Pristine Jewellery, Mumbai V. Income Tax Officer, Ward1(2)(4), Surat, Surat

ITA 277/SRT/2023

AI Insights

The case involves Pristine Jewellery, a partnership firm, which faced penalty proceedings under section 271B for failing to furnish an audit report as required under section 44AB of the Income Tax Act, 1961, for the assessment year 2012-13. The Assessing Officer initiated the penalty proceedings and imposed a penalty of Rs. 1.50,000. The firm appealed to the National Faceless Appeal Centre (NFAC), which upheld the penalty. Subsequently, the firm appealed to the Income Tax Appellate Tribunal, which admitted an additional ground of appeal regarding the limitation period and ultimately quashed the penalty on the grounds that it was barred by limitation.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302032 (ITAT-SURAT)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-07-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 19-04-2023
• Other Referred Cases: National Thermal Power Company Ltd. vs. CIT, Paharpur Cooling Towers Ltd. v. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Period of limitation; Reasonable cause; Competent authority; Time period of passing order; Revenue expenditure; Ignorance of law; Set aside
• Section: 147; 271(1)(c); 273B; 143(3); 274; 143(2); 271B; 44AB; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM &DR. A.L.SAINI, AM आयकर अपीलसं./ITA No.277/SRT/2023 (िनधाŊरणवषŊ / Assessment Year: (2012-13) (Physical Court Hearing) Pristine Jewellery Plot No.20, MIDC Behind Khanna House, Road No.6, Andheri East, Mumbai-400096 Vs. Income Tax Officer Ward-1(2)(4), Surat, Room No.119, 1 st Floor, Aayakar Bhawan, Near Majura Gate, Opp. New Civil Hospital, Surat- 395001 ̾थायीलेखासं./जीआइआरसं./PAN/GIR No.: AAIFP 6894 R (अपीलाथŎ /Appellant) (ŮȑथŎ/Respondent) िनधाŊįरती की ओर से /Appellant by : Shri Unmesh Dalal, C.A राजèव कȧ ओर से /Respondent by : Shri Vinod Kumar, Sr-DR सुनवाईकीतारीख/ Date of Hearing : 07/07/2023 घोषणाकीतारीख/Date of Pronouncement: 04/09/2023 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the assessee, pertaining to assessment year 2012-13, is directed against the order passed by the National Faceless Appeal Centre, New Delhi [for short ‘NFAC/Ld.CIT(A)’] dated 24.02.2023, which in turn arises out of a penalty order passed by the Assessing Officer u/s 271B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide order dated 09.08.2021. 2. Grounds of appeal raised by the assessee are as follows: “1. The Ld. CIT appeal erred in confirming the order passed by the Ld assessing officer which is bad-in-law. 2. The Ld CIT Appeal erred in confirming the penalty imposed by the Ld assessing officer for non-furnishing audit report under the provision of section 44AB of the Income Tax Act, 1961 without reasonable cause. 3. The assessee craves leave to add, amend, alter, drop any of the grounds of appeal.” Page | 2 ITA No.277/SRT/2023 A.Y. 2012-13 Pristine Jewellery 3. Additional ground raised by the assessee, is as follows: “On the facts and circumstances of the case, the learned Commissioner of Income Tax(Appeal) erred in confirming order passed u/s 271B by the Assessing Officer, which is barred by limitation.” 4. The facts of the case which can be stated quite shortly are as follows: The assessee before us is a partnership firm. During the assessment year under consideration, the Assessing Officer observed that as per ITS data, the assessee has received contractual receipts to the tune of Rs.1,02,98,778/- from M/s Vishal Diamonds. However, the assessee did not file the return of income. Therefore, after getting prior approval from the competent authority, case of the assessee was reopened u/s 147 of the Act and notice u/s 148 of the Act was issued to the assessee on 31.03.2019 through ITBA e- proceedings and the same was duly served upon the assessee. In response to notice u/s 148 of the Act, the assessee has filed the return of income on 27.04.2019, declaring total income at Rs.Nil. The reasons recorded for reopening of the assessment was supplied to the assessee, vide letter dated 19.01.2019. The notice u/s 143(2) of the Act, was issued to the assessee on 19.11.2019, and the same was duly served upon the assessee. After that assessment was completed u/s 143(3) r.w.s. 147 of the Act, as per order dated 24.12.2019 and income as returned at Rs. Nil, was accepted. 