2015 (10) TMI 1281 - HC - Income Tax

Penalty u/s 271-E - violation of the provisions of Section 269T - CIT(A) quashed penalty proceedings - Held that - In the present case, at the level of the AO, the quantum proceedings was completed on 28th December 2007. Going by this date, the penalty order could not have been passed later than 31st March 2008. The second possible date is expiry of six months from the month in which the penalty proceedings were initiated. With the AO having initiated the penalty proceedings in December 2007, the last date by which the penalty order could have been passed is 30th June 2008. The later of the two dates is 30th June 2008. When the AO recommended the initiation of penalty proceedings the AO appeared to be conscious of the fact that he did not have the power to issue notice as far as the penalty proceedings under Section 271-E was concerned. He, therefore, referred the matter concerning penalty proceedings under Section 271-E to the Additional CIT. For some reason, the Additional CIT did not issue a show cause notice to the Assessee under Section 271-E (1) till 20th March 2012. There is no explanation whatsoever for the delay of nearly five years after the assessment order in the Additional CIT issuing notice under Section 271-E of the Act. The Additional CIT ought to have been conscious of the limitation under Section 275 (1) (c), i.e., that no order of penalty could have been passed under Section 271-E after the expiry of the financial year in which the quantum proceedings were completed or beyond six months after the month in which they were initiated, whichever was later. In a case where the proceedings stood initiated with the order passed by the AO, by delaying the issuance of the notice under Section 271-E beyond 30th June 2008, the Additional CIT defeated the very object of Section 275 (1) (c). - Decided in favour of assessee.

Summary

Issues:
1. Validity of penalty imposed under Section 271-E of the Income Tax Act, 1961.
2. Interpretation of limitation period under Section 275 (1) (c) for passing a penalty order.

Analysis:

Issue 1: Validity of penalty imposed under Section 271-E:
The case involved an appeal by the Revenue challenging the penalty imposed on the Assessee under Section 271-E of the Income Tax Act. The Additional Commissioner of Income Tax had confirmed the penalty of Rs. 17,90,000 for violation of provisions under Section 269T. The Assessee challenged this penalty before the CIT (A), who subsequently deleted the penalty citing limitation under Section 275 (1) (c) of the Act. The ITAT affirmed the CIT (A) decision, emphasizing that the date of the quantum proceedings did not impact the penalty order.

Issue 2: Interpretation of limitation period under Section 275 (1) (c):
The Revenue contended that the penalty order was within limitation as the notice was issued by the Additional CIT on 12th March 2012. However, the Court disagreed, citing Section 275 (1) (c) which provides two distinct periods of limitation for passing a penalty order - the end of the financial year in which the quantum proceedings were completed and six months from the initiation of penalty proceedings. In this case, the penalty order should have been passed by 30th June 2008, considering the completion of quantum proceedings in December 2007. The delay in issuing the notice by the Additional CIT beyond 30th June 2008 was deemed unjustified, and it was held that the penalty order was rightly deleted by the CIT (A) and upheld by the ITAT.

In conclusion, the Court dismissed the appeal, stating that no substantial question of law arose for determination. The judgment highlighted the importance of adhering to the statutory limitation periods for passing penalty orders under the Income Tax Act, ensuring procedural fairness and compliance with legal provisions.