ASADULLAH KHAN,MYSORE vs. INCOME TAX OFFICER, WARD-1, MANDYA

All the appeals filed by the respective assessees are directed against the orders passed by Ld CIT(A)- Mysuru and they relate to the assessment years mentioned in the caption. Common issue urged in all these appeals relate to the penalty levied by the AO u/s 271(1)(b)/271F, as the case may be, and confirmed by Ld CIT(A).

All the appeals were heard together, since the legal issue urged by the assessee by way of additional ground is identical in nature in all the appeals.

In the additional ground urged in all the appeals, both the assessees are contending that the penalty orders passed by the AO in all these appeals are barred by limitation.

Since the additional ground urged by both the assessees is legal in nature and since all the materials relating thereto are available on record, we admit the additional ground in all the appeals.

The Ld A.R submitted that the assessing officer has initiated penalty proceedings u/s 271(1)(b)/271F of the Act, as the case may be, in all these cases by issuing notice dated 26.03.2013, which was served upon the respective assessees on 28-03-2013. However, the assessing officer has passed all the penalty orders only on 26- 12-2016, i.e., after expiry of almost three and half years. The Ld A.R submitted that the limitation provided in the provisions of sec. 275(1)(c) shall apply in respect of both the penalties referred above for computing the limitation period available with the AO for imposition of penalty. He submitted that, as per clause (c) of sub- section (1) of sec.275, the penalty orders should have been passed (a) 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) (b) six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. He submitted that the AO has initiated penalty proceedings on 26.3.2013 during the course of assessment proceedings and hence he should have completed the proceedings latest by 30-09-2013. He submitted that the AO has, however, passed the impugned penalty orders only on 26.12.2016 and hence the impugned penalty orders are barred by limitation. Accordingly he submitted that the impugned penalty orders are liable to be quashed on this legal ground.

We heard Ld D.R, who did not controvert the factual aspects presented by Ld A.R. The provisions of sec.275 of the Act

As rightly pointed out by Ld A.R, clause (c) of sub-section (1) of sec.275 shall apply to the impugned penalties. According to clause (c), the time limit is (a) 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 six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later.

In the instant case, the penalty proceedings have been initiated in March, 2013, i.e., may be during the course of assessment proceedings. Hence the first time limit prescribed in clause (c) is the expiry of financial year in which the assessment proceedings was completed, i.e., 31.3.2013. The second time limit is six months from the end of the month in which action for imposition of penalty is initiated, i.e., 30-09-2013. Thus the later time limit being 30-09-2013, the AO should have passed the penalty orders latest by 30-09-2013. However the impugned penalty orders have been passed by the AO only on 26-12-2016. Hence they are barred by limitation. Accordingly there is merit in ITA No.2077 - 2080 /Bang/2018 the contentions of the assessee that all the penalty orders are liable to be quashed as they are barred by limitation.

Accordingly, we set aside all the impugned orders passed by LD CIT(A) and quash the penalty orders passed by the AO.

Since we have quashed the penalty orders on the point of limitation, there is no necessity to adjudicate the grounds urged on merits.

In the result, all the appeals are allowed.