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TMI Blog2023 (9) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... n confirming penalty of Rs. 60,000/- imposed by the A.O u/s. 271(1)(b). The penalty imposed by the A.O and confirmed by CIT(A) is illegal and not justified. 2. Without prejudice to ground no.1 Ld. CIT(A) erred in confirming penalty without appreciating the fact that the A.O has levied penalty without providing any opportunity of being heard to the appellant. 3. Without prejudice to ground no.1 and 2, the Ld. CIT(A) erred in confirming penalty without appreciating the fact the penalty order passed by the A.O is illegal and ab initio void inasmuch as same is barred by limitation. The penalty order passed by the A.O and affirmed by the Ld. CIT(A) is liable to be quashed. 4. The appellant reserves the right to add, amend or alter any ground/s of appeal." 3. Succinctly stated, as the assessee who was engaged in manufacturing and trading of iron and steel items had carried out substantial business transactions during the year but had failed to file his income return; therefore, the A.O. initiated proceedings u/s. 147 of the Act. Notice u/s. 148 dated 30.03.2000 was issued to the assessee. 4. As the assessee failed to comply with the notices issued to him, therefore, the A.O. was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , while upholding the penalty imposed by the A.O u/s. 271(1)(b) of the Act had observed as under: "8.1 During the appellate proceeding, the appellant has made written submission in respect of this ground of appeal which is produced as under: 2.1. The appellant was not served with any show cause notice before levying penalty as in the Income Tax records of appellant, address mentioned was of Vaishali Nagar, Bhilai wherein the office premises of Rolling Mill business was situated and due to continued losses in the business, the Rolling Mill was sold off in FY 1995/96 and subsequently the office of appellant shifted to the other address C/o Shri Rajkumar Jain, Opp. of Dr. P. N. Jain Mandir Road, Durg (C.G.). 2.2. The address at which notice etc. is to be served, is prescribed in Rule 127(2) I. T. Rules, 1962, which provides that the address would be the address available in PAN database or the income tax return or in the last income tax return or in the case of a company, address of the registered office as available in the website MCA The second proviso to Rule 127(2) provides that where the communication cannot be delivered at any of the above address, the communication shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order was passed on 15.03.2002 u/s 144/147, as is mentioned in the first pare of the penalty order. 3.2 As per the sec. 275(1)(c), no order imposing penalty could be passed after the expiry of financial year in which the proceedings, in the c-raise of which action for imposition of penalty was initiated, are completed, or six months from the end of the month in which action for imposition on penalty is initiated, whichever is later. 3.3 We are enclosing herewith a copy of the assessment order dated 15.03.2002 (page no. 01 to 03). A perusal of such assessment order shows that the penalty proceeding u/s 271(1)(b) was initiated by AO along with passing of the assessment order and therefore, as per sec. 275(1)(c), the penalty order could be passed either by 31:03.2002 or 30.09.2002, whichever is later. Therefore, the penalty could have been imposed only by 31092002 whereas it has been imposed on 27.07.2015. Therefore, the penalty order is barred by limitation. 3.4 The language of sec. gnat is noteworthy. It says "no order imposing a penalty under this Chapter shall be passed'. Having regard to the language used, it is evident that beyond the limitation period prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been initiated in the course of assessment proceedings itself, by way of issue of notice under section 274 read with section 271(1)(b) of the Act. The relevant assessment order was admittedly a subject matter of appeal before the Appellate Tribunal. The appeal was dismissed by the ITAT, Raipur vide order dated 17.12.2014, which was received in the office of CIT-1, Raipur on 20:01.2015. These facts are clearly mentioned at Para 6 of the penalty order itself, - "6. The. Hon'ble CIT(A), Raipur dismissed the appeals of the assessee on 10.07.2003. The Hon'ble ITAT, Bilaspur Bench, Bilaspur vide order date4.1 5:02:2008 set-aside the order of the Ld. Raipur. The Department had challenged the above order before the Hon'ble High Court of Chhattisgarh, Bilaspur. The Hon'ble High Court vide its order dated 17.01.2012 had restored it back to the Hon'ble ITAT. Subsequently, the Hon'ble ITAT, Raipur Bench, Raipur has dismissed all the appeals of the assessee vide order dated 17.12.2014 (received in the O/o the CIT-1, Raipur on 20.10.2015) and upheld the AO's order." 