ASHU ENGINEERS & PLASTICS P. LTD, MUMBAI V. DCIT 1(1), MUMBAI

ITA 3453/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48544 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2001-2002
• Appeal Filed On: 30-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A K NAYAK
• Keywords: Rectification of order; Period of limitation; Initiation of penalty proceedings; Wrong claim; Time period of passing order; Revenue expenditure
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, G BENCH, MUMBAI. BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER I.T.A NO.3453/ MUM/2010 ASSESSMENT YEAR: 2001-02 ASHU ENGINEERS & PLASTICS P.LTD. .. APPELLANT 7 TH FLOOR, MANEK MAHAL, 90, VEER NARIMAN ROAD, CHURCHGATE, MUMBAI-20 PA NO.ACCA 6734 E VS DCIT 1(1) ,. RESPONDEN T 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. APPEARANCES: SUKHINDER BAGAI, FOR THE APPELLANT A.K. NAYAK, FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE-APPELLANT H AS CALLED INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 29 TH APRIL, 2009, UPHOLDING VALIDITY AND CORRECTNESS OF ORDER DATED 31 ST MARCH, 2009 PASSED BY THE ASSESSING OFFICER UNDER SECTION 154 R.W.S. 143(1)(A) OF THE INCOME T AX ACT, 1961, FOR THE ASSESSMENT YEAR 2001-02. 2. GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT CA LL FOR ANY ADJUDICATION. I.T.A NO.3453/ MUM/2010 ASHU ENGINEERS & PLASTICS P.LTD. 2 3. IN GROUND NO.2, THE ASSESSEE HAS RAISED THE FOLL OWING GRIEVANCE:- THE LD CIT (A) ERRED IN UPHOLDING THE ORDER DATED MARCH 31, 2009 PASSED BY DCIT UNDER SECTION 154 OF THE INCOME TAX ACT, 1961 WHEN THE SAME WAS CLEARLY PASSED BEYOND THE PE RIOD OF TIME STIPULATED IN SECTION 154(7) OF THE ACT. 4. TO ADJUDICATE ON THIS GRIEVANCE, ONLY A FEW MATE RIAL FACTS NEED TO BE TAKEN NOTE OF. ON 31 ST OCTOBER, 2001, THE ASSESSEE FILED ITS RETURN OF I NCOME DISCLOSING TOTAL INCOME OF `.22,27,470 WHICH WAS PR OCESSED AND ACCEPTED AS SUCH BY WAY OF INTIMATION UNDER SECTION 143(1)(A) O N 8.2.2003. SUBSEQUENTLY, ON 23 RD NOVEMBER, 2004, A SHOW CAUSE NOTICE UNDER SECTION 154 WAS SERVED UPON THE ASSESSEE REQUIRING THE ASSE SSEE TO SHOW CAUSE AS TO WHY EXCESS TDS CREDIT GRANTED TO THE ASSESSEE, AMOU NTING TO `.2,604 NOT BE WITHDRAWN. VIDE LETTER DATED 3.12.2004, THE ASSESS EE STATED THAT HE HAS NO OBJECTION TO THE PROPOSED RECTIFICATION. ON 21.2.2 005, AN ORDER UNDER SECTION 154 WAS, ACCORDINGLY, PASSED. WE MAY, AT T HIS STAGE, MENTION THAT THERE IS DISPUTE AS TO THE DATE OF SERVICE OF THE S AID ORDER AND THE ASSESSEE CONTENDS THAT THE ORDER WAS RECEIVED ONLY ON 5.5.20 09. HOWEVER, FOR THE REASONS, WE SHALL SET OUT IN A SHORT WHILE, IT IS N OT NECESSARY TO GO INTO THAT ASPECT OF THE MATTER ANY