2016 (5) TMI 701 - AT - Income Tax

Penalty order quashed for exceeding limitation period & lacking required approval

The Assistant Commissioner of Income-tax, Circle-1, Kannur Versus Shri P.P. Ummerkutty Vice-Versa

The penalty order passed by the Assessing Officer was quashed as it was beyond the limitation period prescribed by section 158BFA(3)(e) of the Income Tax ... Penalty u/s. 158BFA(3)(e) - penalty order within the time allowed - Held that:- Standing Counsel has to be treated as the recognized agent of the Commissioner or the Income Tax Department and the date of receipt of the order of the Hon’ble High Court by him has to be treated as the date of receipt of the order by the Commissioner or the Income Tax Department. Accordingly, the penalty order should have been passed on or before 31/03/2010 or 31/08/2010, which in fact had been passed on 27/09/2010 which is beyond the limitation period as prescribed in the Income Tax Act. Therefore, the penalty order passed by the Assessing Officer is barred by limitation and is liable to be quashed. Accordingly, we do not find any infirmity in the order of the Ld. CIT(A) who has rightly quashed the penalty order passed by the Assessing Officer. - Decided in favour of assessee. Issues Involved:1. Whether the penalty order passed by the Assessing Officer falls within the time allowed under section 158BFA(3)(e) of the Income Tax Act.2. Whether the permission of the Joint Commissioner was required before passing the penalty order.Issue-wise Detailed Analysis:1. Timeliness of the Penalty Order under Section 158BFA(3)(e):The primary issue was whether the penalty order passed by the Assessing Officer was within the statutory time limit as per section 158BFA(3)(e) of the Income Tax Act. The quantum assessment of the assessee was under appeal before the High Court of Kerala under section 260A. The relevant dates were the pronouncement of the High Court's order on 03/11/2009 and the receipt of the certified copy by the Standing Counsel on 16/02/2010. According to section 158BFA(3)(e), the penalty order becomes time-barred after the financial year in which the proceedings for penalty initiation are completed, or six months from the end of the month in which the penalty initiation action is completed, whichever is later. The penalty order in this case should have been passed by 31/03/2010 or 31/08/2010. Since the penalty order was passed on 27/09/2010, it was beyond the limitation period. This view was supported by the decision of the Madhya Pradesh High Court in Sultanpur Kshetriya Gramin Bank v. Joint CIT, which held that the date of receipt of the order by the recognized agent (Standing Counsel) is considered the date of receipt by the Commissioner/Department. Thus, the penalty order was quashed as it was barred by limitation.2. Requirement of Permission from the Joint Commissioner:The second issue was whether the permission of the Joint Commissioner was required before passing the penalty order. According to section 158BFA(3)(b), the Assessing Officer should obtain prior approval from the Joint Commissioner if the penalty exceeds twenty thousand rupees. The penalty order dated 27/09/2010 was treated as a primary order, and the Assessing Officer should have obtained the prior approval of the Joint Commissioner. The ITAT, Pune Bench in Akil Gulamali Somji vs. ITO held that if the mandatory approval is not obtained, the order is null and void. Since the penalty order was passed without the Joint Commissioner's approval, it was deemed null and void.Conclusion:The appeal of the Revenue was dismissed as the penalty order was barred by limitation and passed without the necessary approval from the Joint Commissioner. The Cross Objection filed by the assessee was also dismissed as it was supportive in nature and did not present any new grounds. The final order pronounced in open court on 09-03-2016 dismissed both the Revenue's appeal and the assessee's Cross Objection.