2004 (7) TMI 329 - AT - Income Tax

Summary

Issues:
1. Appeal against cancellation of penalty under s. 271B for asst. yrs. 1987-88 and 1989-90.

Analysis:
1. For the assessment year 1987-88, the penalty under s. 271B was imposed in 2001, challenged before the CIT(A), and subsequently appealed. The penalty was initiated beyond the limitation period as per s. 275 of the Act. The CIT(A) canceled the penalty, which was upheld by the ITAT Lucknow. The penalty order should have been passed within six months from the end of the month in which the action for imposition of penalty was initiated, as per s. 275(1)(c) of the Act. Since the penalty was imposed in 2001, it was beyond the limitation period, leading to the dismissal of the appeal raised by the Revenue.

2. Regarding the assessment year 1989-90, a similar scenario unfolded where the penalty was imposed in 2001, challenged before the CIT(A), and subsequently appealed. The CIT(A) canceled the penalty on the grounds of being passed beyond the limitation period, as per s. 275 of the Act. The ITAT Lucknow upheld the CIT(A)'s decision, emphasizing that the penalty order should have been passed within six months from the end of the month in which the action for imposition of penalty was initiated. Since the penalty was imposed in 2001, it was deemed beyond the limitation period, resulting in the dismissal of the Revenue's appeal.

3. The ITAT Lucknow considered the submissions of both the Departmental Representative and the counsel. It was acknowledged that the penalty proceedings for both years were initiated after 31st March 1989, invoking the provisions of s. 275 of the Act as amended by the Direct Tax Laws (Amendment) Act, 1987. As the penalty order was not related to the computed income, s. 275(1)(c) stipulated that the penalty should have been passed within six months from the end of the month in which the penalty imposition action commenced. Since the penalty was imposed in 2001, beyond the prescribed timeline, the CIT(A)'s decision to cancel the penalty was upheld, and the Revenue's appeal was dismissed.

4. In conclusion, the ITAT Lucknow dismissed both appeals directed by the Revenue, upholding the CIT(A)'s decisions to cancel the penalties under s. 271B for the assessment years 1987-88 and 1989-90 due to the penalties being imposed beyond the limitation period specified in s. 275 of the Act.