FURTHER. COMING BACK TO T HE SEQUENCE OF EVENTS, ON 23.3.2009, ONCE AGAIN, A SHOW CAUSE NOTICE WAS SERV ED ON THE ASSESSEE REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY RECT IFICATION UNDER SECTION 154 NOT BE CARRIED OUT IN RESPECT OF LOSS ON SALE O F CAR WHICH HAS BEEN CLAIMED AS A REVENUE EXPENDITURE AND WHICH IS INADM ISSIBLE. IT WAS AT THIS STAGE POINTED OUT BY THE ASSESSEE THAT IN TERMS OF PROVISIONS OF SECTION 154(7), THE PROPOSED RECTIFICATION OF MISTAKE IS TI ME BARRED INASMUCH AS WHILE THE STATUE PERMITS RECTIFICATION OF MISTAKE W ITHIN FOUR YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH ORDERS SOUGHT TO BE AMENDED WAS PASSED, I.T.A NO.3453/ MUM/2010 ASHU ENGINEERS & PLASTICS P.LTD. 3 THE PROPOSED RECTIFICATION ORDER IS MUCH BEYOND THE EXPIRY OF SAID TIME LIMIT I.E. ON 31.3.2007. THIS SUBMISSION DID NOT IMPRESS THE ASSESSING OFFICER. HE NOTED THAT SINCE RECTIFICATION ORDER UNDER SECTION 154 WAS PASSED ON 21.2.2005 AND IN VIEW OF THE DECISION OF HONBLE SU PREME COURT IN THE CASE OF HIND WIRE INDUSTRIES LTD V. CIT (1995) 212 ITR 6 39(SC), THE LIMITATION OF FOUR YEARS LAID DOWN IN SECTION 154(7) FOR RECTIFIC ATION OF AN ORDER IS TO BE RECKONED FROM THE DATE OF LATEST AMENDED ORDER AND NOT FROM THE DATE OF THE ORIGINAL ORDER. THE ASSESSING OFFICER WAS OF THE V IEW THAT SINCE THE LAST RECTIFICATION ORDER WAS PASSED ON 21.2.2005, HE WAS WELL WITHIN HIS POWER TO RECTIFY THE ORDER UPTO 31.3.2009. HE, ACCORDINGLY, PROCEEDED TO PASS THE IMPUGNED RECTIFICATION ORDER WITHDRAWING THE DEDUCT ION IN RESPECT OF LOSS ON SALE OF CAR AMOUNTING TO `.1,22,139. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A), INTER ALIA, ON THE GROUND THAT RECTIFICATION ORDER UNDER SECTION 154 PASSED BY THE ASSESSING OFFICER IS TIME BARRED. THE CIT(A) DISMISSED THE PLEA OF THE ASSES SEE OBSERVING AS FOLLOWS: I HAVE CONSIDERED THE APPELLANT SUBMISSION MADE THR OUGH LETTER DATED 31.12.2007. I HAVE PERUSED THE ASSESSMENT ORDER UN DER SECTION 154 PASSED BY THE AO DATED 31.3.2009. THE AO HAS DISCU SSED THE REASONS FOR RECTIFICATION IN DETAIL IN HIS ORDER, THE MISTAKE A PPARENT FROM RECORD TO BE RECTIFIED UNDER SECTION 154 OF THE IT ACT, 1961. THE AO HAS CATEGORICALLY STATED THAT HE IS RECTIFYING THE ORDE R DATED 21.2.2005 PASSED BY THE AO UNDER SECTION 154 OF THE I.T.ACT, 1961. IN THE COURSE OF APPELLATE PROCEEDINGS THE COPY OF THE SAID RECTIFIC ATION ORDER WAS SUBMITTED BEFORE ME BY THE APPELLANT. THEREFORE, T HE APPELLANTS THIS ARGUMENT THAT THE AO WAS BARRED BY LIMITATION IS NO T CORRECT AS THE ORDER DATED 21.2.2005 PASSED BY THE AO WAS WELL WIT HIN TIME TO BE RECTIFIED U/S.154(7) OF THE I.T.ACT, 1961. THUS, T HE AOS ACTION FOR RECTIFYING THE ORDER DATED 21.2.2005 WAS WELL WITHI N TIME AND ALSO IN ACCORDANCE WITH 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 RECTI FYING THE ORDER DATED 21.2.2005 WAS CORRECT AND, ACCORDINGLY, THE AOS AC TION IS UPHELD. THE APPEAL IS DISMISSED ON THIS ACCOUNT. 5. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. I.T.A NO.3453/ MUM/2010 ASHU ENGINEERS & PLASTICS P.LTD. 4 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), HONBLE BOMBAY HIGH COURT WAS IN SEISIN OF A SITUATION IN WHICH A SOMEWHAT IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE TH EIR LORDSHIPS. THE ORIGINAL ASSESSMENT ORDER PASSED BY THE ASSESSING O FFICER CARRIED OUT IN APPEAL BEFORE THE AAC BUT GRANT OF REBATE WAS NOT T HE ISSUE ON WHICH THE ASSESSMENT ORDER WAS CARRIED OUT IN APPEAL. THE AS SESSING OFFICER SUBSEQUENTLY PASSED THE ORDER RECTIFYING THE MISTAK E AND, WHILE DOING SO, COMPUTED THE TIME LIMIT UNDER SECTION 154(7) WITH R EFERENCE TO APPELLATE ORDER. ON THESE FACTS, THEIR LORDSHIPS HELD THAT S INCE GRANTING OF REBATE WAS NOT SUBJECT MATTER OF APPEAL TO THE AAC, THE LIMITA TION OF ORDER FOR RECTIFICATION TO WITHDRAW THE SAID REBATE START FRO M THE DATE OF ORIGINAL ORDER AND NOT FROM ORDER GIVING EFFECT TO THE APPELLATE O RDER. IN OTHER WORDS, WHAT WAS HELD BY THEIR LORDSHIPS WAS THAT TIME LIMIT UND ER SECTION 154(7) IS TO BE COMPUTED WITH REFERENCE TO THE DATE ON WHICH ORD ER DEALING WITH THE SUBJECT MATTER OF SUCH RECTIFICATION WAS PASSED AND AS LONG AS SUBSEQUENT ORDER DID NOT DEAL WITH THE SAME ISSUE, MERE PASSIN G OF THE LATER ORDER DOES NOT EXTEND THE TIME LIMIT UNDER SECTION 154(7). I N THE CASE OF KOTHARI INDUSTRIAL CORPORATION LTD V AGRICULTURAL INCOME TA X OFFICER(1998) 230 ITR 307(KAR), HONBLE KARNATAKA HIGH COURT HAD AN OCCAS ION TO DEAL WITH THE SAME ISSUE. ONE OF THE QUESTIONS BEFORE THEIR LORD SHIPS IN THIS CASE WAS WHERE AN ORDER OF AN AUTHORITY IS RECTIFIED, WHETHE R THE ORIGINAL ORDER MERGES WITH THE ORDER OF RECTIFICATION, AND WHETHER , IN THE EVENT OF SECOND RECTIFICATION, THE PERIOD OF LIMITATION FOR SUCH SU BSEQUENT RECTIFICATION SHOULD BE RECKONED FROM THE DATE OF THE ORIGINAL OR DER OR THE DATE OF THE ORDER OF FIRST RECTIFICATION. AFTER AN ELABORATE S URVEY OF JUDICIAL PRECEDENTS I.T.A NO.3453/ MUM/2010 ASHU ENGINEERS & PLASTICS P.LTD. 5 ON THE ISSUE, THEIR LORDSHIPS CONCLUDED THAT IF TH E SUBJECT MATTER OF SUBSEQUENT RECTIFICATION IS NOT THE SUBJECT MATTER OF FIRST RECTIFICATION, THE PERIOD OF LIMITATION WILL HAVE TO BE CALCULATED FRO M THE DATE OF ORIGINAL ORDER IN VIEW OF THESE DISCUSSIONS, IT IS CLEAR TH AT THE LEGAL POSITION IS THAT THE TIME LIMIT FOR RECTIFICATION OF MISTAKE UNDER S ECTION 154(7) IS TO BE CONSIDERED FROM THE