Karnataka H.C : Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the penalty proceedings initiated on 8th June, 1993 and completed on 15th Dec., 1993 were beyond the period of limitation ?

High Court Of Karnataka

CIT vs. Tam Tam Pedda Guruva Reddy

Sections 271B, 275(1)(c)

Asst. Year 1991-92

R. Gururajan & Jawad Rahim, JJ.

IT Appeal No. 60 of 1999

18th July, 2006

Counsel Appeared

M.V. Seshachala, for the Appellant : Dr. R.B. Krishna, for the Respondent

JUDGMENT

R. Gururajan, J. :

This appeal is at the instance of the Revenue.

2. Assessment order for the year 1991-92 was passed under s. 143(3) of the IT Act on 25th March, 1992. Thereafter, reassessment proceedings were initiated and completed in terms of an order dt. 30th Dec., 1994. In the meanwhile, noticing the failure to get the accounts audited under s. 44AB, a notice was issued on 8th June, 1993. Penalty was also levied on 15th Dec., 1993 by the Department. The said penalty was confirmed by the CIT(A). The Tribunal has set aside the penalty on the sole ground of limitation. It is in these circumstances, Revenue is before us. This Court at the time of admission has chosen to frame the following questions of law : “Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the penalty proceedings initiated on 8th June, 1993 and completed on 15th Dec., 1993 were beyond the period of limitation ?”

3. Heard the learned counsel for the parties and perused the material on record.

4. In terms of the question of law framed by this Court, we are only concerned as to whether the imposition of penalty in terms of the provisions governing penalty is sustainable or not ?

5. Admitted facts would reveal of no audit. The same is noticed by the Tribunal. After noticing, the Tribunal was of the view that penalty could not have been levied, since according to the Tribunal, it was issued 14 months after the completion of the assessment and it is affected by limitation under s. 271B of the Act. The said section provides for levy of penalty and the quantum of penalty in terms of the statute. Sec. 271B reads as under : “If any person fails to get his accounts audited in respect of any previous year relevant to an assessment year or obtain a report of such audit as required under s. 44AB or furnish the said report along with the return of his income filed under sub-s. (1) of s. 139, or along with the return of income furnished in response to a notice under cl. (i) of sub- s. (1) of s. 142, the AO may direct that such person shall pay, by way of penalty, a sum equal to one half per cent of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of one hundred thousand rupees, whichever is less.” Time limitation is prescribed in terms of s. 275(1) of the Act. We are only concerned with s. 275(1) (c) of the Act. The same reads as under : “(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.” A combined reading of ss. 271B and 275(1)(c) would show that six months period of limitation is with reference to initiation of proceedings in terms of s. 275(1)(c) of the Act. In the case on hand, it is seen that initiation was done on 8th June, 1993 and the penalty was levied on 15th Dec., 1993. It is within six months from the date of initiation of penalty proceedings.

6. At this stage, we must also notice s. 275(1)(b) of the Act. It reads as under : “(b) in a case where the relevant assessment order or other order is the subject-matter of revision under s. 263, after the expiry of six months from the end of the month in which such order of revision is passed;” Sec. 275(1)(b), if read carefully would show that it refers to proceedings by way of assessment in terms of s. 271B of the Act. Those words are missing in s. 275(1)(c) of the Act. Therefore we are of the view that the Tribunal is not justified in deleting the penalty on the ground of limitation. We find substance in the argument of the learned counsel for the Revenue.

On the facts and circumstances of this case, we deem it proper to answer the question of law in favour of the Revenue and against the assessee. Ordered accordingly. No costs.

[Citation : 287 ITR 72]

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