Question And Answer
Subject: Penalty u/s 271(1)(c)
Answered by:
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Date: December 2, 2021
Query asked by KANIKA AGRAWAL

1.Penalty  of Rs.5,00,000 u/s 271(1)(c) was deleted by CIT appeal on the ground that penalty order passed by A.O. was passed after six months u/s 275(1)(a) .

2.The revenue is in appeal before ITAT on the ground that

i) The penalty order was received late by CIT

ii) The case is covered under exception to small tax effect circular of CBDT para 10(a)

iii) Appeal admitted by the High court in quantum case is not relevant since withdrawal application has been filed by the assessee as per Vivad  se Vishwas scheme.

3. On behalf of the assessee it was submitted before ITAT

i) no evidence by the revenue that the order was received late  by the CIT was submitted

ii) Order of CIT appeal interpreting the provision of section 275 does not amount to interpretation of constitutional validity and therefore is not covered in para 10(a)  of CBDT circular.

iii)Since substantial question of law in quantum case was framed by the high court application for withdrawal of appeal in view of Vivad se Vishwas scheme application does not alter the legal position on framing of substantial question of law that additions in quantum case are disputed.

Case before the ITAT is fixed in next week . Your valuable guidance will be highly appreciated.

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Answer given by

: As per Para 10(a) of the CBDT Circular No. 03 of 2018 dated July 11, 2018 [2018] 405 ITR (St.) 29, where adverse judgements relating to the Constitutional validity of the provisions of the Act or Rule is under challenge, then there is no monetary limit on the revenue for filing an appeal.

In the given case, the Departmental appeal is on the interpretation of section 275 of the Income-tax Act, 1961. The same cannot be construed to an issue relating to Constitutional validity. Therefore, the Revenue’s appeal will be covered by the pecuniary jurisdiction as determined by the Circular, and may not survive. The assessee is right order interpreting the section 275 does not amount to interpretation of Constitutional validity . The assessee may have to verify the notice issued under Section 271 (1) ( c) of the Act . The constitutional validity means conformity with the provisions of the Constitution . Article 13 of the Constitution of India . Laws inconsistent with or in derogation of fundamental rights . The exception is provided when a provision is challenged under writ Article 226/227 of the Constitution or under Article 32 of the Constitution . The law of limitation under income -tax Act cannot be construed as interpretation of constitutional validity . The assessee can also support the order of CIT ( A) relying on the judgment of Bombay High Court in Mohd. Farhan A. Shaikh v. ACIT ( 2021 ) 434 ITR 1/ 200 DTR 65/ 320 CTR 26/ 280 Taxman 334 / 125 253 (Panji ) ( FB ) ( Bom) (HC)

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