Ii. Whether The Appellate Tribunal Wascorrect In Law In Not Appreciating The Ratioof The Judgment Of The Hon'ble Apex Court Inthe Case Of Toyota Motor Corporati v. Cit[Reported In 306 Itr 52] To The Effect Thatdropping Of Penalty Proceedings Withoutreasoning Is Amenable To Revision Undersection 263 Of The Income Tax Act ?”

In the High Court of Judicature at Madras The Honourable Mr.Justice T.S.SIVAGNANAMand The Honourable Mrs.Justice V.BHAVANI SUBBAROYAN Tax Case Appeal No.420 of 2019 The Principal Commissioner of Income Tax, Central 2, Chennai-34....Appellant APPEAL under Section 260A of the Income Tax Act, 1961 againstthe order dated 15.11.2018 made in ITA.No.1846/Chny/2018 on thefile of the Income Tax Appellate Tribunal, Madras 'D' Bench forthe assessment year 2012-13 against the order passed by thePrincipal Commissioner of Income Tax Central 2 Chennai dated27.03.2018 made in C.No. 2744/C2/2016-2017/31 and against theAssessment order passed by the Assistant Commissioner of IncomeTax Central Circle 2(2) Chennai dated 31.03.2016 made in GINo./PA No. AEAPD7363R. For Respondent: Mrs.Pushya Sitaraman, SC for Mr.R.Murali Judgment was delivered by T.S.Sivagnanam,J We have heard Mr.T.R.Senthilkumar, learned Senior StandingCounsel and Ms.K.G.Usharani, learned Standing Counsel appearingfor the Revenue and Mrs.Pushya Sitaraman, learned Senior Counselappearing on behalf of Mr.R.Murali, learned counsel appearingfor the respondent – assessee. 2. This appeal, filed by the Revenue under Section 260A ofthe Income Tax Act, 1961 (for short, the Act), is directedagainst the order dated 15.11.2018 made in ITA.No.1846/Chny/2018on the file of the Income Tax Appellate Tribunal, Madras 'D'Bench (for brevity, the Tribunal) for the assessment year 2012-13. https://hcservices.ecourts.gov.in/hcservices/ 3. The Revenue has filed this appeal by raising the followingsubstantial questions of law : “i. Whether, on the facts and in thecircumstances of the case, the Tribunal wasright in law in quashing the revision orderpassed under Section 263 of the Income TaxAct by applying the time limit prescribedfor penalty proceedings under Section 271(1)(c) and not the time limit prescribed underSection 263 of the Act ? And ii. Whether the Appellate Tribunal wascorrect in law in not appreciating the ratioof the judgment of the Hon'ble Apex Court inthe case of Toyota Motor Corporation Vs. CIT[reported in 306 ITR 52] to the effect thatdropping of penalty proceedings withoutreasoning is amenable to revision underSection 263 of the Income Tax Act ?” 4. The assessee is an individual, who is engaged in thebusiness of property development. For the assessment year underconsideration namely 2012-13, the assessee filed his return ofincome on 18.4.2013 admitting an income of Rs.29,92,146/-. Therewas a search and seizure action under Section 132 of the Act inthe premises of the assessee on 03.9.2013, following which, anotice under Section 153A of the Act was issued on 29.4.2014 tofile the return of income for six assessment years. TheAssessing Officer completed the assessments under Section 153Aread with Section 143(3) of the Act on 31.3.2016, determined thetotal income as Rs.2,29,92,150/- and demanded tax to the extentof a sum of Rs.33,76,873/-. On the same day i.e. 31.3.2016, theAssessing Officer initiated proceedings under Section 271(1)(c)of the Act alleging that the assessee concealed particulars andfurnished inaccurate particulars of income. 5. Subsequently, the Assessing Officer dropped the penaltyproceedings on 08.9.2016. This, according to the Revenue, iswithout recording reasons and therefore, the PrincipalCommissioner of Income Tax, Central 2, Chennai-34 namely theappellant issued a notice under Section 263 of the Act dated09.3.2018 calling upon the assessee to show cause as to why theorder passed by the Assessing Officer dropping the penaltyproceedings should not be revised. 