2024 (11) TMI 1310 - AT - Income Tax

Revenue's penalty appeal dismissed as Additional CIT's notice issued beyond section 271E limitation period

DCIT, Central Circle-15 Versus M/s. THAPAR HOMES LIMITED

The ITAT Delhi dismissed the Revenue's appeal regarding penalty under section 271E imposed for limitation issues. The Tribunal held that the limitation ... Penalty u/s 271E as barred by limitation - HELD THAT:- It is well settled law that the period of limitation for initiating the penalty starts from the date of issuance of notice by the AO and not from the issuance of penalty notice by the JCIT/Addl.CIT. In the present case, the penalty notice has been issued by the AO on 31/12/2010 along with the passing of the assessment order and subsequent issue of another notice by Addl. CIT was on 30/06/2011. It would not mean that initial notice issued by the A.O. would seized to be valid or operative. Thus, the imposition of penalty u/s 271E to be done before 30/06/2011 and not 31/12/2011. CIT(A) by following the judicial precedents of the Hon'ble High Courts and the Apex Court and also following the CBDT Circular 9 dated 26/04/2016, deleted the penalty which requires no interference by the Tribunal. Finding no merit in the Grounds of Appeal of the Revenue, we dismiss the same. Issues Involved:1. Whether the penalty order under Section 271E was barred by limitation.2. Determination of the starting point for the limitation period for imposing penalty under Section 271E.3. Applicability of Section 275(1)(c) for the limitation period in penalty proceedings.4. Validity of the penalty order issued by the Additional CIT.Detailed Analysis:1. Whether the penalty order under Section 271E was barred by limitation:The primary issue in this case was whether the penalty order under Section 271E, imposing a penalty of Rs. 3,44,15,000/-, was barred by limitation. The Ld. CIT(A) held that the penalty order was indeed barred by limitation, as it was passed beyond the permissible time frame stipulated under the Income Tax Act. The Department argued that the penalty order was within the limitation period, as it was passed within six months from the initiation of proceedings by the Additional CIT. However, the Ld. CIT(A) found that the penalty order should have been passed on or before 30th June 2011, whereas it was passed on 30th December 2011, thus rendering it time-barred.2. Determination of the starting point for the limitation period for imposing penalty under Section 271E:The Ld. CIT(A) examined the sequence of events to determine the starting point for the limitation period. The Assistant CIT initiated the penalty proceedings by issuing a show cause notice on 31st December 2010, along with the assessment order. The Additional CIT issued another notice on 13th June 2011. The Ld. CIT(A) relied on judicial precedents and the CBDT Circular No. 9 dated 26th April 2016, which clarified that the limitation period starts from the issuance of notice by the Assessing Officer, not from the issuance of notice by the Additional CIT. Therefore, the limitation period began on 31st December 2010.3. Applicability of Section 275(1)(c) for the limitation period in penalty proceedings:The Ld. CIT(A) discussed the applicability of Section 275(1)(c), which governs the limitation period for imposing penalties. According to Section 275(1)(c), the penalty order must be passed within six months from the end of the month in which the penalty proceedings are initiated, or by the end of the financial year in which the proceedings are completed, whichever is later. The Ld. CIT(A) concluded that the penalty order was time-barred as it was not passed within the required timeframe, taking into account the initiation date by the Assessing Officer.4. Validity of the penalty order issued by the Additional CIT:The Ld. CIT(A) held that the penalty order issued by the Additional CIT was invalid due to being time-barred. The Tribunal upheld this finding, emphasizing that the limitation period started from the date of the notice issued by the Assessing Officer. The Tribunal found no merit in the Revenue's appeal and dismissed it, affirming the Ld. CIT(A)'s decision to delete the penalty.In conclusion, the Tribunal dismissed the Revenue's appeal, agreeing with the Ld. CIT(A)'s decision that the penalty order was barred by limitation. The Tribunal relied on judicial precedents and the CBDT Circular to determine the correct starting point for the limitation period, ultimately finding that the penalty order was issued beyond the permissible timeframe.