Penalty 271(1)(c) limitation provisions u/s 2751a apply as per law in force at the time of filing of return

INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR

I.T.A No.137(Asr)/2014 Assessment Year: 1994-95

Income Tax Officer (Appellant) vs. K.D. Bali (Respondent)

Date of Order: 04-03-2016

ORDER

PER T. S. KAPOOR (AM):

This is an appeal filed by the Revenue against the order of learned CIT(A), dated 05.03. 2014 for Asst. Year 1994-95.

2. The grounds of appeal taken by Revenue are reproduced below.

“(i) That, on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the penalty of Rs.33,60,000/- levied by the A.O U/s 271(1)(c) of the Income Tax Act,1961. The Ld. CIT(A) has failed to appreciate that the penalty proceedings were initiated at the time of completion of assessment and the assessment was sustained by the Hon’ble Punjab & Haryana High Court, Chandigarh and section 275(1A) was rightly applied by the A.O.

(ii) That, it is prayed that the order of the Ld. CIT(A) be set-aside and that of the Assessing Officer restored.”

3. The brief facts of the case as noted in the assessment order are that an addition of Rs.58,20,600/- was made to the income of assessee vide order dated 27.03.1997 and in appeal before learned CIT(A), the learned CIT(A) set aside the addition of Rs.50,00,000/- out of the total addition vide order dated 12.03.1998 and consequently the Assessing Officer passed a fresh assessment order on 31.12.1999 and assessed the income at Rs.5,78,330/- and also initiated penalty proceedings u/s 271(1)(c) but did not complete the penalty proceedings. The assessee in the mean time again filed appeal before learned CIT(A) and learned CIT(A) decided the issued in favour of assessee vide order dated 09.10.2000. Against the order of learned CIT(A), the Revenue filed appeal before ITAT and ITAT dismissed the appeal filed by Revenue vide order dated 27.06.2005. The Revenue filed appeal against the order of Tribunal before Hon’ble High Court and the Hon’ble High Court vide order dated 17.02.2011decided the issue in favour of Revenue. The Assessing Officer in view of the order of Hon’ble High Court after giving opportunity notice u/s 129 to the assessee completed penalty proceedings and imposed penalty vide order dated 21.12.2011. Against the penalty order the assessee filed appeal before learned CIT(A) and contended that the order passed by Assessing officer in penalty proceedings was time barred and learned CIT(A) vide order dated 05.03.2014 deleted the penalty by holding that the penalty order was time barred.

4. Aggrieved the Revenue is in appeal before us.

5. At the outset, the learned DR submitted that in view of the order of Hon’ble High Court the penalty proceedings which were initiated earlier were revived in view of the provisions of section 275(1A) and in this respect our attention was invited to the provisions of section 275(1A).

6. The learned AR, on the other hand, submitted that the provisions of section 275(IA) were inserted in the Act vide amendment Act 2006 w.e.f 13.07.2006 whereas the assessee’s case relates to assessment year 1994-95. He submitted that the law existing at the time of committing an offence can be applied and law which was not in force at the time of committing an offence cannot be applied. He submitted that it is an undisputed fact that before 13.07.2006, section 275(1A) was not on statute and the provisions of section 275(1)(a) were only applicable and in this respect our attention was invited to the provisions of section 275(1)(a). He submitted that in these provisions the order of effect of High court is not mentioned and therefore, the case was time barred as rightly held by learned CIT(A). Reliance in this case was placed on the following case laws:

(i) B.N. sharma vs. CIT 226 ITR 442 (SC)

(ii) Cosmo Films Ltd. vs. ACIT (ITAT, Delhi Bench) in ITA No.2192(Del)2010.

