2023 (10) TMI 1321 - HC - Income Tax

Penalty u/s 271E - period of limitation as prescribed u/s 275 (1)(c) - HELD THAT - If the limitation period is connected to when the concerned officer issues notice, then the appellant/ revenue can extend the period of limitation, way beyond the timeline prescribed in Section 275 (1)(c). We are clearly of the view that the notice issued by the JCIT on 13.06.2011 could not have extended the period of limitation, as prescribed under Section 275 (1)(c). In this case, what is required to be brought to the forefront is that the AO had taken prior approval of the ACIT, who is equal in rank to the JCIT, before triggering the penalty proceedings. Thus, although the decision to initiate penalty proceedings is found embedded in the assessment order dated 31.12.2010 and approval to frame the assessment order was given prior to the said date, the notice was issued only on 13.06.2011. Even though this may be an additional factor in this particular case, our reasons for holding the limitation period as prescribed u/s 275 (1)(c) had expired latest by 30.06.2011, is not confined only to this aspect of the matter. The appellant/revenue, as noticed above, cannot extend the period of limitation by deciding at its whim and fancy when the notice has to be issued. The notice u/s 274 should have been issued before the period of limitation, as discussed above. Decided in favour of assessee.

Summary

Issues involved:
The judgment concerns the Assessment Year 2008-09 and the question of law regarding the deletion of penalty under Section 271E of the Income Tax Act, 1961 by the Income Tax Appellate Tribunal due to the limitation period prescribed under Section 275 (1)(c) of the Act.

Assessment of Penalty:
The appeal involved the consideration of whether the Tribunal misdirected itself on facts and in law by deleting the penalty imposed under Section 271E of the Income Tax Act, 1961, beyond the period of limitation as prescribed under Section 275 (1)(c) of the Act. The assessment order was passed on 31.12.2010, and penalty proceedings were initiated under Sections 271AAA, 271D, and 271E. The Additional Commissioner of Income Tax issued a notice on 13.06.2011 under Section 274 and 271E, and the penalty order was passed on 30.12.2011.

Interpretation of Limitation Provision:
The Court analyzed Section 275 (1)(c) of the Act, which sets the limitation for imposing penalties. The provision states that the penalty should not be passed after the expiry of the financial year in which the proceedings are completed or six months from the end of the month in which the action for penalty imposition is initiated, whichever period expires later. The Court examined the two limbs of the provision to calculate the expiration date of the limitation period.

Legal Argument and Decision:
The appellant argued that the limitation period should start from the date when the Joint Commissioner of Income Tax issued the notice, extending it to 31.12.2011. However, the Court disagreed, stating that such an interpretation would allow the revenue to extend the limitation period beyond what is prescribed by the Act. The Court held that the limitation period expired latest by 30.06.2011, as the notice should have been issued before this date. Therefore, the question of law was answered against the appellant and in favor of the respondent, leading to the disposal of the appeal in favor of the respondent.

Appreciation and Conclusion:
The Court acknowledged the assistance of Mr. Nischay Kantoor and directed the Registry to dispatch a copy of the order to the respondent through all prescribed modes before concluding the judgment.