TaxTMI 
TaxTMI 
2026 (2) TMI 943
X X X X Extracts X X X X
X X X X Extracts X X X X
....ith regard to total cash income in FY 2015-16, the petitioner admitted an additional income of Rs. 10 crore for the said FY, thereby aggregating to the receipt of a sum of Rs. 15 crore in cash during FY 2015-16. 2. A return of income was filed by the petitioner for FY 2015-16 (AY 2016-17) on 29.07.2016 declaring the total income of Rs. 35,42,91,890/-, which included the above mentioned sum of Rs. 15 crore. Not accepting the return of income, an assessment was undertaken and assessment order dated 30.12.2017 was issued making three additions, which are discussed below. In the return of income, depreciation of Rs. 89,07,814/- was claimed. By concluding that the depreciation claim partly pertained to personal use of the relevant assets by the petitioner, 20% of the amount claimed as depreciation (i.e. Rs. 17,81,562/-) was disallowed and this amount was added to the assessee's total income. On verification of the profit and loss account, it was noticed that the assessee had claimed a sum of Rs. 2,92,44,825/- as expenditure under the head "Release & Rasigar Mandram Expenses". Out of this sum, it was stated by the authorized representative of the petitioner in letter dated 15.12.2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l Commissioner of Income-Tax set aside assessment order dated 30.12.2017 on the ground that penalty proceedings should have been initiated under Section 271AAB of the I-T Act. The petitioner challenged the said order before the ITAT. By order dated 13.05.2022, the ITAT took note of the fact that the assessment order had recorded that penalty proceedings would be initiated under Section 271(1)(c)/271AAB. Therefore, the ITAT concluded that the exercise of jurisdiction under Section 263 was unwarranted. Consequently, the revision order was quashed. 6. In the interregnum, notice dated 11.12.2018 was issued under Section 274 read with Section 271AAB. After considering the objections of the petitioner dated 22.01.2019 and 05.04.2019 in response, impugned order dated 30.06.2022 imposing penalty under Section 271AAB of the I-T Act was issued. The present writ petition challenges the penalty order. Counsel and their contentions: 7. Oral arguments on behalf of the petitioner were advanced by Mr.A.S.Sriraman, learned counsel, and on behalf of the revenue by Mr.A.P.Srinivas, learned senior standing counsel. 8. Although objections were raised against the proposed imposition of penal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....11. Rebutting the contention of learned senior standing counsel that clause (c) of Section 275(1) only applied where no appeal was filed, he relied on several judgments wherein appeals against the assessment order had been filed, but clause (c) was held to be applicable. He also denied the contention that such judgments only dealt with the imposition of penalty by an officer, other than the assessing officer. According to him, the overarching principle in those judgments is that clause (c) and not clause (a) applies whenever the appellate proceedings against the assessment order have no bearing on the penalty proceedings. In support of these contentions, learned counsel referred to and relied upon the following judgments: (i) Commissioner of Income-Tax v. Hissaria Bros., [2008] 169 taxmann 262 (RAJ) (Hissaria Bros), particularly paragraphs 14 to 27 thereof; (ii) Commissioner of Income-tax-VI v. Worldwide Township Projects Ltd., [2014] 48 taxmann.com 118 (Delhi) (Worldwide Township), particularly paragraphs 4 and 5 thereof; (iii) Circular No.10 of 2016 dated 26.04.2016 accepting the judgment in Worldwide Township; (iv) Principal Commissioner of In....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2. Because the order imposing penalty was issued on 30.06.2022, learned senior standing counsel contended that the order was issued within the period of limitation. 14. As regards Section 275(1)(c) of the I-T Act, learned senior standing counsel contended that it cannot be applied if the case falls within clause (a) or clause (b). He also pointed out that the assessment order was set aside by exercising powers of revision under Section 263 on 30.10.2019, and the order in revision was set aside by the ITAT only on 13.05.2022. In these circumstances, he submitted that the order imposing penalty cannot be said to be barred by limitation. 15. As regards the judgments relied on by learned counsel for the petitioner, Mr.Srinivas submitted that all the judgments relate to penalty proceedings initiated by an officer, other than the assessing officer. After pointing out that penalty proceedings cannot be initiated by the assessing officer in respect of penalties under certain provisions, learned senior standing counsel contended that such penalty proceedings do not emanate from the assessment or other order and, consequently, are completely independent of any appeal arising therefrom.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Principal Chief Commissioner or Chief Commissioner or [Principal Commissioner or Commissioner, whichever period expires later : Provided that in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A, and the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Commissioner (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aterial phrases: (i) "in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253" (ii) "after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed" (iii) "or six months from the end of the month in which the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever period expires later." Imposition of penalty 22. Learned counsel for the petitioner contended that clause (a) does not apply because the penalty proceedings under Section 271AAB relate to a part of the returned income, and that no appeal was filed in respect thereof. Consequently, he contended that only clause (c) applies. He also relied on several judgments to contend that clause (c) applies wherever the penalty proceedings are unrelated to the assessment order forming the subject of an appeal b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... category of penalties is that they are typically not strongly linked to assessment or other proceedings. It should, nonetheless, be recognised that the breaches could have been noticed either in course of assessment or other proceedings or otherwise. Hence, the expressions "in the course of any proceedings under this Act" or "during the course of any proceedings under this Act" are not found in the provisions relating to these penalties. A third, small, category is discernible. This relates to penalties originating in search proceedings and Sections 271AAA and 271AAB fall in this category. Because Section 271AAB is at the heart of this dispute, I discuss the provision in greater detail later. Now, keeping in mind this statutory backdrop and, particularly, the varying degrees of separation from the primary tax proceedings, I turn to the judgments cited by learned counsel for the petitioner. Precedents on penalty proceedings 27. Hissaria Bros is a judgment of the Division Bench of the Rajasthan High Court dealing with the imposition of penalty for the breach of Sections 269SS and 269T. In that context, it was held as follows: "23. A close scrutiny of section 275 which....