Joginder Pall, A.M.
1. By this order, we shall dispose of these three appeals filed by the Revenue against the three orders (all dt. 12th Feb., 1996) of CIT(A), Chandigarh, for the asst. yr. 1992-93. While the two appeals i.e., ITA Nos. 489 and 490 of 1996 relate to cancelling of penalties of Rs. 18,850 and Rs. 47,900 imposed by the AO under Sections 271D and 271E respectively, appeal in ITA No. 488 of 1996 relates to order under Section 154 of the IT Act.
2. The only issues raised in these appeals are that CIT(A) was not justified in cancelling the penalties of Rs. 18,850 and Rs. 47,900 imposed by the AO under Sections 271D and 271E, respectively, and also in allowing assessee’s appeal filed against the order passed by the AO under Section 154 of the IT Act, The facts of the case are that during the course of assessment proceedings, the AO noticed that the assessee had accepted cash deposits/loans of Rs. 18,850 in violation of provisions of Section 269SS and also repaid such deposits aggregating to Rs. 47,900 in violation of provisions of Section 269T. He, therefore, initiated penalty proceedings under Sections 271D and 271E at the time of completing the assessment on 30th Dec., 1994. Since the penalties for such defaults were imposable by the Dy. CIT (now Jt. CIT), the AO referred the case to the Dy. CIT vide her letter dt. 30th Dec., 1994. The Dy. CIT initiated penalty proceedings by issue of show-cause notices under Sections 271D and 271E on 13th Jan., 1995. In reply to the show-cause notices, the assessee submitted that it had received/repaid certain amounts in cash from/to M/s Vishal Lime Industries, a sister concern of the assessee in which partners of both the firms were related to each other. The assessee was under a bona fide belief that provisions of Sections 269SS and 269T were attracted only if single receipt or repayment exceeded Rs. 20,000. In this case, each receipt and payment was far below Rs. 20,000 and, therefore, the assessee was under the bona fide belief that such provisions were not attracted. However, the Dy. CIT was not satisfied with such explanation of the assessee. He held the assessee in default and accordingly imposed penalties of Rs. 18,850 and Rs. 47,900 under Sections 271D and 271E, respectively. Subsequently, it appears that the assessee moved an application under Section 154 pointing out certain mistake in the calculation of penalty under Section 271E. Such application was, however, rejected by the AO.
3. Being aggrieved, the assessee filed appeals before the first appellate authority challenging the impugned penalties and order under Section 154. It was submitted before the CIT(A) that penalties imposed by the AO under Sections 271D and 271E were barred by time. It was submitted that the penalty proceedings were initiated by the AO at the time of completing assessment under Section 143(3) on 30th Dec., 1994. Therefore, the orders for imposing penalties must have been passed within a period of six months from the end of the month in which penalty proceedings were initiated i.e., on or before 30th June, 1995. Since the orders for imposing the penalties were passed on 25th July, 1995, the same had become barred by limitation. Accepting the contention of the assessee, CIT(A) cancelled the impugned penalties on the ground that the orders for imposing the same were barred by limitation. The findings recorded in paras 2.3 and 2.4 of CIT(A)’s order are as under :
“I have carefully considered the submissions of the appellant’s counsel and also made reference to the assessment records. It is observed that the assessment in this case was framed vide order dt. 30th Dec., 1994, passed under Section 143(3) of the IT Act. In the said order, there is direction to issue penalty notices under Sections 271D and 271E of the IT Act. Thus, there is merit in the submission of the leaned counsel that penalty proceedings were initiated vide notices dt. 30th Dec., 1994. Penalties have been levied vide orders dt. 25th July, 1995, whereas period of limitation expired on 30th June, 1995. Thus, contention of the learned counsel that penalties have been imposed beyond the period of limitation is tenable. In this view of the matter, the penalties levied are cancelled having been imposed beyond the time-limit prescribed under Section 275(1)(c) of the IT Act. This ground of appeal is allowed.
Since the levy of penalties have been held to be not justified and have been called, it is not considered necessary to adjudicate in respect of other grounds of appeal and the appeals are treated as allowed in view of the finding given in respect of ground No. 6 above.”