DATE OF THE ORIGINAL ORDER OR I N SUBSEQUENT RECTIFICATION ORDER ONLY IF THE SAID RECTIFICATION ORDER DEALING WITH THE SAME WHICH IS SOUGHT TO BE RECTIFIED. IN THIS VIEW OF THE MATTER AND HAVING NOTED THAT THE FIRST RECTIFICATION ORDER DEALT WITH ENTIRELY DIFFE RENT ISSUE I.E. EXCESS ALLOWANCE OF TDS CREDIT, IT IS CLEAR THAT THE TIME LIMIT FOR PASSING THE IMPUGNED ORDER INDEED EXPIRED ON EXPIRY OF FOUR YEA RS FROM THE END OF THE FINANCIAL YEAR, IN WHICH, THE ORIGINAL ORDER SOUGHT TO BE RECTIFIED WAS PASSED I.E. ON 31.3.2007. THERE IS NO DISPUTE THAT IN TE RMS OF PROVISIONS OF SECTION 154(7), NO AMENDMENT UNDER SECTION 154 CAN BE CARRI ED OUT AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE SAID ORDER WAS PASSED. LEARNED DEPARTMENTAL REPRESENTATIVE, HOWEVE R, HAS AN INTERESTING ARGUMENT. HE POINTS OUT THAT LIMITATION UNDER SECT ION 154(7) APPLIES ONLY IN CASES COVERED BY SECTION 154(1)(A) I.E. DEAL WITH R ECTIFICATION OF ANY ORDER PASSED UNDER THE PROVISIONS OF THIS ACT, WHEREAS TH E 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 1 43. IT IS STATED THAT, AS EVIDENT FROM THE WORDINGS OF SECTION 154(1), AN INT IMATION IS NOT AN ORDER AND IS COVERED IN THE SCOPE OF SECTION 154 BY THE V IRTUE OF SPECIFIC INCLUSIONS OF INTIMATIONS UNDER CLAUSE 154 (1)(B). HIS ARGU MENT 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), A S 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 SE CTION 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 S EE ANY SUBSTANCE IN THIS PLEA BECAUSE IF ACCEPTED IT WILL LEAD TO ABSURDITY INASMUCH AS NO FINALITY CAN I.T.A NO.3453/ MUM/2010 ASHU ENGINEERS & PLASTICS P.LTD. 6 EVER GIVEN TO AN INTIMATION UNDER SECTION 143(1) AN D TO THE SUMMARY ASSESSMENTS. NOT ONLY THAT IT IS SIMPLY ABSURD THA T THE INTIMATION UNDER SECTION 143(1)(A) NEVER RECEIVES FINALITY, IT IS AL SO IMPRACTICABLE BECAUSE EVEN MAINTAINING OF RECORDS IS NOT NECESSARY BEYOND TIME LIMIT. IT IS ONLY ELEMENTARY THAT THE STATUE IS TO BE INTERPRETED UT RES MAGIS VALEAT QUAM PEREAT , I.E., TO MAKE IT WORKABLE RATHER THAN REDUNDANT. NEITHER THE INCOME TAX DEPARTMENT NOR THE ASSESSEE IS UNDER OBLIGATION TO MAINTAIN RECORDS BEYOND A PARTICULAR TIME LIMIT AND IN SUCH A SITUAT ION, IT WILL BE WHOLLY UNWORKABLE TO DEPRIVE THE INTIMATIONS UNDER SECTION 143(1)(A) EVER RECEIVING FINALITY. IN THIS VIEW OF THE MATTER AND IN ACCORDANCE WITH THE SCHEME OF SECTION 154, WE CONSIDER IT FIT AND PROPE R TO CONSTRUE THE TIME SET OUT UNDER SECTION 154 (7) AS APPLICABLE TO INTIMATI ON UNDER SECTION 154(1)(B) AS WELL. IN ANY EVENT, EVEN WHEN NO TIME LIMIT IS SET OUT IN THE STATUTE, A REASONABLE TIME LIMIT IS TO BE APPLIED. WHILE ON THIS ASPECT OF THE MATTER, IT