ORDER
G.K. Israni, Judicial Member
1. This appeal by the assessee is directed against the order of the learned CIT(A) dated 18-1-1994 in respect of the assessment year 1990-91.
2. Under challenge is the penalty of Rs. 1,35,500 levied under Section 271D of the Act. The Dy. Commissioner noted that the assessee had obtained loans totalling Rs. 1,35,500 where the individual amounts exceeded the limit as laid down under Section 269SS. The penalty proceedings were accordingly initiated. During the course of the penalty proceedings before the Dy. Commissioner, the assessee made the following contentions:
(i) the amounts received were not in the form of deposits, but were received during the course of flow of current account,
(ii) the geographical location of the assessee’s factory, lack of banking facilities etc. necessitated the assessee to receive these amounts in cash,
(iii) all these cash loans were taken in situations of urgency.
3. The Dy. Commissioner did not accept any of these contentions. He thereupon proceeded to levy the impugned penalty.
4. During the course of the first appellate proceedings, the assessee through its written submissions raised the following points:
(1) the penalty proceedings initiated by the show-cause notice dated 30-9-1991 by the Dy. Commissioner suffered from legal infirmity and were void ab initio in terms of the implicit bar of limitation provided by Section 275(1)(c) of the Income-tax Act,
(2) the penalty order dated 27-5-1992 passed by the Dy. Commissioner under Section 271D was barred by limitation in terms of the explicit provisions of Section 275,
(3) the penalty order was non-speaking one and does not show that there had been application of mind by the Dy. Commissioner,
(4) the Dy. Commissioner failed to consider and apply the provisions of Section 273B and appreciate the superiority of that provision over the combined reading of Sections 269SS and 271D,
(5) penalty proceedings have got to be initiated before the completion of the proceedings out of which the said penalty proceedings crop up or emanate.
In support of the above contentions, the assessee cited the following decisions :
(1) CIT v. Rajinder Kumar Somani [1980] 125 ITR 756 (Delhi),
(2) CIT v. Sardar Amarjit Singh [1981] 132 ITR 365 (Delhi), and
(3) Durga Timber Works v. CIT[1971] 79 ITR 63 (Delhi).
In this connection, it was further submitted before the learned CIT(A) that the assessment was completed on 14-8-1991 whereas the penalty proceedings were initiated on 30-9-1991 and therefore, the penalty proceedings were void ab initio. In connection with the initiation of the penalty proceedings and their validity and the issue of penalty notice, a dispute of fact was raised before the learned CIT(A). Whereas the department contended that the penalty notice was dated 20-11-1991 which was despatched on 20-11-1991 and served on the assessee on 26-11-1991, the contention of the assessee was that the notice was in fact dated 30-9-1991 and since the penalty order was not passed within a period of 6 months from the date of initiation of penalty proceedings as required by the later part of Clause (c) of Sub-section (1) of Section 275, the penalty order was void ab initio and, therefore, could not have been upheld by the learned first appellate authority.
5. The learned CIT(A), during the course of his dealing with the question of date of initiation of proceedings, examined the office record of the Dy. Commissioner and also asked for the report of the Dy. Commissioner and heard her. On the examination of the record, he found that the penalty proceedings had been initiated with the recording of order sheet entry dated 20-11-1991 which directed that penalty show-cause notice under Section 271D to attend on 3-12-1991 be issued. He further found, after inspection of the office copy of the notice and the original notice, that both the notices bore the original date of 30-9-1991 which was changed to 20-11-1991. The date on which the hearing was fixed was scored out and read as 3-12-1991. The office record further showed that the notice was served on the assessee on 26-11-1991. After cumulative consideration of all these facts and circumstances, he came to the conclusion that the penalty proceedings had in fact been initiated on 20-11-1991 and not on 30-9-1991. He accordingly held that penalty order was passed within the period of 6 months as laid down under Clause (c) of Sub-section (1) of Section 275. As regards the plea of the assessee with regard to the non-speaking nature of the penalty order and non-application of mind by the Dy. Commissioner, the learned CIT(A) referred to the record of the proceedings and found that the Dy. Commissioner had in fact required further information and statements from the assessee and had examined the facts relating to the availability of cash or otherwise and the transaction of deposits. All these facts and circumstances clearly showed that there had been application of mind by the Dy. Commissioner. Similar was the case with regard to the question of consideration of reasonable cause under Section 273B. He thus concluded that there was no reasonable cause which could explain the borrowings in cash. He further held that there was no legal infirmity in the penalty order on account of limitation or non-commencement of penalty proceedings during the course of assessment proceedings. He accordingly dismissed the appeal giving rise to the present appeal before us.
