2010 (10) TMI 1067 - AT - Income Tax

Summary

Issues involved: The judgment deals with penalty levied u/s 271(1)(c) of the Income-tax Act, relating to assessment year 2004-05, against three different assessees challenging the jurisdiction of the Assessing Officer to levy the penalty.

Issue 1 - Jurisdiction of Assessing Officer:
The appeals raised the issue of the penalty imposed u/s 271(1)(c) being time-barred in view of the proviso to section 275(1)(a) of the Act, which was considered fundamental to the matter at hand.

The CIT(A) dismissed the appeal of the assessee, upholding that the Assessing Officer had initiated the penalty proceedings within the prescribed time limit as per section 275 of the Act. The CIT(A) relied on the judgment of the Hon'ble Madras High Court in Rayala Corporation Pvt. Ltd. Vs. UOI (161 Taxman 127) to support the decision. The assessee appealed against this order.

Issue 2 - Time Limit for Imposing Penalty:
The time limit for imposing penalty under Chapter XXI is governed by section 275 of the Act. Subsection 1(a) specifies that the penalty order cannot be passed after the expiry of the financial year in which the proceedings for penalty were initiated or six months from the receipt of the order by the Chief Commissioner or Commissioner, whichever is later. The proviso to section 275(1)(a) states that if the CIT(A) passes an order after June 1, 2003, the penalty order must be passed within one year from the receipt of the CIT(A)'s order.

In this case, the order of the CIT(A) was passed on December 19, 2007, and received on December 20, 2007. The penalty proceedings were time-barred on March 31, 2009, as per the proviso to section 275(1)(a). The penalty order passed on September 25, 2009, was beyond the statutory limitation, leading to the decision to delete the penalty.

Separate Judgment:
The Tribunal directed the Assessing Officer to delete the penalty levied u/s 271(1)(c) of the Act in all three appeals (ITA Nos. 694 to 696/Chd/2010) as they were time-barred. The merits of the penalty levy were not addressed due to the time-bar issue.