5. During the course of assessment proceedings, the Assessing Officer observed that total receipts of the assessee during the year under consideration exceeds the limits as prescribed u/s 44AB of the Act, thus, the assessee was required to get its books of account audited or furnish a report of such audit, as required u/s 44AB of the Act, for the assessment year 2012- 13. The assessee did not file the original return of income within the time allowed and failed to furnish report of such audit; therefore, penalty proceedings u/s 271B of the Act were initiated. Page | 3 ITA No.277/SRT/2023 A.Y. 2012-13 Pristine Jewellery 6. Therefore, the Assessing Officer, issued a show cause notice, dated 24.12.2019, to the assessee. In response to the said show cause notice, the assessee, vide reply dated 09.01.2020, submitted as under: “That our clients is receipt of your notice under section 274 read with 271B of the Income Tax Act, 1961 for failure to get the accounts audited and not filed Tax Audit Report as provided under section 44AB before the due date for A.Y 2012- 13.In this respect we would like to state as under: According to Section 273B, no penalty shall be imposable on the person or the assessee, as the case maybe for any failure which inter alia include the defaults mentioned in Section 271B, if he proves that there were reasonable cause for the said failure. A plain reading of Section 273B makes it clear that the same is a procedural law with regard to the question of imposition of penalty under different sections which include section 271B. Section 271B maintains imposition of penalty on the failure but, by reasons of rule of evidence provided under section 273B, such imposition of penalty is dependent on the proof that there was no reasonable cause for the failure. The assessee was not doing any business in the partnership firm and has just started the operations from the current year and this being the first year of full fledge operations. All the three partners are almost senior citizen and they were not having knowledge of compliance and therefore the same was not filed. After the said assessment year the firm has complied with all the provisions of Income Tax Act,1961.” 7. Thereafter, the assessee`s case was transferred to NFAC and further show cause notices dated 24.02.2021, 09.03.2021, 05.05.2021 and 28.07.2021 were issued to the assessee. However, the assessee did not respond to any such notices. Therefore, the case was decided by the assessing officer, keeping in view the reply of assessee. From the perusal of the reply, it was observed by the Assessing Officer that the assessee has not brought out any reasonable cause for non-furnishing of return of income and audit report even though the assessee was liable to get his accounts audited and furnish the details thereof in the return of income. Furthermore, ignorance of law is not excuse in the eyes of law. Therefore, the contention of the assessee that partners were not having knowledge of compliance of the provision of the Income Tax Act, is not tenable. In view of the above facts and circumstances, the Assessing Officer held that this is a fit case for levy of penalty u/s 271B of the Act for non- furnishing the details of audit Page | 4 ITA No.277/SRT/2023 A.Y. 2012-13 Pristine Jewellery under provision of section 44AB of the Act. Therefore, the Assessing Officer levied minimum penalty of Rs.1.50,000/- u/s 271B for non- furnishing details of Audit Report under the provision of Section 44AB of the Act. 8. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before NFAC/Ld. CIT(A), who has confirmed the penalty imposed by the Assessing Officer. Therefore, the assessee is in further appeal before this Tribunal. 9. Before us the Learned Counsel for the assessee, at the outset submitted that assessee has raised additional ground of appeal stating that penalty order passed by the Assessing Officer u/s 271B of the Act, is barred by limitation, hence penalty order may be quashed. Learned Counsel submits before us that additional ground of appeal may be admitted, as it is being purely a legal issue and all facts are already on record. On the other hand, Learned DR for the Revenue pleaded that assessee did not raise this issue during the appellate proceedings, before the ld CIT(A), therefore, at this stage the assessee cannot raise additional ground on legal issue. 10. We note that above additional ground raised by the assessee goes to the root of the matter and it is purely a legal issue and all facts are already on record which goes to the root of the matter and no further inquiry is required for deciding the same as all facts are already on record. Therefore, in the light of ratio laid down by the Hon'ble Supreme Court in the case of National Thermal Power Company Ltd., vs. CIT (1998) 229 ITR 382 (SC), we admit the additional ground raised by the assessee. Page | 5 ITA No.277/SRT/2023 A.Y. 2012-13 Pristine Jewellery 11. In respect of the additional ground, Learned Counsel for the assessee, argued that assessment order was framed by the Assessing Officer u/s 143(3) r.w.s. 147 of the Act, on 24.12.2019. Whereas, the penalty order was passed on 09.08.2021 by the Assessing Officer. The last reply filed by the assessee during the penalty proceedings was on 09.01.2020. The ld Counsel submitted that Assessing Officer initiated the penalty proceedings on 24.12.2019. No any appeal was filed by the assessee, against assessment order dated 24.12.2019. The six months from the end of the month in which action for imposition of penalty is initiated, expires on 30.06.2020. However, the Assessing Officer passed the penalty order on 08.08.2021, therefore, such penalty order is barred by limitation, hence may be quashed. 12. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 13. We have considered the rival submissions and perused the relevant finding given in the order ld NFAC/Ld.CIT(A). We note that Assessing Officer levied penalty of Rs.1,50,000/- for failure to obtain audit report and furnish the same. The penalty was initiated by the Assessing Officer in its assessment order, as per order passed u/s 143(3) r.w.s.147 dated 24.12.2019. The Assessing Officer accepted the returned income of assessee at Rs. Nil. No any appeal was filed by the assessee against the assessment order. Therefore, the finality of income assessed was closed on 24.12.2019. With regard to penal proceedings, show cause notice was first issued on 24.12.2019. In response to the show cause- notice, the assessee replied on 09.01.2020. The Assessing Officer while passing order u/s 271B of the Act, has reproduced the assessee`s reply in the penalty order. The Assessing Officer passed the penalty order on 08.08.2021. The Assessing Officer Page | 6 ITA No.277/SRT/2023 A.Y. 2012-13 Pristine Jewellery should have passed the penalty order on or before 30.06.2020, therefore order passed by the Assessing Officer is barred by limitation therefore it should be quashed. 14. The ld Counsel for the assessee submitted before us the calculation for limitation of period, which is shown in the following table: Particulars Date Page Computation of assessment, order 24.12.2019 51-53 Initiation of penal proceedings 24.12.2019 41 Any appeal against assessment order No - Limitation period a. 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 whichever period expires later 31.03.2020 30.06.2020 - Limitation date 30.06.2020 Penalty order passed on 08.08.2021 - From the above sequence of dates, it is abundantly clear that the penalty order got time barred on 30.06.2020 and the order was passed on 08.08.2021 therefore, it is barred by limitation. If the Assessing Officer has not been able to impose penalty within period of limitation due to certain practical difficulties, the period of limitation cannot be extended. If penalty is not levied within time prescribed under section 275 of the Act, it is barred by limitation and existence of reasonable cause for failure of the Assessing Officer to levy penalty is immaterial. For this reliance can be placed on the judgment of the Coordinate Bench of ITAT Kolkata in the case of Paharpur Cooling Towers Ltd. v. CIT [2007] 109 ITD 69 (Kol.), wherein the Tribunal held as follows: “8. We have carefully considered the arguments of both the sides and perused the material placed before us. The question before us is whether the penalty orders passed by the Assessing Officer are barred by limitation. It is contended by the Ld. D.R. that section 275 prescribes period of limitation. The sub-clauses of this section provide certain conditions under which the period of limitation as per the relevant sub-clause would be applicable. As per the Ld. D.R., the facts of the assessee’s case do not fall within any of the sub-clauses of section 275 and, therefore, the period of limitation prescribed under section 275 cannot be Page | 7 ITA No.277/SRT/2023 A.Y. 2012-13 Pristine Jewellery applicable to the cases under appeal. The learned counsel for the assessee, on the other hand, claimed that section 275 would be applicable. The assessment years under consideration before us are 1970-71 to 1974-75. The penalty proceedings were initiated vide assessment order 14-9-1976. Section 275, as it stood at the relevant time, reads as under :— "275. Bar of limitation for imposing penalties.—No order imposing penalty under the Chapter shall be passed— (a) in a case where the relevant assessment or other order is the subject- matter of an appeal to the Appellate Assistant Commissioner under section 246 or an appeal to the Appellate Tribunal under sub-section (2) of section 253, after the expiration of a period of - (i) two years from the end of the financial year in which the proceedings in the course of which action for imposition of penalty has been initiated, are completed, or (ii) six months from the end of the month in which the order of the Appellate Assistant Commissioner or, as the case may be, the Appellate Tribunal is received by the Commissioner, whichever period expires later, (b) in any other case, after the expiration of two years from the end of the financial year in which the proceedings, in the disclosure of which action for imposition of penalty has been initiated, are completed. Explanation.—In computing the period of limitation for the purpose of this section, - (i) the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129; (ii) any period during which the immunity granted under section 245H remained in force; and (iii) any period during which a proceeding under this Chapter for the levy of penalty is stayed by an order or injunction of any court, shall be excluded." 