TaxTMI 
TaxTMI 
2011 (4) TMI 1519
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....te of. On 31st October, 2001, the assessee filed it's return of income disclosing total income of Rs. .22,27,470 which was processed and accepted as such by way of intimation under section 143(1)(a) on 8.2.2003. Subsequently, on 23rd November, 2004, a show cause notice under section 154 was served upon the assessee requiring the assessee to show cause as to why excess TDS credit granted to the assessee, amounting to Rs. .2,604 not be withdrawn. Vide letter dated 3.12.2004, the assessee stated that he has no objection to the proposed rectification. On 21.2.2005, an order under section 154 was, accordingly, passed. We may, at this stage, mention that there is dispute as to the date of service of the said order and the assessee contends that the order was received only on 5.5.2009. However, for the reasons, we shall set out in a short while, it is not necessary to go into that aspect of the matter any further. Coming back to the sequence of events, on 23.3.2009, once again, a show cause notice was served on the assessee requiring the assessee to show cause as to why rectification under section 154 not be carried out in respect of loss on sale of car which has been claimed as a revenue....
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....th the law. If the appellant company has made wrong claim through its profit and loss account which was not an allowable expenditure as per Act, then the AO action in rectifying the order dated 21.2.2005 was correct and, accordingly, the AO's action is upheld. The appeal is dismissed on this account." 5. The assessee is not satisfied and is in further appeal before us. 6. We have heard the rival contentions, perused the material on record and duly considered the factual matrix of the case as also the applicable legal position. 7. In the case of CIT vs. Sakseria Cotton Mills Ltd., 124 ITR 570(Bom), Hon'ble Bombay High Court was in seisin of a situation in which a somewhat identical issue came up for consideration before Their Lordships. The original assessment order passed by the Assessing Officer carried out in appeal before the AAC but grant of rebate was not the issue on which the assessment order was carried out in appeal. The Assessing Officer subsequently passed the order rectifying the mistake and, while doing so, computed the time limit under section 154(7) with reference to appellate order. On these facts, Their Lordships held that since granting of rebate was not ....
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....gument. He points out that limitation under section 154(7) applies only in cases covered by section 154(1)(a) i.e. deal with rectification of any order passed under the provisions of this Act, whereas the impugned order is in fact covered by section 154(a)(b), which deal with "any intimation or deemed intimation under sub-section(1) of Section 143. It is stated that, as evident from the wordings of Section 154(1), an intimation is not an order and is covered in the scope of Section 154 by the virtue of specific inclusions of 'intimations' under clause 154 (1)(b). His argument is that while there is a time barring limit for orders to be passed under section 154(1)(a), there no such limit for orders under section 154(1)(b), as time limit set out in section 154 (7) refers only to an 'order' and there is no specific inclusion of 'intimations'. It is, therefore, contended that section 154(7) does not come into play so far as rectification of intimation or deemed intimation under section 143(1)(a) is concerned. We are unable to see any substance in this plea because if accepted it will lead to absurdity inasmuch as no finality can ever given to an intimation under section 143(1) and to t....
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....provisions have been introduced. Per contra, it implies that in case where the limitation has expired before the amended provisions have come into force, the new provisions cannot be applied to such assessee as the vested right which has already been acquired by the assessee before the amendment cannot be taken away. The Hon'ble Delhi High Court in the case of CIT vs. Pratap Singh of Nabha (1982) 138 ITR 27 (Del) has dealt with a similar case wherein their Lordships have held that as per the law as it then stood, penalty order has to be passed within two years and since there is no change of law within this period, the period of limitation cannot be extended by applying the amended provisions. In the present case, as on 31st Jan., 1989, penalty proceedings have not been initiated. As we have already held that under the unamended provisions of s. 275 the AO is required to initiate penalty proceedings in the course of the assessment proceedings. The non-initiation thereof would take away the jurisdiction of the AO to initiate proceedings subsequently. Thus, before the amendment of s. 275, i.e., 1st April, 1989, the AO ceased to have jurisdiction to levy penalty and thus the amend....
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.... respectfully following the judgment of the jurisdictional High Court in the case reported in 1990 CrLJ 1110, maximum of two years from the end of the assessment year in which the assessments are completed, can be said to be a reasonable time within which the AO could have initiated the penalty proceedings. As in the present case, the penalty proceedings have been initiated about 43 months after the completion of the assessment, we are of the opinion that the penalty proceedings are barred by limitation and consequently penalties levied under s. 271B cannot be sustained. 11. In this context we may also draw support from the judgment of the Hon'ble Andhra Pradesh High Court in the case of K.P. Narayanappa Setty & Co. vs. CIT (1975) 100 ITR 17 (AP) wherein their Lordships have held that though no specific period was prescribed within which penalty may be levied, there should not be inordinate delay and the penalty should be levied within reasonable time. We may further observe that the intention of the legislature cannot be otherwise, in as much as, Democles Sword cannot be allowed to hang on the head of the assessee perennially giving discretion to the AO before whom th....