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Income Tax Appellate Tribunal, “A’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal by assessee is directed against order of NFAC passed u/s 250 of the Income-tax Act,1961 ['the Act' for short] for the assessment year 2014-15 dated 30.9.2023. The assessee has raised following grounds:
1. “The learned Commissioner of Income tax(Appeals), NFAC. Delhi has erred in Confirming the levy of penalty u/s 272A(2)(e) of the Act in the case of the appellant as levied by the JCIT. The orders as passed/confirmed being void ab initio, without Jurisdiction and are liable to be quashed.
2.1 In any case, the learned CIT(A) has erred in not appreciating the fact that the initiation- of penalty proceedings and consequential order passed levying penalty u/s 272A(2)(e) of the Act are barred by limitation and erred in holding that the limitation period got extended by TOLA and thereby confirming the validity of the order instead of quashing the impugned order as barred by limitation.
Sree Rajendra Suri Gurumandir Trust, Bangalore Page 2 of 7 2.2 In any case there being no proper Initiation of penalty proceedings, the impugned order becomes bad in law and is liable to be quashed.
3. In any case, the levy of penalty u/s 272A(2)(e) of the Act being erroneous both on facts and law applicable is to be deleted.
In any case and without prejudice, there being no contumacious conduct or deliberate default, and the appellant being prevented from reasonable cause to file the return of income within the prescribed due date, the penalty levied is to be deleted.
In view of the above and on other grounds to be adduced at the time of hearing, it is requested that the impugned order be quashed or atleast the penalty levied/confirmed be deleted.”
Facts of the issue are that the assessee is a religious trust registered u/s 12AA of the Act. During the year under consideration, the assessee has filed return of income u/s 139(4) of the Act declaring Nil income on 31.3.2017. Hence, there was delay in filing the return of income for the assessment year 2014-15. Accordingly, the ld. AO has initiated the penalty proceedings u/s 272A(2)(e) of the Act. The penalty was levied at Rs.85,100/- as there was a delay of 851 days in filing the return of income for the assessment year 2014-15. Against this assessee went in appeal before NFAC which has confirmed the order of ld. AO. Against this assessee is in appeal before us.
We have heard the rival submissions and perused the materials available on record. The main contention of the ld. A.R. is that as per section 275(1)(c) of the Act, the order u/s 272A(2)(e) of the Act is to be passed before the expiry of financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed or 6 months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. Thus, she submitted that in the present case, notice u/s 274 of the Act has been issued on 21.12.2020. As such, penalty order to be passed on or before 30th
Sree Rajendra Suri Gurumandir Trust, Bangalore Page 3 of 7 June, 2021. However, in the present case, penalty order has been passed on 5.3.2022, which is time barred. For this purpose, she relied on the order of the Tribunal in the case of Amit Sabharwal in dated 14.5.2019. In the present case, as per clause (c) of section 275(1) of the Act, the penalty proceedings u/s 272A(2)(e) of the Act have been initiated vide notice dated 21.12.2020. According to ld. A.R., the time limit to pass penalty order is 6 months from the end of month in which penalty proceedings were initiated would expire on 30.6.2021. She, therefore submitted that, competent authority could have imposed penalty before 30.6.2021. However, the penalty order in the present case has been passed on 5.3.2022, which is clearly barred by limitation. 3.1 On the other hand, ld. D.R. submitted that in the normal circumstances the above argument of the assessee’s counsel holds good. However, in the present case, the penalty proceedings though initiated on 21.12.2020, the time limit to complete the penalty proceedings will lapse on 30.6.2021. However, this period is Covid period. Penalty order could not able to be passed and the period of limitation has been suspended by Hon’ble Supreme Court in Miscellaneous Application No.21 of 2022 and in Miscellaneous Application No.665 of 2021 in Suo Moto WP No.(C) No.3 of 2020 in Re: Cognizance of Limitation dated 10.1.2022. Hence, this period to be excluded. In our opinion, there is force in the argument of ld. D.R. The time limit to pass the penalty order has been expired on 30.6.2021. However, during this period, there was Covid’19 and the Limitation Act has been suspended as rightly pointed out by the Hon’ble Supreme Court in Miscellaneous Applications cited (supra). Being so, the time limit will commence from 28.2.2022 and in the present case, penalty order has been passed on 5.3.2022 which is within time. On this count, the assessee have no case. 3.2 However, the other argument of the ld. A.R. is that initiation of penalty proceedings itself is bad in law as it was initiated vide notice
Sree Rajendra Suri Gurumandir Trust, Bangalore Page 4 of 7 dated 21.12.2020 and the initiation ought to have been done within the reasonable time after completion of assessment. According to her, in the present case, the assessee’s return of income has been accepted as it is, as such, copy of return of income filed on 31.3.2017 to be considered as copy of assessment order for all practical purposes. The ld. AO ought to have initiated the penalty proceedings within reasonable time from this date and in the present case, since it has been initiated vide notice dated 21.12.2020, which is beyond the reasonable time expected from the ld. AO to initiate the penalty proceedings u/s 272A(2)(e) of the Act. She relied on the order of the Tribunal in the case of Amit Sabharwal in dated 14.5.2019, wherein the coordinate bench of Delhi Tribunal has considered the following judgements and decided the issue in favour of the assessee.