8.1 From the above, we find that clause (a) of section 275 covers the cases where the relevant assessment was subject-matter of an appeal to the Appellate Asstt. Commissioner or to the Appellate Tribunal. However, in the case under consideration before us, no appeal was filed to the A.A.C. or to the Appellate Tribunal against assessment order passed by the Assessing Officer on 14-9-1976 in which penalty proceedings under section 271(1)(c) were initiated. Therefore, clause (a) of section 275 would not be applicable. Clause (b) is a residuary clause and it is applicable in all those cases where clause (a) is not applicable. Therefore, in the case of the assessee, clause (b) would be applicable and the Assessing Officer is debarred from passing the penalty order after the expiration of two years from the end of the financial year in which the proceeding for imposition of penalty has been initiated. However, as per Explanation, certain period is to be excluded while computing the period of limitation. As per Explanation (ii) of section 275, the period during which immunity granted under section 245H by the Settlement Commission remained in force is to be excluded while computing the period of limitation. Now question would Page | 8 ITA No.277/SRT/2023 A.Y. 2012-13 Pristine Jewellery arise with regard to the date on which immunity was granted under section 245H by the Settlement Commission and the date up to which the immunity remained in force. 8.2 The contention of the revenue is that the period of limitation starts by passing of the order under section 245D(1) by the Settlement Commission, because as soon as the Settlement Commission passes the order under section 245D(1), the Settlement Commission has the exclusive jurisdiction upon the assessee and, therefore, the Assessing Officer cannot pass any order levying penalty under section 271(1)(c) upon the assessee. In principle, we agree with this contention of the Ld. D.R. However, the question is whether any order under section 245D(1) was passed by the Settlement Commission for the assessment years 1970-71 to 1974-75? The assessee had filed application under section 245C before the Settlement Commission for assessment year 1975-76. The order under section 245D(1) was also for assessment year 1975- 76. Therefore, the Settlement Commission has the exclusive jurisdiction to deal with all the matters relating to assessment year 1975-76. During the course of settlement proceedings for assessment year 1975-76, the assessee requested for reopening and settlement of earlier assessment years, i.e. assessment years 1970-71 to 1974-75. It would be evident from the following observation at pages 14 and 15 of the order of the Settlement Commission :— "On 1-1-1979 fresh notices of hearing were issued to the parties fixing the case for 27-1-1979. In the meantime, on 19-1-1979, the assessee submitted another letter dated 16-1-1979 which reads as follows :— ‘In our petition, statement of facts and submissions before the Commission during the hearings we had submitted to you that it is necessary to take into consideration the assessment for the assessment years 1970-71 to 1974-75 (both years inclusive), for proper settlement of our above settlement application. During the hearing before the Settlement Commission, the question was put to us as to whether the disclosure made by us was completed in all respects. Out of abundant precaution, we have once again checked the matter. While we find that there is no further disclosure necessary, we find that certain capital expenditure has been claimed as revenue expenditure. We would like to set right the said matter. We had purchased scaffeeding pipes, clamps and other equipment during assessment years 1970-71 to 1974-75 as per details given in Annexure I. These items were earlier charged to revenue due to our misunderstanding of provisions of law. We are confident that the commission will favourably consider our above additional disclosure and grant us full immunity, since we have fully established our bona fide before the Commission. We shall be glad to produce our books of account for your inspection as and when directed. As earlier submitted, we are desirous of having complete settlement of all our pending income-tax problems including penalty proceedings which are pending before the ITO for the above assessment years. We now request you to settle fully all our income-tax problems.’" 