2017 (12) TMI 356 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on penalty orders for A.Y. 2009-10, emphasizing limitation period start.

Income Tax Officer, Ward-4 (4), Jaipur Versus Shri Prashant Sharma And Vice-Versa

The Tribunal upheld the CIT(A)'s decision to set aside penalty orders u/s 271D and 271E for A.Y. 2009-10, emphasizing that the limitation period starts ... Penalty u/s 271D as well as 271E - point of reckoning of limitation from the date of issuing the notice by the ITO or by the JCIT - bar of limitation - authority competent to impose penalty - Held that:- In the present case, the first show cause notice for initiation of proceedings was issued by the AO on 25.03.2003 and was served on the assessee on 27.03.2003. Obviously, the later period also expired on 30.09.2003 when six months expired from the end of the month in which the action for imposing the penalty was initiated. The order as passed by the Joint Commissioner of Income Tax for the penalty under Section 271D on 28.05.2004 was clearly hit by the bar of limitation and has rightly been set aside in the orders impugned. In view of the above, our answer to the formulated question of law is that even when the authority competent to impose penalty under Section 271D was the Joint Commissioner, the period of limitation for the purpose of such penalty proceedings was not to be reckoned form the issue of first show cause by the Joint Commissioner; but the period of limitation was to be reckoned from the date of issue of first show cause for initiation of such penalty proceedings. For the purpose of present case, as observed hereinabove, for the proceedings having been initiated on 25.03.2003, the order passed by the Joint Commissioner under Section 271D on 28.05.2004 was hit by the bar of limitation. The CIT(A) and the Tribunal have, thus, not committed any error in setting aside the order of penalty. See CIT Vs Jitendra Singh Rathore [2013 (3) TMI 222 - RAJASTHAN HIGH COURT ] - Decided in favour of assessee Issues:- Appeal against penalty orders u/s 271D and 271E for A.Y. 2009-10- Validity of penalty orders being barred by limitation- Dispute over reckoning the limitation period from the date of notice by ITO or JCITAnalysis:1. The Revenue filed appeals against penalty orders u/s 271D and 271E for A.Y. 2009-10. The AO found that the assessee received and paid cash amounts in contravention of sections 269SS and 269T of the Act, initiating penalties. The CIT(A) set aside the penalties, citing them as beyond the 6-month limitation period as per section 275 of the Act from the first show cause notice issued by the AO.2. The main issue revolved around the computation of the limitation period for penalty orders. The Revenue argued that the limitation should be reckoned from the notice issued by the JCIT, who is competent to levy penalties. Conversely, the assessee contended that the orders were beyond the limitation period based on the first show cause notice by the ITO. The Tribunal noted conflicting views from different High Courts but held the jurisdiction High Court's decision binding, emphasizing that the limitation starts from the date of the notice by the AO.3. Citing the decision in CIT vs. Jitendra Singh Rathore, the Tribunal clarified that the period of limitation for penalty proceedings under sections 271D and 271E should be calculated from the date of the first show cause notice issued by the AO, even if the competent authority to impose penalties is the JCIT. The Tribunal upheld the CIT(A)'s decision, as it followed the jurisdiction High Court's ruling, dismissing the Revenue's appeals against the penalty orders.4. The Tribunal highlighted that the jurisdiction High Court's stance, as reiterated in subsequent cases like CIT Vs. Banshi Lal Rathi, supports reckoning the limitation period from the date of the show cause notice by the AO. Therefore, the Tribunal concluded that the penalty orders were rightly set aside by the CIT(A) due to being beyond the statutory limitation period, and subsequently dismissed the Revenue's appeals.5. In conclusion, the Tribunal upheld the CIT(A)'s decision, emphasizing the importance of calculating the limitation period for penalty proceedings under sections 271D and 271E from the date of the show cause notice issued by the Assessing Officer, even if the penalty is to be imposed by the Joint Commissioner. The appeals by the Revenue against the penalty orders were dismissed.