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2022 (1) TMI 1202 - AT - Income TaxPenalty u/s. 271(1)(c) - Bar of limitation for imposing penalties - HELD THAT - Proviso in section 275(1)(a) of the Act was inserted in the statute by the Finance Act 2003 w.e.f. 01.06.2003, meaning thereby, the same would be applicable for all penalties levied on or after 01.06.2003. In the instant case, the order of ld. CIT(A) in quantum proceedings was passed on 19.01.2010 and hence the maximum time limit for passing the penalty order would expire by 31.3.2011 in normal course and by 31.03.2012 in abnormal course of delay in receipt of order of ld. CIT(A) by the ld. AO. Hence either way, the penalty order passed on 30.08.2012 would be squarely barred by limitation. Decisions relied supra by the ld. DR are factually distinguishable as they were rendered for the Asst Years 2001-02 and 2000-01. Admittedly the law prevailing for the Asst Years 2000-01 and 2001-02 for levy of penalty would be governed by section 275(1)(a) of the Act, where the ld. AO could keep the penalty proceedings in abeyance till the order of tribunal was received. But due to insertion of proviso with effect from 01.06.2003, the ld. AO would be entitled to keep the penalty proceedings in abeyance only till the disposal of the first appeal by the ld. CIT(A). Hence the reliance placed on the decisions by the ld DR would not advance the case of the revenue. Accordingly, as rightly pointed out by the ld. AR before us, the time limit for passing the penalty order would expire by 31.03.2011 i.e one year from the end of the financial year in which the order of ld. CIT(A) is passed is received by the ld. Administrative Commissioner having jurisdiction over the assessee - we hold that the penalty order passed by the ld. AO on 30.08.2012 is squarely barred by limitation in view of proviso to section 275(1)(a) of the Act. Hence levy of penalty is hereby cancelled. - Decided in favour of assessee.
Issues:
1. Justification of upholding penalty u/s 271(1)(c) of the Income Tax Act. 2. Whether penalty order u/s 271(1)(c) had been passed within time and not barred by limitation. Issue 1: Justification of upholding penalty u/s 271(1)(c) of the Income Tax Act: The appeal in ITA No.7188/Mum/2019 for A.Y.2003-04 was filed against the order of the ld. Commissioner of Income Tax (Appeals)-33, Mumbai regarding the imposition of penalty u/s 271(1)(c) of the Income Tax Act, 1961. The primary issue was to determine whether the ld. CITA was justified in upholding the levy of penalty u/s 271(1)(c) of the Act based on the facts and circumstances of the case. Issue 2: Whether penalty order u/s 271(1)(c) had been passed within time and not barred by limitation: The key contention revolved around the timeliness of the penalty order u/s 271(1)(c) of the Act. The assessee firm, engaged in the export business, had filed its return for A.Y. 2003-04, which led to scrutiny assessment proceedings resulting in various additions and disallowances. The penalty proceedings were initiated by the ld. AO, and subsequent appeals were made to the ld. CIT(A) and the tribunal. The crux of the matter was whether the penalty order dated 30.08.2012 was barred by limitation as per the proviso to section 275(1)(a) of the Act. The assessee argued that the penalty order was time-barred, citing the date of the order by the ld. CIT(A) in the original quantum proceedings as a reference point for calculating the time limit for passing the penalty order. The contention was that the penalty order passed on 30.08.2012 exceeded the prescribed time limit as per the proviso to section 275(1)(a) of the Act. On the other hand, the ld. DR contended that the penalty order was within the time limit prescribed, considering the pendency of the quantum appeal before the tribunal. The legal provisions of section 275(1)(a) of the Act, including the proviso inserted by the Finance Act 2003, were extensively discussed to determine the applicability of the time limit for imposing penalties. The Tribunal analyzed the timeline of events, including the dates of orders and appeals, to ascertain the validity of the penalty order in question. The Tribunal concluded that the penalty order passed on 30.08.2012 was indeed barred by limitation as per the proviso to section 275(1)(a) of the Act. The Tribunal distinguished the relied-upon decisions, noting that the law had changed post the insertion of the proviso in 2003, limiting the time frame for passing penalty orders. Consequently, the penalty order was deemed to be cancelled due to being time-barred, rendering further discussion on other grounds raised by the assessee unnecessary as they would become academic. In light of the above analysis, the Tribunal allowed the appeal of the assessee, canceling the levy of penalty due to it being barred by limitation. The decision was pronounced on 24/01/2022, emphasizing the importance of adhering to the statutory timelines for imposing penalties under the Income Tax Act.
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