the Act can be levied protectively. For this reasons, the Income Tax Act has not prescribed any limitation for initiation of penalty, u/s 271D and 271E, and has only provided that once initiated, same has to be disposed of within the prescribed time limit as specified u/s 275(1)( c ) of the Act. On the strength of this argument, the ld. Counsel submitted that on merits also penalty levied under these two sections be cancelled.

8. In rejoinder, the ld. DR pointed out that in quantum proceedings the ld. CIT(A) passed the odder on 3.9.2004, penalty orders were passed on 30.3.2006, therefore, as per the provisions of section 275(1)( a), penalty levied u/s 271D and 271E of the Act are within the limitation period as in case of this assessee section 275 (1)(a) of the Act is applicable. To the query whether any High Court on this issue has taken a contrary view to the view taken by the Hon'ble Karnataka High Court (supra). The ld. DR fairly stated that no contrary judgment is available.

9. The ld. DR further pointed out that in the impugned order, the ld. CIT(A) has not adjudicated upon the penalty on merits, therefore, it may be held that the penalty order passed within the limitation provided u/s 275(1)(a) of the Act and therefore, the ld. CIT(A) be directed to decide both the appeals of the assessee on merits after giving opportunity of being heard to both the sides.

10. The sole issue involved in these two appeals is to decide whether the case of the assessee falls under clause (a) or clause (c) of section 275(1). At the time of hearing, both sides admitted that only High Court judgment on this issue available is the judgment of the Hon'ble High Court of Karnataka in the case of Shanbhag Restaurant (supra). The Hon'ble High Court in this case has under as under :
"Penalty under SS 271D and 271E- - limitation u/ s 275(1)(c)- Order passed after the expiry of six months from the end of the month in which proceedings were initiated-As per section 275(1)(c), out of two periods, whichever period expires later would ensure to the benefit of the Revenue-Financial year in the first part of section 275(1)(c) must be understood as the financial year in which the assessment order is made in the course of which proceedings for penalty could be initiated-In the present, case, assessment order was made on 25th Feb 1994-That financial year had expired on 31st March, 1994-Action for imposing of penalty was initiated by issue of notices dated 8th June 1994-Oerdes imposing the penalty should have been passed before 31st Dec, 1994-Thus,on Thus, orders passed on 28th March, 1995, imposing penalty were barred by limitation.

The reading of section 275(1)(c) of the Act makes it clear that the said section comprises of two parts. The first part provides that no order imposing penalty under Chapter XXI could be made in cases which do not fall under section 275(1)(a) and (b) after the expiry of the financial year in which the proceedings in the course of which action for imposition of penalty has been initiated are completed. The second part relates to the cases which prohibits passing of an order imposing penalty after the expiry of six months from the end of the month in which action for imposition of penalty is initiated. However, the section further provides that when proceedings for imposition of penalty is initiated, whichever period expires later, would endure to the benefit of the revenue. In the instant case, as noticed by us earlier, the assessment order was passed on 25th February, 1994. The financial year in which the proceedings in the course of which action for imposition of penalty has been initiated is required to be understood as the proceedings relating to the assessment year. The financial year in which the proceedings, in the course of which action for imposition for penalty had been initiated, could be understood as the proceedings relating to imposition of penalty. The financial year in the first part of section 275(1)(c) must be understood as the financial year where the assessment order was made in the course of which proceedings for penalty could be initiated. In the present case, the assessment order was made on 25th February, 1994. The financial year in respect of assessment order, as rightly found by the Commissioner (Appeals), had expired on 31st March, 1994. In cases where the proceedings initiated falls under second part of section 275(1)(c) of the Act, the order imposing the penalty is required to be passed within six months from the end of the month in which action for imposition of penalty is initiated. In the instant case, the action for imposition of penalty was initiated by issue of notices dated 8th June, 1994, by the Dy. Commissioner. In that event, the orders imposing the penalty should have been passed before 31st Dec.1994, as the six months' period from end of June, 1994 expired on 31st Dec 1994. Therefore, as notices earlier, the conclusion reached by the Commissioner (Appeals) that the order passed imposing penalty was barred by limitation is correct. The contrary view taken by the Tribunal in the impugned order is erroneous and totally unsustainable in law. In the light of the above conclusion, the order passed by the Tribunal was liable to be set aside.

