2001 (5) TMI 140 - AT - Income Tax

Summary

Issues:
- Imposition of penalty under section 271(1)(c) of the IT Act.
- Validity of penalty proceedings initiated by the Assessing Officer.
- Interpretation of the provisions of section 275 of the IT Act regarding the period of limitation for passing penalty orders.

Analysis:
1. Imposition of Penalty under Section 271(1)(c):
The case involved the imposition of a penalty under section 271(1)(c) of the IT Act on the assessee for furnishing inaccurate particulars. The Assessing Officer (AO) had made additions to the declared income of the assessee, leading to the initiation of penalty proceedings. The assessee challenged the penalty on various grounds, including the surrender of amounts and the justification for penalty imposition. The AO imposed a penalty of Rs. 1,05,000, which was later cancelled by the Commissioner of Income Tax (Appeals) [CIT(A)].

2. Validity of Penalty Proceedings:
The AO initiated penalty proceedings against the assessee under section 271(1)(c) on the same day the assessment proceedings were completed. The penalty order was passed after about 16 months from the initiation of penalty proceedings. The key contention revolved around the interpretation of section 275 of the IT Act, which prescribes the period of limitation for passing penalty orders. The relevant provisions of section 275 were analyzed, both pre and post-amendment, to determine the correct period for passing the penalty order.

3. Interpretation of Section 275 of the IT Act:
The Tribunal analyzed the provisions of section 275 of the IT Act to ascertain the correct period of limitation for passing the penalty order. It was noted that the penalty proceedings were initiated by the AO on a specific date, and the period of limitation for levy of penalty should be determined as per the provisions in force at the time of initiation of penalty proceedings. The Tribunal held that the penalty order passed by the AO was beyond the period of limitation prescribed under section 275(1)(c) of the IT Act. Consequently, the Tribunal upheld the decision of the CIT(A) in canceling the penalty imposed by the AO, based on the ground of limitation.

In conclusion, the Tribunal dismissed the appeal of the Revenue, affirming the cancellation of the penalty imposed under section 271(1)(c) due to the penalty order being barred by the period of limitation as per section 275 of the IT Act.