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2017 (5) TMI 433 - HC - Income TaxBar of limitation for imposing penalties - Penalty levied under Sections 271D and 271E - Held that - This question came up for consideration in PCIT v. JKD Capital & Finlease Ltd. (2015 (10) TMI 1281 - DELHI HIGH COURT). The date on which the AO recommended the initiation of penalty proceedings was taken to be the relevant date as far as Section 275(1)(c) was concerned. There was no explanation for the delay of nearly five years in the ACIT acting on the said recommendation. The Court held that the starting point would be the initiation of penalty proceedings. Given the scheme of Section 275(1)(c) it would be the date on which the AO wrote a letter to the ACIT recommending the issuance of the SCN. While it is true that the ACIT had the discretion whether or not to issue the SCN, if he did decide to issue a SCN, the limitation would begin to run from the date of letter of the AO recommending initiation of the penalty proceedings. In the present case, the limitation in terms of Section 275 (1) (iii) of the Act began to run on 23rd July, 2012 and the last date for passing the penalty orders was 31st January, 2013. Therefore, the penalty orders issued on 26th February 2013 were clearly barred by limitation. - Decided in favour of assessee.
Issues:
- Whether the order imposing the penalty was passed within the time limit under Section 275(1)(c) of the Income Tax Act, 1961. Analysis: 1. The appeals were filed by the Revenue against the ITAT order for the Assessment Year 2009-10, questioning the imposition of penalty within the time limit specified in Section 275(1)(c) of the Act. 2. Following a search operation, a notice under Section 153A was issued to the Assessee, leading to an Assessment Order by the AO. However, the penalty proceedings were initiated more than six months after the assessment order. 3. The Assessee contended that the penalty proceedings were time-barred under Section 275(1)(c) of the Act, which sets a limit for passing penalty orders. 4. The ACIT passed the penalty orders in February 2013, negating the limitation plea, but the CIT(A) later canceled the penalties on merits while upholding the initiation of penalties within the time limit. 5. The ITAT, referring to previous decisions, held that the penalty orders were indeed barred by limitation under Section 275(1)(c) of the Act. 6. The Revenue relied on a different case to argue that the starting point of limitation should be the date of issuance of the Show Cause Notice, but the Court distinguished that case and upheld the decision based on the initiation of penalty proceedings. 7. The Court clarified that the date of initiation of penalty proceedings is crucial for determining the limitation period under Section 275(1)(c) and in this case, the penalty orders issued in February 2013 were beyond the prescribed limit. 8. Consequently, the Court dismissed the appeals, stating that no substantial question of law arose from the ITAT's order, as the penalty orders were clearly barred by limitation under the Act.
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