Income-Tax Officer v. Ramkishore Rewaram Tada

A.M Sapre, J.:— This is an appeal filed by the Revenue (Commissioner of Income-tax) under section 260A of the Income-tax Act, 1961 against an order dated November 25, 2002 passed by the Income-tax Appellate Tribunal in I.T.A No. 529.Ind/1999. The appeal was admitted for final hearing on the following substantial question of law:

“Whether, on the facts and circumstances of the case, the Tribunal was right in holding that penalty proceedings under section 271D are independent of assessment proceedings?”

2. In our opinion yet one real question that arises for consideration in the appeal is whether the Tribunal was justified in holding that penalty imposed by the Assessing Officer under section 271D is barred by limitation as provided in section 275(1)(c) ibid. We, therefore formulate one following question of law which, in our opinion, arises for consideration:

“Whether the Tribunal was justified in holding that the impugned penalty imposed under section 271D is barred by limitation as provided in section 275(1)(c) ibid?”

3. The facts of the case lie in a narrow compass. They need mention in brief. The dispute relates to the assessment year 1990–91. In this assessment year the assessee received loans in cash from 9 parties amounting to Rs. 5,75,000 thereby contravening the provisions of section 269SS of the Act. It is this contravention which gave rise to initiation of penalty proceedings under section 271D by the Assessing Officer against the assessee. A notice to this effect was accordingly issued by the Assessing Officer on April 7, 1993. However an order imposing penalty was passed on October 31, 1997 by the Assessing Officer. It is this order which was upheld by the Commissioner of Income-tax (Appeals) when challenged by the assessee in appeal but set aside by the Tribunal in an appeal filed by the assessee giving rise to filing of appeal by the Revenue. In the opinion of the Tribunal, the order of penalty was barred by limitation having been passed beyond the period prescribed under section 275(1)(c) ibid. Accordingly it was set aside.

4. Heard Shri A.P Patankar, learned counsel for the appellant, and Shri Nazir Singh learned counsel for the respondent.

5. Having heard learned counsel for the parties and having perused the record of the case, we are inclined to dismiss the appeal and uphold the order of the Tribunal.

6. section 275(1)(c) provides for bar of limitation for imposing penalties. It reads as under:

“Section 275. Bar of limitation for imposing penalties. (1)

(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.”

7. The language of the aforequoted section is clear leaving no ambiguity therein for calculating the period of limitation. Applying the rigour of clause (c) ibid to the facts of this case it is clear that proceedings for imposition of penalty were initiated in the financial year 1993–94, i.e, on April 7, 1993 when the notice under section 271D was issued whereas the impugned order of penalty was passed in the year 1997, i.e, on October 31, 1997.

8. The Assessing Officer having issued notices under section 271D on April 7, 1993 was under obligation to have completed the proceedings from the end of the month in which action for imposition of penalty was initiated, i.e, on or before March 31, 1994 or six months from April 30, 1993 i.e October, 1993. In this case outer period was March 31, 1994 for completion of the proceedings because the six month period was expiring in October, 1993. In this view of the matter the Assessing Officer had the benefit of the later period, i.e, March 31, 1994 as contemplated under section 275(1)(c). Since the penalty order was passed on October 31, 1997 and hence it was in contravention of section 275(1)(c) ibid. It was in other words passed beyond the period prescribed for passing the order under section 271D, which falls in Chapter XXII.

9. In view of the foregoing discussion the Tribunal did not commit any error in holding that the penalty order passed under section 271D ibid for the alleged contravention of section 269SS ibid is bad in law being passed in contravention of section 275(1)(c) ibid, i.e, barred by limitation prescribed under section 275(1)(c) of the Act. We concur with the view so taken and accordingly uphold the same. In view of the aforesaid finding recorded by us against the appellant on 2nd additional question framed by us, it is not necessary to answer the first question which in our opinion is academic in nature.

10. Accordingly and in view of the aforesaid discussion the appeal fails and is dismissed.

No costs.