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TMI Blog2025 (1) TMI 1237X X X X Extracts X X X X X X X X Extracts X X X X ..... edings by issuance of notice under section 271D of the Act on 10/11/2017, thereby the time limit for computation of penalty proceedings as stipulated in section 275 (1) (c) of the Act expires on 31/5/2018, which is within six months from 10/11/2017 and not 31/5/2017 as held by Tribunal"?. A Co-ordinate Bench of this court vide order dated 14.12.2020 had admitted the appeal on the above substantial question of law, of course, which has not been well articulated. Be that as it may. 3. After service of notice, Respondent-Assessee having entered appearance through his counsel resisted the appeal, making submission in justification of the impugned orders and the reasons on which they have been constructed. 4. BRIEF FACTS OF THE CASE EMERGING FROM THE RECORD: 4.1 Assessee is a businessman inter alia doing digital printing. He had filed IT Return for the Assessment Year 2012-13. That was picked up for Scrutiny Assessment u/s. 143 (3) of the 1961 Act and that eventually resulted into passing of Assessment Order on 26.02.2015 by the 2nd respondent-ITO, whereby two additions were made to the declared income. 4.2 In the light of said Assessment Order, the 2nd appellant made a reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Law Maker's intent is as clear as Gangetic Waters; the above provision prescribes a specific limitation period for accomplishing the penalty proceedings, once initiated; apparently, no limitation period is prescribed for initiation of such proceedings; penalty proceedings are initiated once the competent authority issues notice to the Assessee to show cause against the proposed levy of penalty; in the instant case, admittedly the initiation is unfettered by any statutorily imposed limitation and the order imposing penalty is well within the prescribed time and therefore, the ITAT grossly erred in relieving the Assessee from the penalty. Per contra, learned counsel appearing for the Assessee contended that: the intent of the Law Makers is to ensure that penalty proceedings cannot be taken up whimsically whenever the authorities want; when the ITO makes reference to the competent authority, that itself is the triggering point of initiation; reckoned from such reference, the order imposing penalty is time barred and therefore, unsustainable. 6.2 Textually speaking, Parliament has prescribed the limitation period for imposing penalties by accomplishing penalty proceedings an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imposition of penalty. As noted above, the AO had found that it was the admitted case that the assessee had defaulted in deduction of TDS, which it was obliged to do. It had, accordingly, made a reference to the learned JCIT. This was obviously for the purposes of imposition of penalty. The reference, thus, clearly marked the first step for initiation of action for imposition of penalty. The Show Cause Notice issued subsequently was to provide the assessee an opportunity to show cause why penalty not be imposed." 6.3 Another Division Bench of Delhi High Court in CLIX CAPITAL SERVICES PVT. LTD., v. JOINT COMMISSIONER OF INCOME TAX (2023) 459 ITR 470 (Delhi), having scanned the text of Section 275 (1) (c) of the 1961 Act has at Paragraph Nos. 15, 16, 17 & 20 has observed as under: "It is, therefore, Mr Maratha's submission, that since the legislature has not provided a trigger point for completion of proceedings under Section 271C, the date of commencement can only be that date when the SCN is issued under Section 274 of the Act...According to us, at the heart of the matter, is the interpretation that is required to be given to the provisions contained under Section 275 (1) ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... courts on the State policy of limitation as follows: "The Courts have expressed three differing reasons supporting the existence of statutes of limitation, namely (1) that long dormant claims have more cruelty than justice to them, (2) that the defendant might have lost the evidence to disprove a stale claim, and (3) that persons with good causes of action who are able to enforce them should pursue with reasonable diligence." The Law Commission of India in its 89th report made in 1983 had suo moto examined the law of limitation. It concised its view as under: "1.5 The policies underlying the law of limitation are ultimately based on justice and convenience. An individual should not live under the threat of a possible action for an indeterminate period, since it would be unjust. Again the defendant should be saved the task of defending stale causes of action as it is often inconvenient. Further, vigilance in the pursuit of rightful cases should be encouraged so that these are the ethical or rational justifications for the law of limitation. All that has been said can be summarised by stating that the law of limitation rests upon three main foundations, justice, conve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already discussed the policy objective or the purpose of limitation enactments or provisions relating to limitation in other enactments. In matters like this, the doctrine of purposive interpretation in law has to be resorted to. In Cabell vs Markham (1945) 148 F2d 737 Learned Hand J explained the merits of purposive interpretation as under: "Of course it is true that the words used, even in their literal sense are the primary and ordinarily the most reliable, source of interpreting the meaning of any writing; be it a statute, a contract, or anything else. But it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary; but to remember that statutes always have some purpose or object to accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaning." (emphasis supplied) Looked at in this background, the twin purposes that have to guide our interpretation are the following (i) the policy underlying the law of limitation rather than the black letter has to be implemented and (ii) unfettered discretion in the hands of Additional Commissioner on the timing of issuance of a show cause not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot impressed by the argument advanced on behalf of the appellant that the proceedings for the imposition of penalty were initiated not by the Income Tax Officer but by the Inspecting Assistant Commissioner when the matter had been referred to him under section 274(2) of the Act. The proceedings for the imposition of penalty in terms of sub-section (1) of section 271 have necessarily to be initiated either by the Income Tax Officer or by the Appellate Assistant Commissioner. The fact that the Income Tax Officer has to refer the case to the Inspecting Assistant Commissioner if the minimum imposable penalty exceeds the sum of rupees one thousand in a case falling under clause (c) of sub-section (1) of section 271 would not show that the proceedings in such a case cannot be initiated by the Income Tax Officer. The Income Tax Officer in such an event can refer the case to the Inspecting Assistant Commissioner after initiating the proceedings. It would, indeed, be the satisfaction of the Income Tax Officer in the course of the assessment proceedings regarding the concealment of income which would constitute the basis and foundation of the proceedings for levy of penalty". 6.9 The re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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