6. Let us for the sake of convenience take up the question of fact relating to the date of initiation of proceedings. Before us also the original notice of penalty proceedings received by the assessee was produced for inspection. Also available before us was the office copy of the said notice. On our directions, the other relevant record including the order sheets and the penalty register, despatch register etc. were also produced for our inspection. Our inspection corroborates the finding of the learned CIT(A) that the concerned file starts with the first entry dated 20-11-1991 to the effect that a penalty show-cause notice under Section 271D to attend on 3-12-1991 be issued. It was also contended before us by the learned counsel for the assessee that the date of issue as originally recorded on the original notice and office copy thereof was 30-9-1991. As such, the penalty proceedings had been initiated on 30-9-1991. Since the penalty order was not passed within the period of 6 months from the end of the month in which action for imposition of penalty was initiated, the penalty order is barred by limitation as prescribed by Section 275(1)(c).
7. We have given our careful thought to the argument of the learned counsel and also taken into consideration the record available before us and find ourselves in agreement with the learned CIT(A) that the penalty proceedings in the present case were in fact initiated on 20-11-1991 and not on 30-9-1991. It is of course true that the original notice as well as copy thereof initially bore the date of issue as 30-9-1991. But then, in both the original as well as in the office copy, this date has been struck out and replaced with the date 20-11 -1991. There is neither direct nor any indirect circumstantial evidence to lead us to the conclusion that the notice was actually issued on 30-9-1991. The record does not corroborate such contention. There is a presumption of the regularity of the official acts performed. There is no reason to believe that substitution of the date of issue is the result of any forgery on the part of any official of the department. A finding of forgery as sought by the assessee cannot be recorded on mere surmise, conjecture or suspicion, more so, in a case of the nature as the present one, where the official record including the assessment file, penalty register, despatch register etc. do not corroborate the stand of the assessee that the penalty notice fixing the date of hearing as 3-12-1991 was issued on 30-9-1991 and not on 20-11-1991. In this connection, one of the observations of the learned CIT(A) is to the effect that such notices ordinarily fix the date of hearing of about two week distance. In the instant case, had the notice been actually issued on 30-9-1991, the date of hearing would not have been such distant as 3-12-1991. There is another finding of the learned CIT(A) to the effect that the notice was served on the assessee on 26-11-1991. This fact was not contradicted by the assessee at any stage of the original or appellate proceedings. Had the notice actually been issued on 30-9-1991, it would not have taken almost two months to reach the assessee. These circumstances further support the departmental version to the effect that the notice was actually issued on 20-11 -1991 and, therefore, served on the assessee on 26-11-1991. Thus, no case has been made out for our interference in the learned CIT(A)’s finding to the effect that the penalty proceedings were initiated only on 20-11-1991.
8. As to the validity of the penalty order, it was stressed by the learned counsel that since neither the penalty proceedings were initiated nor any direction for initiation of penalty proceedings was passed during the course of or up to the completion of the assessment proceedings, the penalty proceedings could not have been initiated subsequently and, therefore, any penalty order resulting from such penalty proceedings is void ab initio. In this connection, main reliance was placed upon the decision of the Delhi High Court in the case of Rajinder Kumar Somani (supra) and the decision of the Ahmedabad Bench of the Tribunal in the case of H. Ajitbhai & Co. v. Asstt. CIT[ 1993] 45 ITD 262. Further reference in this connection was made to the following decisions :
(1) CIT v. Dajibhai Kanjibhai [ 1991 ] 189 ITR 41 (Bom.),
(2) Sardar Amarjit Singh’s case (supra).