WILL BE USEFUL TO TAKE NOTE OF A CO-ORDI NATE BENCH DECISION IN THE CASE OF SIBONARAYAN PATRA VS ITO (54 TTJ 644 (CTK) , WHEREIN, SOMEWHAT IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE TH E TRIBUNAL. EVEN IN THE ABSENCE OF ANY TIME BARRING LIMITATION SET OUT IN T HE STATUE, THE CO-ORDINATE BENCH HELD THAT IN PROCEEDINGS UNDER THE INCOME TAX ACT MUST HAVE A REASONABLE TIME LIMIT AND IT CANNOT BE OPEN ANY ONE TO PROCEED ON THE BASIS OF PROCEEDINGS, WHICH CAN BE INITIATED AT ANY STAGE . SPEAKING THROUGH ONE OF US (I.E. LEARNED VICE PRESIDENT), THE CO-ORDINATE B ENCH HAS OBSERVED AS FOLLOWS: 9. IT IS THE CASE OF THE LEARNED DEPARTMENTAL REPR ESENTATIVE THAT S. 275 DEALS WITH PROCEDURAL LAW AND IN THE CASE OF PR OCEDURAL LAW, THE PROVISIONS AS IT STOOD AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS ARE APPLICABLE AS THERE IS NO VESTED RIGHT TO THE A SSESSEE IN SUCH MATTERS. WE HAVE GIVEN CAREFUL CONSIDERATION TO THE SUBMISSIONS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE. THE AMENDE D PROVISIONS OF S. 275 WHICH HAVE COME INTO EFFECT FROM 1ST APRIL, 1989, ARE APPLICABLE ONLY TO THOSE CASES WHERE THE LIMITATION AS PER THE UNAMENDED PROVISIONS, IS NOT EXPIRED. IN FACT, IN THE CASE CI TED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE I.E., BHIKARI CHARAN PA NDA VS. CIT I.T.A NO.3453/ MUM/2010 ASHU ENGINEERS & PLASTICS P.LTD. 7 (SUPRA) THEIR LORDSHIPS HAVE HELD THAT TWO YEAR PER IOD MENTIONED IN S. 275 OF THE UNAMENDED ACT HAD NOT EXPIRED AT THE STA GE WHEN THE NEW PROVISIONS HAVE BEEN INTRODUCED. PER CONTRA, IT IMP LIES THAT IN CASE WHERE THE LIMITATION HAS EXPIRED BEFORE THE AMENDED PROVISIONS HAVE COME INTO FORCE, THE NEW PROVISIONS CANNOT BE APPLI ED 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 SING H OF NABHA (1982) 138 ITR 27 (DEL) HAS DEALT WITH A SIMILAR CASE WHER EIN THEIR LORDSHIPS HAVE HELD THAT AS PER THE LAW AS IT THEN STOOD, PEN ALTY ORDER HAS TO BE PASSED WITHIN TWO YEARS AND SINCE THERE IS NO CHANG E OF LAW WITHIN THIS PERIOD, THE PERIOD OF LIMITATION CANNOT BE EXT ENDED 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 A O IS REQUIRED TO INITIATE PENALTY PROCEEDINGS IN THE COURSE OF THE A SSESSMENT PROCEEDINGS. THE NON-INITIATION THEREOF WOULD TAKE AWAY THE JURISDICTION OF THE AO TO INITIATE PROCEEDINGS SUBS EQUENTLY. THUS, BEFORE THE AMENDMENT OF S. 275, I.E., 1ST APRIL, 19 89, THE AO CEASED TO HAVE JURISDICTION TO LEVY PENALTY AND THUS THE AMEN DED PROVISIONS CANNOT BE APPLIED TO DISTURB THE VESTED RIGHT OF TH E ASSESSEE. WE, THEREFORE, HOLD THAT THE AMENDED PROVISIONS OF S. 2 75 OF THE ACT ARE NOT APPLICABLE TO THE GIVEN FACTS. 