3.2.1 Referring to the decision of the Cochin Bench of the Tribunal in the case of Noble Pictures vs. JCIT reported in 90 ITD 248, she submitted that the Tribunal in the said decision has held that there should be a reasonable time within which penalty proceeding is to be initiated or to be completed. Even if a time is not prescribed under the law, however, the penalty cannot hang on the head of an assessee as sword of Damocles indefinitely and it should be initiated and completed within a reasonable time.
3.2.2 Referring to the decision of the Hon'ble Calcutta High Court in the case of Indian Handloom Textiles vs. ITO reported in 68 ITD 0560, she submitted that the penalty proceedings u/s 271B initiated 34 months after the completion of assessment was held to be invalid. He accordingly submitted that since, in the instant case, the penalty proceedings have been initiated after a period of more than four years, therefore, the penalty so levied by the Assessing Officer and upheld by the CIT(A) is not justified. She also relied on Sree Rajendra Suri Gurumandir Trust, Bangalore Page 5 of 7 the decision of the Hon'ble Delhi High Court in the case of CIT vs. NHK Japan Corporation reported in 305 ITR 132. 3.3 In the present case also, the assessee has filed return of income for the assessment year 2014-15 on 31.3.2017. There was no regular assessment and the return of income has been accepted as it is. In our opinion, copy of the return of income itself serve as an assessment order for all practical purposes. So the penalty proceedings has been initiated vide notice dated 21.12.2020, which is approximately after lapse of 45 months. Therefore, the penalty order passed by ld. AO u/s 272A(2)(e) of the Act is not within reasonable time. 3.4 Further, the Hon’ble Delhi High Court in the case of PCIT Vs. JKD Capital & Finlease Ltd. in of 2015 vide judgement dated 13.10.2015, held as under: “8. We are unable to agree with the above submission of learned Standing counsel for the Revenue. Section 275 (1) (c) reads as under:
(1) No order imposing a penalty under this Chapter shall be passed (a).... (b)....
(c) in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later.
In terms of the above provision, there are two distinct periods of limitation for passing a penalty order, and one that expires later will apply. One is the end of the financial year in which the quantum proceedings are completed in the first instance. In the present case, at the level "of the AO, the quantum proceedings was completed on 28th December 2007. Going by this date, the penalty "order could not have been passed later than 31st March 2008. The second possible date is expiry of six months from the month in which the penalty proceedings were initiated. With the AO having initiated the penalty proceedings in December 2007, the last date by which the penalty order could have been passed is 30th June 2008. The later of the two dates is 30th June 2008.
Considering that the subject matter of the quantum proceedings was the non- compliance with Section 269 T of the Act, there was no need for the appeal against the said order in the quantum proceedings to be disposed of before the penalty proceedings could be initiated. In other words, the initiation of penalty proceedings did not hinge on the completion of the appellate quantum proceedings. This position has been Sree Rajendra Suri Gurumandir Trust, Bangalore Page 6 of 7 made explicit in the decision in CIT v. Worldwide Township Projects Limited (supra) in which the Court concurred with the view expressed in Commissioner of Income- Tax v. Hissaria Bros. (2007) 291 ITR 244(Raj) in the following terms: "The expression other relevant thing used m s. 275(l)(a) and cl. (b) of Sub- s. (1) of S. 275 is significantly missing from cl. (c) of s. 275(1) to make out this distinction very clear. We are, therefore, of the opinion that since penalty proceedings for default in not having transactions through the bank as required under ss. 269SS and 269T are not related to the assessment proceeding but are independent of it, therefore, the completion of appellate proceedings arising out of the assessment proceedings or the other proceedings during which the penalty proceedings under ss. 27ID and 27IE may have been initiated has no relevance for sustaining or not sustaining the penalty proceedings and, therefore, cl. (a) of sub-s. (1) of s. 275 cannot be attracted to such proceedings. If that were not so cl. (c) of s. 275(1) would be redundant because otherwise as a matter of fact ever/penalty proceeding is usually initiated when during some proceedings such default is noticed, though the final fact finding in this proceeding may not have any bearing on the issues relating to establishing default e.g. penalty for not deducting tax at source while making payment to employees, or contractor, or for that matter not making payment through cheque or demand draft where it is so required to be made. Either of the contingencies does not affect the computation of taxable income and levy of correct tax on chargeable income; if cl. (a) was to be invoked, no necessity of cl. (c) would arise." (emphasis supplied) 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 20th 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 30th June 2008, the Additional CIT defeated the very object of Section 275(l)(c).
In that view of the matter, the order of the CIT (A) which has been affirmed by the impugned order of the ITAT does not suffer from any legal infirmity.”
Sree Rajendra Suri Gurumandir Trust, Bangalore Page 7 of 7 3.5 Being so, considering the facts and circumstances of the case, by placing reliance on the judgement of Hon’ble Delhi High Court in the case of JKD Capital & Finlease Ltd. dated 13.10.2015, we are of the opinion that penalty order has not been passed within reasonable time. Accordingly, we quash the penalty order dated 5.3.2022 on this reason. 3.6 Since we have quashed the penalty order, we refrain from going to other grounds raised by the assessee at this stage, which are kept open.
4. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 5th Dec, 2023