Revision order passed against dropping penalty u/s 271(1)(c) after expiry of limitation invalid – ITAT

Revisionary order u/s 263 passed against dropping of penalty u/s 271(1)(c) after the expiry of limitation period as provided u/s 275 of the Act was invalid – ITAT

ABCAUS Case Law Citation:
ABCAUS 2644 (2018) (11) ITAT

Important Case Laws Cited/relied upon:
Toyota Motor Corporation reported in 306 ITR 52 SC

The appeal involved was filed by the assessee against the order of the Principal Commissioner of Income Tax

The appellant assessee was an individual, who is doing real estate business. Consequent to Search and Seizure Operation, the assessment was completed u/s 143(3) r.w.s. 153A of the Act wherein the returned income of the assessee had been accepted.

The penalty proceedings for concealment of income u/s 271(1)(c) of the Act was also initiated simultaneously which were later dropped by the AO after considering the explanation filed by the assessee.

Later, the Principal Commissioner of Income Tax issued a show cause notice u/s 263 asking the assessee why the dropping of the penalty proceedings initiated by Assessing Officer in assessee’s case should not be revised.

The reply of assessee was not considered and the Principal Commissioner of Income Tax passed an order u/s 263 of the Act holding that the dropping of the penalty proceedings initiated in the case of the assessee was erroneous and prejudicial to the interests of the Revenue and the same was set-aside.

The Department relied upon an judgment of the Hon’ble Supreme Court wherein wherein in respect of failure to deduct tax at source ( TDS ), the Assessing Officer had initiated penalty proceedings, but had dropped them without giving detailed reasons, then the Commissioner of Income Tax had invoked the power of revision directing the Assessing Officer to pass reasoned order. The Hon’ble Supreme Court had upheld the Order u/s 263 and directed that the order was valid in so far as it was the duty of the AO to take all facts into account and pass a reasoned order.

The Tribunal opined that provisions of the section 271(1)(c) of the Act requires the initiation of penalty proceedings in the course of assessment proceedings, and it is clearly on the satisfaction of the person, who has passed the assessment order, or person who has in the course of any proceedings under the Act is satisfied that any person, has concealed its income. The imposition of the said is subject to time limit as prescribed in section 275(1) of the Act.

The Tribunal clarified that judgment relied upon by the Department was with reference to penalty under Section 271C which is initiated in the course of any proceedings and there is no time limit for initiation of penalty u/s.271C of the Act.

The Tribunal observed that the time limit for levy of penalty u/s 271(1)(c) of the Act expired in 6 months from the end of the month in which the penalty proceedings was initiated.

Whereas, the Principal Commissioner of Income Tax issued the show cause notice for reviving the penalty proceedings after the expiry of said limitation period.

The Tribunal opined though the order passed by the Assessing Officer dropping the penalty proceedings was an unspeaking order, but still, that would not make it valid reason for extending the limitation as provided u/s 275 of the Act by invoking the powers of revision u/s 263 of the Act.

The order passed u/s 263 of the Act held unsustainable in law was quashed.

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