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TMI Blog2006 (9) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... pex Court. The order of penalty being ab initio void is liable to be cancelled. 3. That on the facts and in the circumstances of the case the CIT(A) as well as the Assessing Officer erred in passing the penalty order imposing the penalty. The orders of the CIT(A) and Assessing Officer are liable to be reversed and the penalty order be cancelled. 4. That the appellant may be permitted to present additional grounds of appeal both on questions of law and fact at the time of hearing of the appeal." 3. The facts of all the years under consideration are identical. Therefore, we shall discuss here in detail the facts for assessment year 1970-71. For the year under consideration (i.e., assessment year 1970-71), the assessee filed the original return on 5-10-1970 declaring total income of Rs. 15,57,747 which was assessed at Rs, 16,01,427. Notice under section 148 was issued on 23-6-1975. In response to notice under section 148, the assessee filed the return of income on 3-7-1975 declaring total income of Rs. 20,33,264. The additional income offered in the return filed in response to notice under section 148 was Rs. 4,66,790. The assessment was completed under section 143(3)/147 on 14- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r hearing on 31-7-1996. The assessee submitted the reply dated 28-8-1996 and after considering the same, the Assessing Officer vide his order dated 30-8-1996 levied the penalty of Rs. 4,65,290. The CIT(A) sustained the penalty levied by the Assessing Officer. Hence this appeal by the assessee. 5. At the time of hearing before us, the learned counsel for the assessee argued at length. He stated that the penalty imposed by the Assessing Officer is barred by limitation. As per section 275, clause (c) (sic), no order imposing a penalty can be passed after the expiry of financial year (sic) in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed. As per Explanation (ii), while computing the period of limitation any period during which the immunity granted under section 245H remained in force, is to be excluded. He stated that the penalty proceedings were initiated in the assessment order dated 14-9-1976. Two years from the end of the relevant financial year would expire on 31-3-1979. That the Settlement Commission passed the order waiving the penalty on 1-3-1979 and the Hon'ble Apex Court set aside the said order of the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the signature of the Registrar. He also referred to the Supreme Court Rules to support his contention that the relevant date would be the date of receipt of the order and not the date of pronouncement of the order. He also contended that the Assessing Officer cannot act without receiving the order, because the Assessing Officer is supposed to act as per the direction of the Hon'ble Apex Court. The exact direction can be ascertained only by reading the judgment. The Assessing Officer cannot act on the basis of the pronouncement of the judgment in the open Court. Therefore, it is logical to hold that the immunity would continue till the order of the Apex Court is received by the revenue. He also referred to section 268 wherein it is prescribed that the time taken for obtaining the copy of the order shall be excluded while computing the period of limitation. He also stated that there is similar provision in section 12, sub-section (2) of the Limitation Act. He, therefore, stated that while computing the period of limitation prescribed under section 275(c), the time taken by the revenue for obtaining the copy of the decision of the Apex Court is to be excluded. 6.2 He further sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended by the learned counsel that after decision of the Apex Court, the penalty notice issued by the Assessing Officer on 9-5-1996 had already become barred by limitation. Therefore, thereafter even if the hearing was adjourned at the request of the assessee, it will not bring the penalty order within the period of limitation. In view of the above, it is reiterated by the learned counsel that the penalty order was barred by limitation. 8. We have carefully considered the arguments of both the sides and perused the material placed before us. The question before us is whether the penalty orders passed by the Assessing Officer are barred by limitation. It is con tended by the Ld. D.R. that section 275 prescribes period of limitation. The sub-clauses of this section provide certain conditions under which the period of limitation as per the relevant sub-clause would be applicable. As per the Ld. D.R., the facts of the assessee's case do not fall within any of the sub-clauses of section 275 and, therefore, the period of limitation prescribed under section 275 cannot be applicable to the cases under appeal. The learned counsel for the assessee, on the other hand, claimed that secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debarred from passing the penalty order after the expiration of two years from the end of the financial year in which the proceeding for imposition of penalty has been initiated. However, as per Explanation, certain period is to be excluded while computing the period of limitation. As per Explanation (ii) of section 275, the period during which immunity granted under section 245H by the Settlement Commission remained in force is to be excluded while computing the period of limitation. Now question would arise with regard to the date on which immunity was granted under section 245H by the Settlement Commission and the date up to which the immunity remained in force. 