2016 (10) TMI 979 - HC - Income Tax

Validity of penalty u/s 271E - period of limitation - Held that - Taking into consideration that under Section 275(1)(c) of the Act it is no doubt that Commissioner is the competent authority and other contention that the notice was within limitation in our view is misconceived inasmuch as AO on 30/12/2009 issued notice to the assessee and he was clear that no penalty proceedings required to be initiated. We ought to have held that the Department has taken advantage of any wrong. We are of the opinion that the issues are squarely covered therefore in both the appeals we answer the question raised in favour of the assessee

Summary

Issues:
1. Interpretation of time limit for completion of penalty proceedings under Section 275(1)(a) vs. 275(1)(c).
2. Consideration of nature of transaction in quantum appeal.

Analysis:

Issue 1:
The High Court admitted the appeal questioning whether the ITAT erred in applying the time limit under Section 275(1)(a) instead of 275(1)(c). The facts revolved around a search under Section 132 of the Act leading to penalty proceedings initiated by the assessing officer on 30/12/2009. The CIT(A) order was received on 30/3/2011, and the ITAT order on 14/2/2012. The Addl. CIT imposed a penalty on 30/3/2012. The appellant contended that the penalty was levied within the limitation, emphasizing the role of the Commissioner as the competent authority under Section 275(1)(c). The Court held that the Department took advantage of any perceived error and dismissed the appeals in favor of the assessee.

Issue 2:
The second issue questioned whether the CIT(A) and ITAT considered the nature of the transaction in the quantum appeal. The respondent cited precedents like CIT Vs. Hissaria Bros. and CIT Vs. Jitendra Singh Rathore to support their argument. The respondent referred to a circular of CBDT addressing conflicting interpretations on the initiation of penalty proceedings. The Court acknowledged the conflicting views and emphasized the importance of the Joint Commissioner as the competent authority to initiate penalty proceedings. The Court upheld the "Departmental View" and directed Assessing Officers below the rank of Joint Commissioner to refer violations to the Range Head for penalty imposition.

In conclusion, the High Court dismissed the appeals, ruling in favor of the assessee on both issues. The judgment clarified the role of the Commissioner as the competent authority under Section 275(1)(c) and emphasized adherence to the "Departmental View" regarding the initiation of penalty proceedings. The decision provided clarity on conflicting interpretations and highlighted the significance of the Joint Commissioner in initiating penalty proceedings.