2016 (5) TMI 22 - AT - Income Tax

Rectification of mistake - rectification of the order passed u/s 201(1) and 201(1A) seeked - Held that - what is required for adjudication is only the subsequent appeal of the assessee which is filed by him against the order u/s 154 dated 30th April, 2015. The order u/s 154 dated 30th March, 2013 stood modified by the subsequent order passed u/s 154 dated 30th April, 2015. Therefore, in our opinion, no separate adjudication is required with reference to the order u/s 154 dated 30th March, 2013. To that extent, the present appeals filed by the assessee which have originated from the order u/s 154 dated 30th March, 2013 have been rendered infructuous. However, we find some merit in the assessee s contention that the observation of learned CIT(A) in the order dated 8th December, 2014 wherein he has upheld the order u/s 154 dated 30th March, 2013 may cause prejudice to the case of the assessee while disposing of its appeal against the order u/s 154 dated 30th April, 2015. Therefore, we hold that learned CIT(A) while deciding the appeal against the order u/s 154 dated 30th April, 2015 would not be influenced by any observation or finding given in his order dated 8th December, 2014 but he will decide the appeal afresh uninfluenced by any observation/finding in his order dated 8th December, 2014 Levy of penalty imposed u/s 271C - period of limitation - Held that - As per clause (c) of Section 275(1), the penalty proceedings were initiated in the course of order u/s 201(1) and 201(1A) dated 27th June, 2008 and the relevant financial year would expire on 31st March, 2009. Six months from the end of the month in which penalty proceedings were initiated would expire on 31st December, 2008. Therefore, the competent authority could have imposed the penalty before the expiry of 31st March, 2009. However, the penalty order has been passed on 2nd March, 2010 which is clearly barred by limitation. We, therefore, respectfully following the decision of Hon ble Jurisdictional High Court in the case of JKD Capital & Finlease Ltd. (2015 (10) TMI 1281 - DELHI HIGH COURT ) hold that the penalty order passed u/s 271C was barred by limitation

Issues Involved:
1. Rectification of orders under Section 154 of the Income-tax Act, 1961.
2. Levy of penalty under Section 271C of the Income-tax Act, 1961.
3. Limitation period for imposing penalties under Section 271C.

Detailed Analysis:

1. Rectification of Orders under Section 154:

The appeals by the assessee for the assessment years 2006-07, 2007-08, and 2008-09 were directed against the order of the CIT(A), Ghaziabad, dated 8th December 2014. These appeals originated from the order under Section 154 dated 30th March 2013, where the Assessing Officer rejected the assessee's application for rectification of the order passed under Sections 201(1) and 201(1A) of the Income-tax Act, 1961.

During the hearing, the assessee's counsel pointed out that the Assessing Officer subsequently rectified the order under Section 201(1)/201(1A) via an order dated 30th April 2015 under Section 154, partially accepting the assessee's contentions. The assessee appealed against this subsequent order. The counsel suggested that the CIT(A)'s order upholding the rejection of the rectification application should be set aside and the matter restored to the CIT(A) for adjudication along with the appeal against the order dated 30th April 2015.

The DR argued that the appeals had become infructuous since the subsequent order partially accepted the assessee's contentions, and the only adjudication required was for the appeal against the order dated 30th April 2015. The earlier appeal did not survive for adjudication.

The Tribunal noted that the sequence of events led to the conclusion that no separate adjudication was required for the order dated 30th March 2013, as it had been modified by the subsequent order dated 30th April 2015. However, the Tribunal acknowledged that the CIT(A)'s observations in the order dated 8th December 2014 might prejudice the assessee's case. Therefore, the Tribunal directed that the CIT(A) should decide the appeal against the order dated 30th April 2015 afresh, uninfluenced by any observations in the order dated 8th December 2014. Consequently, the appeals were dismissed as infructuous.

2. Levy of Penalty under Section 271C:

The assessee appealed against the levy of penalties under Section 271C for the assessment years 2006-07, 2007-08, and 2008-09. The penalties were levied as follows:
- ?6,63,102 for 2006-07
- ?3,16,58,404 for 2007-08
- ?12,33,848 for 2008-09

The penalties were modified by the Assessing Officer in view of the order under Section 154, resulting in reduced amounts:
- ?2,99,016 for 2006-07
- ?94,49,969 for 2007-08
- ?35,172 for 2008-09

The assessee contended that the penalty orders were barred by limitation under Section 275(1)(c). The penalty proceedings were initiated on 20th June 2008, but the penalty orders were passed on 2nd March 2010, beyond the prescribed limitation period.

3. Limitation Period for Imposing Penalties under Section 271C:

The Tribunal considered the relevant provisions of Section 275, which stipulate the limitation period for imposing penalties. As per Section 275(1)(c), the penalty order cannot be passed after the expiry of the financial year in which the proceedings were completed or six months from the end of the month in which the action for imposition of penalty was initiated, whichever is later.

The Tribunal noted that the penalty proceedings were initiated by the Assessing Officer on 27th June 2008. Therefore, the penalty order should have been passed before 31st March 2009. However, the penalty order was passed on 2nd March 2010, which was clearly barred by limitation.

The Tribunal referred to the decisions in CIT Vs. Dinesh Jain and Pr. Commissioner of Income Tax-5 Vs. JKD Capital & Finlease Ltd., which held that the initiation of penalty proceedings by the Assessing Officer is the relevant date for determining the limitation period. The Tribunal concluded that the penalty order was barred by limitation and quashed the same.

Conclusion:

The appeals related to the rectification of orders under Section 154 were dismissed as infructuous, with directions to the CIT(A) to adjudicate the subsequent appeal afresh. The appeals against the levy of penalties under Section 271C were allowed, and the penalty orders were quashed as they were barred by limitation.

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