TaxTMI 
TaxTMI 
2008 (11) TMI 45
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.... of the relevant previous year audited by an accountant as also to furnish the report of such audit in the prescribed form duly signed and verified by such an accountant before the specified date indicated in the said provision, which, at the relevant point of time, meant the 31st day of October of the assessment year. It is an admitted position that the assessee neither got his accounts audited nor did he file the audited report before the Assessing Officer as stipulated under Section 44AB. 3. The assessee filed his return of income on 22.06.2000. The said return was processed under Section 143(1) on 14.03.2002. It was not subjected to assessment under Section 143(3) of the said Act. Subsequently, on 31.07.2003, the Assistant Commissioner of Income-tax, Circle 23(1), New Delhi issued a show cause notice under Section 274 of the said Act read with Section 271B thereof. The said show cause notice indicated that the assessee had filed the return of income for the assessment year 2000-01 on 22.06.2000 and that, from the return it was apparent that the assessee had, without reasonable cause, failed to get his accounts audited or to obtain a report of such audit as per the provis....
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....ll as on merits. 5. The assessee, still being aggrieved, preferred an appeal before the Income-tax Appellate Tribunal which was also dismissed by virtue of the impugned order both on merits as well as on the point of limitation. However, as noted above, the present appeal is only concerned with the pleas with regard to limitation and the question framed for our consideration is also in respect of this plea of limitation. The tribunal was also of the view that since the penalty proceedings were initiated on 31.07.2003, as per the provisions of Section 275(1)(c) of the said Act, the penalty order could be passed upto the end of the financial year (in this case, upto 31.03.2004), in which proceedings were initiated, or within six months from the end of the month in which the action for imposition of the penalty was initiated, whichever period expired later. The tribunal held that since the Assessing Officer had imposed the penalty on 17.02.2004, inasmuch as the end of the financial year fell later than the six month period stipulated in Section 275(1)(c), the order of penalty was within time. The tribunal held that in terms of the provisions of Section 275(1)(c), in the facts o....
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....sions, the learned counsel for the appellant / assessee also placed reliance on the following decisions:- 1) Shanbhag Restaurant v. Deputy Commissioner of Income-tax: 266 ITR 393 (Kar); 2) Commissioner of Income-tax v. Hissaria Brothers: 291 ITR 244 (Raj); 3) Commissioner of Income-tax v. Chhajer Packaging and Plastics P. Ltd: 300 ITR 180 (Bom). 7. Mrs Prem Lata Bansal, the learned counsel appearing on behalf of the respondent / revenue, submitted that the tribunal as well as the other authorities below had correctly interpreted the provisions of Section 275(1)(c) and had arrived at the correct conclusion that the penalty order was not barred by limitation. She supported the impugned order on the basis of the reasoning adopted by the tribunal. However, before us, she also advanced a new argument. She submitted that Section 275(1)(c) prescribes two periods of limitation and it stipulates that the one that expires later would be the relevant period before which a penalty order can be passed. In this context, she submitted that the present case is one of penalty under Section 271B of the said Act. Such penalty proceedings have not been initiated in the course of any proceedi....
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....een initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. xxx xxx xxx xxx ' 10. Section 275 falls within Chapter XXI which deals with 'Penalties Imposable'. Sub-clauses (a) and (b) of Section 275(1), which have not been extracted above and are not attracted in the present case, relate to cases where the assessment to which the proceedings for imposition of penalty relate are the subject matter of an appeal before higher authorities or are the subject matter of a revision under Section 263 of the said Act, respectively. Sub-clause (c) of Section 275(1) covers all other cases not falling within sub-clauses (a) or (b). In this sense, Section 275(1)(c) is a residuary provision. In the present case, sub-clauses (a) and (b) are not at all attracted and, therefore, the case squarely falls within sub-clause (c). It is also necessary to point out that in respect of each of the sub-clauses (a) to (c), specific periods of limitation have been prescribed. Thus, in the first instance, it is to be seen as to under which sub-clause the case falls and then to apply the period of limitation....
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....gory of cases, both the periods of limitation may be applicable, whereas in the latter category, only the second period of limitation of six months from the end of the month in which action for imposition of penalty is initiated, would apply. To illustrate this, let us take the first category of cases. This is that category where the action for imposition of penalty is initiated in the course of some other proceeding. In such a situation, it is obvious that both the periods of limitation would come into play. One would be reckoned from the date on which the other proceedings are completed upto and including the end of the financial year in which that date occurs. The other period of limitation would be that which applies irrespective of the date of completion of the 'other proceedings' and which is relatable simply to the date on which action for imposition of penalty is initiated. The period of limitation in such a case would be six months from the end of the month in which the action for imposition of penalty is initiated. It is clear that where penalty proceedings are initiated in the course of some other proceedings, the legislature has provided for two different periods of lim....
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....ng on 31.03.2008 being the end of the financial year relatable to 25.05.2007, the date on which the proceedings were completed and 31.10.2007 being the date relatable to the initiation of the penalty proceedings. Once again, applying the expression 'whichever period expires later', the period of limitation for this example would be 31.03.2008. 14. The above two examples illustrate cases where the applicable period of limitation would be relatable either to the date of initiation of the penalty proceedings or to the date of completion of the proceedings in the course of which action for the imposition of penalty has been initiated. But there is a third / residuary category of cases where the initiation of action for imposition of penalty is not in the course of some proceedings. In such cases, the first part of Section 275(1)(c) would have no application and it is only the period of limitation prescribed in the second part which would apply. Since only one period of limitation would be applicable, the expression 'whichever period expires later' would have to be read as that very period of limitation. The present case undoubtedly falls under Section 275(1)(c) and, that too, un....
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....ful interpretation. This is exactly what we have done. The said expression has significance where two periods of limitation are triggered, one being later than the other. But that does not mean that in a situation where there is only one period of limitation under Section 275(1)(c), because two periods of limitation are not applicable and because the expression 'whichever period expires later' has to be considered literally, such a situation would not be covered under Section 275(1)(c). The argument advanced by Mrs Bansal can be easily countered by an example. Let us assume that the action for imposition of penalty was initiated on 15.09.2007 in the course of proceedings which were completed on 11.11.2007. Going by the first part of Section 275(1)(c), the limitation for passing a penalty order would end on 31.03.2008, being the end of the financial year in which the proceedings, in the course of which action for imposition of penalty had been initiated, are completed. But, we find that even going by the second part of Section 275(1)(c), in this example, the end point of limitation would be 31.03.2008. This is so because the action for imposition of penalty was initiated on 15.09.20....
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..... In Chhajer Packaging and Plastics Pvt. Ltd (supra), the penalty proceedings arose out of the assessment proceedings relating to the assessment year 1996-97. The assessment order was passed on 30.03.1999. Consequently, considering the first part of Section 275(1)(c), the penalty order could have been passed latest by 31.03.1999 being the end of the financial year in which the assessment proceedings were completed. The Bombay High Court noted that under the second mode of computation of limitation under the latter half of clause (c) of Section 275(1), since the penalty proceedings were initiated by a notice dated 06.04.1999, the period of limitation of six months to be computed from the last date of the month in which the penalty proceedings were initiated would end on 29.10.1999, though in our view, it should have been 31.10.1999 because we are considering calendar months. Since the order imposing penalty was passed on 13.03.2000, the Bombay High Court was of the view that, computing limitation in both permissible ways, the order was beyond the period of limitation. In the first case, the period expired on 31.03.1999 and in the second case, it expired, according to the Bomba....