TMI Blog2007 (7) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the Assessment Year 1986-87 in respect of the penalty imposed under Section 271-B of the Act. 3 Briefly stated the facts giving rise to the present reference are as follows. 4 The applicant is a private limited company engaged in the business of carpet etc. Its accounts are required to be audited by a Chartered Accountant under Section 44AB of the Act. For the Assessment Year 1986-87, for which previous year of the applicant ended on 31st March, 1986, the applicant was required to get its accounts audited and to obtain the audit report by 31st July, 1986. The audit report was, however, obtained on 10th September, 1986 and was filed along with the return of income on 22nd October, 1986. The assessment for the Assessment Year 1986-87 was completed on 30th March, 1988 vide order under the provisions of Section 143 (3) of the Act. In the assessment order there was no mention of the initiation of penalty proceedings under Section 271B of the Act. It was initiated by issuance of a show cause notice dated 16th January, 1989. The explanation given by the applicant was not found to be satisfactory by the assessing authority and vide order dated 23rd October, 1990 a penalty of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om deciding the said issue. 10 Section 275 of the Act places bar of limitation for imposing penalties. Prior to its amendment by Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1.4.1989, it read as follows: S.275. Bar of limitation for imposing penalties.--(1) No order imposing a penalty under this Chapter shall be passed.-- (a) in a case where the relevant assessment or other order is the subject matter of an appeal to the Deputy Commissioner (Appeals) 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 Deputy Commissioner (Appeals) or the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, which ever 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 course of which action for imposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of sub-clause( b) of Section 275 of the Act before the Madhya Pradesh High Court the assesses has challenged this notice in the present petition on the ground that it was barred by limitation prescribed under s.275(b) of the amended IT Act It had held as follows: (page 417) " 8 It remains to be seen whether proceedings under s.271B were necessarily required to be initiated in the assessment proceedings of the relevant assessment year. But as it is, the default contemplated by s. 271A and s.271B are separate and distinct. Under the latter provision if the assessee fails to get his accounts audited under s.44AB, he is liable to penalty as laid down inthis section. The object is to get a clear picture of assessee's accounts whose turnover exceeds the prescribed limit. The rates envisaged two types of defaults are also different. Therefore without dilating on the issue further we find no difficulty in holding that impugned, second notice dt.11th Sept., 1989 cannot be ascribed to the direction of AO for initiation of penalty proceedings in his assessment order dt. 30th May, 1986. Since it is not covered by that order, it should be treated initiating penalty proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment proceedings but action can be taken independently of the assessment order. 18 In the case of Shanbhag Restaurant [2004] 266 ITR 393 the Karnataka High Court was considering a case of clause (c) of Section 275(1) of the Act and has held as follows: ".....The reading of section 275(1)(c) of the Act makes it clear that the said section comprises of two parts. The first part provides that no order imposing penalty under Chapter XXI could be made in cases which do not fall under section 275(1)(a) and (b) 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. The second part relates to the cases which prohibit the passing of an order imposing penalty after the expiry of six months from the end of the month in which action for imposition of penalty is initiated. However, the section further provides that when proceedings for imposition of penalty are initiated, whichever period expires later, would enure to the benefit of the Revenue. In the instant case, as noticed by us earlier, the assessment order was passed on February 25, 1994. In our considered view the financial ..... X X X X Extracts X X X X X X X X Extracts X X X X
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