2019 (5) TMI 944 - AT - Income Tax

Levy of penalty u/s 271B - penalty proceedings initiated after a long gap of more than 4 years from the date of original assessment in order passed in remanded matter by Tribunal - barred by limitation - HELD THAT - Penalty is not leviable where the penalty proceedings were not initiated long after the completion of the assessment and the assessment order was silent about the levy of penalty u/s 271B. Since the AO in the instant case has initiated the penalty proceedings after a period of more than 4 years from the date of original assessment order and there was no such mention of the initiation of penalty proceedings u/s 271B and the fact of higher gross receipt was very much available to the Assessing Officer which has been mentioned in the body of the original assessment order, therefore, the penalty proceeding initiated by the AO in our opinion is barred by limitation. The decision relied on by the DR will not help the Revenue since the same relates to initiation of penalty proceedings u/s 271B in the course of assessment proceedings. The decision does not speak of levy of penalty after inordinate delay. The penalty proceedings initiated after a long gap of more than 4 years from the date of original assessment order is not sustainable in law being barred by limitation. - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271B of the Income Tax Act.

Detailed Analysis:

Issue 1: Levy of penalty under section 271B
The appeal was against the order passed by the CIT(A) upholding the penalty of ?1 lakh imposed by the Assessing Officer under section 271B of the Income Tax Act. The Assessing Officer initiated penalty proceedings due to discrepancies in the assessee's reported income. The assessee had shown net receipts lower than the admitted gross freight income, leading to the penalty imposition. The argument presented was that the penalty was time-barred as it was initiated after a significant delay of more than four years from the original assessment order.

Analysis:
1. The original assessment was completed in 2011, where discrepancies in reported income were noted, but no penalty under section 271B was imposed at that time.
2. The penalty proceedings were initiated by the Assessing Officer after more than four years following the Tribunal's decision to restore the issue.
3. The penalty notice was issued beyond the statutory time limit specified in section 275(1)(c), which prohibits passing a penalty order after a certain period from the completion of proceedings.
4. The Tribunal found that the penalty initiation after such a long delay, without any mention in the original assessment order, was not justified and was time-barred.
5. The Tribunal referred to various legal precedents supporting the view that penalty proceedings should be initiated and completed within a reasonable time frame.
6. The decision highlighted that the penalty imposition in this case, after a significant delay, was not in line with the statutory provisions and legal principles.

Conclusion:
The Tribunal set aside the CIT(A)'s order and allowed the appeal filed by the assessee, ruling that the penalty imposition under section 271B was not sustainable in law due to being barred by limitation. The decision emphasized the importance of timely initiation and completion of penalty proceedings in accordance with legal requirements.

This detailed analysis provides a comprehensive overview of the judgment, focusing on the issue of the levy of penalty under section 271B of the Income Tax Act and the Tribunal's decision in this regard.