TMI Blog2001 (5) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... ing results of Khal were not verifiable. The assessee vide letter dt. 9th May, 1989 offered a sum of Rs. 1 lakh to be added to the returned income on account of any discrepancy found in the book of account, unaccounted investment and other irregularities. When the assessee was asked to specify under which head the amount of Rs. 1 lakh has been surrendered then the assessee vide his letter dt. 27th May, 1989 has stated that the surrender of Rs. 1 lakh includes a sum of Rs. 71,822 spent outside the books of account for the acquisition of draft from State Bank of India, Patiala on 22nd July, 1987 for the purchase of Sarson from M/s. Tarsem Chand Harbans Lal. In this manner the addition of Rs. 71,822 was made by the AO under s. 69 of IT Act on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allenged the initiation of penalty proceedings against him on the reasoning that in this case the AO has not deduced any positive amount to the extent of which the assessee has furnished inaccurate particulars except making additions on the basis of amount surrendered by the assessee so the AO was neither justified in initiating the penalty proceedings nor imposing the impugned penalty in the existing facts and circumstances of the case of the assessee. The AO rejecting all these contentions of the assessee, imposed a minimum imposable penalty of Rs. 1,05,000 @ 100 per of the tax sought to be evaded by the assessee by making detailed observations in his order. 2.3. Against the order of AO, the assessee filed an appeal before the CIT(A) al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of both the parties, perused the records and carefully gone through the orders of lower authorities. 2.8. We consider it appropriate to deal with legal issue raised by the assessee in this case wherein according to the assessee no penalty could be imposed by the AO or sustained by the CIT(A) under s. 271(1)(c) of IT Act because the penalty order passed by the AO was barred by a period of limitation as provided under s. 275 of IT Act. We have already mentioned that this issue was not dealt with by the CIT(A) though this plea taken by the assessee before the AO has been rejected by the AO. Before we further deal with this issue, we would like to restate the uncontroverted and relevant facts pertaining to the disposal of this legal plea a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Whereas after the amendment i.e. w.e.f. 1st April, 1989 the penalty order has to be passed in the financial year in which the proceedings in which penalty was initiated, are completed, or six months from the end of the month in which the penalty is initiated. 2.12. This means that period of limitation for levy of penalty is to be determined in accordance with law prevailing at the time of initiation of penalty proceedings. 2.13. From the order of AO it is clear that while completing assessment proceedings on 6th July, 1989 he had also initiated penalty proceedings against the assessee under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO latest by 31st March, 1990, i.e. end of financial year. In this case admittedly the penalty order has been passed by the AO on 5th March, 1991 which is definitely beyond the period of limitation prescribed under s. 275(1)(c) of IT Act. Since the penalty order passed by the AO is barred by period of limitation and so the same is liable to be set aside and the impugned penalty amount imposed by the AO is also liable to be cancelled. 2.16. In view of our findings given herein above, the penalty order passed by the AO being barred by period of limitation and hence on this score order of CIT(A) in cancelling the penalty order passed by the AO, is upheld and in consequence thereof ground No. 1 of the appeal of the Revenue is rejected. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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