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TMI Blog2019 (11) TMI 404X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all these appeals call into question correctness of the relief granted to the taxpayers by the Commissioners of Income Tax (Appeals) and, most importantly, the tax effect involved in all these appeals does not exceed ₹ 50,00,000 in each of these appeals. The cross objections taken up for hearing are only such cross objections as emanate from these appeals and are broadly in support of the orders passed by the Commissioner (Appeals). In these cases, in the light of the discussions with the Principal Chief Commissioner of Income Tax (Gujarat) and representatives of the Ahmedabad ITAT Bar Association, individual notices are dispensed with; notices of hearing are given only through the notice board. 2. It is in this backdrop that we are pleased to take note of a very pragmatic and taxpayer friendly policy decision by the Government of India for reducing the income tax litigation. Vide CBDT circular dated 8th August, 2019, the income tax department has further liberalized its policy for not filing appeals against the decisions of the appellate authorities in favour of the taxpayers, wherein tax involved is below certain threshold limits, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll issue that we must deal with. 4. Smt Aparna Agarwal, learned Departmental Representative, however, has a point to make. She points out that the circular dated 8th August 2019 is not clearly retrospective inasmuch as it specifically states in para 4 that (t)he said modifications shall come into effect from the date of issue of this Circular . It is thus pointed out that this sentence gives an impression that is only after the date of the said circular that the departmental appeals will not be filed in the cases within the specified tax effect limits. We are urged to bear in mind the impact of this observation while giving effect to the circular dated 8th August, 2019. She, however, hastens to add that she is yet to have any specific instructions on the issue and she leaves it for the bench to take the appropriate call. Learned representatives appearing for the taxpayers vehemently oppose the suggestion implicit in her submissions. All of them are unanimous in their argument that the circular must be held to have retrospective application and must equally apply to the pending appeals as well. Shri J P Shah, Senior Advocate, points out that the circular dated 8t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the same lines, arguments are advanced by the learned representatives which, for the sake of brevity and to avoid repetition, we are not referring to in more specific details. In brief rejoinder, learned Departmental Representative graciously leaves the matter to us. 5. Having considered the rival submissions and having perused the material on record, we do not have slightest of hesitation in holding that the concession extended by the CBDT not only applies to the appeals to be filed in future but it is also equally applicable to the appeals pending for disposal as on now. Our line of reasoning is this. The circular dated 8th August 2019 is not a standalone circular. It is to be read in conjunction with the CBDT circular no 3 of 2018 (and subsequent amendment thereto), and all it does is to replace paragraph nos. 3 and 5 of the said circular. This is evident from the following extracts from the circular dated 8thAugust 2019: 2. As a step towards further management of litigation. it has been decided by the Board that monetary limits for filing of appeals in income-tax cases be enhanced further through amendment in Para 3 of the Circular mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. This Circular will apply to SLPs/ appeals/ cross objections/ references to be filed henceforth in SC/HCs/Tribunal and it shall also apply retrospectively to pending SLPs/ appeals/ cross objections/references. Pending appeals below the specified tax limits in pare 3 above may be withdrawn/ not pressed. 7. In view of the above discussions, we hereby hold that the relaxation in monetary limits for departmental appeals, vide CBDT circular dated 8th August 2019 (supra) shall be applicable to the pending appeals in addition to the appeals to be filed henceforth. 8. Learned Commissioner (DR) then submits liberty may kindly be given to point out, upon necessary further verifications, and to seek recall the dismissal of appeals and restoration of the appeals in the cases (i) in which it can be demonstrated that the appeals are covered by the exceptions, and (ii) which are inadvertently included in this bunch of appeals, wherein the tax effect, in terms of the CBDT circular (supra), exceeds ₹ 50,00,000. None opposes this prayer; we accept the same. We make it clear that the appellants shall be at liberty to point out the cases which are wrongly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the month of October or November, the penalty order should have been passed within six months from the date of receipt of the order of the Tribunal, i.e., by April or May 2014, whereas the penalty has been imposed on 27/01/2017, which is beyond six months. The ld. counsel for the assessee submitted that the appeal effect has also been given in the month of September 2014 itself, which establishes that the order was received by the Revenue in the month of September, 2014 and the penalty should have been imposed latest by 31/03/2015. The ld. counsel for the assessee submitted that as such, the penalty imposed is barred by the limitation prescribed by section 271(1)(a), as rightly held by the ld. CIT(A). 9. Heard. The question is as to whether the Department is correct in contending that the limitation to pass penalty order in the present case is governed by the provisions of section 271(1A) of the Act, or if the ld. CIT(A) has rightly held the penalty order to be barred by the limitation prescribed by section 271(1)(a) of the Act. 10. Section 275 deals with bar of limitation for imposing penalty. Sub-section (1) of section 275 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action for imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal, is received by the Chief Commissioner or Commissioner, whichever period expires later. However, this limitation is applicable only if the Commissioner (Appeals) passed the order before 1st June, 2003, disposing of the appeal made before him; (ii) in a case where relevant assessment or other order is the subject matter of an appeal to the Commissioner (Appeals) under section 246 or section 246AQ, and the Commissioner (Appeals) passes the order on or after 1st June, 2003, disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Commissioner (Appeals) is received by the Chief Commissioner or Commissioner, whichever is later; (iii) In a case where, the relevant assessment or other order is the subject matter of revision unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. Sub-section (1A) of section 275, as is clear from the language employed therein, has been inserted so as to facilitate the revision of an order for the imposition of penalty or dropping the proceedings for the imposition of penalty, on the basis of subsequent revision of assessment by Commissioner (Appeals), or Appellate Tribunal, or High Court, or Supreme Court, or under section 263 or section 264 by the Commissioner. The object of insertion of section 275(1A) in the Act has been explained by the CBDT vide its Circular No.1 of 2007, dated 27.4.2007 [290 ITR (St.) 73]. It has been provided in this sub-section that in a case where the relevant assessment or other order is the subject matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A, or an appeal to the Appellate Tribunal under section 253, or an appeal to the High Court under section 260A, or an appeal to the Supreme Court under section 261, or revision under section 263 or section 264 and an order imposing, or enhancing, or reducing penalty, or dropping the proceedings for the imposition of penalty, is passed before the order of the Commissioner (Appeals), or the Appellate Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed within a specified period after the completion of the assessment. The order imposing penalty should be passed only within the specified time. An order passed after the expiry of period of six months from the appellate order would be barred by limitation. 15. On the other hand, as per section 275(1A), the objective is to ensure that even where proceedings were dropped or required to be dropped on successful appeal or revision, time limit is available for continuing the penalty proceedings on reversal of the order favourable to the assessee. A plain reading of the section evinces that the expiry of the period of six months as prescribed is to be reckoned from the date of completion of proceedings, or from the end of the month in which the order of the CIT(A) or, as the case may be, the Appellate Tribunal, is received. Now, 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, wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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