2002 (10) TMI 81 - HC - Income Tax

Penalty - Concealment Of Income - penal action was initiated under section 271(1)(c) - Extension Of Period Of Limitation - it is clear that the Department has committed an error in levying penalty which is clearly barred by limitation by four days. It is also clear from the above discussion that the Explanation to section 275 cannot be invoked by the Department unilaterally to compute the period of limitation on its own without there being any request for rehearing by any assessee.

Summary

Issues:
1. Correctness of penalty order under section 271(1)(c) of the Income-tax Act, 1961.
2. Application of Explanation to section 275 of the Act for computing the period of limitation without a request for rehearing by the assessee.

Analysis:
1. The petitioner challenged the penalty order passed by the Income-tax Officer under section 271(1)(c) of the Income-tax Act, 1961. The petitioner, an employee deriving income mainly from salary, sold a residential site and the income was assessed for the year 1995-96. Subsequently, penal action was initiated under section 271(1)(c) of the Act. The petitioner contended that the penalty order was barred by time as it was imposed beyond six months from the end of the relevant financial year. The Department attempted to support the penalty order by relying on the provisions of section 129 of the Act and the Explanation to section 275. However, the petitioner argued that the penalty was imposed beyond the prescribed time limit, leading to a delay of four days. The court held that the penalty order was clearly barred by limitation and needed to be set aside.

2. The petitioner also raised the question of whether the Explanation to section 275 could be used by the Department to save the limitation period when the assessee had not requested a rehearing under the proviso to section 129. The Explanation to section 275 allows for the exclusion of certain periods in computing the limitation period. The Department had issued notices under section 129 without any request from the petitioner for rehearing. The court noted that the Department could not unilaterally rely on the Explanation to section 275 to compute the period of limitation without a request for rehearing by the assessee. As there was no request for rehearing made by the petitioner, the Department's attempt to levy penalty beyond the prescribed time limit was deemed erroneous. The court concluded that the penalty order was misconceived and barred by limitation, thereby quashing the order.

In conclusion, the court allowed the writ petition, quashed the penalty order, and ruled that the Explanation to section 275 could not be invoked by the Department unilaterally without a request for rehearing by the assessee.