Commencement of limitation for penalty proceedings under sections 271D and 271E. AO not to issue notice-CBDT Circular on Departmental View

Circular No.  09/DV/2016
(Departmental  View)

F.No.279/Misc./M-116/2012-IT J
Government of India
Ministry of Finance
Department  of Revenue
Central Board of Direct Taxes
******

New Delhi , 26th April , 2016

Subject:- Commencement of limitation for penalty proceedings under sections 271D and 271E of the Income tax Act, 1961 – reg.

It has been brought to the notice of the Central Board of Direct Taxes (hereinafter referred to as the Board) that there are conflicting interpretations of various High Courts on the issue whether the limitation for imposition of penalty under sections 271D and 271 E of the Income tax Act, 1961 (hereafter referred to as the Act) commences at the level of the Assessing Officer (below the rank of Joint Commissioner of lncome Tax.) or at level of the Range authority i.e. the Joint Commissioner of Income Tax./Addl. Commissioner of Income Tax.

Some High Courts have held that the limitation commences at the level of the authority competent to impose the penalty i.e. Range Head while others have held that even though the Assessing Officer is not competent to impose the penalty, the limitation commences at the level of the Assessing Officer where the Assessing Officer has issued show cause notice or referred to the initiation of proceedings in assessment order.

2. On careful examination of the matter, the Board is of the view that for the sake of clarity and uniformity, the conflict needs to be resolved by way of a “Departmental View”.

3. The Hon’ble  Kerala  High  Court  in the  case  of  Grihalaxmi  Vision   Add!.  Commissioner  of Income  Tax, Range  1, Kozhikode, vide  its order  dated  8.7.15  in  ITA Nos.  83 & 86 of 2014, observed that,  “Question to be considered  is whether proceedings for  levy  of penalty,  are  initiated with the passing  of the  order  of  assessment  by  the Assessing  Officer  or  whether  such proceedings  have commenced  with  the  issuance  of  the  notice  issued  by  the  Joint  Commissioner. From  statutory provision,  it is clear  that the  competent  authority  to levy penalty  being  the Joint  Commissioner. Therefore, only the Joint Commissioner can initiate proceedings for  levy of penalty.   Such initiation of proceedings  could not have been done by the Assessing  Officer   The statement  in the assessment order that the proceedings  under Section 271D and E are initiated is inconsequential .  On the other hand, if the assessment order is taken as the initiation of penalty proceedings , such initiation is by an authority   who   is  incompetent   and  the  proceedings   thereafter   would   be  proceedings   without jurisdiction.   If that be so, the initiation of the penalty proceedings  is only with the issuance of the notice issued by the Joint Commissioner to the assessee to which he has filed  his reply. “

4. The above judgment reflects the “Departmental View”. Accordingly, the Assessing Officers (below the rank of Joint Commissioner of Income ) may be advised to make a reference to the Range Head , regarding any violation of the provisions of section 269SS and section 269T of the Act , as the case may be , in the course of the assessment proceedings (or any other proceedings under the Act). The Assessing Officer, (below the rank of Joint Commissioner of Income Tax) shall not issue the notice in this regard. The Range Head will issue the penalty notice and shall dispose/ complete the proceedings within the limitation prescribed u/s 275(1)(c) of the Act.

5. Where any High Court decides this issue contrary to the “Departmental View”, the “Departmental View” thereon shall not be operative in the area falling in the jurisdiction of the relevant High However, the CCIT concerned should immediately bring the judgment to the notice of the Central Technical Committee. The CTC shall examine the said judgment on priority to decide as to whether filing of SLP to the Supreme Court will be adequate response for the time being or some legislative amendment is called for.

6. The above clarification may be brought to the notice of all

Sadhana Panwar
DCIT (OSD) (ITJ)
CBDT, New Delhi