2020 (6) TMI 25 - AT - Income Tax

Penalty u/s 271(1)(c) - unexplained cash credit - HELD THAT - In response to a specific question from the bench, learned Departmental Representative could not show us any specific initiation of penalty proceedings by the CIT(A). It is only elementary that unless the penalty proceedings are specifically initiated in respect of an addition, the penalty cannot be imposed. As no such addition was made by the Assessing Officer, there could not have any occasion to initiate the penalty in respect of this addition Addition was made by the CIT(A), who has himself termed it as enhancement , and there was no specific initiation of penalty by the CIT(A). In the absence of specific satisfaction recorded by the CIT(A) that the penalty is required to be initiated in respect of the related addition in our considered view, the impugned penalty is devoid of a legally sustainable foundation. We, therefore, deem it fit and proper to delete the impugned penalty. The assessee gets the relief accordingly. Pronouncement of order after the expiry of 90 days from the date of conclusion of hearing - Covid 19 epidemic - world wide lockdown - HELD THAT - We are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. The extraordinary steps taken suo motu by Hon ble jurisdictional High Court and Hon ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words ordinarily , in the light of the above analysis of the legal position, the period during which lockout was in force is to excluded for the purpose of time limits set out in rule 34(5) of the Appellate Tribunal Rules, 1963. Viewed thus, the exception, to 90-day time-limit for pronouncement of orders, inherent in rule 34(5)(c), with respect to the pronouncement of orders within ninety days, clearly comes into play in the present case.

Summary

Issues:
- Confirmation of penalty under section 271(1)(c) for unexplained cash credit
- Legality of penalty imposition by CIT(A) without specific initiation of penalty proceedings
- Procedural delay in pronouncement of the order beyond 90 days due to lockdown

Confirmation of Penalty under Section 271(1)(c) for Unexplained Cash Credit:
The appeal challenged the confirmation of the penalty under section 271(1)(c) by the CIT(A) regarding unexplained cash credit of ?3,41,000. The CIT(A) had reduced the estimated business income from ?1,00,00,000 to ?8,00,000, providing relief of ?92,00,000 to the appellant. However, the CIT(A) upheld the penalty concerning the unexplained loans of ?1,50,000 and ?1,91,000, totaling ?3,41,000. The Assessing Officer imposed the penalty, which was deleted for the ?8,00,000 addition but confirmed for the ?3,41,000 addition. The ITAT concluded that the penalty lacked a legally sustainable foundation as there was no specific initiation of penalty proceedings by the CIT(A) for the ?3,41,000 addition. Consequently, the penalty was deemed improper and was deleted, granting relief to the assessee.

Legality of Penalty Imposition without Specific Initiation:
The ITAT emphasized that penalty proceedings must be explicitly initiated for any addition to impose a penalty. In this case, the CIT(A) had enhanced the income by ?3,41,000 without specifically initiating penalty proceedings for this amount. As the penalty was not initiated by the Assessing Officer and there was no specific satisfaction recorded by the CIT(A) regarding the penalty for the ?3,41,000 addition, the ITAT deemed the penalty to lack a legally sustainable foundation. Therefore, the penalty was deleted based on the absence of proper initiation of penalty proceedings for the specific addition.

Procedural Delay in Pronouncement of Order due to Lockdown:
The ITAT acknowledged the delay in pronouncing the order beyond the 90-day period due to the nationwide lockdown imposed in response to the Covid-19 pandemic. Considering the extraordinary circumstances and disruptions caused by the lockdown on judicial functions, the ITAT interpreted the time limit for order pronouncement in a pragmatic manner. Referring to legal provisions and court directives, the ITAT excluded the lockdown period from the calculation of the 90-day limit for order pronouncement. The ITAT highlighted the need to factor in ground realities and exceptional situations while interpreting legal timelines. Ultimately, the ITAT allowed the appeal, taking into account the extraordinary circumstances caused by the lockdown and the corresponding extension of time limits by the courts.