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2016 (6) TMI 428 - AT - Income TaxPenalty U/s 271(1)(c) - assessee admitted additional income on account of undisclosed expenditure/investment towards purchase of land in survey U/s 133A - Held that - As per Section 275(1)(a) of the Act, the penalty order ought to have been passed on or before 31/3/2012 i.e. within one year from the end of the financial year in which the ld CIT(A) s order was received by the department. However, penalty order passed on 27/09/2013 by the ld Assessing Officer, therefore, penalty order passed is barred by limitation. We further find that the penalty proceedings initiated in original assessment has been dropped by the ld Assessing Officer vide D&CR No. 87/135 dated 27/3/2012. When there is no addition made in set aside proceedings, no penalty can be imposed on ₹ 4,57,72,496/-. In set aside assessment order, the ld Assessing Officer has not specified at the time of initiation of penalty proceedings whether penalty is initiated for the inaccurate particulars of income or concealment of income. The case laws relied by the ld AR i.e. CIT Vs Manjunatha Cotton & Ginning Factory & Ors. (2013 (7) TMI 620 - KARNATAKA HIGH COURT ) is squarely applicable - Decided in favour of assessee.
Issues Involved:
1. Deletion of penalty under Section 271(1)(c) of the Income Tax Act, 1961. 2. Determination of limitation period for passing the penalty order. Issue-wise Detailed Analysis: 1. Deletion of Penalty under Section 271(1)(c): The revenue's appeal contested the deletion of the penalty amounting to ?1,54,07,020/- imposed under Section 271(1)(c) for furnishing inaccurate particulars and concealment of income. The assessee initially filed a return declaring ?14,73,790/- but revised it to ?5,11,69,560/- post-survey operations that revealed undisclosed investments. The Assessing Officer (AO) initiated penalty proceedings based on these discrepancies. However, the CIT(A) deleted the addition of ?39,23,278/- while the remaining addition was not challenged by the assessee. The ITAT set aside the issue to the AO, who later accepted the original assessed income without further additions and issued a notice under Section 274 read with Section 271(1)(c). The AO imposed the penalty, but the CIT(A) deleted it, arguing that the penalty proceedings were barred by limitation and that the AO did not specify whether the penalty was for concealment or inaccurate particulars. 2. Determination of Limitation Period: The CIT(A) determined that the penalty order was barred by limitation as per Section 275(1)(a) of the Income Tax Act. The AO initially dropped the penalty proceedings after the ITAT set aside the assessment order. However, the AO later imposed the penalty on 27/09/2013, which was beyond the permissible period of one year from the end of the financial year in which the CIT(A)’s order was received, i.e., 31/03/2012. The CIT(A) and subsequently the ITAT upheld that the penalty order was invalid as it was passed beyond the limitation period. Detailed Judgment Analysis: Issue 1: Deletion of Penalty under Section 271(1)(c): The revenue's appeal focused on the deletion of the penalty imposed for inaccurate particulars and concealment of income. The AO had initially imposed the penalty based on a survey that revealed undisclosed investments. The CIT(A) deleted the penalty, noting that the AO did not specify the grounds for the penalty in the notice issued under Section 274 read with Section 271(1)(c). The CIT(A) also observed that the penalty proceedings were initiated without a clear indication of whether it was for concealment of income or furnishing inaccurate particulars, which is a requirement as per the decision in CIT vs. Manjunatha Cotton & Ginning Factory & Ors (359 ITR 565). The ITAT upheld the CIT(A)'s decision, emphasizing that the penalty proceedings were not properly initiated and thus invalid. Issue 2: Determination of Limitation Period: The CIT(A) determined that the penalty order was barred by the limitation period specified in Section 275(1)(a). The AO initially dropped the penalty proceedings on 27/03/2012, following the ITAT's order to set aside the assessment. The CIT(A) argued that the penalty order should have been passed within one year from the end of the financial year in which the CIT(A)'s order was received, i.e., by 31/03/2012. Since the penalty order was passed on 27/09/2013, it was beyond the permissible period, rendering it invalid. The ITAT upheld this view, confirming that the penalty order was barred by limitation and thus invalid. Conclusion: The ITAT dismissed the revenue's appeal, upholding the CIT(A)'s decision to delete the penalty under Section 271(1)(c) and confirming that the penalty order was barred by the limitation period as per Section 275(1)(a). The judgment emphasized the necessity for clear initiation of penalty proceedings and adherence to the statutory limitation period for passing penalty orders.
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