Case Note & Summary
The Revenue (Pr. Commissioner of Income Tax and Income Tax Officer) filed an appeal under Section 260A of the Income Tax Act, 1961, challenging the order dated 20/09/2019 of the Income Tax Appellate Tribunal (ITAT), Bengaluru, in ITA No. 2544/Bang/2018 for the Assessment Year 2012-2013. The ITAT had set aside the penalty order passed under Section 271D by the Range Head on 22/8/2018, holding that it was barred by limitation under Section 275(1)(c) of the Act. The facts are that the assessee, Shri K. Umesh Shetty, had filed his return of income for AY 2012-2013. The Assessing Officer passed an assessment order under Section 143(3) on 28/3/2015. The assessee appealed to the Commissioner of Income Tax (Appeals), who set aside the assessment order on 30/12/2016. Subsequently, the Range Head passed a penalty order under Section 271D on 22/8/2018. The assessee challenged the penalty order before the ITAT, which held that the penalty was barred by limitation. The Revenue appealed to the High Court. The substantial question of law framed was whether the ITAT was justified in setting aside the penalty order on limitation grounds. The Court analyzed Section 275(1)(c) of the Act, which provides that no order imposing a penalty shall be passed after the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or six months from the end of the month in which the action for imposition of penalty is initiated, whichever is later. The Court noted that the assessment order was set aside by the Commissioner (Appeals) on 30/12/2016, and therefore, the penalty proceedings could only be completed within the financial year 2016-2017, i.e., by 31/3/2017. The penalty order passed on 22/8/2018 was clearly beyond this period. The Court also observed that the penalty order was passed by the Range Head, who was not the Assessing Officer, and there was no valid delegation of powers under Section 274(2). However, the Court did not decide this issue as the appeal was dismissed on the ground of limitation. The Court held that the ITAT was justified in setting aside the penalty order and dismissed the Revenue's appeal.
Headnote
A) Income Tax - Penalty - Limitation - Section 275(1)(c) Income Tax Act, 1961 - The issue was whether the penalty order under Section 271D passed by the Range Head on 22/8/2018 was barred by limitation. The Court held that since the assessment order was set aside by the Commissioner (Appeals) on 30/12/2016, the penalty proceedings could only be completed within the financial year in which the proceedings were initiated, i.e., by 31/3/2017. The penalty order passed on 22/8/2018 was beyond the limitation period under Section 275(1)(c). (Paras 1-5) B) Income Tax - Delegation of Powers - Section 271D read with Section 274(2) Income Tax Act, 1961 - The Court noted that the penalty order was passed by the Range Head, who was not the Assessing Officer, and there was no valid delegation of powers. However, the Court did not decide this issue as the appeal was dismissed on the ground of limitation. (Para 4)
Issue of Consideration
Whether the Income Tax Appellate Tribunal was justified in setting aside the penalty order passed under Section 271D of the Income Tax Act, 1961, on the ground that it was barred by limitation under Section 275(1)(c) of the Act.
Final Decision
The High Court dismissed the Revenue's appeal, holding that the ITAT was justified in setting aside the penalty order under Section 271D as it was barred by limitation under Section 275(1)(c) of the Income Tax Act, 1961.
Law Points
- Limitation for penalty under Section 275(1)(c) of Income Tax Act
- 1961
- Penalty order passed by Range Head without valid delegation
- Assessment order set aside by appellate authority
- Penalty must be imposed within financial year when proceedings initiated
