TMI Blog2009 (1) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... substantial question of law which arises for our consideration is as follows:-Whether, in the facts and circumstances of the present appeals, the Income-tax Appellate Tribunal was correct in law in deleting the penalty imposed by the assessing officer under section 271C of the Income Tax Act, 1961, on the ground that the penalty order dated 16.03.2000 was passed beyond the time prescribed by section 275(1)(c), the same having been passed more than six months from the end of the month in which the show cause notices were issued" 2. The assessee/respondent is a company incorporated in Japan and has a liaison office in India. A survey operation under section 133A of the Income Tax Act, 1961 (hereinafter referred to as "the said act") was carried out in the assessee's premises at 8, Balaji Estate, Guru Ravidas Marg, Kalkaji, New Delhi, on 4.12.1998. In the course of the survey, statements of various expatriates working for the assessee were recorded and they admitted that a part of their salary was being paid to them in India and some part was being received by them in their native country. Consequent upon the said survey, the assessee sent a letter dated 18.01.1999 to the income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lure to deduct the tax. You can appear personally or through your authorised representative or file written submission in this regard at 11.00 a.m. on 22.7.99. Your failure to represent the case will lead to the presumption that you have nothing to state in the matter and the case will be decided on merits." 4. Apparently, the Joint Commissioner of income-tax had in the meanwhile requested the assessee to file a statement indicating the reconciliation of additional tax and interest deposited by it and the other companies of the IKEA group on account of their expatriate employees. Consequent upon such a request, the chartered accountants of the assessee sent a letter dated 12.07.1999 to the Joint Commissioner of income-tax enclosing therewith the reconciliation statement in respect of the additional tax and interest deposited by the IKEA group on account of their expatriate employees. Insofar as the assessee was concerned, the additional tax liability was shown as Rs 49,91,289/-, which was the same as indicated in the earlier letter dated 18.01.1999 and as mentioned in the said show cause notice. The said reconciliation statement also indicated the interest liability to be Rs.49,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were initiated had not yet been completed and therefore the period of limitation which would begin on the culmination or completion of the former proceedings had not yet begin to run. After rejecting the plea of limitation raised by the assessee, the Joint Commissioner of income-tax by virtue of the penalty order dated 16.03.2000 held against the assessee on merits and imposed the said amount of penalty. 7. Being aggrieved by the penalty order dated 16.03.2000 passed by the Joint Commissioner of income-tax, the assessee preferred appeals before the Commissioner of income-tax (appeals), who, by an order dated 04.12.2002 accepted the plea of the petitioner on the point of limitation and set aside the penalty order dated 16.03.2000. Since the Commissioner of income-tax (appeals) had accepted the plea of limitation, he did not examine the question of penalty on merits inasmuch as it had become academic. The Commissioner of income-tax (appeals) followed the decision of the Tribunal in the case of Lurgi India company Ltd wherein the Tribunal had observed that for the purpose of section 271C, the time available for passing an order imposing penalty is six months from the end of the mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the penalty order, having been passed on 16.03.2000, was clearly within time. 9. The learned counsel for the respondent/assessee supported the impugned order passed by the Tribunal and urged that the same does not call for any interference. He made two-fold submissions. In the first place, it was contended that penalty proceedings under section 271C are independent of any other proceeding and do not arise out of any other proceeding. The existence of, continuation, or culmination of any other proceeding is not a requirement for initiating penalty proceedings under section 271C of the said Act and no such pre-condition ought to be read into the statute. Secondly, it was contended, even if it be assumed that penalty proceedings were initiated in the course of verification proceedings, the said proceedings stood completed on 18.01.1999 when the assessee submitted all the details of additional tax and interest payable after having paid the same and that, too, in excess on 08.01.1999. The show cause notice dated 26.06.1999 itself only referred to the letter dated 18.01.1999 (wrongly mentioned as 18.12.1999). There is no mention of any pending proceeding. It was, therefore, submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) of Section 275(1), which have not been extracted above and are not attracted in the present case, related to cases where the assessment to which the proceedings for imposition of penalty relate were the subject matter of an appeal before higher authorities or were the subject matter of a revision under Section 263 of the said Act, respectively. It was noticed that sub-clause (c) of Section 275(1) covers all other cases not falling within sub-clauses (a) or (b) and, in that sense, section 275(1)(c) is a residuary provision. 12. There are two periods of limitation prescribed under sub-clause (c), the first period relates to those category of cases where action for the imposition of penalty has been initiated in the course of "some" proceedings. In such a situation, the period of limitation prescribed is upto the end and including the financial year in which such proceedings are completed. 13. The second part of Section 275(1)(c) pertains to all cases falling under clause (c). This is so because the action for imposition of penalty is contemplated in both parts. Penalty can only be imposed under Chapter XXI by following the procedure prescribed in Section 274 of the said Act w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated in the course of some other proceedings, the legislature has provided for two different periods of limitation. However, so that there is no confusion with regard to which of the two would apply, the legislature has added the expression "whichever period expires later" at the end." "But there is a third / residuary category of cases where the initiation of action for imposition of penalty is not in the course of some proceedings. In such cases, the first part of Section 275(1)(c) would have no application and it is only the period of limitation prescribed in the second part which would apply. Since only one period of limitation would be applicable, the expression "whichever period expires later" would have to be read as that very period of limitation." From the above observations in Subodh Kumar Bharagava (supra), it is clear that that every penalty order under section 275(1)(c) emanates from a notice/show cause notice. However, such notice may or may not arise in the course of some other proceeding. Where it does arise in the course of some other proceeding, two periods of limitation would be available. One starting from the completion of the other proceeding and ending wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the very case at hand. No order under section 201(1)/201(1A) has been passed, yet the penalty order under section 271C has been passed all the same. Moreover, the "other" proceeding mentioned in section 271(1)(c) must be a legitimate proceeding having due recognition under the said act such as an assessment proceeding. If it were to be contended that the survey proceeding was pending, it would be contrary to the scope and ambit of the provisions of section 133A of the act. The survey operation commenced and concluded on 04.12.1998. As regards the submission that verification proceedings were pending, we note that under the said act there is no proceeding which goes by the name of verification proceedings. It is true that in the course of some proceedings such as assessment proceedings, the assessing officer may undertake verification of certain facts but, there is no provision for an independent and formalized verification proceeding under the said Act. Thus, apart from the fact that no verification was underway when the show cause notice was issued, the plea of pendency of verification proceedings cannot be accepted even in law. 16. Clearly, the present case falls in the third ..... X X X X Extracts X X X X X X X X Extracts X X X X
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