2016 (11) TMI 370 - HC - Income Tax

Penalty under section 271B - Period of limitation - Held that - There are two independent periods of limitation prescribed under section 275(1)(c). If what argued by Shri Singh, learned Senior Counsel, that both period should be read conjunctively, it would not only render the words whichever is later redundant but also do violence to simple phrase used by legislature in the aforesaid provision. It is a well settled principle of interpretation that plain reading of a statute must be preferred if it is clear. It must be read as it is and neither anything should be added nor ignored or omitted. We should not assume that legislature has left any scope of imagination or a provision must be read by applying casus omissus. Looking to the facts of the present case, we find that assessments were completed on 31.3.1989 and 30.3.1990 in respect to assessment years 1988-89 and 1989-90. Notices for penalty in respect of assessment year 1988-89 was issued on 2.4.1990 and for assessment year 1989-90, issued on 20.6.1990. Penalty orders were passed in both the cases on 30.10.1990. In our view, penalty orders are within the period of limitation. - Decided against assessee

Issues Involved:
1. Whether the initiation of penalty under Section 271B of the Income Tax Act, 1961, must occur during the assessment proceedings as per Section 275(1)(c).
2. Whether the penalty order passed on 30.10.1990 was within the limitation period prescribed under Section 275 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Initiation of Penalty under Section 271B:

The core question was whether the initiation of penalty under Section 271B must occur during the assessment proceedings. The Tribunal held that it is not necessary for the initiation of penalty to occur during the assessment proceedings. The Court clarified that Section 275(1)(c) prescribes two independent periods of limitation: the end of the financial year in which the proceedings are completed, or six months from the end of the month in which the action for the imposition of penalty is initiated, whichever is later. The Court emphasized that these two periods should not be read conjunctively as it would render the phrase "whichever period expires later" redundant and create unreasonable limitations. The Court supported its interpretation with references to various judgments, including the Karnataka High Court in Shanbhag Restaurant v. Deputy Commissioner of Income Tax, which held that the limitation period is either the end of the financial year in which the assessment is completed or six months from the initiation of penalty proceedings, whichever is later.

2. Limitation Period for Penalty Order:

The second issue was whether the penalty order passed on 30.10.1990 was within the limitation period prescribed under Section 275. The Court examined the facts and found that the assessments were completed on 31.3.1989 and 30.3.1990 for the assessment years 1988-89 and 1989-90, respectively. The notices for penalty were issued on 2.4.1990 and 20.6.1990, and the penalty orders were passed on 30.10.1990. The Court concluded that the penalty orders were within the period of limitation as per Section 275(1)(c), considering the six-month period from the end of the month in which the penalty notices were issued.

Conclusion:

The Court answered both questions in favor of the Revenue and against the Assessee. It upheld the Tribunal's view that the initiation of penalty proceedings under Section 271B need not occur during the assessment proceedings and that the penalty orders were within the prescribed limitation period. The Court emphasized the importance of interpreting statutory provisions based on their plain language and not adding or omitting words to fit assumed legislative intentions.

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