R.P.DARMALINGAM,CHENNAI vs. ACIT CENTRAL CIRCLE 2(2), CHENNAI

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ITA 1846/CHNY/2018Status: DisposedITAT Chennai15 November 2018AY 2012-136 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the PCIT's revisionary power under Section 263 was unsustainable because the penalty proceedings under Section 271(1)(c) had expired by limitation as per Section 275(1). The dropping of the penalty, even if an 'unspeaking order', did not extend the limitation period for revision.

What were the facts?

The assessee's assessment was completed under Section 143(3) r.w.s. 153A. Penalty proceedings under Section 271(1)(c) were initiated but dropped by the Assessing Officer. The Principal Commissioner of Income Tax (PCIT) invoked Section 263 to revise the order dropping the penalty, but the penalty proceedings were already time-barred.

What were the issues?

Whether the PCIT can revise an order dropping penalty proceedings under Section 271(1)(c) when the time limit for levying such penalty has expired. Whether the dropping of penalty proceedings by the AO, even if not reasoned, validates revision under Section 263 after the limitation period.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 153A,Section 271(1)(c),Section 275(1),Section 263

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, ‘ D’ BENCH : CHENNAI

Before: SHRI GEORGE MATHAN & SHRI A.MOHAN ALANKAMONY

आदेश / O R D E R

PER GEORGE MATHAN, JUDICIAL MEMBER

1.

This is an appeal filed by the assessee against the order of the Principal Commissioner of Income-tax(Central)-2,Chennai in C.

No.2744/C-2/2016-17/31 dated 27.03.2018 for the assessment year 2012-13.

2.

Mr.Mohandas represented on behalf the of the Assessee and Ms.V.S.Sreelekha represented on behalf the of the Revenue.

3.

It was submitted by ld.A.R that the assessee is an individual, who is doing real estate business. Consequent to Search and Seizure Operation on the assessee 03.09.2013, the assessment came to be passed u/s.143(3) r.w.s.153A of the Act on 31.03.2016 wherein the returned income of the assessee had been accepted. It was a submission that assessment year involved is 2012-13 and the return filed on 20.11.2015in response to the notice u/s.153A was the first return filed. The assessment came to be completed on 31.03.2016 and penalty proceedings initiated u/s.271(1)(c) of the Act was also initiated simultaneously. It was a submission that the assessee had responded to the penalty proceedings and the ld. Assessing Officer had dropped the penalty proceedings after considering the explanation filed by the assessee. It was a submission that the dropping of the penalty proceedings by the ld. Assessing Officer in the order sheet noting is extracted at para 5.1. of the order of the Pr.CIT u/s.263 of the Act. It was a submission that the ld. Principal Commissioner of Income Tax had issued a show cause notice u/s.263 dated 09.03.2018 asking the assessee why the dropping of the penalty proceedings initiated by ld. Assessing Officer in assessee’s case should not be revised. The assessee had replied vide letter dated 20.03.2018. It was a submission that the reply of assessee was not considered and the ld. Principal Commissioner of Income Tax passed an order dated 27.03.2018 directing the ld. Assessing Officer to re-do the assessment order passed u/s.143(3) r.w.s.153A denovo. It was a further submission that subsequently on 29.03.2018 a corrigendum was issued wherein it has been held that the dropping of the penalty proceedings initiated u/s.263 of the Act on 31.03.2016 in the case of the assessee has been held to be erroneous and prejudicial to the interests of the Revenue and the same was set-aside. The order of assessment u/s.143(3) r.w.s.153A of the Act was not disturbed. It was a prayer that the order passed u/s.263 is liable to be annulled.

4.

In reply, the ld.D.R vehemently supported the order of Principal Commissioner of Income Tax passed u/s.263 of the Act. It was a submission that the dropping of the penalty proceedings was erroneous and prejudicial to the interests of the Revenue. The ld.D.R placed reliance on the decision of the Hon’ble Supreme Court in the case of Toyota Motor Corporation reported in 306 ITR 52 SC wherein in respect of failure to deduct tax at source, the ld. 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 and had directed the ld. 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 ld. Assessing Officer to take all facts into account and pass a reasoned order.

5.

We have considered the rival submissions. At the outset, the decision of the Hon’ble Supreme Court in the case of Toyota Motor Corporation Vs. CIT referred to supra, is on completely different footing. That was the case where penalty u/s.271C was involved, and that was the case of failure to deduct tax at source. In the present case, the issue is of concealed income. It is an issue relating to penalty levied u/s.271(1)(c) of the Act. 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 time limit for the imposing penalty u/s.271(1)(c) of the Act is prescribed in 275(1) of the Act.

Section 271C is not a penalty which is initiated in the course of any proceedings. There is no time limit for initiation of penalty u/s.271C of the Act. The limitation of Sec.275(1) of the Act in respect of Sec.271C of the Act would start, when the action for the imposition of the penalty is initiated. Here, in the present case, the action for initiation of the penalty u/s.271(1)(c) of the Act had been initiated in the course of assessment proceedings itself u/s.143(3) r.w.s.153A of the Act on 31.03.2016. Thus, the time limit for levy of penalty u/s.271(1)(c) of the Act would expire in the present case on 31.09.2016, being 6 months from the end of the month in which the penalty proceedings has been initiated. Now, after the expiry of said limitation, the ld. Principal Commissioner of Income Tax has issued the show cause notice on 09.03.2018 for reviving the penalty proceedings, which was already expired and barred by limitation. True, the order passed by the ld. Assessing Officer dropping the penalty proceedings is an unspeaking order, but still, that would not make it valid reason for extending the limitation provided u/s.275 of the Act for the purpose of levying the penalty or for considering the levy of penalty u/s.271(1)(c) of the Act by invoking the powers of revision u/s.263 of the Act. In the circumstances, the order passed u/s.263 of the Act being unsustainable in law stands quashed.

6.

In the result, the appeal of the assessee is allowed.

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