2009 (10) TMI 20 - HC - Income Tax

Time limit for imposing penalty period of limitation six months held that - the assessee filed appeal before the Tribunal and also wrote a letter seeking deferment of penalty proceedings till the appeal was decided. On the request of the assessee the proceedings were deferred and penalty proceedings were initiated after order of the Tribunal. Even if delay was not condoned and the assessee filed time barred appeal and on that ground sought deferment of penalty proceedings the assessee could not be heard to say that filing of appeal should be ignored. No one can take advantage of his own wrong - since the quantum appeal was pending before the Tribunal the limitation period for imposing penalty had not yet expired

Summary

Issues:
1. Whether the penalty imposed by the AO has become barred by time limitation under section 275(1)(a) of the Income Tax Act, 1961?
2. Whether the limitation period for imposing penalty had expired despite the quantum appeal being pending before the Tribunal?

Analysis:

Issue 1:
The appellant challenged the levy of penalty, arguing that it was beyond the stipulated period of limitation under section 275 of the Income Tax Act, 1961. The CIT(A) rejected this plea, which was upheld by the Tribunal. The Tribunal considered the timeline of events, including the delay in filing the appeal before the Tribunal and the subsequent request by the assessee to keep penalty proceedings in abeyance. The Tribunal concluded that the penalty was not barred by limitation as the appeal was filed before the Tribunal and the delay was caused by the assessee's own actions. The Tribunal's decision was based on the fact that the appeal against the CIT(A)'s order was pending before the Tribunal, and hence, the penalty imposition was not time-barred.

Issue 2:
The appellant contended that the limitation for passing the penalty order should have commenced from the receipt of the CIT(A)'s order, not from the date of the Tribunal's order. The appellant relied on the judgment in Computwel Systems Limited v. W. Husan, where the delay in filing an appeal was not condoned. However, the revenue argued that the Computwel judgment was distinguishable as it pertained to a different context. The revenue relied on the Mela Ram & Sons case, emphasizing that the date of dismissal of an appeal as time-barred marks the commencement of limitation. In this case, the assessee filed an appeal before the Tribunal and requested deferment of penalty proceedings until the appeal was decided. Despite the delay in filing the appeal, the assessee's request for deferring penalty proceedings was considered. The court dismissed the appeal, stating that no substantial question of law arose, and upheld the penalty imposition.

In conclusion, the High Court dismissed the appeal, emphasizing that the penalty imposition was not barred by limitation as the appeal was filed before the Tribunal, and the delay in proceedings was due to the assessee's actions. The court differentiated the present case from the Computwel judgment and held that the penalty proceedings were valid.