8.3 From the above, it is evident that the assessee vide letter dated 16-1-1979 requested for settlement of assessment years 1970-71 to 1974-75 also. At page-23 of the order, the Settlement Commission held as under :— "This brings us to the next point, viz., whether the assessments for the earlier years should be reopened by the Commission." Page | 9 ITA No.277/SRT/2023 A.Y. 2012-13 Pristine Jewellery Further, at page-28 in para-40, the Settlement Commission held as under :— "In the circumstances, it is our considered view that, for reasons recorded earlier on the facts before us, for the proper disposal of this case, it is necessary and expedient to reopen the assessment proceedings completed by the ITO/AAC for the assessment years 1970-71 to 1974-75, we reopen these. We may also observe that not only are we competent to reopen the assessment proceedings for the said five years; but we feel it is incumbent on us to do so on the facts of the case in order to ensure an effective settlement of the case before us as in enjoined by law on us." 8.4 Thus, in the order under section 245D(4) dated 1-3-1979, the Settlement Commission first considered the question whether the earlier years should be reopened by the Commission or not and on being satisfied that the earlier years are required to be reopened, they reopened the assessment proceedings of earlier years. Thereafter at page-29, para-42 of the order, the Settlement Commission observed as under :— "Having decided to reopen the completed assessment proceedings for the assessment year 1970-71 to assessment year 1974-75, we may next deal with the point whether the Commission is now competent in law to assume jurisdiction over other proceedings e.g. various penalty proceedings, proceedings before the Commissioner of Income-tax under section 273A etc. relating to these years." At page-68, para-113 of the order, the Settlement Commission observed as under :— "In view of what has been stated by us above, we hold that, as a result of our reopening the completed assessment proceedings for assessment years 1970-71 to 1974-75, we are competent in law to assume jurisdiction of the other proceedings e.g. penalty proceedings, proceedings before the CIT under section 273A, etc. etc. relating to these years. We would even go further and hold that we are enjoined by law to pass necessary orders in respect of these related proceedings." 8.5 Thus, in the order dated 1-3-1979, the Settlement Commission first raised the question whether they are competent to assume the jurisdiction over the penalty proceedings relating to assessment years 1970-71 to 1974-75 and came to the conclusion that they are competent to assume jurisdiction to the penalty proceedings for those years. At page-79, para-129 of the order, they held as under :— "Having regard, therefore, to all the circumstances of the case, we hold that a complete waiver of the penalty is called for and is fully justified in this case in terms of the sub-section (4) of section 273A as to do otherwise would cause genuine hardship to the applicant. By virtue of the powers vested in us under section 273A(4) read with section 245F(1)/F(2), we, therefore, completely waive the penalty under section 271(1)(c) for all the years in this case." 8.6 From the order of the Settlement Commission it is evident that no separate application under section 245C was given by the assessee for assessment years 1970- 71 to 1974-75. The application under section 245C was only for assessment year 1975-76 for which the order of admission under section 245D(1) was passed. During the course of settlement proceedings for assessment year 1975-76, the assessee requested for reopening of earlier assessment years, i.e., assessment years 1970-71 to 1974-75 and also requested for the waiver of penalties for these years. The Settlement Commission in its order under section 245D dated 1-3-1979 first examined whether Page | 10 ITA No.277/SRT/2023 A.Y. 2012-13 Pristine Jewellery they have power of reopening of earlier assessment years and whether they have power of assuming jurisdictions to the penalty proceedings which were already initiated in those years. After considering the submissions of the parties, they arrived at the conclusion that they have the power to reopen the earlier assessment years as well as to assume jurisdiction for the penalty proceedings already initiated in earlier years and thereafter waived the penalties under section 271(1)(c) for all the years. Thus, the period of immunity under section 245H would begin only on passing of the order under section 245D(4) by the Settlement Commission on 1-3-1979 and not earlier, as contended by the revenue. 9. The next question is up to which date the immunity remained in force, i.e., till the date of the passing of the order by the Hon’ble Apex Court or till the date of the service of the order upon the revenue authorities. The Hon’ble Apex Court vide their order dated 11-3-1996 held as under :— "The appeals are accordingly allowed and the order of the Settlement Commission is set aside to the extent it has dropped the penalty proceedings relating to assessment years 1970-71 to 1974-75 and to the extent it has waived the penalties for the said assessment years. The orders and directions made by it shall not affect the said penalty proceedings which can now proceed according to law. The Settlement Commission shall modify its judgment and order in terms of and in accordance with this judgment." Thus, the Hon’ble Apex Court set aside the order of the Settlement Commission to the extent it dropped the penalty proceedings relevant to assessment years 1970-71 to 1974-75. The Hon’ble Apex Court further held that the penalty proceedings can now proceed according to law. The order was delivered and pronounced on 11-3-1996 by the Hon’ble Apex Court. In our opinion, as soon as the Hon’ble Apex Court pronounced the order on 11-3-1996, the order of the Settlement Commission stood set aside and remained no longer operative. Once the Hon’ble Apex Court has set aside the order of the Settlement Commission, it cannot be said that it remained in force till the order of the Apex Court is served upon the revenue authorities. The effectiveness of the order does not depend upon its service on the parties. 