IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH : SMC : NEW DELHI
BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER
ITA No.886/Del/2018
Assessment Year: 2009-10
Amit Sabharwal, Vs. ITO,
C/o M/s Ashok Raj & Associates, Ward-1(5),
19, Navyug Market, Ghaziabad.
2nd Floor,
Ghaziabad.
PAN: ALYPS1816K
(Appellant) (Respondent)
Assessee by : Dr. Rakesh Gupta &
Shri Somil Aggarwal, Advocates
Revenue by : Shri S.L. Anuragi, Sr. DR
Date of Hearing : 06.05.2019
Date of Pronouncement : .05.2019
ORDER
This appeal by the assessee is directed against the order dated 13th October,
2017 passed by the CIT(A), Ghaziabad, relating to Assessment Year 2009-10.
2. Levy of penalty of Rs.1 lakh u/s 271B of the Act by the Assessing Officer
which has been upheld by the CIT(A) is the only issue raised by the assessee in the
grounds of appeal.
3. Facts of the case, in brief, are that the assessee is an individual and filed his
return of income on 30th September, 2009 declaring the total income of Rs.4,73,090/-.
The Assessing Officer concluded the assessment u/s 143(3) determining the total
ITA No.886/Del/2018
income at Rs.30,13,660/- by making various additions. The assessee preferred appeal
before the CIT(A), but, without any success. Subsequently, the assessee preferred
appeal before the Tribunal and the Tribunal vide ITA No.5413/Del/2012, order dated
5th February, 2016, restored the issue to the Assessing Officer with certain directions.
Thereafter, the Assessing Officer passed the order on 21.11.2016 determining the
total income at Rs.6,73,090/-. In the mean time, the Assessing Officer has initiated
penalty proceedings u/s 271B of the IT Act on the ground that the assessee had shown
receipts from booking (net) at Rs.20,58,378/- whereas the gross freight of
Rs.2,08,31,714/- which was admitted by the assessee to have been received. Against
the above receipts, the assessee has claimed to have paid an amount of
Rs.1,87,73,336/- and the net receipt was shown at Rs.20,58,378/-. The Assessing
Officer, therefore, issued a show cause notice asking the assessee to explain as to why
penalty u/s 271B should not be levied. Rejecting the various explanations given by
the assessee and observing that the assessee has admitted to have received gross
freight of Rs.2,08,31,714/-, the Assessing Officer, invoking the provisions of section
44AB of the Act and the provisions of section 271A of the Act, levied a penalty of
Rs.1 lakh.
4. Before the CIT(A), it was submitted that the original assessment order was
passed by the Assessing Officer on 29th December, 2011 wherein some additions
were made by the Assessing Officer which was confirmed by the CIT(A) and on
further appeal by the assessee, the Tribunal restored the issue to the file of the
Assessing Officer. The Assessing Officer, at the time of passing the order, did not
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impose any penalty u/s 271B. The Assessing Officer has issued the first penalty
notice on 24th August, 2016 and levied penalty of Rs.1 lakh which is barred by
limitation. It was further argued that penalty u/s 271B was for non-auditing of
accounts and it has no relevance with addition of income. Since it is barred by
limitation, therefore, the penalty levied by the Assessing Officer deserves to be
deleted.
5. However, the ld.CIT(A) was not satisfied with the arguments advanced by the
assessee. She noted that the assessee filed the return of income on 30th September,
2016 along with unaudited Profit & Loss Account and balance sheet. Since the
assessee failed to get its accounts audited as per the provisions of section 44AB and
since there is no limitation for initiation of penalty u/s 271B and such penalty need
not be initiated during the course of any assessment proceedings only, the ld.CIT(A)
confirmed the penalty so levied by the Assessing Officer.
6. Aggrieved with such order of the CIT(A), the assessee is in appeal before the
Tribunal.
7. The ld. counsel for the assessee, referred to the decision of the Hon'ble
Rajasthan High Court in the case of CIT vs. Hissaria Bros reported in 291 ITR 0244
and submitted that the Hon'ble High Court in the said decision has held that penalty
proceedings for default under ss.269SS and 269T not being related to the assessment
proceedings, completion of appellate proceedings arising out of the assessment
proceedings or other proceedings have no relevance and the limitation under s.
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275(1)(c) applies to such proceedings and, therefore, impugned penalty orders under
s. 271D passed beyond 6 months from the end of the month in which the assessments
were completed were barred by time. He submitted that the SLP filed by the
Revenue was dismissed by the Hon'ble Supreme Court as reported in 386 ITR 0719.
