Punjab & Haryana H.C : Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the penalty order dt. 16th March, 1988, passed under s. 271(1)(c) of the IT Act, is beyond the period of limitation ?

High Court Of Punjab & Haryana

CIT vs. Smt. Santosh Mahey

Section 271(1)(c), 275(1)(a)

Asst. Year 1977-78 to 1980-81

M.M. Kumar & Rajesh Bindal, JJ.

IT Ref. Nos. 16 to 16-C of 1992

1st March, 2007

Counsel Appeared

Sanjiv Bansal, for the Revenue

JUDGMENT

Rajesh Bindal, J. :

The Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (for short, “the Tribunal”), has referred the following question of law, which emerges from its common order dt. 22nd June, 1990, in ITA Nos. 1007 to 1010/Asr/1989, for the asst. yrs. 1977-78 to 1980-81 : “Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the penalty order dt. 16th March, 1988, passed under s. 271(1)(c) of the IT Act, is beyond the period of limitation ?” Briefly the facts, as noticed in the statement of the case, are that the assessee for the asst. yr. 1977-78 filed his return on 16th March, 1981, declaring a loss of Rs. 10,232. While framing the assessment on 28th March, 1982, income was determined at Rs. 46,205, which was set aside by the AAC vide order dt. 30th March, 1984, to the file of the AO. After remand of the case by the AAC, the assessment was again framed vide order dt. 14th March, 1986, and the income was assessed at Rs. 21,264. The penalty proceedings culminated into an order under s. 271(1)(c) of the IT Act, 1961 (for short, “the Act”), on 16th March, 1988, whereby penalty of Rs. 14,633 was levied on the assessee. Appeal against the order of levying penalty was dismissed by the Dy. CIT (A). However, further appeal by the assessee before the Tribunal was accepted. The Tribunal while setting aside the penalty held that in terms of s. 275(a)(ii) of the Act the order of penalty having been passed beyond the period of limitation prescribed in the section, the order of penalty was not sustainable.

We have heard learned counsel for the Revenue and perused the paper book. Learned counsel for the Revenue has relied upon s. 275 of the Act to state that in the case in hand even though the original order of the assessment was passed on 28th arch, 1982, the same was the subject-matter of appeal and after remand by the AAC, fresh order of the assessment was passed on 14th March, 1986, and if the period of limitation is counted from that date, the penalty order passed on 16th March, 1988, is well within the limitation as prescribed under s. 275 of the Act. Accordingly, the view expressed by the Tribunal is not in conformity with the provisions of the Act.

5. To appreciate the controversy involved in the present case, it would be relevant to extract the relevant provisions of s. 275 of the Act, which, at the relevant time, read as under : “275. No order imposing a penalty under this Chapter shall be passed— (a) in a case where the relevant assessment or other order is the subject- matter of an appeal to the AAC or the CIT(A) under s. 246 or an appeal to the Tribunal under sub-s. (2) of s. 253, after the expiration of a period of— (i) two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed; or (ii) six months from the end of the month in which the order of the AAC or the CIT(A) or, as the case may be, the Tribunal is received by the CIT, whichever period expires later; (b) in any other case, after the expiration of two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed. Explanation—In computing the period of limitation for the purposes 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.” A perusal of s. 275 of the Act, as reproduced above, shows that the same provides for bar of limitation for imposition of various penalties under Chapter XXI of the Act. Sub-cl. (i) of cl. (a) thereof provides that where the relevant assessment order is the subject-matter of appeal under s. 246 or under s. 253 of the Act, no order of penalty can be passed after the expiry of the period of two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed. Stress could be laid on the word “completed” used in the provision. Sub-cl. (ii) of cl. (a) thereof provides that the maximum period is six months from the end of the month in which the order of the AAC, or the CIT(A) or, as the case may be, the Tribunal is received by the CIT. However, the last date would be the date which expires later out of the either of two clauses above. Sub-cl. (b) of s. 275 provides that in other cases the maximum period for levy of penalty would be two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed. This sub-clause deals with limitation for levy of penalty in a case where penalty is levied simpliciter after assessment.

In our opinion, the case in hand would fall within the provisions of s. 275(a) for the purpose of calculation of limitation for passing the order of penalty. Sub-cl. (i) thereof clearly provides the period of limitation to be two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed. The word “completed” has to be given its full meaning in a case where in appeal, the assessment order, during the course of which the penalty proceedings are initiated, is set aside and the case is remanded back for the fresh assessment. The assessment proceedings cannot be held to be completed till such time the order is passed in the remand proceedings. In the present case also, the undisputed facts on record are that the original assessment was framed on 28th March, 1982. In appeal, the order of the assessment was set aside and the matter was remanded back to the AO vide order dt. 30th March, 1984. Thereafter, the remand case was decided vide order dt. 14th March, 1986, and the penalty order was passed on 16th March, 1988. If we calculate the period from the date, the remand order was passed, i.e., on 14th March, 1986, the penalty order passed on 16th March, 1988, would be well within the limitation as prescribed under sub-cl. (i) of s. 275 (a) of the Act as it is that date which shall be considered to be the date on which the proceedings, in the course of it, the action of imposition of penalty had been initiated, were completed.

In view of the plain language of the provision itself, in our view, it cannot be held that the order for imposition of penalty was beyond the period of limitation, as prescribed under s. 275 of the Act. We find that a similar view has been expressed by the Andhra Pradesh High Court in Seetharama Lakshmi Rice & Groundnut Oil Mill Contractors Co. vs. ITO (1977) 1977 CTR (AP) 244 : (1978) 111 ITR 212 (AP) and the Himachal Pradesh High Court in Seth Panchhi Ram & Co. vs. CIT (1992) 101 CTR (HP)143 : (1991) 192 ITR 289 (HP).

10. In view of our above discussions, the question referred is answered in favour of the Revenue and against the assessee. The reference is disposed of accordingly.

[Citation : 293 ITR 573]

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