TMI Blog2018 (2) TMI 1533X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned, the assessee definitely was not aggrieved. It was incumbent upon the revenue to complete the penalty proceedings and pass order within the six months period. It did not. Its reliance upon the crutches of a non-appeal, which is what its effort at appeal to the ITAT eventually became in the present case, could not have been legitimately upheld as was done by the impugned order. - Decided in favour of the assessee - ITA 799/2005 - - - Dated:- 20-2-2018 - MR. S. RAVINDRA BHAT AND MR. A.K. CHAWLA, JJ. For The Appellant : Mr. Salil Kapoor and Mr. Sumit Lalchandani, Advs. For The Respondent : Mr. Puneet Rai, Standing Counsel MR. JUSTICE S. RAVINDRA BHAT 1. The question of law which arises for decision in this appeal is: Whether on the facts and in the circumstances of the case and on the true interpretation of the provisions contained in Section 275 (1) (a) read with Section 254 (1) of the Income Tax Act, 1961 the ITAT was right in law in holding that the order passed by the Assessing Officer under Section 271 (1) (c) was within the period of limitation, prescribed in Section 275 (1) (a) of the Income Tax Act, 1961. 2. The facts are brief; the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the penalty proceedings held as follows: 8. The submissions and contentions of the Ld. AR in this regard carry weight that the order of the ITAT allowing withdrawal of the said appeal cannot be regarded as an order U/s 254(1) as the appeal filed by the Department was not an effective appeal. In this regard the position has been categorically clarified by the Hon ble Supreme Court in the case of CIT v. B.N. Bhattacharjee that if an appeal is filed and not effectively pursued, and the same is withdrawn thereafter then it will cancel the effect of having been an appeal, which is the same as not preferring an appeal. Therefore, in this case, it cannot be said that an effective appeal had been filed by the Department before the ITAT, as very clearly the same was withdrawn by the Department. This situation would be covered squarely by the decision of the Hon ble Supreme Court in the case of CIT v. B.N. Bhattacharjee, referred to above. Therefore, the submissions and contentions of the Ld. AR of the appellant-company that the penalty order was time barred carry weight. This order should have been passed within six months from the end of the month in which the order of the CIT(A) had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which was constituted for speedy disposal of cases where searches have been conducted were being interpreted. The proviso, with which the SC was concerned prohibited an assessee from approaching the Settlement Commission where the ITO had preferred an appeal to the Tribunal in that case, the ITO first filed an appeal to the tribunal, but later withdrew the same and the contention before the SC was that the assessee cannot approach the Settlement Commission. It was in this context that the words preferred an appeal were interpreted to mean that where the appeal is withdrawn it would amount to not preferring an appeal at all. We are, however, concerned with a period of limitation which could be taken advantage of by an assessee, generally speaking by first preferring an appeal to the Tribunal and thereafter withdrawing the same and contending that no appeal was ever filed to the Tribunal in law and, therefore, even where the additions sustained by the CIT(A) had attained finality, the AO ought to have passed the penalty order within six months from the receipt of the order of the CIT(A). This despite the fact that factually the order of the CIT(A) was the subject matter of appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le that withdrawal of an appeal results in the proceedings never having been initiated may apply, and may be correct, it cannot have universal application so as to defeat the intent of Parliament which mandated imposition of penalty. It was submitted that if the appeal had in fact been proceeded and decided on the merits, the period of limitation would have commenced only from the date of final order of the ITAT. Learned counsel also supported the ITAT s reasoning that the mischief sought to be avoided by liberal interpretation of the statute should be adopted rather than one which defeats the intent of the law that dictated the penalty once an addition is made. 7. As is apparent, the facts relating to the question of law formulated are narrow. The amounts added by the AO in the original adjudicatory order were modified. The partial success of the assessee s appeal meant that addition of some amounts was sustained. The order of the CIT(A) was received by the assessee in January 1994. It is not disputed that the AO had initiated penalty proceedings in the meanwhile. What the assessee complains however is that despite the CIT(A) s order, the Revenue did not complete the penalty pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 33. There is good ground to think that an appeal means an effective appeal.1973 (31) STC 434. An appeal withdrawn is an appeal non est as judicial thinking suggests.1968 (21) STC 154; 1964 (52) ITR 780. Black's Law Dictionary gives the following meaning PREFER: To bring before; to prosecute; to try to proceed with. Thus, preferring an indictment signifies prosecuting or trying an indictment signifies prosecuting or trying an indictment. To give advantage, priority, or privilege; to select for first payment, as to prefer one creditor over others. Thus it may mean 'prosecute' or effectively pursue a proceeding or merely institute it. Purposefully interpreted, preferring an appeal means more than formally filing it but effectively pursuing it. If a party retreats before the contest begins it is as good as not having entered the fray. After all, Chapter XIXA is geared to promotion of settlement and creation of road-blocs in reasonable compositions. The teleological method of interpretation leads us to the view that early withdrawal of the I.T.O's appeal removes the bar of the Proviso. 10. In A.V. Sreenivasalu Naidu v. CIT 1948 (16) ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintainability of an appeal preferred by either the revenue or the assessee, in the eventuality of withdrawal of that appeal, without an adjudicatory order, the period of limitation would be deemed to subsist. The law abhors uncertainty. Therefore, the dependence of the period of the limitation upon whether an order becomes final at the instance of one party, i.e. that filing and prosecution or withdrawal of an appeal (by one party or the other) would be, in the opinion of the Court one such event which leaves the legal position inchoate and unsatisfactory. Instead, an interpretation that permits certainty should be adopted. Viewed as such, the CIT s order provided a fixed date from which to reckon the end of the period of limitation some time in early July 1994. The absence of an appeal by the assessee (against the CIT(A) s appellate adjudicatory order) meant that at least with respect to the amount that it had accepted in the adjudicatory order as an addition, the penalty proceedings survived. As far as the other issue was concerned, perhaps there was no occasion for a further penalty proceeding given that the issue might have been rendered debatable, even in the eventuality of ..... 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