Rajanikanth Saraf Vs the Joint Commissioner of Income Tax

THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE AS WRIT OF CERTIORARI OR ANY OTHER SUITABLE WRIT FOR QUASHING OF THE DIGITALLY SIGNED AND ELECTRONICALLY COMMUNICATED NOTICE UNDER SECTION 271DA OF THE INCOME TAX ACT, 1961 DATED 29/11/2024 ISSUED BY THE RESPONDENT NO. 1 FOR THE ASSESSMENT YEAR 2020-21 WHICH BEARS THE DIN VIZ., ITBA/PNL/S/271DA/202425/1070741632(1) AND ENCLOSED AS ANNEXURE-D AND ETC.

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THIS PETITION, COMING ON FOR PRELIMINARY HEARING 'B' GROUP, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

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HC-KAR

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CORAM: HON'BLE MR. JUSTICE M.NAGAPRASANNA

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ORAL ORDER

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The petitioner is before this Court seeking the following

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prayer:

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"a. Issue as writ of certiorari or any other suitable writ for quashing of the digitally signed and electronically communicated notice under section 271DA of the Income Tax Act, 1961 dated 29/11/2024 issued by the Respondent No.1 for the Assessment Year 2020-21 which bears the DIN viz., ITBA/PNL/S/271DA/2024-25/1070741632 (1) and enclosed as Annexure-D .

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b. Issue a writ of certiorari or any other suitable writ for quashing of the digitally signed and electronically communicated order u/s 271DA of the Income Tax Act, 1961 dated 29/03/2025 issued by the Respondent No.1 for the Assessment Year 202021 which bears the DIN viz., ITBA/PNL/S/271DA/2024-25/1075225967 (1) and enclosed as Annexure F1.

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c. Issue as writ of certiorari or any other suitable writ for quashing of the digitally signed and electronically communicated notice under section 156 of the Income Tax Act, 1961 dated 29/03/2025 issued by the Respondent No.1 for the Assessment Year 2020-21 which bears the DIN viz., ITBA/PNL/S/156/2024-25/1075223758 (1) and enclosed as Annexure F2.

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d. Grant such other reliefs as this Hon'ble Court deems fit in this matter including but not limited to COST OF THIS PETITION."

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Learned counsel appearing for the petitioner would

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submit that this Court need not deal deep into the matter as the issue stands answered in the judgment rendered by the Division Bench of this Court in the case of Principal Commissioner of Income-tax v. K.Umesh Shetty¹ , wherein

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the co-ordinate Bench held as under:

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"6. Having heard the learned counsel for the parties and having perused the Appeal papers as also the written submissions, we decline indulgence in the matter, for the following reasons:

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6.1 Both the sides in all fairness agreed that the period of limitation within which the proceedings u/s 271-C of the 1961 Act that are to be completed is covered u/s 275(1)(c) and therefore, the same is reproduced:

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“275.Bar of limitation for imposing penalties –

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(i) No order imposing a penalty under this Chapter shall be passed-…

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(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

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1 [2025] 170 taxmann.com 748 (Karnataka)

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which action for imposition of penalty is initiated, whichever period expires later.”

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Learned Panel Counsel submitted that the Law Maker’s intent is as clear as Gangetic Waters; the above provision prescribes a specific limitation period for accomplishing the penalty proceedings, once initiated; apparently, no limitation period is prescribed for initiation of such proceedings; penalty proceedings are initiated once the competent authority issues notice to the Assessee to show cause against the proposed levy of penalty; in the instant case, admittedly the initiation is unfettered by any statutorily imposed limitation and the order imposing penalty is well within the prescribed time and therefore, the ITAT grossly erred in relieving the Assessee from the penalty. Per contra, learned counsel appearing for the Assessee contended that: the intent of the Law Makers is to ensure that penalty proceedings cannot be taken up whimsically whenever the authorities want; when the ITO makes reference to the competent authority, that itself is the triggering point of initiation; reckoned from such reference, the order imposing penalty is time barred and therefore, unsustainable.

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6.2 Textually speaking, Parliament has prescribed the limitation period for imposing

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penalties by accomplishing penalty proceedings and obviously, no limitation period is fixed for the initiation of such proceedings. Linguistically, there is a certain difference between initiation of proceedings and accomplishment of proceedings. The former precedes the latter. This aspect of the matter is discussed by a Division Bench of Hon’ble Delhi High Court in COMMISSIONER OF INCOME TAX (TDS)-2, DELHI v. TURNER GENERAL ENTERTAINMENT NETWORKS INDIA PVT. LTD.² , The discussion at Paragraph Nos. 14 to 19 as under:

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“The expression initiated is not defined under the Act and must be construed in its normal sense.

