2025 (8) TMI 1792 - AT - Income Tax

Limitation for penalty proceedings under Section 271D ran from the Assessing Officer's reference, quashing the penalty order.

Penalty under Section 271D was held time-barred because limitation under Section 275(1)(c) was computed from the Assessing Officer's reference to the ... Penalty under section 271D - Period of limitation - limitation prescribed under section 275(1)(c) - Exclusion of rehearing period u/s 129 - no specific request by the assessee for rehearing under section 129 - HELD THAT: - The Tribunal held that the exclusion under Explanation (i) to section 275 is attracted only where, upon change of incumbent, the assessee specifically demands reopening of the earlier proceedings or a rehearing under the proviso to section 129. Since the Revenue could not show any such request by the assessee, the mere fact that the succeeding officer issued opportunity letters did not extend the limitation period. [Paras 12, 13, 17] The Revenue's alternate plea for exclusion of time was rejected. Initiation of penalty proceedings - Bar of limitation - reckoning of date - whether the limitation is to be reckoned from the date of reference by the Ld. AO to the Ld. Addl. CIT (18.01.2017) or from the date of notice issued by the Ld. Addl. CIT (14.02.2017)? - HELD THAT: - Following PCIT vs. K. Umesh Shetty [2025 (1) TMI 1237 - KARNATAKA HIGH COURT] the Tribunal held that the reference made by the Assessing Officer to the competent authority is the triggering point for initiation of penalty proceedings under section 271D. It declined to adopt the contrary view of the Kerala High Court in Grihalakshmi Vision[2015 (8) TMI 1214 - KERALA HIGH COURT] The Tribunal further observed that, even if two interpretations were possible, the principle in CIT vs. Vegetable Products Ltd [1973 (1) TMI 1 - SUPREME COURT] required adoption of the view favourable to the assessee. On that basis, initiation having occurred on 18.01.2017, the penalty order passed on 31.08.2017 was beyond limitation. [Paras 15, 16, 17] The penalty order under section 271D was held to be barred by limitation and was quashed. Final Conclusion: The Tribunal allowed all the appeals and quashed the penalties under section 271D as time-barred. It held that limitation ran from the Assessing Officer's reference to the Addl. CIT, and no period could be excluded for rehearing in the absence of a specific request by the assessee. Issues: Whether the penalty order under Section 271D was barred by limitation under Section 275(1)(c), and whether the time alleged to have been taken for rehearing on change of incumbent was liable to be excluded under Explanation (i) to Section 275 read with Section 129.Analysis: The limitation question turned on the date of initiation of penalty proceedings. The competing views were whether initiation occurred on the Assessing Officer's reference to the Additional Commissioner or on the later show-cause notice issued by the penalty authority. The Tribunal preferred the view that the reference by the Assessing Officer was the triggering point, following the later High Court ruling relied upon before it and the principle that, where two views are possible, the one favourable to the assessee should be adopted. On the exclusion plea, the Tribunal held that Explanation (i) to Section 275 applies only where the assessee demands rehearing under the proviso to Section 129, and no such request was shown on record.Conclusion: The penalty order was held to be time-barred and was quashed. The assessee's appeals were allowed.