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es falling under clause (c), penalty proceedings are to be completed within six months from the end of the month in which the proceedings during which the action for imposition of penalty is 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. There is no provision under clause (c) for the extended period of limitation commensurating with completion of the appellate proceedings, if any, arising from the proceedings during the course of which such penalty proceedings are initiated as in the case where the penalty proceedings are linked with the assessment proceedings or the other relevant proceedings. 27. We are, therefore, of the opinion that since penalty proceedings for default in not having transactions through the bank as required under sections 269SS and 269T are not related to the assessment proceedings but are independent of it, therefore, the completion of appellate proceedings arising out of the assessment proceedings or the other proceedings during which the penalty proceedings under sections 271D and 271E may have been initiated has no relevance for sustaining or....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... but not by the assessing officer. 30. Mahesh Wood Products related to the contravention of Sections 269SS and 269T and the imposition of penalty under Sections 271D and 271E. In this case, the action for initiation of penalty was not in the assessment order. The judgment in Subodh Kumar Bhargava pertained to the imposition of penalty under Section 271B for breach of the auditing obligation under Section 44AB. Most of these judgments follow the judgment of the Rajasthan High Court in Hissaria Bros and relate to penalties several degrees removed from assessment proceedings. Indeed, except Sandeep Chandak, none of them deal with the imposition of penalty under Section 271AAB. Therefore, I set out Section 271AAB before examining the judgment in Sandeep Chandak. Section 271AAB 31. Section 271AAB, as it stood during the relevant period, is set out below: "Penalty where search has been initiated. 271AAB.(1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of July, 2012 but before the date on which the Taxation Laws (Second Am....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessment order. Action for the initiation of penalty proceedings could, however, be taken independently. In that situation, limitation for the imposition of penalty under Section 271AAB would be determined as per Section 275(1)(c). On the other hand, if an assessment order were to be issued, such order would take within its fold the undisclosed income admitted in course of search proceedings and included in the return of income. It also becomes possible to initiate action for the imposition of penalty in such assessment order. 33. In Sandeep Chandak, action for the imposition of penalty under Section 271AAB was not initiated in the assessment order. Instead, it was done in separate proceedings. Such action was upheld on the ground that the ingredients of Section 271AAB had been satisfied. It was also held therein that such proceedings may be initiated independently of the assessment proceedings and that satisfaction of the assessment officer in respect thereof is not required to be recorded during assessment proceedings. The said judgment did not deal with the limitation period under Section 275(1) of the I-T Act. The view taken in the judgments cited by learned counsel for the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecause neither the assessee nor the revenue filed any further appeal. Thus, all the criteria set out above for the applicability of clause (a) of Section 275(1) are satisfied in this case. I next examine whether clause (c) should nonetheless apply because the proceedings are under Section 271AAB. 36. Both the assessee and the revenue agree that only clause (a) of Section 271AAB(1) is relevant for present purposes. It follows from the text of Section 271AAB(1), as applicable to this dispute, that penalty under this provision may be imposed by the assessing officer and not by any other person. It is also evident that this provision is only applicable to cases where a search was initiated under Section 132 of the I-T Act. The assessment order, in this case, makes reference to the initiation of a search. It also records that penalty proceedings under Section 271AAB would be initiated separately. Therefore, in this case, the action for the imposition of penalty was initiated in the course of assessment proceedings. 37. The assessment order was challenged in respect of two out of three additions, but not in respect of the income of Rs. 35,42,91,890/-, which was the income returned ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is attracted. Whether the order imposing penalty was within the period of limitation specified therein remains to be considered. Computation of period of limitation 40. As discussed above, action for the imposition of penalty was initiated in the assessment order dated 30.12.2017. If the said date is construed as the date of completion of proceedings, it falls within financial year 2017-18. If limitation were to be reckoned on the basis of expiry of the financial year in which proceedings were completed, the last date for issuing the penalty order would be 31.03.2018. If determined on this basis, the penalty order dated 30.06.2022 would be beyond the period of limitation. 41. Section 275(1), however, also enables the period of limitation to be computed from the date on which the appellate order or the order of the appellate tribunal is received. The starting point for such computation is the end of the month in which the order is received and the end date is 6 months from such date. If determined on this basis, the order of the ITAT was issued on 22.12.2021 and could not have been received prior thereto. Considering 22.12.2021 as the date of receipt, the relevant month end....