High Court Of Karnataka
B.N. Amarnath vs. CIT & Anr.
Sections 271(1)(c), 275(1)(c), 275, Expln.
Asst. Year 1995-96
K.L. Manjunath, J.
Writ Petn. No. 18630 of 2002
4th October, 2002
Counsel Appeared
R. Rama Murthy, for the Assessee : M.V. Sheshachala, for the Respondents
ORDER
K.L. MANJUNATH, J. :
Petitioner in this writ petition has questioned the correctness of the order passed by the ITO, Bangalore, Salary Ward No. 3(3) dt. 4th Oct., 2000, under s. 271(1)(c) of the IT Act ,1961. Petitioner is an employee in BEML, Bangalore, deriving income mainly from salary, A residential site was allotted to him by the BEML Employees Co-operative Society. Petitioner sold the said site on 29th March, 1995, for a valuable sale consideration of Rs. 1,76,000. Assessment of the petitioner for the year 1995-96 was completed under s. 144 r/w s. 147 of the IT Act” (‘the Act’ for short) on 23rd March, 2000, determining the total income of Rs. 1,59,884 which is inclusive of long-term capital gain of Rs. 1,27,210. Subsequently, notice under s. 274 r/w s. 271 of the Act was served on the petitioner on the ground that the assessee failed to disclose the long-term capital gains arising out of the sale of his residential site escaping capital gains for the asst. yr. 1995-96 within the meaning of s. 147 of the Act. Notice under s. 148 of the Act was issued calling upon the petitioner to file his returns. As there was no response from the petitioner, notice under s. 142(1) of the Act was issued and served on the assessee and there was no response for the said notice also from the petitioner. Finally, one more notice was given on 22nd March, 2000, and he was called upon to furnish details called for. As there was no response from the petitioner, assessment was completed under s. 144 r/w s. 147 of the Act on 23rd March, 2000. Subsequently, penal action was initiated under s. 271(1)(c) of the Act on 28th March, 2000, calling upon the petitioner to show cause as to why an order imposing penalty should not be made under s. 271 of the Act. As there was no response from the petitioner to the said notice, Department gave two more opportunities to the petitioner by issuing notices dt. 25th Aug., 2000, and 28th Sept., 2000, under s. 129 of the Act. As there was no response to the said notices by the petitioner, penalty of Rs. 25,442 has been levied under s. 271(1)(c) of the Act on 4th Oct., 2000.
The said order was questioned by the petitioner by filing a revision petition before the CIT under s. 264 of the Act. The said petition came to be rejected by R-1 CIT by his order dt. 11th March, 2002, which is produced as Annexure-C. These two orders are called in question in this writ petition.
The main contention of the petitioner before, this Court is that the order passed by R-2 as per Annexure-B levying penalty of Rs. 25,442 on 4th Oct., 2000, as per Annexure-B was clearly barred by time and, therefore, the order passed by R-2 has to be set aside. Petitioner has also raised an important question of law that whether the Expln. 1 to s. 275 of the Act can be made use of by the Department to save the limitation when the assessee has not requested the Department to rehear the matter under the proviso to s. 129 of the Act.
Before the CIT the petitioner has mainly questioned the correctness of the order passed by R-2 as per Annexure-B contending that no penalty can be levied by R-2 beyond six months from the end of the month in which action for imposition of penalty is initiated. Learned counsel for the petitioner has relied upon s. 275(1)(c) of the Act which reads, as hereunder: “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.”
From this provision, it is clear that penalty can be imposed within six months from the end of the month in which action for imposition of penalty is initiated. It is not in dispute that the financial year comes to an end on 31st March, 2000, even though the assessment in respect of the petitioner was completed on 23rd March, 2000. If the authorities are intending to impose any penalty in the case of the petitioner, they have to levy the same under s. 271(1)(c) of the Act within six months from 31st March, 2000. In the instant case, penalty has been imposed beyond six months from 31st March, 2000, and that there is a delay of 4 days.
8. Department has made an attempt to support the order passed by R-2 by relying upon the provisions of s. 129 of the Act. To support the contention of the Department, learned counsel for the Department has relied upon the Expln. 1 to s. 275 of the Act. Expln. 1 to s. 275 of the Act reads hereunder: “Explanation : In computing the period of limitation for the purpose of this section— (i) the time taken in giving an opportunity to the assessee to be reheard under the proviso to s. 129; (ii) any period during which the immunity granted; under s. 245H remained in force; and (iii) any period during which a proceeding under this chapter for the levy of penalty is stayed by an order or injunction of any Court, shall be excluded.”
It is clear from the Explanation to s. 275 of the Act that the assessee is entitled to seek an opportunity for rehearing under the proviso to s. 129 of the Act. From this it is clear that if there is any application or a request is made by the assessee to provide him an opportunity for rehearing and if such rehearing is given by the authorities, then the time taken in giving opportunity to the assessee can be computed for the purpose of limitation. Therefore, it is clear whether this proviso can be made use of to compute the period of limitation even without there being any request by the assessee and at the instance of the Department.
It is not in dispute that notice under s. 129 of the Act has also been issued by the ITO. But unfortunately, the said notice was not issued at the instance of the petitioner. The petitioner at no point of time has requested the authorities to provide him an opportunity of rehearing. But the Department on its own went on issuing notices under s. 129 of the Act. If the Department on its own has issued notice one after the other and when there is no request made by the assessee for rehearing, whether the Department can levy penalty by relying upon Explanation to s. 275 of the Act from 31st March, 2000. The respondents are not in a position to convince this Court that there was an attempt made by the petitioner requesting the Department to provide him an opportunity of rehearing. When there is no request by the petitioner, Department on its own cannot take shelter to condone the lapses of the Department and levy penalty beyond six months from 31st March, 2000. Therefore, it is clear that the Department has committed an error in levying penalty as per Annexure-B dt. 4th Oct., 2000, which is clearly barred by limitation by 4 days. It is also clear from the above discussion that Explanation to s. 275 cannot be invoked by the Department unilaterally to compute the period of limitation on its own without there being any request for rehearing by any assessee. Therefore, the order passed by R-2 which has been confirmed by R-l as per Annexure- C are misconceived and the order passed by R-2 as per Annexure-B is clearly barred by limitation and the same is required to be quashed.
In the result, this writ petition is allowed. Annexures B and C, dt. 4th Oct., 2000, and 11th March, 2002, respectively are hereby quashed. Rule is made absolute.
[Citation : 259 ITR 590]