10. FOR THE SAKE OF ARGUMENT, WE PROCEED ON THE PRE SUMPTION THAT THE PROVISIONS OF THE AMENDED S. 275 ARE APPLICABLE TO THE FACTS OF THE CASE. THE NOTES ON CLAUSES, APPENDED TO THE DIRECT TAX LAWS (AMENDMENT) BILL, 1987 [(1988) 67 CTR (ST) 98 AT 12 7 : (1988) 168 ITR (ST) 301 AT 352] READS AS UNDER : 'CLAUSE (C) I NCORPORATES THE PROVISIONS OF THE EXISTING CL. (B). HOWEVER, THE LI MITATION FOR PASSING PENALTY ORDER WHERE NO APPEAL IS FILED IS REDUCED F ROM TWO YEARS FROM THE END OF THE FINANCIAL YEAR, TO THE END OF THE FI NANCIAL YEAR ITSELF IN WHICH ASSESSMENT ORDER, ETC. IS PASSED OR SIX MONTH S FROM THE END OF THE MONTH IN WHICH PENALTY PROCEEDINGS WERE INITIAT ED, WHICHEVER IS LATER.' ON A READING OF THE PROVISIONS OF S. 275(C) ALONG WITH THE NOTES ON CLAUSES, WE ARE OF OPINION THAT THE AMENDED CL. (C) IS NO DIFFERENT FROM THE UNAMENDED CL. (C) OF S. 275(1) OF THE ACT AND THE LEGISLATURE ONLY INTENDED TO REDUCE THE PERIOD OF LIMITATION WH ICH WAS HITHERTO TWO YEARS FROM THE END OF THE FINANCIAL YEAR. THUS, TO OUR MIND, THE SAME INTERPRETATION WHICH WAS PLACED ON THE UNAMEND ED CL. (1) OF S. 275 APPLIES TO THE PROVISIONS OF AMENDED W.E.F. 1ST APRIL, 1989. WE MAY FURTHER OBSERVE THAT EVEN ACCEPTING FOR A MOME NT THAT THERE IS NO TIME-LIMIT PRESCRIBED UNDER THE ACT FOR INITIATI NG PENALTY PROCEEDINGS UNDER S. 271B/275 OF THE ACT, AS RIGHTL Y SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, BY TAKING THE SPI RIT OF THE PROVISIONS OF S. 275 FIXING THE TIME- LIMIT FOR INITIATION OF PENALTY PROCEEDINGS I.T.A NO.3453/ MUM/2010 ASHU ENGINEERS & PLASTICS P.LTD. 8 UNDER S. 271(1)(A), 271(1)(B), ETC. IN THE CASE OF THE ASSESSEE, PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE AO WITHIN A REASONABLE PERIOD OF TIME AND ANY PROCEEDING INITIATED AFTER AN ABNOR MAL DELAY, IS LIABLE TO BE TREATED AS INVALID IN LAW. ADMITTEDLY, THE AS SESSMENTS WERE COMPLETED IN 1989 AND PENALTY PROCEEDINGS WERE INIT IATED AFTER ABOUT 43 MONTHS AFTER THE DATE OF COMPLETION OF THE ASSES SMENT AND ABOUT 50 MONTHS FROM THE DATE OF OBTAINING THE AUDIT REPO RT. THE SUBSEQUENT INCUMBENT AO HAS INITIATED THE PENALTY PROCEEDINGS. TO OUR MIND, TAKING THE LIMITATION PERIOD PRESCRIBED IN S. 275 F OR INITIATION OF PENALTY PROCEEDINGS UNDER THE OTHER SECTIONS OF THI S CHAPTER AND ALSO BY RESPECTFULLY FOLLOWING THE JUDGMENT OF THE JURIS DICTIONAL HIGH COURT IN THE CASE REPORTED IN 1990 CRLJ 1110, MAXIMUM OF TWO YEARS FROM THE END OF THE ASSESSMENT YEAR IN WHICH THE ASSESSM ENTS ARE COMPLETED, CAN BE SAID TO BE A REASONABLE TIME WITH IN WHICH THE AO COULD HAVE INITIATED THE PENALTY PROCEEDINGS. AS IN THE PRESENT CASE, THE PENALTY PROCEEDINGS HAVE BEEN INITIATED ABOUT 4 3 MONTHS AFTER THE COMPLETION OF THE ASSESSMENT, WE ARE OF THE OPINION THAT THE PENALTY PROCEEDINGS ARE BARRED BY LIMITATION AND CONSEQUENT LY PENALTIES LEVIED UNDER S. 271B CANNOT BE SUSTAINED. 