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The word 'initiated' is a past tense of the word 'initiate'. The Shorter Oxford English Dictionary defines the word 'initiate' as under: "to begin, commence, enter upon, to introduce, set going, originate." In Webster's Third New International Dictionary, the word 'initiate' has, inter alia, been defined thus: "to begin or set going: make a beginning of: perform or facilitate the first actions, steps, or stages of:" The Words and Phrases

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2 2024 SCC OnLine Del 7760

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(Permanent Edition) defines 'initiate' to mean: "an introductory step or action, a first move; beginning; start, and to initiate as meaning - to commence." In Om Prakash Jaiswal v. D.K. Mittal & Anr.: (2000) 3 SCC 171, the Supreme Court had considered the meaning of the expression 'initiate any proceedings for contempt' by referring to the dictionary meaning of the said word. It is relevant to refer to paragraph 10 of the said decision, which is set out below: The expression-"initiate any proceedings for contempt" is not defined in the Act. Words and Phrases (Permanent Edition) defines "initiate" to mean - an introductory step or action, a first move; beginning; start, and "to initiate" as meaning to commence. Black's Law Dictionary (6th Edn.) defines "initiate" to mean commence; start; originate; introduce; inchoate. In section 20, the word "initiate" qualifies "any proceedings for contempt". It is not the initiation of just any proceedings; the proceedings initiated have to be proceedings for contempt." The expression 'action for imposition of penalty is initiated' must, thus, clearly refers to the date on which the first introductory step for such action is taken, it must necessarily mean the start of such

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action. It must mean the commencement of action for imposition of penalty. As noted above, the AO had found that it was the admitted case that the assessee had defaulted in deduction of TDS, which it was obliged to do. It had, accordingly, made a reference to the learned JCIT. This was obviously for the purposes of imposition of penalty. The reference, thus, clearly marked the first step for initiation of action for imposition of penalty. The Show Cause Notice issued subsequently was to provide the assessee an opportunity to show cause why penalty not be imposed.”

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6.3 Another Division Bench of Delhi High Court in CLIX CAPITAL SERVICES PVT. LTD., v. JOINT COMMISSIONER OF INCOME TAX³ , having scanned the text of Section 275(1)(c) of the 1961 Act has at Paragraph Nos.15, 16, 17 & 20 has observed as under:

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“It is, therefore, Mr Maratha's submission, that since the legislature has not provided a trigger point for completion of proceedings under Section 271C, the date of commencement can only be that date when the SCN is issued

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3 (2023) 459 ITR 470 (Delhi)

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under Section 274 of the Act…According to us, at the heart of the matter, is the interpretation that is required to be given to the provisions contained under Section 275(1)(c) of the Act…As would be evident, the aforementioned provision has two limbs. The first limb concerns fixation of period of limitation when penalty is sought to be imposed as fallout of action taken in another proceeding. On the other hand, the second limb of clause (c) of Sub-section (1) of Section 275 of the Act fixes the period of limitation, where initiation of action of imposition of penalty is taken on a stand-alone basis i.e., not as a consequence of action taken in another proceeding. [17.1] For the second limb, the legislature has provided a limitation of six months from the end of the month in which action for imposition of penalty is initiated. [17.2] It is apparent, that while a timeframe has been provided for the conclusion of penalty proceedings once initiated, there is no indication, as to when the period of six months ought to commence. In other words, can initiation of penalty proceeding be left to the whims and fancies of the revenue or it should be hitched to the dicta of "reasonable period" adopted by Courts in such situations, in the absence of a

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statutory provision?...However, we are inclined to agree with the submission made on behalf of the petitioner i.e., the assessee, and the reason for that is quite simple. If we were to accept the respondent/revenue's stand, then it could end up [as it has in this case] in a situation, where the revenue could decide the date when it could trigger a SCN to fulfil, as a mere formality, the principles of natural justice, which are engrafted under Section 274 of the Act. Section 274 of the Act, inter alia, mandates that no order imposing a penalty under the Chapter i.e., Chapter XXI shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard.”

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This decision adopts the doctrine of delay & laches as contradistinguished from any specific limitation period for initiating the Penalty Proceedings.

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6.4 After all, law of limitation, in whichever statutes it be enacted, is of repose & peace, vide DallasC.J. in TOLSON v. KAYE⁴ , It cannot be treated as a matter of technicality. It is a matter of State Policy that the potential or possibility of

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4 3 Br. & Bp.223

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dispute/litigation in matters like this should not be kept alive beyond a particular point of time. Halsburys Laws of England (Fifth Edition, Volume 68, Para 905) summarises the view of English courts on the State policy of limitation as follows:

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“The Courts have expressed three differing reasons supporting the existence of statutes of limitation, namely (1) that long dormant claims have more cruelty than justice to them, (2) that the defendant might have lost the evidence to disprove a stale claim, and (3) that persons with good causes of action who are able to enforce them should pursue with reasonable diligence.”

