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TMI Blog2023 (8) TMI 820X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007 and end of such financial year is 31-03-2008, which means the Addl. CIT barred from imposing penalty after the end of financial year in which assessment was completed, i.e. admittedly after 31-03-2008. As it is evident from penalty order that the ACIT initiated penalty proceedings by issuing notice u/s. 274 r.w.s. 271D and 271E of the Act on 11-03-2010 and imposed penalty vide order dated 24-09-2010. It is clear from the above that the Addl. CIT initiated penalty proceedings on 11-03-2010 i.e. after the expiry of financial year in which the proceedings, in the course of which action for the imposition of penalty to be initiated, therefore, the very initiation is barred by limitation as the Addl. CIT did not initiate penalty proceedings in the course of assessment proceedings. Decided against revenue. - Shri S.S. Viswanethra Ravi, Judicial Member And Shri G.D. Padmahshali, Accountant Member For the Assessee : Shri Pramod Shingte For the Revenue : Shri Mahesh Jasnani ORDER PER S.S. VISWANETHRA RAVI, JM : This appeal by the Revenue against the order dated 01-08-2019 passed by the Commissioner of Income Tax (Appeals)-2, Kolhapur [ CIT(A) ] for assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the said employee confirmed the fact of availing cash loans of Rs. 23,28,690/- and repayment thereon in cash by the assessee which is evident from para 2 of the penalty order. As noted above, the penalty imposed u/s. 271E of the Act in assessee s own case was cancelled by this Tribunal, which is on record, basing on which the CIT(A) cancelled the penalty u/s. 271D of the Act in the present case. We note that the main contention of the assessee before the CIT(A) was that the initiation of penalty proceedings were barred by limitation. In support of the same, the ld. AR drew our attention to the provisions u/s. 275(1)(c) of the Act and argued that the assessment was completed on 30-11-2007 and penalty proceedings u/s. 271D and 271E of the Act were initiated vide notice dated 11-03-2010, is barred by limitation. He vehemently argued that Clause (c) of sub-section (1) of section 275 is applicable to the facts on hand. He relied on the order of this Tribunal in assessee s own case u/s. 271E of the Act and drew our attention to para 6 of that order at page No. 73 of the paper book, argued that this Tribunal by placing reliance on the decision of Hon ble High Court of Rajasthan in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad been passed within such extended period from date of the appellate decision against the assessment order for the assessment year during which notice under Sections 271D and 271E was issued. 21. It would be apposite here to refer to Section 275 in its fullness: 275. Bar of limitation for imposing penalties.--(1) No order imposing a penalty under this Chapter shall be passed (a) 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 an appeal to the Appellate Tribunal under Section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the 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; (b) in a case, where the relevant assessment or other order is the subject-matter of revision under Section 263, after the expiry of six months from the end of the month in which such order of revision is passed; (c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings in the course of which the penalty proceedings were initiated in terms of Section 271 or Section 273 which were the principal provisions for imposing penalty under Chapter XXI. Since the initiation of penalty proceedings was linked with assessment proceedings and the orders in such assessments were subject to appeal, the findings in such proceedings ordinarily became the foundation for initiating proceedings for penalty and remained relevant evidence to reach a final conclusion in penalty proceedings which were otherwise independent. Where assessment proceedings in the course of which penalty proceedings were initiated became the subject-matter of appeal and there was modification or reversal of findings, it affected final result of penalty proceedings also. 24. Section 275 was substituted by the Taxation Laws (Amendment) Act, 1970 which came into effect with effect from April 1, 1971. The change was explained by the Board vide circular 56 dated March 19, 1971. Significantly, it postulated that Section 275 of the Income-tax Act which specified the timelimit for completion of penalty proceedings has been substituted by a new section. Under the existing section, pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time limit for completion of penalty proceedings which was generally two years from the end of financial year in which such proceedings were completed or six months from the end of the month in which action for imposition for penalty was initiated, whichever period expired later. 