2023 (12) TMI 1329 - AT - Income Tax

Levy of penalty u/s 272A(2)(e) - delay of 851 days in filing the return of income for the assessment year 2014-15 - main contention of the ld. A.R. is that as per section 275(1)(c) order u/s 272A(2)(e) of the Act is to be passed before the expiry of financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed or 6 months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later HELD THAT - The assessee has filed return of income for the assessment year 2014-15 on 31.3.2017. There was no regular assessment and the return of income has been accepted as it is. In our opinion, copy of the return of income itself serve as an assessment order for all practical purposes. So the penalty proceedings has been initiated vide notice dated 21.12.2020, which is approximately after lapse of 45 months. Therefore, the penalty order passed by ld. AO u/s 272A(2)(e) of the Act is not within reasonable time. As considering Hon ble Delhi High Court in the case of JKD Capital Finlease Ltd. 2015 (10) TMI 1281 - DELHI HIGH COURT we are of the opinion that penalty order has not been passed within reasonable time. Accordingly, we quash the penalty order on this reason. Decided in favour of assessee.

Summary

Issues:
1. Validity of penalty u/s 272A(2)(e) of the Income-tax Act, 1961.
2. Barred by limitation - Initiation of penalty proceedings and order confirmation.
3. Contumacious conduct or deliberate default for penalty levy.
4. Delay in filing return of income and penalty imposition.
5. Suspension of limitation period due to Covid-19.
6. Reasonable time for initiation and completion of penalty proceedings.
7. Judicial precedents on penalty proceedings timelines.
8. Quashing of penalty order due to unreasonable delay.

Analysis:
1. The appeal challenged the order of NFAC confirming the penalty u/s 272A(2)(e) of the Act for the assessment year 2014-15. The main contention was the validity of the penalty order, arguing it was void ab initio without jurisdiction and should be quashed.

2. The delay in filing the return of income led to penalty proceedings initiated by the AO. The penalty was imposed due to an 851-day delay, which was upheld by NFAC. The argument revolved around the limitation period for passing the penalty order.

3. The AR contended that the penalty order passed on 5.3.2022 was time-barred as per section 275(1)(c) of the Act, citing a Tribunal order. However, the DR argued that the Covid-19 period suspended the limitation, making the penalty order within time.

4. The issue of reasonable time for initiating penalty proceedings was raised. The AR argued that the initiation was beyond a reasonable time from the completion of the assessment, citing judicial precedents supporting the need for timely initiation.

5. Referring to the Delhi High Court judgment, the Tribunal concluded that the penalty order was not passed within a reasonable time and quashed it based on the delay in initiation of penalty proceedings.

6. As a result, the penalty order dated 5.3.2022 was quashed, and the appeal of the assessee was allowed, refraining from addressing other grounds raised. The decision was pronounced on 5th Dec, 2023.