Appeal granted, penalty order void under Income Tax Act time limit

The Tribunal allowed the appeal, setting aside the penalty order under Section 158BFA(2) of the Income Tax Act as it was passed beyond the limitation period. The penalty order issued on 28.04.2017 was deemed void ab initio since it exceeded the prescribed period starting from the receipt of the ITAT's order by the Principal CIT-1 on 08.01.2015. The Tribunal relied on the Delhi High Court judgment in 'CIT-7 Vs Odeon Builders Pvt Ltd.' to support this interpretation.

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Issues Involved:
1. Validity of the penalty order under Section 158BFA(2) of the Income Tax Act, 1961.
2. Limitation period for passing the penalty order under Section 158BFA(3)(c) of the Income Tax Act, 1961.

Detailed Analysis:

1. Validity of the Penalty Order under Section 158BFA(2):

The assessee contested the penalty imposed under Section 158BFA(2) of the Income Tax Act, 1961, arguing that it was levied after the expiry of the limitation period prescribed under Section 158BFA(3)(c). The penalty proceedings were initiated on 29.07.2002, but the penalty order was passed on 28.04.2017. The assessee argued that the order was barred by limitation as it was issued more than two years after the end of the financial year in which the ITAT's order was received by the Department.

2. Limitation Period for Passing the Penalty Order:

The core issue was determining the correct limitation period for the penalty order. According to Section 158BFA(3)(c), the penalty order should be passed before the expiry of six months from the end of the month in which the ITAT's order is received by the Principal CIT or Commissioner, whichever period expires later.

The ITAT's order was pronounced on 19.09.2014 and was received by the Principal CIT-1, Chandigarh, on 08.01.2015. However, due to jurisdictional issues, the order was returned and then forwarded to the Principal CIT (Central), Gurgaon. The penalty order was eventually passed on 28.04.2017.

Key Legal Interpretation:

The Tribunal referred to the Delhi High Court judgment in 'CIT-7 Vs Odeon Builders Pvt Ltd.' which clarified that the limitation period begins when the ITAT's order is received by any of the named officers in the Department, including the CIT (Judicial). The internal administrative changes in jurisdiction do not affect the commencement of the limitation period. The relevant excerpts from the Delhi High Court judgment were cited to support this interpretation.

Conclusion:

The Tribunal concluded that the penalty order was passed beyond the prescribed limitation period. The limitation period started from the date the ITAT's order was first received by the Principal CIT-1, Chandigarh, i.e., 08.01.2015. Since the penalty order was passed on 28.04.2017, it was beyond the permissible period and thus void ab initio.

Judgment:

The appeal of the assessee was allowed, and the penalty order under Section 158BFA(2) was set aside as it was passed beyond the limitation period.

Order Pronounced:

The order was pronounced in the Open Court on 10.02.2019.

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