Proceedings for penalty having been initiated by issue of notice dated 8th June, 1994, the order was required to be passed within six months from the end of June, 1994, i.e. before 31st Dec, 1994, and, therefore, the orders imposing penalty passed only on 28th March, 1995 were barred by limitation u/s 275(1)( c), the case being covered by second part of the said section."

11. The block assessment, in the case before us, was passed in the month of June 2001. The JCIT-Range-1, Junagadh issued notices dated 15.1.2001 to the assessee to show cause as to why penalty u/s 271D and 271E should not be imposed. Therefore, the limitation for passing the order u/s 271D and 271E expires on 31.7.2002 as per the provisions of section 275(1)(c) of the Act. The penalty orders in these cases were passed on 30.3.2006 levying penalty u/s 271D and 271E of the Act imposing penalty of Rs.14,29,81,658/- and Rs.10,97,67,135/- respectively which is barred by limitation as assessment has no bearing on linkage with the order passed u/s 271D and 271E of the Act.

12. In this view of the matter, I am of the view that the ld. CIT(A) is legally and factually correct in cancelling the penalty levied u/s 271D and 271E of the Act following the judgment of the Hon'ble Karnataka High Court in the case of Shanbaug Restaurant (supra). I, therefore, inclined to upheld the order of the ld. CIT(A) in cancelling both the penalties levied by the ld. JCIT, Range-1, Junagadh.

13. Without prejudice to the above, the scheme of block assessment as contained in Chapter XIVB of the Act clearly indicates that same is to assess under undisclosed income and in the said Chapter interest and penalty is to be levied for the undisclosed income as specifically provided u/s 158BFA of the Act. Therefore, section 158BH of the Act is not applicable for levy of penalty other than what is provided under Chapter XIVB of the Act. In other words, the order u/s 271D or 271E is relevant only when assessment is framed u/s 143(3) of the Act and not for block assessment framed u/s 158BC of the Act. For these reasons, the order of penalty u/s 271D and 271E is also not sustainable.

14. Even on merits also I find considerable force in the contention of the ld. Counsel for the assessee that whom the credit are considered as income in the assessment framed u/s 158BC of the Act and in subsequent development also the Tribunal directed to recalculate undisclosed income, by taking into account the ratio of the Hon'ble Supreme Court in the case of Anantharam Veerasinghaiah & Co. (supra). On this basis, the cash credits were finally considered as income even by the Tribunal, albeit subject to quantification based on principle of telescopy, relying on the aforesaid judgment, therefore, on this ground also penalty levied are unsustainable as these are not transaction of acceptance of loans or deposits or of repayment of the deposits within the meaning of section 269SS and 269T of the Act. It is well settled law that while addition can be made on protective basis, but penalty under sections 271D and 271E of the Act cannot be levied on protective basis. Therefore, on merits penalty under both these sections are deserves to be cancelled.

15. In view of the aforesaid discussion, in my opinion:

16. Consequently, both the appeals of the revenue are dismissed.
Reference under section 255(4) of the Income-tax Act, 1961

D.K. Srivastava, Accountant Member : The points of difference proposed by Ld. Brother in the aforesaid matter do not reflect actual points of difference between the Members. In my view, points of difference between them are as under:

Reference under section 255(4) of the Income Tax Act, 1961

There is a difference of opinion between the Members who constituted the Bench. On account of this, the following points of difference is placed before the Honble President, ITAT for action u/s 255(4) of the Income-tax Act, 1961.

