1990 (3) TMI 114 - AT - Income Tax

Summary

Issues:
- Calculation of penalty limitation period under section 275(a)(ii) of the Income-tax Act, 1961 based on the date of order by the Tribunal and consequential order by the CIT(Appeals).

Detailed Analysis:
1. The case involved four appeals by the Revenue related to assessment years 1975-76 to 1978-79, challenging the cancellation of penalties under section 273(a) by the CIT(Appeals) as barred by limitation. The central issue was the calculation of the penalty limitation period under section 275(a)(ii) based on the date of the Tribunal's order and the consequential order by the CIT(Appeals.

2. The Tribunal noted that the penalty proceedings were initiated by the ITO during the assessment, which was later partly allowed by the first appellate authority. Subsequently, both the assessee and the Revenue filed cross-appeals before the Appellate Tribunal, which directed the CIT(Appeals) to redetermine the issue. The CIT(Appeals) passed a fresh order in 1986, after which the ITO imposed penalties in 1985, leading to the dispute over the limitation period.

3. The Revenue argued that the limitation period should be counted from the date of the final order by the CIT(Appeals) in 1986, contending that the penalties imposed in 1985 were within the time allowed under section 275. Conversely, the assessee contended that the limitation should be calculated from the date of the Tribunal's order, emphasizing that the penalties were time-barred.

4. The Tribunal analyzed section 275(a)(ii) which stipulates the time limit for imposing penalties after an appeal to the Appellate Tribunal or the CIT(Appeals). It highlighted that the intention was to avoid unnecessary litigation until the assessment becomes final. The Tribunal clarified that when the Tribunal's order does not finally dispose of the appeal but restores it to the first appellate authority, the limitation period starts from the date of the consequential order by the first appellate authority.

5. Based on the interpretation of the law, the Tribunal concluded that the penalties imposed by the ITO were within the time provided by section 275(a)(ii) of the Income-tax Act. It emphasized that there was no prohibition against imposing penalties during the pendency of appeals before the CIT(Appeals). Consequently, the Tribunal annulled the order of the CIT(Appeals and restored all appeals to be decided on merits.

6. Ultimately, the Tribunal allowed all four appeals by the Revenue, ruling in favor of the Revenue's position on the calculation of the penalty limitation period under section 275(a)(ii) of the Income-tax Act, 1961.