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The Law Commission of India in its 89^th report made in 1983 had suo moto examined the law of limitation. It concised its view as under:

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“1.5 The policies underlying the law of limitation are ultimately based on justice and convenience. An individual should not live under the threat of a possible action for an indeterminate period, since it would be unjust. Again the defendant should be saved the task of defending stale causes of action as it is often inconvenient. Further, vigilance in the pursuit of rightful cases should be encouraged

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so that these are the ethical or rational justifications for the law of limitation. All that has been said can be summarised by stating that the law of limitation rests upon three main foundations, justice, convenience, and the need to encourage diligence.”

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6.5 The Parliament in its accumulated wisdom has enacted a limitation period in the subject provision of the 1961 Act. What is conspicuous is the absence of any provision for condoning delay or extending the limitation period. In jurisdictions built on the bedrock of Separation of Powers, ordinarily, a judge is authorized to interpret an existing text of a statute, but not to create a new one. Power to alter a statutory text belongs to the domain of its author, not of its interpreter. It hardly needs to be stated that in their non-interpretive capacities, Courts do go beyond just interpreting the text of a statute. Justice Felix Frankfurter of U.S. Supreme Court in his article, ’Some Reflections on the Reading of Statutes’⁵ wrote:

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“Legislation has an aim; it seeks to obviate some mischief, to supply an inadequacy, to effect a change of policy, to formulate a plan of government. That aim, that policy, is not drawn

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5 47 Colum.L.Rev 527, 543 (1947)

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like nitrogen, out of the air; it is evinced in the language of the statute, as read in the light of other external manifestations of purpose. That is what the judge must seek and effectuate, and he ought not to be led off the trail by rests that have overtones of subjective design.”

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6.6. Acceding to the contention of the Revenue Parliament has prescribed the limitation period for accomplishing penalty proceedings and that no such period is prescribed for initiating them and therefore they can be initiated at any time, would defeat the very purpose of such a prescription. One cannot justifiably assume that the Parliament intended unfettered discretion to initiate such a proceeding at any point of time, ie., even after a decade or more.

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There is, in a system founded on the Rule of Law, nothing like absolute or unfettered discretion. The basic principles in this regard are explained by Prof. Sir William Wade⁶ as under:

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“The common theme of all the authorities so far mentioned is that the notion of absolute or unfettered discretion is rejected. Statutory power conferred for public purposes is conferred as it were upon trust, not

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6 Administrative Law (9th Edn.) in the chapter entitled “Abuse of discretion”

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absolutely—that is to say, it can validly be used only in the right and proper way which Parliament when conferring it is presumed to have intended.”

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We have already discussed the policy objective or the purpose of limitation enactments or provisions relating to limitation in other enactments. In matters like this, the doctrine of purposive interpretation in law has to be resorted to. In Cabell vs Markham (1945) 148 F2d 737 Learned Hand J explained the merits of purposive interpretation as under:

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“Of course it is true that the words used, even in their literal sense are the primary and ordinarily the most reliable, source of interpreting the meaning of any writing; be it a statute, a contract, or anything else. But it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary; but to remember that statutes always have some purpose or object to accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaning.”

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(emphasis supplied)

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Looked at in this background, the twin purposes that have to guide our interpretation are

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the following (i) the policy underlying the law of limitation rather than the black letter has to be implemented and (ii) unfettered discretion in the hands of Additional Commissioner on the timing of issuance of a show cause notice cannot be countenanced.

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6.7 In the facts of this case, these twin purposes can be achieved by treating the reference by the ITO to the Additional Commissioner as the triggering point or initiation of penalty proceedings. The ITO vide letter dated 16.11.2016 had admittedly made the reference. The Additional Commissioner of Income Tax issued the Show Cause Notice only on 10.11.2017 (nearly a year later) proposing the levy of penalty u/s 271D of the Act. The Penalty Order was made on 22.02.2018. If the reckoning point is 16.11.2016, it is clear that the proceedings were completed beyond the period of limitation, as rightly contended by the learned counsel appearing for the Assessee. Even otherwise , the concept of delay & latches would crop in; no explanation whatsoever has been offered by the Revenue for the laxity shown in belatedly issuing the show cause notice / proposition notice which they claim, amounted to initiation of penalty proceedings. This view has animated the reasoning of the impugned order of the Tribunal, may be a bit inarticulately."

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Learned counsel Sri M.Dilip appearing for the

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respondent would not dispute the position of law as is laid down by the Division Bench.

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In that light, the petition deserves to succeed and

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the orders impugned to be obliterated.

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For the aforesaid reasons, the following:

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ORDER

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i) Wirt petition is allowed .

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ii) The impugned notice dated 29.11.2024 at Annexure-D; impugned order dated 29.03.2025 at Annexure-F1 and impugned notice dated 29.03.2025 at Annexure-F2 issued by respondent No.1 are hereby quashed.

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Sd/(M.NAGAPRASANNA) JUDGE

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VM

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List No.: 1 Sl No.: 126

Rajanikanth Saraf v. the Joint Commissioner of Income Tax

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Rajanikanth Saraf v. the Joint Commissioner of Income Tax

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