8. Referring to the decision of the Cochin Bench of the Tribunal in the case of
Noble Pictures vs. JCIT reported in 90 ITD 248, he submitted that the Tribunal in the
said decision has held that there should be a reasonable time within which penalty
proceeding is to be initiated or to be completed. Even if a time is not prescribed under
the law, however, the penalty cannot hang on the head of an assessee as sword of
Damocles indefinitely and it should be initiated and completed within a reasonable
time. Referring to the decision of the Hon'ble Calcutta High Court in the case of
Indian Handloom Textiles vs. ITO reported in 68 ITD 0560, he submitted that the
penalty proceedings u/s 271B initiated 34 months after the completion of assessment
was held to be invalid. He accordingly submitted that since, in the instant case, the
penalty proceedings have been initiated after a period of more than four years,
therefore, the penalty so levied by the Assessing Officer and upheld by the CIT(A) is
not justified. He also relied on the decision of the Hon'ble Delhi High Court in the
case of CIT vs. NHK Japan Corporation reported in 305 ITR 132.
9. The ld. DR, on the other hand, heavily relied on the order of the CIT(A). He
submitted that the turnover of the assessee is more than the prescribed limit and,
therefore, the assessee should have got its accounts audited. Since the assessee has
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failed to comply with the provisions of section 44AB and there was no reasonable
cause for not getting its accounts audited, therefore, the CIT(A) was fully justified in
upholding the penalty so levied by the Assessing Officer u/s 271B of the Act.
Referring to the decision of the Hon'ble Allahabad High Court in the case of Rama
Medical Store vs. CIT 2016-TIOL-2750, he submitted that for the purpose of
imposing penalty u/s 271B, its initiation in the course of the assessment proceedings
is not necessary within the meaning of section 275(1)(c).
10. I have heard the rival arguments made by both the sides and perused the orders
of the authorities below. I have also considered the various decisions cited before me.
I find the Assessing Officer completed the original assessment u/s 143(3) on 29th
December, 2011 determining the total income of the assessee at Rs.30,13,680/-. At
that time, as appears from para 2 onwards, the Assessing Officer has mentioned in the
assessment order that the gross receipt is at Rs.2,29,72,281/- whereas as per the
assessee the gross receipts were Rs.2,08,31,714/-. However, the Assessing Officer
has not initiated penalty proceedings u/s 271B of the Act either during the course of
initial assessment proceedings or thereafter. Only when the matter was set aside by
the Tribunal to the file of the Assessing Officer that the Assessing Officer initiated
the penalty proceedings u/s 271B of the IT Act by issue of notice on 24th August,
2016. Thus, the penalty notice was issued after more than 4 ½ years from the end of
the original assessment. As per the provisions of section 275(1)(c), no order
imposing a penalty under this Chapter shall be passed in any case, after the expiry of
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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. As per the various decisions relied on by the ld. counsel for the
assessee, penalty is not leviable where the penalty proceedings were not initiated long
after the completion of the assessment and the assessment order was silent about the
levy of penalty u/s 271B of the Act. Since the Assessing Officer in the instant case
has initiated the penalty proceedings after a period of more than 4 ½ years from the
date of original assessment order and there was no such mention of the initiation of
penalty proceedings u/s 271B of the Act and the fact of higher gross receipt was very
much available to the Assessing Officer which has been mentioned in the body of the
original assessment order, therefore, the penalty proceeding initiated by the Assessing
Officer in the instant case in my opinion is barred by limitation. The decision relied
on by the ld. DR will not help the Revenue since the same relates to initiation of
penalty proceedings u/s 271B in the course of assessment proceedings. The decision
does not speak of levy of penalty after inordinate delay. In view of the above
discussion, I am of the considered opinion that the penalty proceedings initiated after
a long gap of more than 4 ½ years from the date of original assessment order is not
sustainable in law being barred by limitation. Therefore, the order of the CIT(A) is set
aside and the grounds raised by the assessee are allowed.
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11. In the result, the appeal filed by the assessee is allowed.
The decision was pronounced in the open court on 14.05.2019.
Sd/-
(R.K. PANDA)
ACCOUNTANT MEMBER
Dated: 14th May, 2019
dk
Copy forwarded to
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asstt. Registrar, ITAT, New Delhi
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