(3) DM. Manasvi v. CIT[1972] 86 ITR 557 (SC).
On the basis of the above decisions, it was contended by the learned counsel that even though the latter part of Clause (c) of Sub-section (1) of Section 275 does not contain any explicit bar to the initiation of penalty proceedings after compilation of the valid assessment proceedings, yet such bar is tnere implicitly in the very nature of the things, inasmuch as the penalty proceedings originate from the assessment proceedings.
9. We have given our careful thought to this argument of the learned counsel, but do not feel inclined to accept the same. We feel that this argument would possibly have held good in the pre-amendment situation of law contained in Section 275 of the Act. The decision of the Delhi High Court in R.K. Somani’s case (supra) is dated 30-4-1980 and was rendered in a reference relating to the assessment year 1959-60. For the proper appreciation of the point of law involved in the dispute, it would be convenient to reproduce the relevant part of the judgment of the High Court:
The 1961 Act has changed the above position. A careful perusal of Section 275 of this Act shows that it has laid down bars of limitation in two respects, one explicitly and the other by necessary implication. The explicit limitation is that the order imposing the penalty has to be passed within a particular time. While we are not concerned with that period of limitation here, it is necessary to notice that the period of limitation prescribed starts running from the ‘end of the financial year in which the proceedings initiated are completed.’ Thus, indirectly, but by necessary implications, the statute has also provided that the action for imposition of penalty must be initiated in the course of (as far as we are concerned) the assessment proceedings. It is thus not enough that the ITO is satisfied in the course of the assessment proceedings that a case for penalty exists, it is further necessary that he should have initiated some action for the imposition of penalty in the course of such proceedings. It depends on the facts of each case whether any such action has been initiated before the date of completion of the assessment. If, even before the completion of the assessment, the ITO has issued a penalty notice, it is clear that he has taken necessary action for the imposition of penalty. The above condition can also be said to be satisfied where, though a penalty notice has not been issued before that date, it is seen that the officer had given a direction to his office before completing the assessment that such a notice should be issued. Similarly, in cases governed by Section 274(2) (which has been deleted w.e.f. April 1, 1976), action could be considered to have been initiated if the officer had made a reference to the IAC under that provision though the IAC might apply his mind and issue a further notice to the assessee only long thereafter. But some definite step by way of initiation of penalty proceedings should be taken by the officer before the assessment proceedings come to an end.
It would be evident from the above that the Delhi High Court has held explicit limitation on account of necessary intentment arising out of the fact that the period of limitatiori prescribed started running from the “end of the financial year in which the proceedings initiated are completed”. It was in this context that the High Court held that by necessary implication the statute has also provided that the action for imposition of penalty must be initiated in the course of the assessment proceedings. This context has altogether changed with the drastic amendment made in Sub-section (1) of Section 275. It was not disputed by the learned counsel for the assessee that in the case before us it is the latter part of Clause (c) of Sub-section (1) of Section 275 which is attracted for the purpose of limitation. The prescribed period of limitation of 6 months in the present case commences from the end of the month in which action for imposition of penalty is initiated. Thus, the distinction between the law as operative in the case before us and the law as applicable to the case before the Delhi High Court is very material and has to be taken note of. Whereas in the case before the Delhi High Court, the period of limitation commenced from the end of the financial year in which the proceedings initiated were completed, in the case before us, the prescribed period of 6 months is to commence from the end of the month in which the penalty proceedings are initiated. As far as the decision of the Ahmedabad Bench of the Tribunal is concerned, there again the case before it pertained to the assessment years 1986-87 and 1987-88, i.e., before the amendment of Section 275(1). It was in the context of the old law as then prevailing that a view was taken that the penalty proceedings can be initiated only during the course of assessment proceedings and not thereafter. One of the decisions which persuaded the Ahmedabad Bench of the Tribunal to accept this contention was