Pr. CIT vs. JKD Capital & Finlease Ltd (Delhi High Court)

DATE: October 13, 2015 (Date of pronouncement)
DATE: November 16, 2015 (Date of publication)
AY: 2005-06
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S. 275(1)(c): For penalty proceedings initiated on issues unrelated to assessment of income (such as for s. 269SS/ 269T & TDS defaults), time limit runs from date of initiation of penalty proceedings and not from date of CIT(A)'s order

The AO initiated penalty proceedings as per assessment order passed u/s 143(3) dated 28.12.2007. The AO passed a penalty order u/s 271E dated 20.03.2012. The AO held that the time limit for passing of the penalty order had to be reckoned from the date of the passing of the order of the CIT(A) in the quantum appeal. The assessee claimed that the order of the CIT(A) was on a totally different issue and had no bearing on the issue on which penalty u/s 271E was imposed. The CIT(A) accepted the assessee’s claim and held that the penalty order should have been passed within the financial year itself in which the penalty proceedings were initiated or within six months from the end of the month in which the penalty proceedings were initiated, whichever period expires later, and in the present case the penalty order could have been passed on or before 30.06.2008. He held that the penalty order passed u/s 271E on 20.03.2012 is barred by limitation and deserves to be quashed on this ground alone. On appeal by the department, the Tribunal dismissed the appeal. On further appeal by the department to the High Court HELD dismissing the appeal:

(i) In terms of section 275(1)(c), there are two distinct periods of limitation for passing a penalty order, and one that expires later will apply. One is the end of the financial year in which the quantum proceedings are completed in the first instance. In the present case, at the level of the AO, the quantum proceedings was completed on 28th December 2007. Going by this date, the penalty order could not have been passed later than 31st March 2008. The second possible date is expiry of six months from the month in which the penalty proceedings were initiated. With the AO having initiated the penalty proceedings in December 2007, the last date by which the penalty order could have been passed is 30th June 2008. The later of the two dates is 30th June 2008.

(ii) Considering that the subject matter of the quantum proceedings was the non-compliance with Section 269T of the Act, there was no need for the appeal against the said order in the quantum proceedings to be disposed of before the penalty proceedings could be initiated. In other words, the initiation of penalty proceedings did not hinge on the completion of the appellate quantum proceedings. This position has been made explicit in the decision in CIT v. Worldwide Township Projects Limited (2014) 269 CTR 444 in which the Court concurred with the view expressed in Commissioner of Income-Tax v. Hissaria Bros. (2007) 291 ITR 244(Raj).

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