6. The appellant passed an order dated 27.3.2018 directingthe Assessing Officer to impose penalty. Aggrieved by that, theassessee filed an appeal before the Tribunal. The Tribunal,after examining the factual position and taking note of thelegal submissions made on behalf of the assessee as well as the 5. Subsequently, the Assessing Officer dropped the penaltyproceedings on 08.9.2016. This, according to the Revenue, iswithout recording reasons and therefore, the PrincipalCommissioner of Income Tax, Central 2, Chennai-34 namely theappellant issued a notice under Section 263 of the Act dated09.3.2018 calling upon the assessee to show cause as to why theorder passed by the Assessing Officer dropping the penaltyproceedings should not be revised. 6. The appellant passed an order dated 27.3.2018 directingthe Assessing Officer to impose penalty. Aggrieved by that, theassessee filed an appeal before the Tribunal. The Tribunal,after examining the factual position and taking note of thelegal submissions made on behalf of the assessee as well as the https://hcservices.ecourts.gov.in/hcservices/ Revenue, allowed the appeal. The appeal was allowed by theTribunal considering the fact situation to examine as to whetherthe penalty could have been imposed beyond the period oflimitation. The findings of the Tribunal are quoted herein below: “The time limit for imposing the penaltyunder Section 271(1)(c) of the Act isprescribed in Section 275(1) of the Act.Section 271C is not a penalty, which isinitiated in the course of any proceedings.There is no time limit for initiation ofpenalty under Section 271C of the Act. Thelimitation of Section 275(1) of the Act inrespect of Section 271C of the Act wouldstart, when the action for the imposition ofthe penalty is initiated. Here, in thepresent case, the action for initiation ofthe penalty under Section 271(1)(c) of theAct had been initiated in the course ofassessment proceedings itself under Section143(3) read with Section 153A of the Act on31.3.2016. Thus, the time limit for levy ofpenalty under Section 271(1)(c) of the Actwould expire in the present case on31.9.2016, being six months from the end ofthe month, in which, the penalty proceedingshave been initiated. Now, after the expiryof the said limitation, the learnedPrincipal Commissioner of Income Tax hasissued the show cause notice on 09.3.2018for reviving the penalty proceedings, whichhad already expired and was barred bylimitation. True, the order passed by thelearned Assessing Officer dropping thepenalty proceedings is an unspeaking order,but still, that would not make it validreason for extending the limitation providedunder Section 275 of the Act for the purposeof levying the penalty or for consideringthe levy of penalty under Section 271(1)(c)of the Act by invoking the powers ofrevision under Section 263 of the Act. Inthe circumstances, the order passed underSection 263 of the Act, being unsustainablein law, stands quashed.” 7. Considering the factual position, which was noted by theTribunal, a decision has been arrived at by the Tribunalquashing the penalty proceedings. Thus, we find that there is nosubstantial question of law arising for consideration in thiscase because the case was decided by the Tribunal on facts and therefore, we find that there is no ground to entertain theappeal filed by the Revenue. 8. Accordingly, the above tax case appeal is dismissed. Nocosts. -s/d- Assistant Registrar(CS-I) True Copy Sub-Assistant Registrar To1.The Income Tax Appellate Tribunal, Chennai 'D' BenchChennai. 2.The Principal Commissioner of Income TaxCentral 2, No. 121, Mahathma Gandhi RoadChennai 34. 3.The Assistant Commissioner of Income TaxCentral Circle2(2) Mahathma Gandhi RoadChennai 34. +1 CC to Mr.T.R.Senthilkumar, Advocate sr 66112.+1 CC to Mr.R.Murali, Advocate sr 65635. TCA.No.420 of 2019 EV(CO)SP(29/08/2019)