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TMI Blog2010 (11) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... TRAPAL ,JJ. Appellant represented by:Mr. N.P. Sahni Respondent represented by:Mr. P.N. Monga, Mr. Manu Monga, A.K. SIKRI, J. 1. This appeal was admitted on the following substantial question of law:- "Whether the ITAT was correct in law and on facts in holding that the order of the AO imposing penalty is barred in view of the provisions of Section 275 (1) (a) of the Act? "By this order, we propose to decide the aforesaid question. 2. The factual matrix that needs to be noticed may first be narrated keeping in view the commonality of the question, the parties and the impugned order of the Tribunal. Instead of referring to the facts of each case, our purpose would be served by taking note of the facts from ITA 418/2009. 3. This appeal relates to the assessment year 1993-94. For this year, the respondent-assessee had filed return of income declaring loss of ₹ 3352/-. The Assessing Officer, however, did not accept the aforesaid return as filed by the assessee. Instead, he framed the assessment under Section 143 (3) of the Act by assessing the income at ₹ 12,05,724/- vide orders dated 18th July, 1996. In the process, the Assessing Officer made add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty proceedings under Section 271 (1) (c) of the Act and thereafter passed penalty orders dated 26th August, 2005. 9. The Tribunal has set aside this penalty order on the ground that it was time barred. According to the Tribunal as per Section 275 (1) (a) of the Act, the order should have been passed within six months from the date of receipt of the copy of orders passed by the Tribunal in the quantum appeal. Since that order was passed on 2nd August, 2004, six months expired in April, 2005 and the order passed on 26th August, 2005 was thus time barred. The case of the Revenue is that it is clause (c) of sub Section (1) of Section 275 of the Act which would be applicable and as per this, six months period is to be counted from 28th February, 2005 when fresh assessment orders were passed. If Six months is to be counted from 28th February, 2005, the order passed on 26th August, 2005 is well within limitation. 10. In this backdrop, the appeal was admitted on the question of law which has been extracted in the beginning. 11. The issue thus is as to whether clause (a) is applicable in the instant case or it is clause (c) which is applicable i.e. whether six months period is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst order had been cancelled there was only one order and the second order was therefore a legal order under Section 28 of the old Act (corresponding to Section 271 of the new Act). 13. In Seth Panchhi Ram and Co. Vs. Commissioner of Income Tax, 192 ITR, 289 decided by the Himachal Pradesh High Court, it was held that when the original order of assessment was set aside and matter remanded back to the Assessing Officer on the basis of which fresh order of assessment was passed, the limitation would start running from the passing of the fresh assessment order. The Court explained the provisions of Section 275 of the Act in the following manner:- "By looking at the provisions of Section 275, it would be seen that wherever there has been an appeal against the assessment order or other order and if the matter reaches a finality, the period as fixed by Sub-clause (ii) of Clause (a) is six months from the end of the month in which the aforesaid final order is received by the Commissioner. In cases where the proceedings are not completed with the order of the Appellate Assistant Commissioner or the Appellate Tribunal, Sub-clause (ii) would have no application but when there is no appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the orders passed giving effect to the order of the appellate authority. Normal provision for appeal under Section 246 of the Act provides appeal against the order of the Assessing Officer. It was in this context, the provisions of Section 246 of the Act were interpreted. However, the answer depended on the question as to whether the second assessment order passed, even though giving effect to the order of the appellate authority, was a fresh assessment order. The Court held that such an appeal was maintainable and discussed the legal position in the following manner:- "So far as the first submission, which relates to the nature of an order passed by the Income-tax Officer in consequence of orders of the appellate authorities with a view to giving effect to the directions contained therein, is concerned, it is difficult to hold that such an order is an administrative order. The power of the Income-tax Officer is to make assessment under section 143 or 144 of the Act. It is that assessment which is the subject-matter of appeal. The appellate authority, on an appeal against an order of assessment, has power to confirm, reduce, enhance or annul the assessment or to set aside the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer could not have invoked the provisions of Section 43 (1) Explanation-3 in order to determine the cost of cylinders. The discussion on this issue was, thus, summed up in the following manner:- "It is a case of financial arrangement between the assessee and the so-called lessee and, as such, the assessee is not entitled for depreciation over the impugned equipments. So far as the rental income is concerned, we are of the view that the assessing officer has wrongly taxed the rental income in the hands of the assessee because it was only a repayment of the loan with interest advanced by the assessee in order to purchase the impugned equipments. At the most the interest earned in the year under account can only be taxed. So far as invocation of provisions of Section 43 (1) explanation (3) is concerned, we are of the view that this provision was wrongly invoked by the assessing officer. Accordingly we set aside the order of the Commissioner of Income -tax (Appeals) and restore the matter to the file of the assessing officer with the directions to tax only the interest income earned by the assessee during the year under account" 17. In respect of issue at Sl. No.2 above, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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