The CIT(A) further held that since penalties imposed have been cancelled, there is no need for adjudicating the appeal relating to the order under Section 154. Aggrieved, the Revenue has preferred these appeals before us.
4. Learned Departmental Representative heavily relied on the orders of the AO in imposing penalties. He submitted that as per provisions of Sections 271D and 271E, powers to impose penalties are vested only with the Jt. CIT (then Dy. CIT). He submitted that the AO had no authority to initiate and impose penalties. He also drew our attention to the respective penalty orders passed by the Dy. CIT, Range, Ambala, where he has specifically referred that these proceedings were initiated by his predecessor after recording his satisfaction and notices were duly issued on 13th Jan., 1995. He submitted that the authority competent to impose penalties had issued notices on 13th Jan., 1995 and this date should be reckoned for the purpose of initiation of penalty proceedings. He submitted that the AO had no authority to initiate and to impose penalties under Sections 271D and 271E and, therefore, her action to initiate such proceedings by recording her satisfaction in the assessment order was illegal and bad in law. He submitted that the orders under Sections 27ID and 27IE passed on 25th July, 1995, were within time-limit prescribed under Section 275(1)(c) of the IT Act and, therefore, the CIT(A) was not justified in cancelling the impugned penalties.
5. When the case was called on the board, neither anybody appeared on behalf of the assessee nor sought any adjournment. In fact, notice sent by registered post was returned by the postal authorities with the report that “firm was found closed during various visits”. Therefore, notice cannot be served at the address given in the memo of appeals. Accordingly, we proceed to decide these appeals on merit after hearing the learned Departmental Representative.
6. We have heard learned Departmental Representative and carefully considered his submissions, examined the facts, evidence and material placed on record. From the facts detailed above, it is obvious that the orders for imposing penalties under Sections 271D and 271E were passed by the Dy. CIT, Ambala Range, on 25th July, 1995. He also mentioned that proceedings were initiated by his predecessor on 13th Jan., 1995, after receiving reference from the AO on 30th Dec., 1994, i.e., the date when the assessment order was passed. The facts mentioned above also show that at the time of completing assessment under Section 143(3), the AO had mentioned in the assessment order that penalty notices under Sections 271D and 271E were separately issued. Provisions of Sections 271D and 271E are identical and, therefore, for this purpose, it would be appropriate to reproduce hereunder the provisions of Section 271D :
“(1) If a person takes or accepts any loan or deposit in contravention of the provisions of Section 269SS, he shall be liable to pay by way of penalty a sum equal to the amount of the loan or deposit so taken or accepted.
(2) Any penalty imposable under Sub-section (1) shall be imposed by the (Jt.) CIT.”
The wording of Section 271E is in para materia to that of Section 271D. A bare reading of the aforesaid sections show that power to impose penalty under these sections is vested with the Jt. CIT (earlier Dy. CIT). Section 275(1)(c) is applicable to the facts of the present cases and the same prescribes time-limit for completing the penalty proceedings i.e., after expiry of financial year in which 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. Now the question which requires to be considered by this Bench is whether the date of initiation of penalty proceedings should be reckoned as 30th Dec., 1994, i.e., the date when the assessment for the assessment year was completed and the AO had issued directions for initiation of such proceedings or the date when the Dy. CIT, Ambala Range, i.e., authority competent to impose penalty under this section, had initiated proceedings by issue of notices on 13th Jan., 1995. If the date of initiation of penalty proceedings is reckoned as 13th Jan., 1995, the orders passed under 271D and 271E on 25th July, 1995 would be within time, but if the date is reckoned as 30th Dec., 1994, i.e., the date on which the AO issued notices, penalty proceedings would be barred by limitation under Section 275(1)(c). Unlike the provisions of Sections 271(1)(a), (b) and (c), Sections 271D and 271E do not provide that such proceedings are to be initiated by the AO or the CIT(A) in the course of any proceedings under this Act. Thus, for the purpose of Sections 271(1)(a), (b) and (c), it is the satisfaction of the AO which is prerequisite for initiating penalty proceedings, even though the AO’may not be able to impose such penalty without the approval of the Jt. CIT (then Dy. CIT) in view of the restrictions imposed under Sub-section (2) of Section 274 of the IT Act, but there is no such requirement so far as initiation of penalty proceedings under Sections 271D and 271E are concerned. Further, Sections 271D and 271E clearly provide that penalties under these sections shall be imposed by the Jt. CIT (then Dy. CIT) and it is not a case where only approval of the Jt. CIT is required. This shows that penalty proceedings can be initiated by the authority competent to impose such penalty on a reference received from the AO.