11. IN THIS CONTEXT WE MAY ALSO DRAW SUPPORT FROM T HE 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 PRESCR IBED WITHIN WHICH PENALTY MAY BE LEVIED, THERE SHOULD NOT BE INORDINA TE DELAY AND THE PENALTY SHOULD BE LEVIED WITHIN REASONABLE TIME . WE MAY FURTHER OBSERVE THAT THE INTENTION OF THE LEGISLATURE CANNO T BE OTHERWISE, IN AS MUCH AS, DEMOCLES SWORD CANNOT BE ALLOWED TO HANG O N THE HEAD OF THE ASSESSEE PERENNIALLY GIVING DISCRETION TO THE A O BEFORE WHOM THE AUDIT REPORT IS SUBMITTED AND THE SUCCESSOR AO, TO INITIATE THE PENALTY PROCEEDINGS AT ANY TIME. THE OTHER FACT THAT ONLY 6 MONTHS IS PROVIDED FOR COMPLETION OF ASSESSMENT PROCEEDINGS FROM THE D ATE OF INITIATION INDICATES THAT THE INITIATION ITSELF SHOULD BE WITH IN A REASONABLE TIME. 8. IN THE CASE OF MAHINDRA & MAHINDRA LIMITED VS DC IT (30 SOT 374), SPECIAL BENCH OF THIS TRIBUNAL, DEALING WITH SIMILA R PLEA OF THE ASSESSEE IN THE CONTEXT OF TIME LIMIT BEING READ INTO SECTION 2 01, OBSERVED AS FOLLOWS: THE LD. DR HAS CONTENDED THAT THE TRIBUNAL IS NOT C OMPETENT TO LAY DOWN ANY TIME LIMIT. IF THIS CONTENTION IS BROUGHT TO THE LOGICAL CONCLUSION IT WILL MEAN THAT THE UNLIMITED TIME WIL L BE AVAILABLE TO THE DEPARTMENTAL AUTHORITIES AT THEIR SWEET-WILL FOR TA KING ACTION UNDER I.T.A NO.3453/ MUM/2010 ASHU ENGINEERS & PLASTICS P.LTD. 9 THIS SECTION. IN OUR CONSIDERED OPINION THIS CONTEN TION RAISED ON BEHALF OF THE REVENUE IS BEREFT OF ANY FORCE FOR TH E SIMPLE REASON THAT CERTAINTY IS THE HALLMARK OF ANY PROCEEDINGS. IT IS BEYOND OUR COMPREHENSION THAT HOW, IN THE ABSENCE OF ANY TIME LIMITATION PROVIDED IN THE SECTION, THE ACTION CAN BE TAKEN IN INDEFINITE PERIOD. IT IS WHOLLY IMPERMISSIBLE TO ARGUE THAT UNLIMITED TIM E LIMIT BE GRANTED TO THE REVENUE FOR TAKING ACTION UNDER THIS SECTION . THE SWORD OF TAXING AUTHORITIES CANNOT BE ALLOWED TO HANG, FOREV ER, OVER THE HEAD OF THE TAX PAYERS. IF THIS PROPOSITION OF THE LEARNED D.R. IS ACCEPTED THAT WILL GIVE LICENSE TO THE AUTHORITIES TO TAKE ACTION EVEN AFTER 30, 40 OR 50 YEARS. THE CANONS OF LIMITATION ARE ORDINARILY P ROVIDED EXPRESSLY IN THE ACT AND IN THEIR ABSENCE, THEY ARE TO BE IMPLIE DLY INFERRED BY TAKING INTO CONSIDERATION THE SCHEME OF THE RELEVAN T PROVISIONS. 