2025 (11) TMI 1504 - AT - Income Tax

Time-Barred Penalty Under Sections 271(1)(c) and 275(1)(a) Quashed; Limitation Strictly Construed in Penalty Proceedings, Assessee Favoured

ITAT Mumbai allowed the assessee's appeal, holding that the penalty imposed u/s 271(1)(c) for A.Y. 2002-03 was time-barred under s. 275(1)(a). It held ... Penalty levied u/s 271(1)(c) - period of limitation in terms of section 275(1)(a) - HELD THAT:- It is a well-settled principle that penalty provisions, being quasi-criminal in nature, must be construed strictly. Once the statutory period expires, the authority to impose penalty is lost irrevocably. Administrative lapses or internal disarray cannot breathe life into a proceeding that has become barred by time. The moment the department acted upon the CIT(A)’s order by filing Form No. 36, the date of receipt became incontrovertible. The subsequent plea of non-traceability cannot rewrite or extend the limitation prescribed by statute. CIT(A), in concurring with the AO’s reasoning, has overlooked the decisive evidentiary value of Form No. 36 and the inescapable consequence that follows from section 275(1)(a). The jurisdiction to levy penalty extinguished on 31.03.2008. Any penalty order passed thereafter is void ab initio. What has been attempted in October 2023 is not merely belated but jurisdictionally impossible. We hold that the penalty order dated 27.10.2023 is patently barred by limitation under section 275(1)(a) and is therefore null and void. The impugned order of the learned CIT(A) upholding such a time-barred penalty is unsustainable and is hereby set aside. The penalty imposed under section 271(1)(c) for A.Y. 2002–03 is accordingly quashed. Having held the penalty order itself to be non-est for want of jurisdiction on account of limitation, the remaining grounds on the merits of the levy of penalty become wholly academic and are not adjudicated upon.ppeal of the assessee is allowed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether a penalty order under section 271(1)(c) is barred by limitation under section 275(1)(a) when the department itself recorded receipt of the CIT(A)'s order (Form No. 36) on 22.11.2006 and the penalty was levied on 27.10.2023. 2. Whether internal non-availability or non-traceability of departmental records (absence of an office endorsement) can defeat the effect of a departmental admission of receipt (Form No. 36) for the purpose of computing limitation under section 275(1)(a). 3. Whether a belated penalty passed after the statutory outer limit prescribed by section 275(1)(a) is void for want of jurisdiction (i.e., null and void ab initio), and whether administrative lapses can revive jurisdiction. 4. Consequentially, whether any merits of the penalty need to be considered once the penalty order is held time-barred and jurisdictionally invalid. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Application of section 275(1)(a) to the facts Legal framework: Section 275(1)(a) prescribes the outer time-limit for passing a penalty order under the Act: the penalty must be passed on or before the later of (i) the end of the financial year in which the assessment was completed, or (ii) one year from the end of the financial year in which the order of the CIT(A) is received by the Principal Commissioner/Commissioner. The proviso addresses computation in certain circumstances but does not displace the basic commencement rule tied to receipt by the PCIT/CIT. Precedent Treatment: The judgment does not refer to or rely upon any judicial precedents; the decision applies the statutory text to the undisputed chronology. Interpretation and reasoning: The Tribunal accepted the undisputed chronology that the CIT(A)'s order dated 01.09.2006 was received on 22.11.2006 (as admitted by the department in Form No. 36). Applying section 275(1)(a), the relevant outer limit ran to 31.03.2008. A penalty imposed on 27.10.2023 therefore fell squarely outside the statutory period. Ratio vs. Obiter: Ratio - limitation under section 275(1)(a) is computed from actual receipt of the appellate order by the PCIT/CIT; an admitted date of receipt in departmental pleading (Form No. 36) is conclusive for limitation computation. Obiter - none materially; analysis is directly dispositive. Conclusions: The penalty order dated 27.10.2023 is time-barred under section 275(1)(a) because the department's own recorded date of receipt (22.11.2006) fixed the limitation expiry as 31.03.2008. Issue 2 - Evidentiary value of Form No. 36 and admissibility against the Department Legal framework: Evidence establishing the date of receipt by the department is the factual touchstone for computing the limitation under section 275(1)(a). Admissions in departmental pleadings and forms filed before appellate authorities bear evidentiary significance. Precedent Treatment: No prior decisions were invoked; the Tribunal relied on general evidentiary principles and statutory mechanics. Interpretation and reasoning: The department itself, in pursuing the quantum appeal, annexed Form No. 36 stating receipt of the CIT(A)'s order on 22.11.2006. The Tribunal held that this categorical disclosure 'carries conclusive evidentiary value' and binds the revenue for computing limitation. Once the department acted on the CIT(A)'s order (by filing appeal and using the stated receipt date), it cannot later repudiate that date by relying on alleged absence of office records. Ratio vs. Obiter: Ratio - a departmental admission of receipt (e.g., Form No. 36) is binding for limitation purposes and cannot be negated subsequently by internal record-keeping lapses. Obiter - emphasis that actual receipt, not record quality, starts limitation. Conclusions: Form No. 36, filed by the department in appellate proceedings, fixed the date of receipt for limitation computation and precluded the revenue's contrary contention based on alleged non-traceability of internal records. Issue 3 - Effect of alleged non-availability of internal records/remand report on limitation Legal framework: Limitation is statutory and jurisdictional; equitable or administrative considerations cannot extend or postpone it. The date of actual receipt governs; absence of contemporaneous internal files does not alter the legal commencement of limitation where receipt is otherwise established. Precedent Treatment: The judgment applies settled principles regarding strict construction of penal/quasi-criminal provisions and the finality of statutory limitations; no distinct precedent is cited or overruled. Interpretation and reasoning: The Assessing Officer's remand report alleged that the CIT(IT)-2 office records did not show receipt of the CIT(A)'s order, and therefore argued limitation should run from receipt of the Tribunal's order. The Tribunal rejected that contention: the department cannot rely on internal non-traceability to evade the consequence of its own prior admission. Administrative lapses or poor record-keeping cannot revive jurisdiction once the statutory period has expired. Ratio vs. Obiter: Ratio - internal non-availability of departmental records cannot postpone the statutory limitation where the department has already acted upon and admitted receipt of the appellate order. Obiter - administrative disarray cannot breathe life into time-barred proceedings. Conclusions: The remand report and the absence of internal endorsements did not supply a legally permissible basis to recompute or extend limitation; the penalty remained time-barred. Issue 4 - Jurisdictional consequence of expiry of limitation and treatment of merits Legal framework: Penalty provisions are quasi-criminal and construed strictly; expiry of the statutory period results in loss of jurisdiction to impose penalty. Once jurisdiction is shown to be lacking, merits need not be adjudicated. Precedent Treatment: The Tribunal applied the statutory principle that expiry of limitation extinguishes the authority to impose penalty; no case law was cited. Interpretation and reasoning: Because the outer time-limit expired on 31.03.2008, the authority to levy penalty ceased to exist. The Tribunal held the penalty order void ab initio (non est) and set aside the appellate authority's confirmation. Consequently, any substantive grounds on the correctness of penalty were rendered academic and were not considered. Ratio vs. Obiter: Ratio - a penalty order passed after the statutory limitation period is void for want of jurisdiction; where jurisdictional defect exists, merits are not adjudicated. Obiter - none material beyond applying the principle to the facts. Conclusions: The penalty order is null and void for want of jurisdiction; the confirming order is unsustainable; merits were not considered as they became academic. Cross-references See Issue 1 and Issue 2 for interrelated analysis on how the department's own admission of receipt fixes the start of limitation under section 275(1)(a); see Issue 3 for rejection of attempts to rely on internal non-availability to alter that computation; see Issue 4 for the jurisdictional consequence and non-adjudication of merits.