8.2 The contention of the revenue is that the period of limitation starts by passing of the order under section 245D(1) by the Settlement Commission, because as soon as the Settlement Commission passes the order under section 245D(1), the Settlement Commission has the exclusive jurisdiction upon the assessee and, therefore, the Assessing Officer cannot pass any order levying penalty under section 271(1)(c) upon the assessee. In principle, we agree with this contention of the Ld. D.R. However, the question is whether a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uest you to settle fully all our income-tax problems.'" 8.3 From the above, it is evident that the assessee vide letter dated 16-1-1979 requested for settlement of assessment years 1970-71 to 1974-75 also. At page-23 of the order, the Settlement Commission held as under:- "This brings us to the next point, viz., whether the assessments for the earlier years should be reopened by the Commission." Further, at page-28 in para-40, the Settlement Commission held as under:- "In the circumstances, it is our considered view that, for reasons recorded earlier on the facts before us, for the proper disposal of this case, it is necessary and expedient to reopen the assessment proceedings completed by the ITO/AAC for the assessment years 1970-71 to 1974-75, we reopen these. We may also observe that not only are we competent to reopen the assessment proceedings for the said five years; but we feel it is incumbent on us to do so on the facts of the case in order to ensure an effective settlement of the case before us as in enjoined by law on us." 8.4 Thus, in the order under section 245D(4) dated 1-3-1979, the Settlement Commission first considered the question whether the earlier year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... During the course of settlement proceedings for assessment year 1975-76, the assessee requested for reopening of earlier assessment years, i.e., assessment years 1970-71 to 1974-75 and also requested for the waiver of penalties for these years. The Settlement Commission in its order under section 245D dated 1-3-1979 first examined whether they have power of reopening of earlier assessment years and whether they have power of assuming jurisdictions to the penalty proceedings which were already initiated in those years. After considering the submissions of the parties, they arrived at the conclusion that they have the power to reopen the earlier assessment years as well as to assume jurisdiction for the penalty proceedings already initiated in earlier years and thereafter waived the penalties under section 271(1)(c) for all the years. Thus, the period of immunity under section 245H would begin only on passing of the order under section 245D(4) by the Settlement Commission on 1-3-1979 and not earlier, as contended by the revenue. 9. The next question is up to which date the immunity remained in force, i.e., till the date of the passing of the order by the Hon'ble Apex Court or till ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o pass the consequential order in conformity with the decision of the Hon'ble Apex Court. However, in the case under consideration before us, there was no reference to the Hon'ble Apex Court under section 257 of the Income-tax Act and the ITAT is not required to pass any consequential order. The assessee had filed the appeal to the Hon'ble Apex Court against the decision of the Settlement Commission dated 1-3-1979. The Hon'ble Apex Court set aside the order of the Settlement Commission to the extent it has dropped the penalty proceedings relating to assessment years 1970-71 to 1974-75. It also held that the Settlement Commission shall modify its judgment and order in accordance with the decision of the Apex Court. However, the revenue has not waited till the decision of the consequential order required to be passed by the Settlement Commission. The revenue has acted on the decision of the Hon'ble Apex Court wherein the Apex Court after setting aside the order of the Settlement Commission has held that the penalty proceedings can now proceed according to law. Therefore, the provision under section 260 relating to the service of the order of the Hon'ble Apex Court upon the ITAT and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en able to impose the penalty within such period of limitation due to certain practical difficulties, the period of limitation cannot be extended. If the penalty is not levied within the time prescribed under section 275, it is barred by limitation and the existence of the reasonable cause for the failure of the Assessing Officer to levy the penalty within the period of limitation would be irrelevant. 13. The Ld. D.R. has also contended that the time taken for giving an opportunity to the assessee for rehearing under section 129 is to be excluded. In principle, we agree with this contention of the Ld. D.R. However, we find that the Assessing Officer, after the decision of Hon'ble Apex Court, has issued notice on the assessee on 9-5-1996. By this period, the penalty proceedings had already become barred by limitation as under:- (i) Penalty proceedings under section 271(1)(c) were initiated on 14-9-1976 in the assessment order passed under section 143(3)/147. (ii) Two years from the end of the financial year 1975-76 would be over on 31-3-1979. The Settlement Commission vide order dated 1-3-1979 waived the penalty imposable for the year under consideration. (iii) On 1-3-1979, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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