2021 (2) TMI 280 - AT - Income Tax

Penalty u/s 271E - validity of the order passed u/s 271E on the reasoning that it is barred by limitation - Change in jurisdiction of the Income Tax Office - HELD THAT - In the case on hand there was change in the jurisdiction of the Income Tax Office under the provisions of section 129 of the Act from central range to range 3 Baroda. The assessee, on change of jurisdiction, requested for rehearing the case as provided in the proviso to section 129 of the Act vide letter dated 27-11-2003 which came to be concluded on 06-05-2004. Effectively, the time of 162 days was consumed in the rehearing of the case of the assessee. Accordingly, such time has to be excluded as per the explanation attached to section 275 of the Act which has been discussed here in above. The time limit for passing the order was expiring on 30 September 2003 under the provisions of clause (c) to section 275 of the Act but the same needs to be extended for another 162 days as per the explanation provided in section 275 of the Act. Thus, after considering such time, the time limit expired for passing the order as on 11-05-2004 but the AO has passed the penalty order dated 18-05-2004 which is delayed by 7 days. Accordingly we are of the view that the order passed by the AO under section 271E imposing the penalty upon the assessee is not sustainable as it is barred by time. Consequently, we quash the same. Hence the ground of appeal of the assessee is allowed.

Summary

Issues:
- Validity of the penalty order under section 271E of the Income Tax Act, 1961
- Barred by limitation grounds raised by the Assessee
- Calculation of the limitation period under section 275 of the Act
- Jurisdiction change and rehearing request impact on the limitation period
- Condonation of delay and remand by the Hon'ble High Court

Validity of Penalty Order under Section 271E:
The appeal was filed by the Assessee against the penalty order under section 271E of the Income Tax Act, 1961. The Assessee challenged the validity of the penalty order on the grounds that it was barred by limitation. The Assessee contended that the penalty order was passed beyond the prescribed time limit, making it unsustainable.

Barred by Limitation Grounds Raised by the Assessee:
The Assessee argued that the penalty order was time-barred by 7 days. The Assessee provided a detailed computation of the limitation period, highlighting the dates and relevant provisions of the Act. The Assessee's calculations demonstrated that the penalty order was issued after the expiration of the statutory time limit, rendering it invalid.

Calculation of the Limitation Period under Section 275 of the Act:
The Tribunal analyzed the provisions of section 275 of the Act, which specify the time limits for passing penalty orders. The Tribunal considered the explanation attached to section 275, which allows for the exclusion of certain periods in computing the limitation period. The Tribunal meticulously calculated the time taken for various proceedings, including rehearing, and concluded that the penalty order exceeded the permissible time limit.

Jurisdiction Change and Rehearing Request Impact on the Limitation Period:
The change in the jurisdiction of the Income Tax Office and the subsequent rehearing request by the Assessee had a significant impact on the limitation period for passing the penalty order. The Tribunal noted that the time consumed in rehearing the case had to be excluded from the calculation, as per the provisions of the Act. This exclusion further supported the Assessee's argument that the penalty order was time-barred.

Condonation of Delay and Remand by the Hon'ble High Court:
The Hon'ble High Court had previously condoned a significant delay and remanded the appeal back to the Tribunal. Despite the delay and multiple adjournments sought by the Revenue for verification, the Tribunal proceeded to hear the appeal. The Tribunal emphasized that the penalty order was unsustainable due to being barred by time, leading to the partial allowance of the Assessee's appeal.

In conclusion, the Tribunal quashed the penalty order under section 271E of the Act, ruling in favor of the Assessee on the grounds of being time-barred. The detailed analysis of the limitation period, jurisdiction change impact, and the Hon'ble High Court's intervention highlighted the procedural intricacies involved in the case.