2023 (1) TMI 721 - AT - Income Tax

Invalid penalty order due to unreasonable delay; Tribunal stresses adherence to timelines

The Tribunal held that the penalty order under section 271C of the Act, imposing a penalty of Rs. 1,05,36,376, was invalid due to the delay in initiating ... Penalty u/s 271C - Proceedings as time barred - non deduction of tax at source on the transaction under provisions of Section 194C - Counsel submitted that penalty proceedings have been initiated 14 years after the assessment year concerned - HELD THAT:- Firstly, penalty proceedings have been initiated after 14 years and the same is belated and beyond reasonable limitation period of time and this proposition is supported by the decision of NHK Japan Broadcasting [2008 (4) TMI 182 - DELHI HIGH COURT] and Bharti Airtel vs. UOI [2016 (12) TMI 1601 - DELHI HIGH COURT] As in terms of jurisdictional Delhi High Court in CIT vs. Mahesh Woods Products (P) Ltd. [2017 (5) TMI 433 - DELHI HIGH COURT] and PCIT vs. Rishikesh Buildcon Pvt. Ltd. [2022 (11) TMI 1038 - DELHI HIGH COURT] when the date of initiation for the purposes of Section 275 is 27.03.2019 and, therefore, order ought to have been passed within six months i.e. by 30.09.2019, whereas order has been passed on 31.10.2019. Hence, beyond limitation. Thus we hold that the penalty levied in this case deserves to be deleted. Hence, we set aside the orders of the authorities below and delete the penalty. - Decided in favour of assessee. Issues Involved:1. Validity of penalty order under section 271C of the Act.2. Timeliness of penalty proceedings initiation.3. Justifiability of penalty imposition under section 271C.4. Compliance with legal provisions regarding penalty initiation and imposition.Issue 1: Validity of Penalty Order under Section 271C of the Act:The appeal challenged the order under section 250(6) r.w.s 271C of the Act, confirming a penalty of Rs. 1,05,36,376 imposed by the Ld. CIT(A). The appellant argued that the order lacked justifiable reasoning, ignored submissions, and failed to consider judicial precedents, thus being bad in law. The appellant contended that the penalty was imposed without a Document Identification Number (DIN), as mandated by a CBDT circular. The appellant also raised concerns about the penalty being initiated 14 years after the end of the financial year, questioning its validity.Issue 2: Timeliness of Penalty Proceedings Initiation:The assessment order under section 143(3) of the Act was completed on 17.12.2008, with penalty proceedings initiated much later on 27.03.2019, concerning non-deduction of tax at source. The appellant argued that such a delay in initiating penalty proceedings, especially after 14 years, was unreasonable and beyond the limitation period. The appellant cited various case laws to support the argument that the penalty proceedings were time-barred under section 275 of the Act.Issue 3: Justifiability of Penalty Imposition under Section 271C:The appellant contended that the penalty order under section 271C was void ab initio due to the delay in initiation and lack of reasonable cause for the alleged failure in tax deduction. The appellant also argued that the penalty was based on the disallowance made by the AO under section 40(a)(i) of the Act, which was known prior to the completion of assessment, rendering the penalty proceedings unjustifiable.Issue 4: Compliance with Legal Provisions Regarding Penalty Initiation and Imposition:The Tribunal analyzed the proposition presented by the appellant, emphasizing that penalty proceedings initiated after 14 years were beyond a reasonable period. Referring to relevant case laws, the Tribunal concluded that the penalty levied in this case should be deleted due to the belated initiation of penalty proceedings and the violation of the limitation period specified under section 275 of the Act. The Tribunal set aside the orders of the authorities below and deleted the penalty, highlighting the importance of complying with legal provisions regarding the initiation and imposition of penalties under the Income Tax Act.This detailed analysis of the judgment highlights the key issues involved, the arguments presented by the parties, and the Tribunal's decision based on legal principles and precedents.