10. The Ld. D.R. has relied upon section 260(1) in support of his contention that the service of the order by the Apex Court is essential. Section 260, sub-section (1) reads as under :— "260. (1) The High Court or the Supreme Court upon hearing any such case shall decide the questions of law raised therein, and shall deliver its judgment thereon containing the grounds on which such decision is founded, and a copy of the judgment shall be sent under the seal of the Court and the signature of the Registrar to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case conformably to such judgment." 10.1 From the above, it is clear that section 260 is applicable in respect of question of law referred to the Hon’ble Apex Court by the Income-tax Appellate Tribunal under section 257. In such cases, upon the decision of the Hon’ble Apex Court the copy is to be served upon the ITAT which is required to pass the consequential order in conformity with the decision of the Hon’ble Apex Court. However, in the case under consideration before us, there was no reference to the Hon’ble Apex Court under section 257 of the Income-tax Act and the ITAT is not required to pass any consequential order. The assessee had filed the appeal to the Hon’ble Apex Court against the decision of the Settlement Commission dated 1-3-1979. The Hon’ble Apex Page | 11 ITA No.277/SRT/2023 A.Y. 2012-13 Pristine Jewellery Court set aside the order of the Settlement Commission to the extent it has dropped the penalty proceedings relating to assessment years 1970-71 to 1974-75. It also held that the Settlement Commission shall modify its judgment and order in accordance with the decision of the Apex Court. However, the revenue has not waited till the decision of the consequential order required to be passed by the Settlement Commission. The revenue has acted on the decision of the Hon’ble Apex Court wherein the Apex Court after setting aside the order of the Settlement Commission has held that the penalty proceedings can now proceed according to law. Therefore, the provision under section 260 relating to the service of the order of the Hon’ble Apex Court upon the ITAT and the passing of the consequential order by the ITAT would not be applicable for determining the period of limitation for the penalty orders passed by the Assessing Officer in consequence to the decision of Hon’ble Apex Court dated 11-3-1996. 11. The Ld. D.R. has also relied upon section 268 of the Income-tax Act which reads as under:— "268. In computing the period of limitation prescribed for an appeal or an application under this Act, the day on which the order complained of was served and, if the assessee was not furnished with a copy of the order when the notice of the order was served upon him, the time requisite for obtaining a copy of such order, shall be excluded." From the above it is evident that section 268 is applicable for computing the period of limitation prescribed for filing an appeal. However, in the case under consideration before us, we are considering the period of limitation available to the Assessing Officer under section 275 for levying penalty under section 271(1)(c) and not with regard to filing of any appeal by any party. Therefore, section 268 would not be applicable. In computing the period of limitation under section 275, the time to be excluded is the period during which the immunity granted under section 245H by the Settlement Commission remained in force. In our opinion, by no stretch of imagination it can be said that the immunity granted by the Settlement Commission remained in force after the passing of the order by the Hon’ble Apex Court; whereby the order of the Settlement Commission was set aside. 12. The Ld. D.R. has also vehemently contended that the Assessing Officer, who has to pass the penalty order, is at Kolkata while the Hon’ble Apex Court has pronounced the decision in Supreme Court at Delhi. How an Assessing Officer can give effect to the decision pronounced by Supreme Court without having the copy of the decision with him? We agree with this contention of the Ld. D.R. that it may be difficult for the Assessing Officer to give effect to the order of the Hon’ble Apex Court without having copy thereof. However, the question before us is not of the practical difficulties to the Assessing Officer but is of the period of limitation as per the provisions of Income-tax Act. Section 275 provides period of limitation within which the Assessing Officer has to impose the penalty. If the Assessing Officer has not been able to impose the penalty within such period of limitation due to certain practical difficulties, the period of limitation cannot be extended. If the penalty is not levied within the time prescribed under section 275, it is barred by limitation and the existence of the reasonable cause for the failure of the Assessing Officer to levy the penalty within the period of limitation would be irrelevant. 