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Issues:
1. Validity of penalty order under section 271(1)(c) of the Income-tax Act. 2. Barred by limitation as per section 275 of the Income-tax Act. Issue 1: Validity of Penalty Order under Section 271(1)(c) of the Income-tax Act: The appeal was against the penalty of Rs. 6,75,695 imposed by the Assessing Officer under section 271(1)(c) of the Income-tax Act, which was upheld by the Commissioner (Appeals). The assessee contended that the penalty order should be deleted as it was not justified. The facts revealed that the deceased assessee, an Orthopaedic Surgeon, and his wife had purchased a piece of land together and built a hospital converted into a hotel. The Assessing Officer disallowed certain claims made by the assessee regarding losses related to the business of the hotel, resulting in a total income assessment. The Commissioner (Appeals) and the Tribunal upheld this decision. The penalty order was passed after the Tribunal's order, which the assessee argued was beyond the limitation period prescribed under section 275. The Tribunal agreed that the penalty order was time-barred as it was passed after the statutory deadline, and thus, the penalty was quashed. Issue 2: Barred by Limitation as per Section 275 of the Income-tax Act: The main argument revolved around the interpretation of section 275 concerning the limitation for imposing a penalty. The relevant provision stated that no penalty order shall 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 order of the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever is later. The assessee contended that the penalty order was passed beyond this limitation period. The Departmental Authorities did not dispute the dates provided by the assessee regarding the receipt of the Tribunal's order and the passing of the penalty order. The Tribunal held that the penalty order was indeed barred by limitation as it was passed after the prescribed deadline. The Tribunal rejected the argument that the reference under section 256(1) affected the finality of the Tribunal's order under section 254 for the purpose of limitation. Therefore, the penalty order was quashed based on the limitation issue, and the Tribunal did not delve into the merits of the penalty levy under section 271(1)(c). In conclusion, the Tribunal allowed the appeal, quashing the penalty order of Rs. 6,75,695 as it was passed beyond the limitation period specified in section 275 of the Income-tax Act.
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