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Issues involved: Interpretation of time limitation for penalty proceedings u/s 275(b) of the Income Tax Act.
Summary: The appellant firm, engaged in building construction, declared income on estimate basis as it did not maintain account books. The respondent ITO assessed the firm and initiated penalty proceedings, eventually imposing a penalty for not maintaining account books. Subsequently, a second notice was issued for failure to audit accounts u/s 271B of the Act. The appellant challenged the second notice, arguing it was time-barred u/s 275(b) of the IT Act, which states penalty proceedings must be concluded within two years from the end of the financial year in which the relevant proceedings were completed. The respondent contended that s. 275(b) does not prescribe a limitation for commencing penalty proceedings, only for concluding them. The AO initiated penalty proceedings in the assessment order for non-maintenance of account books, not for failure to audit accounts u/s 44AB. The second notice for audit failure was not time-barred as it was distinct from the initial penalty proceedings. The court held that the second notice was not covered by the initial penalty proceedings and was not time-barred u/s 275(b). The default under s. 271A and s. 271B are separate, and the second notice was validly issued for failure to audit accounts, not covered by the initial penalty order. In conclusion, the petition was dismissed as the second notice for failure to audit accounts was not time-barred under s. 275(b) and was a separate proceeding from the initial penalty order.
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