THE COMMISSIONER OF INCOME TAX V. RAKESH KUMAR PROP.

ITA/23/2001

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax, Patiala against the decision of the Income Tax Appellate Tribunal, Amritsar, which had upheld the deletion of a penalty imposed on Rakesh Kumar, the proprietor of M/s. Rakesh Kumar and Co. The penalty was initially imposed for failing to get his accounts audited as required under Section 44AB of the Income Tax Act, 1961. The CIT(A) had deleted the penalty on the grounds that it was barred by limitation, a decision which was later upheld by the Tribunal. The Revenue challenged this interpretation of the limitation period for imposing penalties under the Act, leading to this appeal.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 719358 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 18-11-2010
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax v. Chhajer Packaging and Plastics P. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: SURINDER GARG
• Assessee Lawyers: TEJINDER JOSHI
• Keywords: Assessment Year; Audit; Income Tax; Limitation; Penalty
• Section: 44AB; 260A; 271B; 275(1)(c)

Judgement Text

" Income Tax Appeal No. 23 of 2001 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 23 of 2001 Date of decision: 18.11.2010 The Commissioner of Income Tax Patiala --- Appellant Versus Rakesh Kumar Prop. of M/s. Rakesh Kumar and Co., Gidderbaha --- Respondent CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL ---- PRESENT: Mr. Tejinder K. Joshi, Advocate for the appellant. Mr. Surinder Garg, Advocate for the respondent. ---- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-tax Act, 1961 (for short “the Act’”) has been filed by the Revenue against the order dated 20.6.2000, passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar, (in short “the Tribunal”) in ITA No. 171/ASR/1998 relating to the assessment year 1993-94. The Revenue has claimed the following substantial question of law for determination by this Court: Income Tax Appeal No. 23 of 2001 2 “Whether on the facts and in the circumstances of the case, the ITAT was right in law in deleting the penalty imposed by the Assessing Officer under Section 271B by holding that the proceedings are barred by limitation within the meaning of Section 275(1)(c) of the Income Tax Act, 1961?” The facts necessary for adjudication of the above question, as narrated in the appeal, are that the failure on the part of the respondent-assessee to get his accounts audited and obtain a report from the accountant before the specified date in terms of the provisions of Section 44AB of the Act, led to initiation of proceedings against him under Section 271B of the Act on 12.3.1996. The assessing officer, vide order dated 26.3.1997, imposed a penalty of Rs. one lac on the respondent-assessee under Section 271B. The assessee challenged the order of imposition of penalty before the Commissioner of Income Tax (Appeals), [hereinafter referred to as “CIT(A)”]. The CIT(A) accepted the appeal and deleted the penalty by holding vide its order dated 13.1.1998 that the penalty levied on the appellant under Section 271B was barred by limitation within the meaning of Section 275(1)(c) of the Act. The appeal carried by the Revenue challenging the order of the CIT(A) was dismissed by the Tribunal by the order under appeal. Aggrieved by the order of the Tribunal, the Revenue is now before us in this appeal. We have heard learned counsel for the parties and perused the record. Income Tax Appeal No. 23 of 2001 3 The point for consideration in this appeal is regarding interpretation of Section 275(1)(c) of the Act. According to the counsel for the Revenue, proceedings in the course of which imposition of penalty stood initiated were completed on 31.3.1997 and, therefore, the penalty levied on 26.3.1997, was within limitation. In support of his contention, learned counsel for the Revenue placed reliance on the following observations of the Bombay High Court in Commissioner of Income Tax v. Chhajer Packaging and Plastics P. Ltd., (2008) 300 ITR 180: “Coming to the first method of computing the period of limitation, the last date for imposition of penalty is the last day of the financial year and which is the financial year, is given in parenthetical clause within the first half of clause (c) itself, i.e., “in the course of which action for imposition of penalty has been initiated”. Thus, it is apparent that the law presumes the penalty proceedings to be germinating from some other proceedings already in progress. The date of termination of those proceedings is important and the last date of the financial year in which those proceedings were completed, is the outer limit for conclusion of penalty proceedings.” Learned counsel for the assessee made a faint attempt to support the order passed by the Tribunal. Section 275 (1)(c) of the Act which is relevant for adjudicating the controversy reads thus: Income Tax Appeal No. 23 of 2001 4 “275. Bar of limitation for imposing penalties.-(1) No order imposing penalty under this Chapter shall be passed-……. (c) in any other case, 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 action for imposition of penalty is initiated, which period expires later.” The aforesaid provision provides that no order of penalty can be passed after the end of the financial year in which the proceedings in the course of which penalty proceedings have been initiated are completed, or within six months from the end of the month in which action for imposition of penalty is initiated, whichever is later. As the proceedings in the present case during which action for the imposition of penalty had been initiated were completed on 31.3.1997, the penalty order passed on 26.3.1997 could not be held to be beyond limitation. Further, we find that the legal position as indicated in the judgment of the Bombay High Court in Chhajer Packaging and Plastics P. Ltd.’s case (supra), fully applies to the facts of the present case. The CIT(A) and the Tribunal had primarily addressed itself to initiation of penalty proceedings on 12.3.1996 and held that penalty could be levied up to 30.9.1996. As noticed above the limitation to impose penalty was up to 31.3.1997 and, therefore, the CIT(A) and the Tribunal were not right in holding otherwise. Income Tax Appeal No. 23 of 2001 5 In view of the above, the appeal is allowed and the orders of the CIT(A) and the Tribunal are set aside and the matter is remitted to the CIT(A) to proceed in accordance with law. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) November 18, 2010 JUDGE *rkmalik* "