Since the AO has no authority to impose penalty under Sections 271D and 271E, he cannot initiate penalty proceedings on his/her own as it is not his/her satisfaction which matters, rather it is the satisfaction of the authority who is competent to impose such penalties. It may further be mentioned that quantum of penalties to be imposed under Sections 271D and 271E is not dependent upon the quantum of income determined by the AO. The same depends upon the amount of payments received/made in violation of provisions of Sections 269SS and 269T respectively.
7. Now the question is as to when the authority competent to impose penalty under these sections can assume jurisdiction for the purpose of levy of such penalty. It has been held by Full Bench of Kerala High Court in the case of CIT v. S.M. Syeed Mohd. (1995) 216 ITR 331 (Ker)(FB) that an authority can take cognizance of conferment of jurisdiction or power only when it is brought to its notice or when it is consciously made known to it. Without taking cognizance of conferment of power, no authority can be said to have assumed jurisdiction to do an act and conferment of jurisdiction is prerequisite for the exercise of the power. In this case, the date on which the Dy. CIT recorded his satisfaction and issued notices calling upon the assessee to show-cause why penalties under Sections 271D and 271E should not be imposed, would be the date when the proceedings can be said to have been initiated. The AO who had no authority to levy such penalties, was not competent to initiate such proceedings at the time of completing the assessment. The AO had rightly referred the case to Dy. CIT on the same date i.e. 30th Dec., 1994, for consideration and levy of penalties under Sections 271D and 271E.
8. It may further be mentioned that Sub-section (2) of Section 274 imposes certain restrictions on the powers of the AO and the Asstt. CIT in imposing penalties under Chapter XXI and such authorities can impose penalties only with the prior approval of the Jt. CIT. The monetary limit prescribed for the ITO and the Asstt. CIT is Rs. 10,000 and Rs. 25,000, respectively, but under Sections 271D and 271E, these authorities have not been given powers even to levy penalties within monetary limits mentioned therein. It is, therefore, clear that intention of the legislature is not to confer any power on these authorities and accordingly, such power is conferred upon the Jt. CIT (then Dy. CIT).
9. The issue regarding initiation of penalty proceedings can also be viewed from another angle. Sub-section (1) of Section 274 imposes a condition that no order imposing a penalty shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard. Section 275(1)(c) imposes a time-limit of passing an order for penalty within a period of six months from the end of the month in which penalty proceedings were initiated. Now if we reckon the limitation from the date of initiation of such proceedings by the AO and the AO delays referring the case to Jt. CIT, this would hardly leave any time with the Jt. CIT to allow an effective opportunity to the assessee before imposing the penalty. Therefore, it is natural that the date of initiation of penalty proceedings should be reckoned from the date when the authority competent to levy such penalty issues show-cause notice.
10. In the light of these facts and circumstances of the case, we are of the view that the date of initiation of penalty proceedings would be 13th Jan., 1995, i.e., the date when the authority competent to impose such penalties had issued show-cause notices. Therefore, the orders passed by the Dy. CIT, Ambala for imposing the impugned penalties are not barred by limitation. The CIT(A) has not decided these appeals on merits. We, therefore, consider it fair and appropriate to set aside all the three orders of CIT(A) and restore the issues to his/her file with directions to redecide these appeals on merits after allowing reasonable opportunity to both the parties. We order accordingly and respective grounds of appeals are treated as partly allowed for statistical purpose.
11. In the result, all the three appeals are allowed for statistical purpose.