"Whether on the facts and circumstances of the case, the ld. JM is correct in upholding the order of ld CIT(A) cancelling the penalty levied u/s 271D of Rs.14,29,81,658/- and u/s 271E of Rs. 10,97,67,135/- or the ld. AM in restoring both the appeals to the file of the ld. CIT(A) for examining the character of loan/deposits in the light of material available on record and thereafter decode the issue of levy of penalty on merits."

THIRD MEMBER ORDER

G.C. Gupta, Vice-President (AZ) (As a Third Member) - On account of difference in opinion between the learned Judicial Member and learned Accountant Member of ITAT, Rajkot Bench, this matter has been referred to me by the Hon'ble President, ITAT for consideration and disposal under Section 255(4) of the Income Tax Act, 1961. There is a difference of opinion between the learned Members of the Rajkot Bench on the issue of framing of points of difference between the Members. Accordingly, the learned Judicial Member and the learned Accountant Member have framed point of difference separately. The learned Judicial Member has framed the following point of difference for disposal by the Third Member:

"Whether on the facts and circumstances of the case, the ld. JM is correct in upholding the order of the ld. CIT(A) cancelling the penalty levied under section 271D of Rs.14,29,81,658/- and u/s.271E of Rs.10,97,67,135/- or the ld.AM in restoring both the appeals to the file of the learned CIT(A) for examining the character of loan/deposits in the light of material available on record and thereafter decide the issue of levy of penalty on merits."
The learned AM has framed the following point of difference as under:

2. I have carefully considered the above points of difference drawn by the learned Members of the Rajkot Bench, and have perused the proposed orders of the learned JM and the learned AM. I have heard the learned CIT-DR and the learned counsel of the assessee.

3. The contentions of learned CIT-DR and the learned counsel for the assessee were broadly the same as advanced before the regular Bench and recorded in the proposed draft orders of the learned JM and the learned AM. The learned CIT-DR submitted that the CIT(A) has cancelled the penalty under Section 271D/271E on the ground that their imposition is barred by limitation as per the provision of section 275(1)(c) of the I.T. Act. He submitted that the case of the assessee falls under the provision of Section 275(1)(a) of the Act. He submitted that it was an admitted position that in case, the case of the assessee falls under Section 275(1)(a), the penalty orders passed by the AO were well within the time limit prescribed under the Act. He referred to various relevant dates as recorded by the learned AM in his order at page no.5 of the order. He submitted that in fact the proviso to section 275(1)(a) applies to the case of the assessee. He submitted that the decision of the Hon'ble Karnataka High Court in Shanbhag Restaurant (supra) relied upon by the learned JM is distinguishable on facts since relates to the applicability of provision of section 275(1)(c) only and not with respect to provision of section 275(1)(a) or Section 275(1)(b) of the Act. He referred to para 34 of the learned AM's order wherein the decision of Hon'ble Supreme Court in Government of Karnataka (supra) was cited, and referred to along with certain other decisions of the Hon'ble Courts. He submitted that the order of the penalty has to be linked with the assessment order, and therefore, proviso to Section 275(1)(a) applies to the case of the assessee. The learned CIT-DR submitted that any other interpretation would amount to reading down the specific provision of the Act. He also referred to para 39 of the learned AM's order to submit that whether the penalty has been initiated in the assessment order or any "other order", which is subject matter of appeal, is essentially a finding of fact. He referred to other relevant portions of the learned AM's order in support of the case of the Revenue.

