Tribunal upholds CIT(A) decision on penalty deletion under Income-tax Act, citing limitation period

The Tribunal upheld the CIT(A)'s decision to delete the penalty imposed under section 271E of the Income-tax Act, ruling that the penalty order issued on 30.12.2011 exceeded the limitation period. The Tribunal held that the penalty proceedings commenced with the issuance of the notice by the Assessing Officer on 31.12.2010, not with the assessment order. Consequently, the penalty was deemed unsustainable due to exceeding the prescribed limitation period under section 275(1)(c). The Tribunal dismissed the revenue's appeal, finding no irregularity in the CIT(A)'s decision.

---

---

Issues:
1. Initiation of penalty proceedings: Whether proceedings for levy of penalty are initiated with the passing of the order of assessment or the issuance of a notice by the Addl. CommissionerRs.

Analysis:
The appeal before the Appellate Tribunal ITAT DELHI challenged the order dated 9.9.2016 in Appeal No.237/11-12 for the Assessment Year 2008-09. The main issue was the initiation of penalty proceedings under section 271E of the Income-tax Act, 1961. The Assessing Officer (AO) made an addition on account of certain entries and initiated penalty proceedings. The question was whether the penalty proceedings commenced with the assessment order or the notice issued by the Addl. Commissioner. The AO passed the assessment order on 31.12.2010 and issued a notice under section 274 read with Section 271E on the same day. The Addl. CIT issued a show cause notice on 13.6.2011, and the penalty order was passed on 30.12.2011.

The assessee contended that the penalty order dated 30.12.2011 was beyond the limitation period prescribed under section 271(1)(c) of the Act. The CIT(A) accepted this contention based on the decision of the Hon’ble Delhi High Court and deleted the penalty. The revenue appealed, arguing that the penalty order was passed within six months of the initiation of proceedings by the Addl. CIT, who was competent to levy the penalty. The revenue claimed that the penalty should not have been deleted on the ground of limitation.

The revenue relied on the decision of the Hon’ble Kerala High Court in another case to support their argument that the assessment order should be considered as the initiation of penalty proceedings. However, since the assessee did not appear before the Tribunal, the matter was dealt with based on the available record. The Tribunal noted the conflicting decisions but upheld the CIT(A)’s order. The Tribunal agreed with the CIT(A) that the period of limitation starts from the date of issuance of notice by the AO, not from the initiation of penalty proceedings by the JCIT/ACIT. Therefore, the penalty order dated 30.12.2011 was considered unsustainable due to exceeding the limitation period provided under section 275(1)(c).

Ultimately, the Tribunal found no illegality or irregularity in the CIT(A)’s order and dismissed the revenue’s appeal. The decision was pronounced in the Open Court on 25th February 2019.

---