13. The Ld. D.R. has also contended that the time taken for giving an opportunity to the assessee for rehearing under section 129 is to be excluded. In principle, we agree Page | 12 ITA No.277/SRT/2023 A.Y. 2012-13 Pristine Jewellery with this contention of the Ld. D.R. However, we find that the Assessing Officer, after the decision of Hon’ble Apex Court, has issued notice on the assessee on 9-5-1996. By this period, the penalty proceedings had already become barred by limitation as under :— (i) Penalty proceedings under section 271(1)(c) were initiated on 14-9-1976 in the assessment order passed under section 143(3)/147. (ii) Two years from the end of the financial year 1975-76 would be over on 31-3- 1979. The Settlement Commission vide order dated 1-3-1979 waived the penalty imposable for the year under consideration. (iii) On 1-3-1979, 30 days were left for the penalties to be barred by limitation (1-3- 1979 to 31-3-1979). (iv) The immunity granted by the Settlement Commission under section 245H remained in force up to 11-3-1996, i.e., the date of the order of the Hon’ble Apex Court. (v) Therefore, the penalty was to be levied within 30 days from 11-3-1996, i.e., by 11- 4-1996. (vi) The penalty notice issued on 9-5-1996 was after the period when the penalty has already become barred by limitation. 13.1 Therefore, any time requested by the assessee during the course of penalty proceedings and allowed by the Assessing Officer on such request would be immaterial, because the penalty proceedings have already become barred by limitation on 12-4-1996 and, therefore, any incident taking place thereafter is irrelevant. In view of the above, we hold that the penalties levied by the Assessing Officer for assessment year 1970-71 is barred by limitation and, therefore, the same cannot be sustained. 14. Before we part with the matter, we may mention that both the parties have argued for and against the merit of the levy of the penalty. However, as we have held that the penalty has become barred by limitation, we do not consider it necessary to express any opinion about the justification or otherwise of the merit of the penalty imposed under section 27(1)(c) of the Act. We cancel the penalty for assessment year 1970-71 being barred by limitation. 15. The facts of all the other years, i.e., assessment years 1971-72 to 1974-75, are identical to the facts for assessment year 1970-71. In all the years the penalty proceedings were initiated in the assessment order passed during the financial year 1976-77. Therefore, two years therefrom ended on 31-3-1979. The Settlement Commission vide common order dated 1-3-1979 waived the penalty for all the years. The Hon’ble Apex Court vide common order for all the years dated 11-3-1996 set aside the order of the Settlement Commission. Therefore, the penalty was to be levied within 30 days therefrom, i.e., by 11-4-1996. The Assessing Officer issued penalty notice on 9-5-1996 and levied penalty on 28-8-1996 which was barred by limitation. For the detailed discussions made above in this order from paras 8 to 14, we hold that the levy of penalties for assessment years 1971-72 to 1974-75 are barred by limitation. Accordingly, the same are cancelled. 16. In the result, the assessee’s appeals are allowed.” Page | 13 ITA No.277/SRT/2023 A.Y. 2012-13 Pristine Jewellery 15. We note that if after initiating penalty proceedings, no action is taken either for imposing or not imposing penalty, within the time-limit given u/s 275 of the Act, the penalty proceeding will become time-barred. In such a case, the Competent Authority cannot reinitiate penalty proceedings after the original penalty proceeding has become time barred. Considering the facts and circumstances, we quash the penalty. 16. In view of the reasons set out above, as also bearing in mind entirety of the case, we are of the considered view that the penalty order passed by the Assessing Officer is barred by limitation. Therefore, we have quashed the penalty order passed by the Assessing Officer u/s 271B of the Act. As the penalty order itself is quashed, all other issues on merit of the additions, are rendered academic and infructuous. 17. In the result, appeal of the assessee is allowed in the terms indicated above. Order is pronounced on 04/09/2023 in the open court. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER स ू रत Surat/िदनांक/ Date: 04/09/2023 Dkp Outsourcing Sr.P.S. Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr.CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // True Copy // Assistant Registrar/Sr. PS/PS ITAT, Surat /