(iii) Additional Director of Income Tax vs. Pioneer Overseas Corporation 34 CCH 189 Del Trib

7. We have heard the rival parties and have gone through material placed on record. We find that Assessing Officer had initiated the penalty proceedings on 31.12.1999 but did not pass any penalty order and it was only after the Hon’ble High Court decided the issue in favaour of Revenue that penalty proceedings were revived. From the provisions of section 275(1A), we find that the provisions were included in the Act vide amendment Act. 2006 and it was applicable from 13.07.2006 whereas the case of the assessee relates to assessment year 1994-95, therefore, at the time of filing of return for the assessment year 1994-95 the provisions of section 275(1A) were not applicable. The Hon’ble Supreme Court in the case of B.N. Sharma vs. CIT reported at 226 ITR 442 (SC) has held that the penalty imposable should be worked out on the basis of law in force at the time of filing of return which contained alleged concealment or miss -statement. We further find that the Delhi Bench of ITAT in ITA No. 2192 vide order dated 22.07.2011, for Ass. Year 1998-99 in the case of Cosmo Films Ltd. vs. ACIT (supra) under similar facts and circumstances vide pars 10 to 17 has decided similar issue in fvour of assessee by holding as under:

“10. Thus as per section 275(1)(a) proviso, in order to be within limitation, a penalty order needs must be passed, in the facts of the present case, within one year from the end of the financial year in which the order of the commissioner (A) is received by the Chief Commissioner or Commissioner, whichever, is later, in a case where the assessment order is subject matter of appeal before the Commissioner(A) and the Commissioner passes the order on or after 1.6.2003 disposing of such appeal.

11. In the present case, the order of the Id. CIT(A) in quantum appeal was passed after 1.6.2003, i.e., on 31.7.2003, as available from the record. It was received by the Department on 7.8.2003, as unrebuttedly contended by the learned counsel for the assessee. Thus, as per the proviso to section 275(1)(a) of the Act, the penalty order ought to have been passed on or before 31.3.2005, i.e., within one year from the end of financial year in which the Id. CIT(A)’s order was received back by the Department. The penalty order, however, got to be passed only on 28.7.2009. That being so, the contention of the assessee is correct. The penalty order is clearly barred by limitation provided by the proviso to section 275(1 )(a) of the Act.

12. Apropos the Department’s contention that the case is covered by the proviso to section 275(1A) rather than the proviso to section 275(l)(a) of the Act, it is seen that this is not correct. Section 275(1A) reads as follows:

“[(1A) In a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253 or an appeal to the High Court under section 260A or an appeal to the Supreme Court under section 261 or revision under section 263 or section 264 and an order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty is passed before the order of the Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Supreme Court is received by the Chief Commissioner or the Commissioner or the order of revision under section 263 or section 264 is passed, an order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty may be passed on the basis of assessment as revised by giving effect to such order of the Commissioner (Appeals) or, the Appellate Tribunal or the High Court, or the Supreme Court or order of revision under section 263 or section 764: ”

13. As per section 275(1 A) of the Act, therefore, the limitation provided there under concerns cases where the assessment order or revision is under appeal at the relevant stage and an order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty passed before the appellate order is received by the Department or order of revision is passed. In such a situation, an order imposing or enhancing or reducing or canceling penalty or dropping the proceedings for the imposition of penalty may be passed on the basis of assessment as revised by giving effect to the appellate order or the revisional order.

14. However, in; the present case, no order either imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty stands passed. That being so, the provisions of section 275(1 A) are not applicable.

15. In view of the above, the penalty order is hit by the proviso to section 275(l)(a) of the Act. Going by the para-meters laid down therein in the said section, the penalty order is clearly beyond the limitation provided therein.

16. Accordingly, the penalty order is cancelled, being barred by limitation, as above.

17. Since the penalty order stands cancelled as barred by limitation, nothing else survives. As such, the original grounds raised by the assessee, on merits, are not required to be gone into and we are not doing so.”

The facts in the present case are similar to the facts in the case of Cosmo Films Ltd.(supra) therefore, respectfully following the order of Tribunal, we do not find any infirmity in the order of CIT(A), therefore, the appeal filed by the Revenue is dismissed.

8. In view of the above, the appeal filed by the Revenue is dismissed.

Order pronounced in the open Court on 4th March, 2016.

(A.D. JAIN) JUDICIAL MEMBER  (T. S. KAPOOR) ACCOUNTANT MEMBER

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