2016 (3) TMI 366 - AT - Income Tax

Penalty u/s 271(1)(c) - time limit to levy penalty - Held that - The penalty order under section 271(1)(c) of the Act ought to be passed before the expiry of the financial year in which the proceedings, in the course of which, action for imposition of penalty has been initiated are completed, or six months from the end of the month in which order of the CIT(A) or the Tribunal is received by the Chief Commissioner or the CIT. In other words, in the present case, the proceedings given rise to the penalty were completed on 15.7.1997 when the CIT(A) has passed the order. This order has been given effect on 29.9.1999. Meaning thereby, the order must have been received by the authorities. The time limit to pass the penalty order in this case was before 31.3.2000, because the date of 29.9.1999 falls within the financial year started from 1.4.1999 and ends on 31.3.2000. Other time limit could be six months from the date of receipt of the order, that has also expired. Even for abundant precaution, we observe that in case on re-verification at the end of the A O it emerges out that the penalty is within the limitation and there is some communication gap between mentioning of these dates, then, the Revenue will be at liberty to approach the Tribunal to recall this order. Such an application should be filed within the time limit available under the Income Tax Act. With the above remarks, the appeal of the assessee is allowed and penalty is deleted. - Decided in favour of assessee

Summary

Issues:
1. Confirmation of penalty under section 271(1)(c) of the Income Tax Act.
2. Time-barred penalty order.

Analysis:
1. The primary issue in this case is the confirmation of the penalty amounting to Rs. 40,56,375 imposed under section 271(1)(c) of the Income Tax Act. The assessee had initially shown NIL income in the return but later revised it, claiming deductions and exemptions. However, during assessment, it was discovered that certain claims, including a significant capital expenditure on scientific research, were found to be bogus and fraudulent. The Assessing Officer (AO) imposed the penalty, which was upheld by the CIT(A), leading the assessee to appeal to the ITAT. The ITAT, after considering the facts and legal provisions, found the assessee guilty of concealment of income and inaccurate particulars. Noting the limitations of penalty provisions and the purpose of penalizing taxpayers, the ITAT allowed the appeal and deleted the penalty.

2. The secondary issue raised by the assessee was the time-barred nature of the penalty order. The counsel argued that the penalty order should have been passed within the specified time frame as per section 275 of the Income Tax Act. The relevant dates of assessment, appeal, and penalty imposition were meticulously presented in a tabular form to support the contention. The ITAT examined the provisions of section 275, emphasizing the time limits for passing a penalty order. After a thorough review of the timeline and legal requirements, the ITAT concluded that the penalty order was indeed time-barred. The ITAT directed that if there were any discrepancies or communication gaps regarding the dates, the Revenue could seek redressal within the statutory time limits. Consequently, the ITAT allowed the appeal, thereby deleting the penalty imposed on the assessee.

In conclusion, the ITAT ruled in favor of the assessee on both issues, overturning the penalty under section 271(1)(c) and declaring the penalty order as time-barred. The judgment provides a detailed analysis of the facts, legal provisions, and timelines involved, ensuring a fair and just outcome in accordance with the Income Tax Act.