2019 (11) TMI 404 - AT - Income Tax

Penalty u/s 271(1)(a) - limitation to pass penalty order - HELD THAT - Keeping the logic of the provision in consideration, it is an order that determines, inter alia, the rights of the parties finally, for the completion of penalty proceedings. Otherwise, in the case of maintainability of an appeal filed by either the revenue or the assessee, if there comes about a withdrawal of that appeal, without an order, the period of limitation would be deemed to subsist. The fact as to whether an order becomes final at the instance of one party, i.e., that of filing and prosecution or, on the withdrawal of an appeal cannot, in our considered opinion, be determinative of the period of limitation. Limitation, it goes without saying, has to be fixed and certain. Section 275(1A) speaks of giving effect to the orders passed by the appellate forums. It does not impose any condition whether to levy or not to levy the penalty. The section empowers the authorities to follow the appellate orders of higher forums within a period of six months from the date when the orders are passed. Section 275(1A) speaks of modification of the penalty passed within limitation. If no penalty order has been passed within limitation, the provisions of section 275(1A) are not operative. Thus, all considered, in view of the above discussion, it cannot at all be said that the limitation in the present case is governed by the provisions of section 275(1A) of the Act and not section 275(1)(a) of the Act. We, accordingly, answer the question, as to whether the ld. CIT(A) correctly held the penalty order to be beyond the limitation period by the provisions of section 275 (1)(a) of the Act, against the Department and in favour of the assessee. As per provisions of section 275(1)(a), the penalty order should have been passed within six months from the end of the month in which the order of the Tribunal was received by the Department. However, we find that the order giving effect to Tribunal s order is dated 24/09/2014, which means that the said order was received by the Department in the month of September 2014. If the said date, i.e., 24/09/2014 is taken as the date on which the order of the Tribunal was received by the Department, then, the penalty u/s 271(1)(c) of the Act could be levied upto 31/03/2015. However, the Assessing Officer has levied the penalty u/s 271(1)(c) of the Act on 27/01/2016, which proves that the penalty order is barred by limitation. CIT(A) has duly taken all the above facts into consideration while holding and, in our considered opinion, rightly so, that the penalty order was barred by the limitation prescribed by the provisions of section 275(1)(a) - Appeals of the Revenue are dismissed.

Summary

Issues Involved:
1. Maintainability of the appeal due to low tax effect.
2. Deletion of penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Maintainability of the Appeal Due to Low Tax Effect:

At the outset, the counsel for the assessee submitted that the tax effect involved in appeal No.471/Lkw/2017 does not exceed ? 50 lakhs. Hence, this appeal filed by the Department is not maintainable in view of CBDT’s Circular No.17/2019, dated 8th August 2019, and is liable to be dismissed as such.

The Tribunal noted that the Central Board of Direct Taxes (CBDT), vide Circular No.17/2019, dated 8th August 2019, has directed that no appeal should be filed before the Tribunal if the tax effect does not exceed ? 50 lakhs. The Tribunal referenced the Ahmedabad Bench's recent order, which dismissed 628 appeals due to the tax effect not exceeding ? 50 lakhs, emphasizing the Government's policy to reduce income tax litigation.

The Tribunal held that the concession extended by the CBDT circular applies to pending appeals as well as future appeals. Therefore, the appeal in I.T.A. No.471/Lkw/2017 was dismissed for low tax effect.

2. Deletion of Penalty Imposed Under Section 271(1)(c) of the Income Tax Act, 1961:

In I.T.A. No.470/Lkw/2017, the Revenue contested the deletion of a penalty of ? 67,75,940/- imposed under section 271(1)(c) of the Act by the learned CIT(A). The Department argued that the CIT(A) erred in law and on facts by deleting the penalty, invoking the provisions of section 271(1)(a) instead of section 275(1A) of the Act.

The counsel for the assessee argued that the penalty order should have been passed within six months from the date of receipt of the Tribunal's order, which was in September 2014. Therefore, the penalty order should have been issued by 31/03/2015, but it was imposed on 27/01/2016, making it barred by limitation.

The Tribunal examined section 275, which deals with the bar of limitation for imposing penalties. It noted that section 275(1)(a) specifies that the penalty order must be passed within six months from the end of the month in which the order of the appellate authority is received. The Tribunal found that the order giving effect to the Tribunal’s decision was dated 24/09/2014, indicating receipt by the Department in September 2014. Therefore, the penalty should have been imposed by 31/03/2015.

The Tribunal concluded that the penalty order issued on 27/01/2016 was barred by limitation as per section 275(1)(a). Consequently, the Tribunal upheld the CIT(A)'s decision to delete the penalty, finding no error in the impugned order.

Conclusion:

Both appeals filed by the Revenue were dismissed. The appeal in I.T.A. No.471/Lkw/2017 was dismissed due to low tax effect, and the appeal in I.T.A. No.470/Lkw/2017 was dismissed as the penalty order was barred by limitation.