TMI Blog2008 (11) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Income Tax Act, 1961 correctly and holding that the penalty order passed under Section 271B was within the limitation period '? 2. This appeal is directed against the order dated 28.09.2007 passed by the Income-tax Appellate Tribunal in ITA No.2952/Del/2005 pertaining to the assessment year 2000-01. By virtue of Section 44AB of the said Act, the assessee was liable to get his accounts of the relevant previous year audited by an accountant as also to furnish the report of such audit in the prescribed form duly signed and verified by such an accountant before the specified date indicated in the said provision, which, at the relevant point of time, meant the 31 st day of October of the assessment year. It is an admitted position that the assessee neither got his accounts audited nor did he file the audited report before the Assessing Officer as stipulated under Section 44AB. 3. The assessee filed his return of income on 22.06.2000. The said return was processed under Section 143(1) on 14.03.2002. It was not subjected to assessment under Section 143(3) of the said Act. Subsequently, on 31.07.2003, the Assistant Commissioner of Income-tax, Circle 23(1), New Delhi issued a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial year in which such proceedings had been initiated, whichever period expired later. According to the Commissioner of Income-tax (Appeals), since the financial year would expire on 31.03.2004, the penalty order passed on 17.02.2004 was within time. The Commissioner of Income-tax (Appeals) confirmed the order passed by the Assistant Commissioner of Income-tax both on the point of limitation as well as on merits. 5. The assessee, still being aggrieved, preferred an appeal before the Income-tax Appellate Tribunal which was also dismissed by virtue of the impugned order both on merits as well as on the point of limitation. However, as noted above, the present appeal is only concerned with the pleas with regard to limitation and the question framed for our consideration is also in respect of this plea of limitation. The tribunal was also of the view that since the penalty proceedings were initiated on 31.07.2003, as per the provisions of Section 275(1)(c) of the said Act, the penalty order could be passed upto the end of the financial year (in this case, upto 31.03.2004), in which proceedings were initiated, or within six months from the end of the month in which the action for im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the issuance of the show cause notice on 31.07.2003 and, therefore, the period of six months from the end of July, 2003 would expire on 31.01.2004 The learned counsel submitted that a penalty order in these circumstances could have been made on or before 31.01.2004 Since the penalty order was passed on 17.02.2004, it was barred by time and, therefore, had to be set aside. In making these submissions, the learned counsel for the appellant / assessee also placed reliance on the following decisions:- 1) Shanbhag Restaurant v. Deputy Commissioner of Income-tax: 266 ITR 393 (Kar); 2) Commissioner of Income-tax v. Hissaria Brothers: 291 ITR 244 (Raj); 3) Commissioner of Income-tax v. Chhajer Packaging and Plastics P. Ltd: 300 ITR 180 (Bom). 7. Mrs Prem Lata Bansal, the learned counsel appearing on behalf of the respondent / revenue, submitted that the tribunal as well as the other authorities below had correctly interpreted the provisions of Section 275(1)(c) and had arrived at the correct conclusion that the penalty order was not barred by limitation. She supported the impugned order on the basis of the reasoning adopted by the tribunal. However, before us, she ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided in favour of the revenue and the appeal be dismissed. 9. Section 275(1)(c) reads as under:- '275. Bar of limitation for imposing penalties.'(1) No order imposing a penalty under this Chapter shall be passed ' (a) xxx xxx xxx xxx ; (b) xxx xxx xxx xxx ; (c) In any other case, 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, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. xxx xxx xxx xxx ' 10. Section 275 falls within Chapter XXI which deals with 'Penalties Imposable'. Sub-clauses (a) and (b) of Section 275(1), which have not been extracted above and are not attracted in the present case, relate to cases where the assessment to which the proceedings for imposition of penalty relate are the subject matter of an appeal before higher authorities or are the subject matter of a revision under Section 263 of the said Act, respectively. Sub-clause (c) of Section 275(1) covers all other cases not falling within sub-clauses (a) or (b). In this sense, Section 275(1)(c) is a resi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to be considered is the point of time as to when the action for imposition of penalty is initiated. 13. There may be cases which fall under Section 275(1)(c) in which action for the imposition of penalty is initiated in the course of some other proceedings. There may also be cases under Section 275(1)(c) in which the action for imposition of penalty is initiated, but not in the course of some proceedings. In the former category of cases, both the periods of limitation may be applicable, whereas in the latter category, only the second period of limitation of six months from the end of the month in which action for imposition of penalty is initiated, would apply. To illustrate this, let us take the first category of cases. This is that category where the action for imposition of penalty is initiated in the course of some other proceeding. In such a situation, it is obvious that both the periods of limitation would come into play. One would be reckoned from the date on which the other proceedings are completed upto and including the end of the financial year in which that date occurs. The other period of limitation would be that which applies irrespective of the date of complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 007. This is because, the period of six months would have to be reckoned from the end of the month in which action for imposition of penalty was initiated. Action for penalty in this example was initiated on 15.04.2007. The end of the month would be 30.04.2007. Consequently, the period of six months from this date would end on 31.10.2007. Thus, in this example, we are once again faced with two periods of limitation: the period ending on 31.03.2008 being the end of the financial year relatable to 25.05.2007, the date on which the proceedings were completed and 31.10.2007 being the date relatable to the initiation of the penalty proceedings. Once again, applying the expression 'whichever period expires later', the period of limitation for this example would be 31.03.2008. 14. The above two examples illustrate cases where the applicable period of limitation would be relatable either to the date of initiation of the penalty proceedings or to the date of completion of the proceedings in the course of which action for the imposition of penalty has been initiated. But there is a third / residuary category of cases where the initiation of action for imposition of penalty is not in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Such an argument has only to be stated to be rejected. Section 275(1)(c) is a residuary provision and is designed to cover all cases of penalties which do not fit within sub-clauses (a) or (b) of Section 275(1). Once we recognise this fact, there is no scope for excluding the present case from the provisions of Section 275(1)(c). The expression 'whichever period expires later' has to be read in context and has to be given a meaningful interpretation. This is exactly what we have done. The said expression has significance where two periods of limitation are triggered, one being later than the other. But that does not mean that in a situation where there is only one period of limitation under Section 275(1)(c), because two periods of limitation are not applicable and because the expression 'whichever period expires later' has to be considered literally, such a situation would not be covered under Section 275(1)(c). The argument advanced by Mrs Bansal can be easily countered by an example. Let us assume that the action for imposition of penalty was initiated on 15.09.2007 in the course of proceedings which were completed on 11.11.2007. Going by the first part of Section 275(1)(c), th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned counsel for the appellant. This is so because the prime issue before the Rajasthan High Court was whether the case before them fell within clause (a) or clause (c) of Section 275(1). Such an issue does not arise for our consideration in the present case. For, we are only concerned with Section 275(1)(c). Therefore, not much help can be taken from the said decision of the Rajasthan High Court for the purposes of this appeal. 18. In Chhajer Packaging and Plastics Pvt. Ltd (supra), the penalty proceedings arose out of the assessment proceedings relating to the assessment year 1996-97. The assessment order was passed on 30.03.1999. Consequently, considering the first part of Section 275(1)(c), the penalty order could have been passed latest by 31.03.1999 being the end of the financial year in which the assessment proceedings were completed. The Bombay High Court noted that under the second mode of computation of limitation under the latter half of clause (c) of Section 275(1), since the penalty proceedings were initiated by a notice dated 06.04.1999, the period of limitation of six months to be computed from the last date of the month in which the penalty proceedings we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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