2019 (8) TMI 630 - HC - Income Tax

Revenue appeal dismissed due to expired penalty time limit, lack of valid reasons for extension. No substantial question of law.

The appeal filed by the Revenue against the order made by the Income Tax Appellate Tribunal was dismissed. The Tribunal held that the time limit for ... Revision u/s 263 - Penalty u/s 271(1)(c) - period of limitation u/s 275 - why the order passed by the AO dropping the penalty proceedings should not be revised? - HELD THAT:- Tribunal, after examining the factual position and taking note of the legal submissions made on behalf of the assessee as well as the Revenue, allowed the appeal. The appeal was allowed by the Tribunal considering the fact situation to examine as to whether the penalty could have been imposed beyond the period of limitation. The action for initiation of the penalty under Section 271(1)(c) of the Act had been initiated in the course of assessment proceedings itself under Section 143(3) read with Section 153A of the Act on 31.3.2016. Time limit for levy of penalty under Section 271(1)(c) of the Act would expire in the present case on 31.9.2016, being six months from the end of the month, in which, the penalty proceedings have been initiated. Now, after the expiry of the said limitation, the learned Principal Commissioner of Income Tax has issued the show cause notice on 09.3.2018 for reviving the penalty proceedings, which had already expired and was barred by limitation. True, the order passed by the learned Assessing Officer dropping the penalty proceedings is an unspeaking order, but still, that would not make it valid reason for extending the limitation provided under Section 275 of the Act for the purpose of levying the penalty or for considering the levy of penalty under Section 271(1)(c) of the Act by invoking the powers of revision under Section 263 of the Act. In the circumstances, the order passed under Section 263 of the Act, being unsustainable in law, stands quashed - Decided in favour of assessee. Issues:1. Appeal against order under Section 260A of the Income Tax Act, 1961.2. Quashing of revision order under Section 263 of the Income Tax Act.3. Time limit for penalty proceedings under Section 271(1)(c) of the Act.4. Dropping of penalty proceedings without reasoning.5. Applicability of the judgment of the Hon'ble Apex Court in the case of Toyota Motor Corporation Vs. CIT.Analysis:1. The appeal was filed by the Revenue against the order dated 15.11.2018 made in ITA.No.1846/Chny/2018 on the file of the Income Tax Appellate Tribunal, Madras 'D' Bench for the assessment year 2012-13 under Section 260A of the Income Tax Act, 1961.2. The substantial questions of law raised in the appeal were whether the Tribunal was correct in quashing the revision order passed under Section 263 of the Income Tax Act by applying the time limit prescribed for penalty proceedings under Section 271(1)(c) and not under Section 263, and whether the Appellate Tribunal was correct in not appreciating the ratio of the judgment of the Hon'ble Apex Court in the case of Toyota Motor Corporation Vs. CIT.3. The Assessing Officer initiated penalty proceedings under Section 271(1)(c) of the Act on 31.3.2016, but subsequently dropped the penalty proceedings on 08.9.2016 without recording reasons. The Principal Commissioner of Income Tax issued a notice under Section 263 of the Act on 09.3.2018 to revise the order dropping the penalty proceedings.4. The Tribunal quashed the penalty proceedings based on the finding that the time limit for imposing the penalty under Section 271(1)(c) of the Act had expired on 31.9.2016, as the penalty proceedings were initiated on 31.3.2016. The Tribunal held that the order dropping the penalty proceedings, though unspeaking, did not provide a valid reason for extending the limitation for levying the penalty or for considering the levy of penalty under Section 271(1)(c) by invoking the powers of revision under Section 263.5. The Tribunal concluded that there was no substantial question of law arising for consideration in the case, as it was decided based on facts. Therefore, the appeal filed by the Revenue was dismissed, and no costs were awarded.