the decision of the Delhi High Court in Rajinder Kumar Somani’s case (supra). At this stage, it would be necessary also to refer to the argument of the learned senior departmental representative to the effect that the changed position of law, more particularly that contained in Section 275 does not preclude the revenue authorities from initiating penalty proceedings even after completion of assessment proceedings or independently of the assessment proceedings. In this connection, the learned departmental representative referred, inter alia, to the following provisions of the Income-tax Act, viz Sections 271 A, 271B, 271C, 271D, 271E, 272A, Clause (1) Sub-clause (a), Clause (1) Sub-clause (c), Clause (1) Sub-clause (d), Sections 272AA, 272BB, 272A Sub-section (2). The learned departmental representative submitted that recent amendments in the Act have introduced a large number of penalty provisions which arise out independently and not out of assessment proceedings. The period of limitation even for these penalties has been provided in Section 275. It was, therefore, necessary that the provisions of Section 275 should be amended correspondingly. It is for this reason that Section 275 has undergone material changes including the changes with regard to the commencement of period of limitation. In the changed context of Section 275 therefore, such implicit bar as has been enunciated by the Delhi High Court in Rajinder Kumar Somani’s case {supra) can no longer operate. We have given our anxious thought to this aspect of the matter and find that the argument of the learned senior departmental representative is not without force. The principle of implicit bar was upheld by the Delhi High Court and followed by the Ahmedabad Bench of the Tribunal mainly on the basis that the period of limitation prescribed for the relevant penalty proceedings commenced from the end of the financial year in which the assessment proceedings were completed. On account of change in Section 275, this position no longer obtains and, therefore, the view accepted by the Hon’ble Delhi High Court cannot operate in the case before us. Since the period of limitation prescribed in the present case commences from the end of the month in which action for imposition of penalty is initiated, reference to the assessment proceedings is totally unnecessary and, therefore, there cannot be any implicit bar to the initiation of penalty proceedings after the completion of the assessment proceedings or independently of then.
10. The other argument of the learned counsel related to the reasonableness of the cause for failure to comply with the provisions of Section 269SS and the application of Section 273B. It was contended both before the learned CIT(A) as well as before us that the penalty order is non-speaking one which shows that there was no application of mind by the Deputy Commissioner who imposed the penalty and further there was reasonable cause for failure to comply with the provisions of Section 269SS. From a reading of the penalty order and the impugned order of the learned CIT(A), we find that the learned CIT(A) has not only taken into consideration, but also discussed item-wise the offending cash transactions, the availability of cash resources and cash needs of the assessee on the dates of those transactions. He has made a thorough discussion of the facts and circumstances concerning these factual aspects of the case and has come to a considered judgment to the effect that there was no reasonable cause for the failure to comply with Section 269SS. After a careful consideration of all the relevant facts and circumstances and thorough study of the impugned order, we see no reason for differing with the learned CIT(A) on this question of fact and, therefore, endorse his finding for the reasons stated by him in his impugned order. As regards the non-application of mind by the Dy. Commissioner, here-again, we find that there is no substance in the argument of the learned counsel. The learned CIT(A) has observed that hearings in the penalty proceedings were conducted on more than one occasion. The order was not passed in hurry or without taking into consideration the circumstances explained. In para 3 of the penalty order, the Dy. Commissioner in her own language had dealt with the explanation of the assessee and had considered the circumstances as not reasonable so as to warrant the borrowings in cash. During the course of penalty proceedings, the Dy. Commissioner had further asked for the statement regarding the availability of cash and the cash needs on the dates on which the offending cash borrowings were made. The learned CIT(A) was, therefore, justified in holding that there was no non-application of mind by the Dy. Commissioner so as to vitiate the penalty order passed by her.
11. In view of the discussion above, we hold that there is no infirmity -legal or otherwise – in the impugned order of the learned CIT(A) so as to warrant our interference. This appeal is, thus, without any force and is dismissed.