TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
When case Id is present, search is done only for this
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Penalty under Section 271B must be levied within six months, extended by CBDT circulars during Covid-19 pandemic</h1> <h3>Income Tax Officer, Ward 1 (2) (4), Surat Versus Pristine Jewellery</h3> Income Tax Officer, Ward 1 (2) (4), Surat Versus Pristine Jewellery - TMI 1. Issues Presented and Considered Whether the order dated 04.09.2023 passed by the Tribunal in ITA No. 277/SRT/2023 contains a mistake apparent on record requiring rectification under section 254(2) of the Income Tax Act, 1961. Whether the penalty order under section 271B of the Income Tax Act, 1961, passed on 09.08.2021, is barred by limitation. Whether the time limit for passing penalty orders under section 271B can be extended by CBDT Circular No. 74/2021 dated 25.06.2021. Whether the Tribunal erred in holding that the penalty order was passed beyond the limitation period prescribed under section 275 of the Income Tax Act. Whether the application under section 254(2) can be entertained for review or re-consideration of the Tribunal's order beyond the scope of rectification of mistake apparent on record. Applicability and effect of judicial precedents concerning limitation and extension of time by CBDT circulars on the facts of the present case. 2. Issue-wise Detailed Analysis Issue 1: Existence of Mistake Apparent in the Tribunal's Order Dated 04.09.2023 Legal Framework and Precedents: Section 254(2) of the Income Tax Act provides for rectification of mistakes apparent on the face of the record by the Tribunal. The scope of such rectification is limited to correcting obvious errors and does not extend to review or re-hearing of the matter. Court's Interpretation and Reasoning: The Tribunal initially held that the penalty order under section 271B was barred by limitation as it was passed after the prescribed period under section 275. However, the Revenue contended that the limitation period was extended by CBDT Circular No. 74/2021. The Tribunal did not consider this extension in its earlier order. Key Evidence and Findings: The penalty order was passed on 09.08.2021, and the CBDT Circular No. 74/2021 extended the time limit for passing penalty orders up to 30.09.2021 due to the COVID-19 pandemic. Application of Law to Facts: Since the penalty order was passed within the extended time frame allowed by the CBDT circular, the Tribunal's earlier conclusion that the penalty order was time-barred is a mistake apparent on record. Treatment of Competing Arguments: The assessee argued that the original limitation period expired on 30.06.2020, and the CBDT circular cannot retrospectively extend limitation beyond this date. The Revenue relied on the circular's extension of time up to 30.09.2021. The Court found the Revenue's submission persuasive given the pandemic-related statutory relaxations. Conclusion: The Tribunal's order dated 04.09.2023 contains a mistake apparent on record for not considering the extension of limitation granted by CBDT Circular No. 74/2021. Issue 2: Limitation Period for Passing Penalty under Section 271B and Extension by CBDT Circular Legal Framework and Precedents: Section 271B prescribes penalty for failure to get accounts audited as required under section 44AB. Section 275 prescribes the limitation period for passing penalty orders, generally six months from the end of the relevant assessment year. CBDT Circulars issued under section 3 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) extended various limitation periods due to the COVID-19 pandemic. Court's Interpretation and Reasoning: The Court recognized the statutory basis of the CBDT circulars issued during the pandemic period and acknowledged that these circulars validly extended the limitation period for passing penalty orders. Key Evidence and Findings: The assessment order was passed on 24.12.2019, and penalty proceedings were initiated simultaneously. The original limitation for passing penalty expired on 30.06.2020. However, the penalty order was passed on 09.08.2021, within the extended timeline up to 30.09.2021 as per CBDT Circular No. 74/2021. Application of Law to Facts: The extension granted by the CBDT circular applies to the penalty order in question, making the penalty order validly passed within the extended limitation period. Treatment of Competing Arguments: The assessee's argument that the circular cannot extend limitation beyond the original expiry date was rejected on the ground that the circular was issued under a statutory provision (TOLA Act) that validly extends limitation periods during the pandemic. Conclusion: The penalty order passed on 09.08.2021 is within the extended limitation period allowed by CBDT Circular No. 74/2021 and is therefore