4. The learned counsel for the assessee has opposed the submissions of the learned CIT-DR. He submitted that the decision of Hon'ble Karnataka High Court in Shanbhag Restaurant (supra) and the decision of the Special Bench of the Chandigarh Tribunal in Dewan Chand Amrit Lal (supra) supports the case of assessee and both were relied at the time of hearing before the Tribunal. The learned counsel for the assessee has relied on the following decisions:

He submitted that the provision of Sections 275(1)(a)/ 275(1)(c) of the Act mention the words "during the course of assessment" whereas in the penalty provision of section 271D/271E, there is no such mention of these words. He submitted that now the only issue before the Tribunal is that whether the case of the assessee falls in the proviso to section 275(1)(a) of the Act or section 275(1)(c) of the Act. The case of the assessee falls in section 275(1)(c) as it falls under the words "in any other case" wherein the Revenue can impose the penalty within a period of six months from the end of the month, in which the action for imposition of penalty is initiated or before the expiry of financial year in which the proceedings in the course of which action for the imposition of penalty has been initiated, whichever period expires later. He submitted that the decision of ITAT, Hyderabad Bench in Dillu Cine Enterprises (P.) Ltd. (supra) clearly applies to the case of the assessee wherein held that in the case of penalty levied under Section 271D of the Act, the provision of section 275(1)(c) shall be applicable and limitation for levy of penalty has to be worked out accordingly. The learned counsel for the assessee submitted that now the controversy stands settled in favour of the assessee with the latest decision of the Rajasthan High Court in Jitendra Singh Rathore (supra), wherein the issue has been decided in favour of the assessee, and there is no contrary decision of any other High Court on the issue, and therefore has the binding effect on the Tribunal.

5. The learned CIT-DR in his rejoinder submitted that decision of the Hon'ble Rajasthan High Court in Jitendra Singh Rathore (supra) is distinguishable on facts. He submitted that each decision of the Hon'ble Court has to be seen in light of the facts of each case and no decision can be seen in isolation thereof. He submitted that none of the decisions cited by the assessee are applicable to the facts of the assessee.

6. I have considered rival submissions and have perused the proposed orders of the learned JM and the learned AM on this issue. I find that the only issue before me as Third Member is to adjudicate that whether in the facts and circumstances of the case the provision of Section 275(1)(a) r.w. its proviso is applicable or provision of section 275(1)(c) is applicable for the purpose of calculating the limitation period for imposition of penalty under Section 271D/271E of the Act, in the case of the assessee. Once it is found that the case of the assessee falls under the provision of section 275(1)(c), then admittedly the penalty order in this case was barred by limitation. The opening words of provision of Section 275(1)(a) provides "in a case where the relevant assessment or other order is the subject matter of an appeal...", The provision of section 275(1)(c) provides that "in any other case" for the purpose of determining the limitation period of assessee. The penalty under Sections 271D/271E has been imposed on the assessee for violation of sections 269SS and 269T of the Act for accepting the loans and advances and repaying the same in cash. I find that, with latest decision of the Hon'ble Rajasthan High Court in the case of Jitendra Singh Rathore (supra), the issue has to be decided in favour of the assessee. The Hon'ble High Court after considering the relevant provisions of the Act has concluded that the order imposing penalty was hit by the limitation prescribed under the Act under Section 275(1)(c), and confirmed the orders of the CIT(A) and the Tribunal in setting aside the order of the penalty. The Hon'ble Court has followed view taken by the Hon'ble Rajasthan High Court in the case of Hissaria Bros. (supra) wherein held that -

"38. We are, therefore, of the opinion that since penalty proceedings for default in not having transactions through the bank as required under sections 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 sections 271D and 271E may have been initiated has no relevance for sustaining or not sustaining the penalty proceedings and, therefore, clause (a) of sub-section (1) of section 275 cannot be attracted to such proceedings. If that were not so clause (c) of section 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 clause (a) was to be invoked, no necessity of clause (c) would arise."

Before me, no contrary decision of any other Hon'ble High Court or of the Hon'ble Supreme Court has been cited at the bar. In these facts of the case, I am bound by the ratio of the decision of the Rajasthan High Court cited supra, and since no contrary decision of any other Hon'ble High Court is brought to my knowledge, I respectfully following the same, agree with the order of the learned JM on the issue recorded in the points of difference by the learned Members of the Rajkot Bench in favour of the assessee and against the Revenue, and the points of differences referred to me by the learned JM and the learned AM are answered accordingly.

