The Commissioner Of Income Taxpatiala v. Rakesh Kumar

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 23 of 2001Date of decision: 18.11.2010 The Commissioner of Income TaxPatiala Versus --- Appellant Rakesh Kumar Prop. of M/s. Rakesh Kumarand Co., Gidderbaha --- Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL ---- PRESENT:Mr. Tejinder K. Joshi, Advocatefor the appellant. Mr. Surinder Garg, Advocatefor the respondent. ---- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-tax Act, 1961 (for short “the Act’”) has been filed by the Revenue against theorder dated 20.6.2000, passed by the Income Tax Appellate Tribunal,Amritsar Bench, Amritsar, (in short “the Tribunal”) in ITA No.171/ASR/1998 relating to the assessment year 1993-94. The Revenue has claimed the following substantialquestion of law for determination by this Court: “Whether on the facts and in the circumstances of thecase, the ITAT was right in law in deleting the penaltyimposed by the Assessing Officer under Section 271B byholding that the proceedings are barred by limitationwithin the meaning of Section 275(1)(c) of the Income TaxAct, 1961?” The facts necessary for adjudication of the abovequestion, as narrated in the appeal, are that the failure on the part ofthe respondent-assessee to get his accounts audited and obtain areport from the accountant before the specified date in terms of theprovisions of Section 44AB of the Act, led to initiation of proceedingsagainst him under Section 271B of the Act on 12.3.1996. Theassessing officer, vide order dated 26.3.1997, imposed a penalty ofRs. one lac on the respondent-assessee under Section 271B. Theassessee challenged the order of imposition of penalty before theCommissioner of Income Tax (Appeals), [hereinafter referred to as“CIT(A)”]. The CIT(A) accepted the appeal and deleted the penaltyby holding vide its order dated 13.1.1998 that the penalty levied onthe appellant under Section 271B was barred by limitation within themeaning of Section 275(1)(c) of the Act. The appeal carried by theRevenue challenging the order of the CIT(A) was dismissed by theTribunal by the order under appeal. Aggrieved by the order of the Tribunal, the Revenue isnow before us in this appeal. We have heard learned counsel for the parties andperused the record. The point for consideration in this appeal is regardinginterpretation of Section 275(1)(c) of the Act. According to thecounsel for the Revenue, proceedings in the course of whichimposition of penalty stood initiated were completed on 31.3.1997and, therefore, the penalty levied on 26.3.1997, was within limitation.In support of his contention, learned counsel for the Revenue placedreliance on the following observations of the Bombay High Court inCommissioner of Income Tax v. Chhajer Packaging and PlasticsP. Ltd., (2008) 300 ITR 180: “Coming to the first method of computing the period oflimitation, the last date for imposition of penalty is the lastday of the financial year and which is the financial year, isgiven in parenthetical clause within the first half of clause(c) itself, i.e., “in the course of which action for impositionof penalty has been initiated”. Thus, it is apparent that thelaw presumes the penalty proceedings to be germinatingfrom some other proceedings already in progress. Thedate of termination of those proceedings is important andthe last date of the financial year in which thoseproceedings were completed, is the outer limit forconclusion of penalty proceedings.” Learned counsel for the assessee made a faint attempt tosupport the order passed by the Tribunal. Section 275 (1)(c) of the Act which is relevant foradjudicating the controversy reads thus: “275. Bar of limitation for imposing penalties.-(1) No order imposing penalty under this Chapter shall bepassed-……. Learned counsel for the assessee made a faint attempt tosupport the order passed by the Tribunal. Section 275 (1)(c) of the Act which is relevant foradjudicating the controversy reads thus: “275. Bar of limitation for imposing penalties.-(1) No order imposing penalty under this Chapter shall bepassed-……. (c) in any other case, after the expiry of the financial yearin which the proceedings, in the course of which actionfor the imposition of penalty has been initiated arecompleted, or six months from the end of the month inwhich action for imposition of penalty is initiated, whichperiod expires later.” The aforesaid provision provides that no order of penalty can be passed after the end of the financial year in which theproceedings in the course of which penalty proceedings have beeninitiated are completed, or within six months from the end of themonth in which action for imposition of penalty is initiated, whicheveris later. As the proceedings in the present case during which action for the imposition of penalty had been initiated were completedon 31.3.1997, the penalty order passed on 26.3.1997 could not beheld to be beyond limitation. Further, we find that the legal positionas indicated in the judgment of the Bombay High Court in ChhajerPackaging and Plastics P. Ltd.’s case (supra), fully applies to thefacts of the present case. The CIT(A) and the Tribunal had primarily addressed itself to initiation of penalty proceedings on 12.3.1996 and held thatpenalty could be levied up to 30.9.1996. As noticed above thelimitation to impose penalty was up to 31.3.1997 and, therefore, theCIT(A) and the Tribunal were not right in holding otherwise. In view of the above, the appeal is allowed and the ordersof the CIT(A) and the Tribunal are set aside and the matter isremitted to the CIT(A) to proceed in accordance with law. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) November 18, 2010 JUDGE *rkmalik*