valid. Issue 3: Distinction Between Penalty Proceedings and Assessment Order/Additions Legal Framework and Precedents: Penalty proceedings under section 271B are independent of the assessment order and additions made therein. Limitation for penalty proceedings is separate and distinct from the limitation for assessment or reassessment proceedings. Court's Interpretation and Reasoning: The Court emphasized that penalty under section 271B is not connected to any addition or disallowance in the assessment order. Thus, limitation for penalty must be considered independently. Key Evidence and Findings: The assessment was completed on 24.12.2019, and penalty was levied subsequently. No appeal was filed against the quantum assessment, and penalty proceedings were initiated separately. Application of Law to Facts: Since penalty proceedings are independent, the limitation for penalty must be calculated separately and cannot be linked to the limitation applicable to assessment or reassessment proceedings. Conclusion: The limitation period for penalty under section 271B is distinct and was extended by CBDT circulars, making the penalty order valid. Issue 4: Applicability of Judicial Precedents Relied Upon by the Assessee Legal Framework and Precedents: The assessee relied on decisions of higher courts holding that CBDT circulars cannot override statutory provisions and that limitation cannot be extended beyond the original expiry date unless specifically provided by law. Court's Interpretation and Reasoning: The Court distinguished the facts of the present case from those precedents. It noted that the cited decisions related to reopening of assessments under section 147 or challenged CBDT circulars that derogated statutory exemptions, which is different from the issue of limitation extension under TOLA Act for penalty proceedings. Key Evidence and Findings: The Court observed that the present case involves extension of limitation under a valid statutory provision (TOLA Act) applicable during the pandemic, unlike the situations in the cited cases. Application of Law to Facts: The precedents relied upon are not applicable to the facts of the present case involving pandemic-related statutory extension of limitation. Conclusion: The judicial precedents cited by the assessee do not apply to the present facts and do not negate the validity of the CBDT circular extending limitation. Issue 5: Scope of Application under Section 254(2) for Rectification of Mistake Apparent Legal Framework and Precedents: Section 254(2) permits rectification of mistakes apparent on the face of the record by the Tribunal. It does not provide for review or re-hearing of the matter. Court's Interpretation and Reasoning: The Court held that the Revenue's application under section 254(2) is maintainable as it points out a mistake apparent on record in the Tribunal's order for not considering the CBDT's extension of limitation. Key Evidence and Findings: The Tribunal's order dated 04.09.2023 did not consider the CBDT Circular No. 74/2021, which is an evident omission and constitutes a mistake apparent on record. Application of Law to Facts: The application does not seek review or re-hearing but rectification of an omission, which falls within the scope of section 254(2). Conclusion: The application under section 254(2) is valid and the order dated 04.09.2023 is recalled for fresh hearing. Issue 6: Effect of COVID-19 Pandemic and Statutory Extensions on Limitation Periods Legal Framework and Precedents: The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) empowers the CBDT to extend limitation periods for various proceedings due to the COVID-19 pandemic. Court's Interpretation and Reasoning: The Court acknowledged the unprecedented nature of the pandemic and the statutory authority granted to CBDT to extend limitation periods to ensure fairness and avoid hardship. Key Evidence and Findings: CBDT Circular No. 74/2021 extended the limitation period for passing penalty orders up to 30.09.2021, which the penalty order in question complied with. Application of Law to Facts: The statutory extension is applicable and valid, and the penalty order passed within this extended period is not barred by limitation. Conclusion: Pandemic-related statutory extensions under TOLA Act are valid and applicable to the penalty proceedings in the present case. Final Conclusion The Tribunal's order dated 04.09.2023 is recalled on the ground of mistake apparent on record for not considering the CBDT's extension of limitation period under Circular No. 74/2021. The penalty order under section 271B passed on 09.08.2021 is within the extended limitation period and is valid. The matter is remanded for fresh hearing on the appeal. The Miscellaneous Application filed by the Revenue under section 254(2) is allowed accordingly.
TaxTMI 
TaxTMI 