7. The matter will now go back to the Division Bench for passing order in accordance with majority view.
Order under section 254(1) read with section 255(4) of the Income-tax Act, 1961

1. The aforesaid appeals were listed for hearing pursuant to the directions given by the Hon'ble jurisdictional High Court to which reference has been made in the order of the Accountant Member. The order as proposed by the Accountant Member was dissented from by the Judicial Member. In terms of section 255(4), the points of difference as emerging from their respective orders were referred separately by both the Members to the Hon'ble President of this Tribunal for reference to the Hon'ble Third Member for his opinion. The Hon'ble Vice President (Ahmedabad Zone) of this Tribunal was appointed as Third Member by the Hon'ble President. The opinion of Third Member has since been received in which the points of difference as referred by both the Members to the Hon'ble President have been reproduced. They are therefore not being reproduced here.

2. On receipt of opinion of the Third Member, the matter was listed for hearing for passing consequential order u/s 254(1). While the assessee did not enter appearance, the Revenue was represented by the ld. Departmental Representative.

3. At the time of hearing, the ld. Departmental Representative submitted that the Hon'ble Third Member has not expressed any opinion on any of the points of difference referred by the Accountant Member to the Hon'ble President u/s 255(4). In this connection, he also referred to the judgment dated 26 June 2012 of the Hon'ble jurisdictional High Court in AMOD Stampings (P.) Ltd. v. Commissioner of Customs [2013] 32 taxmann.com 266/39 STT 621 (Guj.). He pleaded that the submissions made by him during the course of hearing before the Hon'ble Third Member have also not been dealt with in the opinion of the Hon'ble Third Member. In support of the aforesaid, the ld. Departmental Representative has filed written submissions, which read as under:

"On account of the difference in opinion between the two Members, the case was referred to the third member which was heard on 3/5/2013. Both the Members had framed different questions in respect of points of difference between then, While the Accountant Member had framed 8 questions, the Judicial Member framed one general question. The Hon'ble Third Member vide his order dtd. 13/05/2013 has reproduced the question framed by the Accountant Member but has not dealt with them in his order. He has passed an order dealing with the facts of the case in general and has failed to answer the specific and pointed questioned framed by the Accountant Member.

During the proceeding before the third Member the Ld. Counsel of the assessee had filed an unreported judgment of the Hon'ble Rajasthan High Court in the case of CIT vs. Jitendra Singh Rathore in IT Appeal No. 90/2007 dtd. 10/1/2013. When confronted to the undersigned it was pointed out, that in the case of Jitendra Singh Rathore that there was a finding of the court in para-8 that the provision of penalty u/s 271D did not have any connection with the order in appeal before the CIT(A) and, therefore, the penalty u/s 271D could have been passed without out waiting for the order of the CIT(A) u/s 275(1)(c). The attention of the Member was drawn to the fact that in the case of the assessee cash credit found during the course of search were treated as unexplained and added to the income of the assessee. The assessee was before the CIT(A) in respect of this addition. Simultaneously proceedings u/s 271D were initiated, protectively treating this cash credit as loan. Therefore, if the addition was confirmed by the CIT(A) then the proceedings u/s 271D would have become infructuous and if the addition was deleted by the CIT(A) then a valid order u/s 271D could have been passed. It was clearly pointed out that both the orders were inter-linked and inseparable from each other. The order u/s 271D was required to be passed only after the order of CIT(A) against the assessment. Therefore, the case of the present assessee was distinguishable from the case of Jitendra Singh Rathore in IT Appeal No. 90 of 2007 and in view of the facts and circumstances the penalty order u/s 271 would be covered u/s 275(1)(a) and not 275(1)(c). The Third Member has passed an order without considering the arguments made by me.

This submission is made in respect of the proceedings by the Hon'ble ITAT giving effect to the order of the Hon'ble Third Member."