Limitation us 275 imposing penalty starts from the date of initiation by the Assessing Officer though it is imposable by Additional/Joint Commissioner of Income-tax but there is no bar on the initiation of penalty proceedings by the ITO. Proceedings us 272A(2)(k), 271C held time barred by ITAT
ABCAUS Case Law Citation:
961 2016 (06) ITAT
Date/Month of Order/Judgment – June, 2016
Assessment Year:2006-07, 2007-08 & 2008-09
Brief Facts of the Case:
The present appeal is directed against the order of CIT(A) in holding that the penalty order dated 16.03.2010 passed u/s 272A(2)(k) of the Income Tax Act 1961 was not time barred as per the provision of section 275 and as such not bad in law.
In the instant case, the penalty proceedings for delay in filing quarterly return/statements of TDS were initiated on 27.06.2008 by the ITO (TDS), Ghaziabad when he passed a consolidated order u/s 201(1) and 201(1A) for the AY 2006-07 to 2008-09 .
According to the assesseee, the penalty orders were passed by the Additional CIT (TDS) on 16.03.2010 whereas this order under the provisions of section 275(1)(c) should have been passed up to the end of the financial year 2008-09, i.e.; 31/03/2009. and hence, time barred. The assessee relied on the order of the coordinate bench in his own case wherein penalty for the same years levied u/s 271C which was also initiated by the same order was held to be time barred.
The coordinate bench while disposing off appeal of the assessee against penalty u/s 271C emanating from the same orders had held as under:
Admittedly, in the case of the assessee, clause (c) of sub-section (1) would be applicable because the relevant order u/s 201(1)/201(1A) was not the subject matter of appeal to the CIT(A) and similarly, the same was not the subject matter of revision u/s 263. As per clause (c) of sub-section (1), the penalty order cannot be passed after the (i) expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed and (ii) six months from the end of the month in which action for imposition of penalty is initiated whichever period expires later. Therefore, the crucial date would be the date of the initiation of penalty proceedings. In the order u/s 201(1) and 201(1A) dated 27th June, 2008, the Assessing Officer observed as under:-
“Issue penalty notice u/s 221 and 271C and 272A(2)(c) & 272A(2)(k) of I.T. Act, 1961 are being issued separately for each & every such default for all the years involved.”
Thus, the Assessing Officer, during the course of passing of order u/s 201(1) & 201(1A), directed for issue of penalty notice u/s 271C. Thus, the penalty proceedings were initiated by the direction of the Assessing Officer for issue of penalty notice u/s 271C. It is contended by the learned DR that as per Section 271C sub-section (2), only the Joint Commissioner of Income-tax is authorized to impose the penalty u/s 271C. Order u/s 201(1) & 201(1A) was passed by the ITO who is not authorized to levy the penalty u/s 271C and, therefore, the period of limitation for the purpose of levy of penalty is to be considered when the Joint Commissioner issued the notice u/s 271C.
We find that this issue has already been considered by the ITAT as well as Hon’ble Jurisdictional High Court. In the case of Dinesh Jain (supra), Delhi „B‟ Bench considered an identical issue and held as under:-
“Held, dismissing the appeal, (i) that under section 271E the penalty was to be imposed by the Joint Commissioner. However, there was no bar on the Assessing Officer to initiate the penalty proceedings under section 271E because when there is any acceptance or repayment of loan in violation of section 269SS or 269T, it is the Assessing Officer who has to prima facie satisfy himself whether there is a violation of section 269SS or 269T and if so, initiate penalty proceedings under section 271D or 271E and thereafter refer the matter to the Joint Commissioner who would finally decide and if satisfied, levy the penalty under section 271D or 271E. Hence the period of limitation was to be counted from the date of the initiation of the penalty proceedings by the Assessing Officer, that is, December 5, 2011. The penalty proceedings were initiated in the course of assessment proceedings in the financial year 2011-12, and such financial year expired on March 31, 2012. Six months from the initiation of penalty proceedings also expired on June 30, 2012. The penalty order passed on September 14, 2012 was certainly after the period of limitation prescribed under section 275(1)(c).”
In the case of JKD Capital & Finlease Ltd. (supra), Hon’ble Jurisdictional High Court held as under:- “11. In fact, when the AO recommended the initiation of penalty proceedings the AO appeared to be conscious of the fact that he did not have the power to issue notice as far as the penalty proceedings under section 271-E was concerned. He, therefore, referred the matter concerning penalty proceedings under Section 271-E to the Additional CIT. For some reason, the Additional CIT did not issue a show cause notice to the assessee under Section 271-E(1) till 20 th March 2012. There is no explanation whatsoever for the delay of nearly five years after the assessment order in the Additional CIT issuing notice under Section 271-E of the Act. The Additional CIT ought to have been conscious of the limitation under Section 275(1)(c), i.e., that no order of penalty could have been passed under Section 271-E after the expiry of the financial year in which the quantum proceedings were completed or beyond six months after the month in which they were initiated, whichever was later. In a case where the proceedings stood initiated with the order passed by the AO, by delaying the issuance of the notice under Section 271-E beyond 30 th June 2008, the Additional CIT defeated the very object of Section 275(1)(c).
Though the above two decisions were with respect to levy of penalty u/s 271E but the ratio of both the above decisions would be squarely applicable in respect of levy of penalty u/s 271C because as in Section 271C, u/s 271E also, only the Joint Commissioner of Income-tax is authorized to levy the penalty under the relevant Section and, therefore, the question before the Tribunal was what would be the date of initiation of the penalty proceedings and Delhi Bench of the Tribunal as well as Hon’ble Jurisdictional High Court held that the initiation of penalty proceedings by the Assessing Officer is the date of initiation of penalty proceedings. Though the penalty is to be imposed by the Joint Commissioner of Income-tax but there is no bar on the initiation of penalty proceedings by the ITO. After initiating penalty proceedings, he has to transfer the proceedings to the Joint Commissioner who is competent to levy the penalty. The penalty is to be levied within the period of limitation prescribed u/s 275(1). Now, reverting to the facts of the assessee‟s case, the ITO issued the penalty notice u/s 271C vide his order u/s 201(1) and 201(1A) dated 27th June, 2008. Therefore, as per clause (c) of Section 275(1), the penalty proceedings were initiated in the course of order u/s 201(1) and 201(1A) dated 27th June, 2008 and the relevant financial year would expire on 31st March, 2009. Six months from the end of the month in which penalty proceedings were initiated would expire on 31st December, 2008. Therefore, the competent authority could have imposed the penalty before the expiry of 31st March, 2009. However, the penalty order has been passed on 2 nd March, 2010 which is clearly barred by limitation. We, therefore, respectfully following the decision of Hon’ble Jurisdictional High Court in the case of JKD Capital & Finlease Ltd. (supra), and ITAT Delhi Bencin the case of Dinesh Jain (supra), hold that the penalty order passed u/s 271C was barred by limitation. The same is quashed.
The Tribunal observed that there was no difference in limitation provision for penalty u/s 271C and 272A(2)(k) and the ratio laid down by the coordinate bench squarely applied to the facts of the case. Following the decision of the coordinate bench the Tribunal held that the penalty order passed on 16.03.2010 by the Addll. CIT (TDS) u/s 272A (2)(k) were barred by limitation of time and hence, cancelled.