9. IN VIEW OF THE ABOVE DISCUSSIONS, THE HYPER TECH NICAL PLEA OF THE LEARNED DEPARTMENTAL REPRESENTATIVE IS ONLY FIT TO BE REJECTED. LEARNED DEPARTMENTAL REPRESENTATIVE AS INDEED THE AUTHORITI ES BELOW HAVE ALSO RELIED ON IN THE CASE OF HIND WIRE INDUSTRIES LTD V. CIT,(SUPRA) BUT THEN IT IS A CASE IN WHICH THE SUBJECT MATTER OF FIRST RECTIFI CATION WAS THE SAME AS THE SUBJECT MATTER OF SECOND RECTIFICATION WAS SOUGHT. IN THE PRESENT CASE, HOWEVER, SUBJECT MATTER OF TWO RECTIFICATION PROCEE DINGS IS ALTOGETHER DIFFERENT AND, THEREFORE, THE RATIO OF HONBLE SUPR EME COURTS JUDGMENT IN THE CASE OF HIND WIRE INDUSTRIES LTD V. CIT(SUPRA) DOES NOT COME INTO PLAY. WHEN THIS PROPOSITION WAS PUT TO LEARNED D.R., HE D ID NOT HAVE MUCH TO SAY EXCEPT PLACED HIS BLAND RELIANCE OF HONBLE SUPREM E COURTS JUDGMENT IN THE CASE OF HIND WIRE INDUSTRIES LTD V. CIT(SUPRA) AND ALSO THE STAND TAKEN BY THE AUTHORITIES BELOW. WE ARE UNABLE TO SEE ANY MERITS IN LEARNED DEPARTMENTAL REPRESENTATIVES RELIANCE ON HIND WIRE INDUSTRIES (SUPRA) EITHER. WE ARE OF THE CONSIDERED VIEW THAT THE RAT IO LAID DOWN IN THE CASE OF HIND WIRE INDUSTRIES LTD V. CIT(SUPRA) REMAINS CONF INED TO A CASE WHERE SUBJECT MATTER OF SECOND RECTIFICATION IS THE SAME AS THE FIRST RECTIFICATION AND IT WAS ONLY IN SUCH A SITUATION THAT THE TIME L IMIT OF SECOND RECTIFICATION PROCEEDINGS GETS EXTENDED BY THE FACT OF FIRST RECT IFICATION PROCEEDINGS. IN A SITUATION IN WHICH THE SUBJECT MATTER OF SECOND REC TIFICATION PROCEEDINGS IS I.T.A NO.3453/ MUM/2010 ASHU ENGINEERS & PLASTICS P.LTD. 10 WHOLLY UNRELATED TO THE SUBJECT MATTER OF FIRST REC TIFICATION PROCEEDINGS AS IS THE SITUATION IN THE PRESENT CASE, THE TIME LIMIT F OR SECOND RECTIFICATION PROCEEDINGS REMAINS UNAFFECTED BY THE FIRST RECTIFI CATION PROCEEDINGS. IN VIEW OF THE THESE DISCUSSION, AS ALSO BEARING IN MI ND ENTIRETY OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE IMPUGNED RECTIF ICATION ORDER, HAVING BEEN PASSED WELL AFTER THE END OF FOUR YEARS FROM T HE END OF FINANCIAL YEAR, IN WHICH, INTIMATION UNDER SECTION 143(1)(A) PASSED, I S TIME BARRED. IN ANY EVENT, BY NO STRETCH OF LOGIC, A RECTIFICATION OF M ISTAKE ALMOST AFTER EIGHT YEARS OF PROCESSING AN INTIMATION UNDER SECTION 143 (1)(A) CAN BE SAID TO HAVE BEEN MADE WITHIN A REASONABLE TIME LIMIT. WE, ACCORDINGLY, QUASH THE IMPUGNED RECTIFICATION ORDER. 10. GROUND NO. 2 IS THUS ALLOWED. AS THIS GROUND IS ALLOWED, AND THE RECTIFICATION ORDER ITSELF IS QUASHED, ALL OTHER GR OUNDS OF APPEAL ARE RENDERED ACADEMIC AND ARE DISMISSED AS SUCH. 11. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TER MS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 29 TH DAY OF APRIL, 2011. SD/- (D.MANMOHAN) VICE PRESIDENT SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI, DATED 29 TH APRIL, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),1, MUMBAI 4. COMMISSIONER OF INCOME TAX, 1 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH G, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI