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2016 (1) TMI 222 - AT - Income TaxPenalty u/ss 271D and 271E - whether penalty orders alleging that the same are barred by limitation as prescribed u/s 275(1)(c)? - Held that - The limitation as prescribed u/s 271(1)(c) has to be reckoned from the date of first notice issued by the AO, though not competent to impose penalty on 31.12.2009 and thus penalty order has to be passed on or before 30.6.2010 and penalty order passed after more than six months on 4.1.2011 u/s 271D and 271E of the Act are clearly hit by the limitation period as prescribed u/s 275(1)(c) of the Act and both the penalty orders cannot be held as sustainable being passed beyond the prescribed limitation by the provisions of the Act and hence we demolish and quash the same. - Decided in favour of assessee.
Issues Involved:
1. Validity of penalty orders under Sections 271D and 271E of the Income-tax Act, 1961. 2. Condonation of delay in filing cross objections. 3. Admission of additional grounds in cross objections. 4. Limitation period for passing penalty orders under Section 275(1)(c) of the Income-tax Act, 1961. Detailed Analysis: 1. Validity of Penalty Orders under Sections 271D and 271E: The Revenue filed appeals against the order of the CIT(A) which canceled the penalties levied under Sections 271D and 271E. The assessee contended that the penalty orders were barred by limitation as prescribed under Section 275(1)(c) of the Act. The Tribunal noted that the first notice for initiation of penalty proceedings was issued by the AO on 31.12.2009, and the penalty orders were passed on 4.1.2011, which was beyond the six-month limitation period from the date of the first notice. Therefore, the penalty orders were held to be barred by limitation and quashed. 2. Condonation of Delay in Filing Cross Objections: The assessee filed cross objections challenging the validity of the penalty orders, alleging they were barred by limitation. The cross objections were delayed by 1297 and 1244 days. The Tribunal considered the reasons for the delay, which included incorrect advice by the previous counsel. The Tribunal found the reasons to be bona fide and condoned the delay, allowing the cross objections to be admitted for adjudication. 3. Admission of Additional Grounds in Cross Objections: The assessee sought to raise an additional ground that the penalty orders were barred by limitation. The Tribunal, following the Supreme Court's decision in National Thermal Power Company Ltd and the ITAT Delhi Bench's decision in DCIT Vs. Silver Line, admitted the additional ground for adjudication. The Tribunal emphasized that the issue was purely legal and went to the root of the matter, requiring no new facts to be invoked. 4. Limitation Period for Passing Penalty Orders under Section 275(1)(c): The Tribunal analyzed the limitation period for passing penalty orders under Section 275(1)(c). It referred to the decisions of the Rajasthan High Court in CIT Vs. Jitender Singh Rathore and the ITAT Delhi in Ashwani Kumar Vs. ITO, which held that the limitation period should be calculated from the date of the first notice issued for initiating penalty proceedings. In this case, the first notice was issued on 31.12.2009, and the penalty orders should have been passed by 30.6.2010. Since the penalty orders were passed on 4.1.2011, they were beyond the prescribed limitation period and were quashed. Conclusion: The Tribunal quashed the penalty orders under Sections 271D and 271E as they were barred by limitation. The delay in filing cross objections was condoned, and the additional ground raised by the assessee was admitted for adjudication. The appeals of the Revenue were dismissed as infructuous, and the cross objections of the assessee were allowed.
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