DCIT CIR 3(1), MUMBAI vs ALL INDIA ASSOCIATION OF INDUSTRIES, MUMBAI

Income Tax Appellate Tribunal, “A” BENCH, MUMBAI

Before: SHRI SANJAY ARORA, AM & SHRI RAM LAL NEGI, JM

For Appellant: Shri R. P. Rastogi, Shri H. S. Parikh

For Respondent: Shri H. S. Parikh

Order : 20.5.2016 आदेश / O R D E R Per Sanjay Arora, A. M.: This is an Appeal by the Revenue agitating the cancellation of the penalty u/s. 271(1)(c) of the Income Tax Act, 1961 (‘the Act’ hereinafter), levied in the sum of Rs.10,14,650/- by the Assessing Officer (A.O.) vide his order dated 30.3.2009 for the assessment year (A.Y.) 2003-04, by the Commissioner of Income Tax (Appeals)-7, Mumbai (‘CIT(A)’ for short) per his order dated 30.5.2011. 2.1 The Revenue’s appeal raises in effect three Grounds. While the first two grounds relate to the issue on merits, the third ground, raised by way of an additional ground subsequently (vide letter dated 23.11.2012), raises a legal issue, i.e., with regard to the time limitation. The issue being legal, with the relevant facts on record, the said Ground was accordingly admitted. This, in fact, we observe to be the only (A.Y.2003-04) Dy. CIT vs. All India Association of Industries issue arising out of the impugned order in-as-much as the ld. CIT(A) has cancelled the penalty by annulling the penalty order, finding the same as time barred, u/s. 275(1)(a) of the Act.

2.2 The operative part of the impugned order reads as under: ‘4.6 On the basis of aforesaid submission as well as taking note of different judicial pronouncements relied upon by the appellant’s AR in support of its contention, it find merits in the arguments of the appellant. It is seen that the appellant’s AR has drawn my attention to Ground No. 1.1 & 1.2, wherein the appellant contended that the penalty order was passed on 30.3.09, which was beyond time limit as stipulated u/s. 275(1) of the IT Act. The appellant contended that the CIT(A) passed the order u/s. 250 on 12.10.2007, where as the penalty order was passed on 30.3.09 but the time limit prescribed is available 6 months from the end of month in which the order of CIT(A) is received by the CCIT or CIT. In view of the same the appellant contended that the penalty order is time barred.

4.7 I have considered the A.O.’s order as well as the appellant’s AR submission. Having considered both, I find that the order passed by the A.O. is beyond time limit as stipulated u/s.275(1) of the IT Act. Accordingly the penalty order is passed beyond the time limit and accordingly on the same pretext the penalty order is to be annulled. Accordingly the penalty order is cancelled.’

We have heard the parties, and perused the material on record. The relevant provision, and which has been rightly considered by the ld. CIT(A), reads as under: ‘Bar of limitation for imposing penalties. 275. (1) No order imposing a penalty under this Chapter shall be passed— (a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253, 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 the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Principal Chief Commissioner or Chief (A.Y.2003-04) Dy. CIT vs. All India Association of Industries Commissioner or Principal Commissioner or Commissioner, whichever period expires later : Provided that in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A, and the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Commissioner (Appeals) is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever is later.’ The relevant date/s, on which we observe no dispute, are as under: a) The date of passing of the penalty order: 30.3.2009; b) Date of passing of the order by the first appellate authority in quantum proceedings: 12.10.2007. The date of service of the appellate order (in quantum proceedings) by the first appellate authority is not on record, and neither could either party before us provide us any assistance in the matter. We, accordingly, take it as having been served in the normal course of business, i.e., within 2 to 4 weeks. In fact, its’ receipt at any time up to the close of the relevant financial year, i.e., 31.3.2008, by which time it would in any case have been served – which (service) is not in dispute, would be of little moment in view of the time as prescribed vide proviso to section 275(1)(a). The ld. CIT(A) has, in our clear view, erred in being guided soley by the main clause ‘(a)’ of the said provision in-as-much as the first proviso thereto carries an exception for the appellate orders passed in respect of appeals preferred u/s. 246/246A on or after 01.6.2003. The order by the first appellate authority in the instant case having been passed on 12/10/2007, it is this clause, i.e., the first proviso to s. 275(1)(a), that would be relevant and applicable. The amendment by way of proviso is by Finance Act 2003, effective 01.6.2003. There is, accordingly, no question of it not operating

DCIT CIR 3(1), MUMBAI vs. ALL INDIA ASSOCIATION OF INDUSTRIES, MUMBAI