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Income Tax Appellate Tribunal (ITAT) Delhi in a recent judgment has held that the limitation period of six months u/s 275(1)(c) for passing penalty order has to be computed from the date of issuance of first show cause notice for initiation of penalty proceedings.
Case Details:
ITA No. 2765/Del /2011, ITA No. 3703/Del /2011
; Assessment Year:2007-08
CO No. 17/Del/2015; CO No. 18/Del/2015
Income-tax Officer (Appellant) vs M/s Vishu Impex Pvt. Ltd (Respondent)
Date of Order: 31-12-2015
Important Case Laws relied by ITAT :
Ashwani Kumar Vs. ITO 118 TTJ 483 [Del-ITAT]
Jitendra Singh Rathore 352 ITR 327 [Raj HC]
Brief facts of the Case:
Revenue had filed appeals against the order of the CIT(A) deleting penalty levied by the Assessing Officer u/s 271D & 271E of the Income Tax Act, 1961. The assessee also filed cross objections challenging the validity of penalty orders alleging that the same were hit by limitation as prescribed u/s 275(1)(c). The ITAT admitted the application of the assessee seeking condonation of delay in filing cross objections of the assessee on the ground of wrong/no advise of the counsel chartered accountant. The Tribunal also admitted additional grounds and on the concurrence of both the parties, first adjudicated on the cross objections of the assessee related to additional ground
Contentions of the assessee:
The assessee contended that the first notice u/ss271D and 271E dated 31.12.2009 was issued by the AO who framed the original assessment orders and thereafter he transferred the case to the competent authority and a second notice dated 26.7.2010 fixing the hearing on 9.8.2010 was issued by the Additional CIT who ultimately passed the penalty order. It was submitted that limitation of six months should be calculated with regard to the first notice issued by the AO and penalty order was to be passed on or before 30.6.2010 whereas both the penalty orders were passed on 4.1.2011 i.e. after a lapse of 12 months from the first notice dated 31.12.2009. Therefore it was submitted that section 275(1)(c) is applicable for calculating limitation period for passing penalty orders u/s 271D & 271E of the Act and the penalty orders were barred by limitation.
Contentions of the Revenue:
The Revenue on the other hand broadly focused upon the merits of the case for imposing the impugned penalties and pleaded that the order of the AO be upheld It was also pleaded that CIT(A) deleted the penalty without giving an opportunity of being heard to the AO
Important Excerpts from ITAT Judgment:
In the light of the proposition laid down by the Hon'ble Rajasthan High Court and ITAT, Delhi [supra], when we analyze the facts and circumstances of the case in hand, then undisputedly and admittedly the first notice for initiation of penalty proceedings u/s 271D and 271E of the Act was issued by the AO on 31.12.2009 who framed the original assessment orders and the other notice dated 26.07.2010 was issued by the Additional CIT who passed the penalty order on 4.1.2011. The ld. AR has contended that the period of limitation prescribed u/s 275(1)(c) of the Act has to be calculated from the date of first notice dated 31.12.2009 which was issued by the AO and on the other hand, the ld. DR contended that since the AO was not empowered to initiate the penalty proceedings and to pass penalty orders, therefore, he transferred the case to the competent authority, viz, Additional CIT who issued notice dated 26.7.2010 and the impugned penalty order was passed on 4.1.2011. Therefore, the ld. DR vehemently contended that the penalty orders cannot be held as barred by limitation. To support this contention, the ld. DR has placed his reliance on the decision of ht Hon'ble Jurisdictional High Court in the case of Sunworld Infrastructure P. Ltd Vs. ITO dated 5.3.2015 in WP(C) No. 1741/2015 and CM No. 3112/15.
In the case of Sunworld Infrastructure Pvt. Ltd. Vs. ITO [order dated 5.3.2015 in WP No. 1741/2015 and CM No. 3112/2015] as relied upon by the ld. DR, the Hon'ble Jurisdictional High Court of Delhi held that notice u/s 143(2) of the Act issued on 10.9.2013 was one without jurisdiction and cannot be regarded as valid notice. In this case, earlier notice was issued by the AO at Bangalore who was without jurisdiction over the assessee and the same was withdrawn when the assessee vide reply dated 17.9.2013 raised the issue of territorial jurisdiction by submitting that it was regularly filing its returns in Delhi and the AO at Bangalore vide letter dated 16.12.2014 transferred the records of the case to Delhi. Their Lordships also observed that if the case itself had been transferred, the same would have to be directed u/s 127 of the Act but no such order of transfer of the case has been made. In the light of the above noted circumstances, their Lordships held that the notice issued by the AO of Bangalore cannot be regarded as a valid notice and the notice issued by the AO of Delhi having jurisdiction over the assessee was, on 24.12.2014 was held as time barred i.e. beyond 30.9.2013 [as per date of 14.9.2012 on which relevant return was filed.
In view of the above noted facts of the case of Sunworld [supra], the ld. AR submitted that the analogy advanced by the ld. DR cannot applied to the present case as the present case is not related to section 143(2) of the Act and there is no dispute of territorial jurisdiction and issuing and withdrawing the notice u/s 143(2) of the Act by the AO not having territorial jurisdiction. The ld. AR replied that the limitation prescribed in the second proviso to section 143(2) cannot be equated with sub-section (c) of section 275(1) of the Act as provisions of section 143(2) mandates limitation for service of notice whereas sub-section (c) to section 275(1) of the Act prescribes limitation for passing of penalty order reckoning from the date of issuance of notice.
In view of the above, we decline to accept the contentions of the ld. DR that the limitation for initiation of penalty proceedings has to be calculated from the date of issuance of second notice by the Additional CIT as speaking for the Hon'ble Rajasthan High Court, their Lordships explicitly held that when the first show cause notice for initiation of penalty proceedings was issued by the AO, then obviously six months expired from the end of the month in which the action for imposition of penalty was initiated by the AO and thus the order, as passed by the competent authority i.e. JCIT/ACIT imposing penalty u/s 271D was clearly hit by the bar of limitation and the same deserves to be set aside. At this juncture, it is pertinent to mention that on a specific query from the Bench, the ld. DR could not show us any proposition or dicta of the Hon’ble Apex Court,
Hon'ble Jurisdictional High Court, Hon'ble Rajasthan High Court or any other Hon'ble High Court which could lead us to take a different view. Therefore, respectfully following the ratio of the decision of the Hon'ble High Court of Rajasthan in the case of Jitender Singh Rathore [supra] and ITAT Delhi in the case of Ashwani Kumar [supra], we are inclined to hold that the limitation as prescribed u/s 271(1)(c) has to be reckoned from the date of first notice issued by the AO, though not competent to impose penalty on 31.12.2009 and thus penalty order has to be passed on or before 30.6.2010 and penalty order passed after more than six months on 4.1.2011 u/s 271D and 271E of the Act are clearly hit by the limitation period as prescribed u/s 275(1)(c) of the Act and both the penalty orders cannot be held as sustainable being passed beyond the prescribed limitation by the provisions of the Act and hence we demolish and quash the same. Accordingly, both the cross objection of the assessee are allowed.
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Limitation period of Six Months u/s 275(1)(c) for passing penalty order has to be computed from the date of issuance of first show cause notice-ITAT | 03-01-2016 |
