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2016 (10) TMI 543 - AT - Income TaxLimitation period on levy of penalty u/s 271(1)(c) - Held that - Hon ble Madras High Court in the case of Rayala Corporation vs. UOI (2006 (4) TMI 96 - MADRAS High Court ) held that, in case where appeal against assessment order was pending before the Tribunal, then in such a situation, the limitation period on levy of penalty would be 6 months from the end of the month in which the order of the Tribunal received by the AO. The aforesaid decisions will allay the fear of the revenue regarding limitation issue for passing of the penalty order. Before us, the revenue has not brought any contrary decision to what has been laid down by the Hon ble Gujarat High Court. Thus, on the facts of the present case, we direct the AO to keep the penalty proceedings in abeyance concurrently for the period of 6 months or till the passing of the order by this Tribunal, whichever is earlier. On the next date of hearing both the parties shall ensure that, hearing of the appeal is taken on peremptorily basis.
Issues Involved:
1. Extension of stay of outstanding demand of ?144,14,48,284. 2. Stay of initiation of penalty proceedings under section 271(1)(c) by the AO. Issue-wise Detailed Analysis: 1. Extension of Stay of Outstanding Demand: The assessee sought an extension of the stay of an outstanding demand of ?144,14,48,284, which was initially stayed by the Tribunal for six months. The Tribunal noted that there was no default on the part of the assessee in conducting the case on the scheduled date of hearing. The circumstances that warranted the initial stay still persisted. Therefore, the Tribunal extended the stay of the outstanding demand for a further period of six months or until the passing of the order in the appeal, whichever is earlier. 2. Stay of Initiation of Penalty Proceedings under Section 271(1)(c): The assessee also requested a stay on the initiation of penalty proceedings under section 271(1)(c) by the AO, pending the outcome of the quantum appeal. The Tribunal considered whether it had the authority to grant such a stay. The assessee's counsel argued that the Tribunal has wide powers under the law, including incidental powers to stay other proceedings emanating from the orders under appeal. The counsel supported this argument with decisions from the Hon'ble Supreme Court in ITO vs. M.K. Mohammed Kunhi and the Hon'ble Gujarat High Court in ACIT vs. G E Industrial Pvt Ltd. The Tribunal acknowledged that the Hon'ble Supreme Court had opined that the powers conferred by section 254 are of the widest amplitude, including incidental powers necessary to make those powers fully effective. The Hon'ble Gujarat High Court had applied this principle, holding that the Tribunal has the power to stay penalty proceedings when quantum proceedings are pending before it. The Tribunal also referred to decisions from the Madras High Court in Paulsons Litho Works vs. ITO and Rayala Corporation (P) Ltd. vs. UOI, which supported the view that appellate jurisdiction includes the power to stay further proceedings to ensure the effective exercise of appellate powers. The Tribunal concluded that it has the power to grant a stay in penalty proceedings pending quantum appeal, as it is incidental and ancillary to its appellate jurisdiction. This avoids multiplicity of proceedings and the creation of untimely huge demands. Therefore, the Tribunal stayed the initiation of penalty proceedings under section 271(1)(c) for six months or until the passing of the order in the quantum appeal, whichever is earlier. The Tribunal also addressed concerns about the limitation period for passing penalty orders, referencing the Hon'ble Gujarat High Court's decision that the limitation period would be extended by six months from the end of the month in which the Tribunal's order is received by the Commissioner. Conclusion: Both prayers of the assessee were allowed. The stay of the outstanding demand was extended for six months or until the passing of the order in the appeal. The initiation of penalty proceedings under section 271(1)(c) was stayed for six months or until the passing of the order in the quantum appeal. The Tribunal directed that the appeal be heard on a peremptory basis on the next date of hearing. The order was pronounced in the open court on 26th August 2016.
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