2016 (3) TMI 1362 - AT - Income Tax

Penalty u/s 271(1)(c) - penalty order barred by limitation - Bar of limitation for imposing penalties u/s 275 - HELD THAT - As decided in COSMO FILMS LTD. VERSUS ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 3 (1) , DELHI. 2011 (7) TMI 1355 - ITAT DELHI as per section 275(1A) of the Act, therefore, the limitation provided there-under concerns cases where the assessment order or revision is under appeal at the relevant stage and an order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty passed before the appellate order is received by the Department or order of revision is passed. In such a situation, an order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty may be passed on the basis of assessment as revised by giving effect to the appellate order or the revisional order. In the present case, no order either imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty stands passed. That being so, the provisions of section 275(1A) are not applicable. Penalty order is hit by the proviso to section 275(1)(a) of the Act. Going by the para-meters laid down therein in the said section, the penalty order is clearly beyond the limitation provided therein. - Decided against revenue.

Summary

Issues:
Appeal against deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961 for Asst. Year 1994-95.

Analysis:
The Revenue filed an appeal against the deletion of a penalty of Rs. 33,60,000 under section 271(1)(c) by the learned CIT(A) for the assessment year 1994-95. The Revenue contended that the penalty proceedings were initiated at the time of assessment completion and were rightly applied by the Assessing Officer. The brief facts of the case revealed that an addition to the income of the assessee was made, partially set aside in appeal, and a fresh assessment was conducted. Subsequently, penalty proceedings were initiated but not completed. The learned CIT(A) decided in favor of the assessee, leading to a series of appeals and orders by ITAT and the High Court. The Assessing Officer imposed the penalty after the High Court's decision, which was challenged by the assessee before the learned CIT(A) on the grounds of being time-barred.

The Revenue argued that the penalty proceedings were revived due to the High Court's order and invoked section 275(1A). However, the assessee contended that as the case pertained to the assessment year 1994-95, the provisions of section 275(1A) inserted in 2006 were not applicable at the relevant time. Citing legal precedents, the assessee emphasized that the penalty should be determined based on the law in force at the time of the alleged offense. The ITAT analyzed the timeline of events, noting that the penalty proceedings were initiated before the insertion of section 275(1A) and concluded that the provisions were not applicable to the case. Referring to the decision in a similar case, the ITAT held that the penalty order was time-barred under section 275(1)(a) and upheld the learned CIT(A)'s decision to delete the penalty.

The ITAT dismissed the Revenue's appeal, stating that the penalty order was beyond the limitation period provided under section 275(1)(a) and not covered by section 275(1A). By following the precedent set in a comparable case, the ITAT found no fault in the learned CIT(A)'s decision to delete the penalty. Consequently, the appeal filed by the Revenue was dismissed, affirming the deletion of the penalty under section 271(1)(c) for the assessment year 1994-95.