27. By these amendments, the three categories were made for applying limitation for completing the penalty proceedings taking into consideration the various penalty proceedings for default of certain provisions of the Income-tax Act which are not necessarily linked with proceedings for any particular assessment year in the course of which only penalty proceedings were required to be initiated. Such consequences of default were not linked with the principal assessment proceedings for any specific assessment year but were independent of it. 28. By substituting Section 275(1), which became operative from April 1, 1989, the provision divided cases for the purpose of prescribing limitation for completing penalty proceedings into three categories: (i) Category I covers cases where the assessment to which the proceedings for imposition of penalty relate is the subject-matter of an appeal to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e financial year in which the proceedings in the course of which action for the imposition of penalty has been initiated, are completed, or 6 months from the end of the month in which the order of Commissioner (Appeals) or, as the case may be, of the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later. 33. Apparently, Clause (a) governs the categories which are integrally related to the assessment proceedings and are not independent of it. 34. We have also noticed that this provision was brought into effect in 1970 with effect from April 1, 1971, so that proceedings may not require rectification or modification depending on the outcome of the appeal against the orders passed in the relevant assessment proceedings or the other proceedings in the course of which the penalty proceedings are required to be initiated. 35. We have also noticed that Sections 271 and 273 were the two original penalty provisions, which require the penalty proceedings to be initiated during the course of relevant assessment proceedings or the other relevant proceedings as the case may be. The penalty proceedings could also be initiated durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, the completion of appellate proceedings arising out of the assessment proceedings or the other proceedings during which the penalty proceedings under Sections 271D and 271E may have been initiated has no relevance for sustaining or not sustaining the penalty proceedings and, therefore, Clause (a) of Sub-section (1) of Section 275 cannot be attracted to such proceedings. If that were not so Clause (c) of Section 275(1) would be redundant because otherwise as a matter of fact every penalty proceeding is usually initiated when during some proceedings such default is noticed, though the final fact finding in this proceeding may not have any bearing on the issues relating to establishing default e.g. penalty for not deducting tax at source while making payment to employees, or contractor, or for that matter not making payment through cheque or demand draft where it is so required to be made. Either of the contingencies does not affect the computation of taxable income and levy of correct tax on chargeable income; if Clause (a) was to be invoked, no necessity of Clause (c) would arise. 39. Thus, both on the ground that the transaction in question retention of sale price by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) i.e. section 275(1)(b) of the Act covers cases where the relevant assessment is the subject matter of revision u/s. 263 of the Act. Category (3) i.e. section 275(1)(c) of the Act covers all the cases not falling within category (1) and (2) i.e. section 275(1)(a) and 275(1)(b) respectively, governed by Clause (c) of sub-section (1) of section 275 of the Act. That being so, the Co-ordinate Bench of this Tribunal in assessee s own case in ITA No. 1238/PUN/2015 for penalty charge u/s. 271E of the Act following the decision of Hon ble High Court of Rajasthan in the case of Hissaria Bros. (supra) held the penalty proceedings initiated u/s. 271E of the Act is barred by limitation. 9. Further, opined that section 275(1)(a) of the Act governs categories which are integrally related to the assessment proceedings and are not independent of it, the expression, other relevant thing used in section 275(1)(a) and 275(1)(b) is significantly missing from Clause (c) of section 275(1) to make out the distinction very clear where the filing of appeal in respect of order passed in proceedings during which the penalty proceedings were initiated is not relevant, where the assessment proceedings ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner (Appeals) is received by the Chief Commissioner or Commissioner, whichever is later;] (b) in a case where the relevant assessment or other order is the subject-matter of revision under section 263[or section 264], after the expiry of six months from the end of the month in which such order of revision is passed; (c) in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later.] 11. On careful reading of the above said provisions, we note that section 275 prescribes bar of limitation for imposing penalties. Sub-section (1) explains no order imposing a penalty under this chapter shall be passed. Clause (c) of sub-section (1) prescribes bar of limitation, in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed , which means, the Addl. CIT barred from initiating penalty proceedings after the expir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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