9.2.1 On these facts, it is evident that the period of limitation for imposing penalty has to be constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of ACIT Vs. Vaish Bros. & Co. (2005) 93 TTJ 476 (Luck.). Referring to the order of the Tribunal, it was submitted by the Ld. AR that the Tribunal had, in the context of penalty u/s. 271B of the Act, observed that as the same was not related to the computation of income, therefore, the time limitation within which the same could be imposed was regulated by the provisions of Section 275(1)(c) of the Act. The Ld. AR, drawing an analogy from the aforesaid judicial pronouncement, submitted that as penalty u/s. 271(1)(b) of the Act was similar to Section 271B of the Act, i.e., neither of those were dependent on the income assessed; therefore, on an equal footing, the same too was regulated by the time limit provided in clause (c) of sub-section (1) to Section 275 of the Act. 11. Per contra, the Ld. Departmental Representative (for short, 'DR') relied on the orders of the lower authorities. 12. Before proceeding any further, it would be relevant to cull out Section 275 of the Act, which lays down the time limits for imposition of penalties under Chapter XXI of the Act, as under: "275. (1) No order imposing a penalty under this Chapter shall be passed- (a) in a case where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the order of the Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Supreme Court is received by the Principal Chief Commissioner or Chief Commissioner or the Principal Commissioner or Commissioner or the order of revision under section 263 or section 264 is passed, an order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty may be passed on the basis of assessment as revised by giving effect to such order of the Commissioner (Appeals) or, the Appellate Tribunal or the High Court, or the Supreme Court or order of revision under section 263 or section 264: Provided that no order of imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty shall be passed- (a) unless the assessee has been heard, or has been given a reasonable opportunity of being heard; (b) after the expiry of six months from the end of the month in which the order of the Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Supreme Court is received by the Principal Chief Commissioner or Chief Commissioner or the Principal Commissioner or Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the order of the Commissioner (Appeals) is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever is later. 14. Be that as it may, as the penalty proceedings u/s. 271(1)(b) of the Act in the present case, had been initiated by the A.O in the body of the assessment order, therefore, we find no justification as to why time period for imposing the said penalty would not be regulated by clause (a) of sub-section (1) to Section 275 of the Act. Although the claim of the Ld. AR that as penalty u/s. 271(1)(b) of the Act is not dependent on the framing of the assessment, thus, the time period for imposing the same would not be regulated by clause (a) of sub-section (1) to Section 275; and would fall within the realm of the time period provided in the residuary provision contemplated in clause (c) of sub-section (1) to Section 275 of the Act, at the first blush appeared to be very convincing, but we are afraid that the same does not merit acceptance. We, say so, for the reason, that as the penalty proceedings u/s. 271(1)(b) had been initiated by the A.O in the body of the assessment order, therefore, there is no reason t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dependently initiated for a default of the assessee to comply with the statutory obligation of getting his accounts audited as per the mandate of Section 44AB of the Act. Based on our aforesaid observations, we are of the considered view that as clause (a) of sub-section (1) to Section 275 of the Act specifically provides that where the penalty has, inter alia, been initiated in the assessment order, then the same is required to be imposed within the time span therein contemplated, therefore, there can be no justification in concluding that the penalty u/s. 271(1)(b) of the Act that was initiated by the A.O in the body of the assessment order would not be regulated by the time limit provided in clause (a) of sub-section (1) to Section 275 of the Act . 16. Apropos the chronology of the proceedings in the case of the assessee, for determining as to whether the penalty imposed by the A.O u/s 271(1)(b) of the Act, vide his order dated 27th July, 2015, is within limitation as provided in clause (a) of sub-section (1) to Section 275 of the Act, we shall cull out the observations recorded by the CIT(Appeals) in his order, as under: "The Hon'ble CIT(A), Raipur dismissed the appeals of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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