COMMISSIONER OF INCOME-TAX Vs. GUPTA MILLS STORES

JUDGEMENT

(1.) THIS is an appeal under Section 260A of the Income -tax Act (hereinafter referred to as the 'Act') for the assessment year 2001 -02. The appeal has been admitted on the following two questions: 1. Whether the learned Income -tax Appellate Tribunal was justified in law in coming to the conclusion that the penalty was time barred ignoring the fact that the initiation of penalty proceedings has to be construed with reference to the steps taken by the Joint Commissioner of Income -tax which started on 3 -9 -2003 and not by the Income -tax Officer's notice dated 1 -8 -2003 since as enjoined by Section 271E(2), Joint Commissioner of Income -tax is the only competent authority to levy penalty under Section 271E of the Income -tax Act, 1961.

(2.) WHETHER the learned Income -tax Appellate Tribunal was justified in quashing the penalty after arriving at the conclusion there was no passing of money while ignoring the entries made by the assessee in his books of account indicating the reduction in the balance amount payable to the creditor. 2. The brief facts of the case are that there was a deposit of Rs. 4,89,450 in the name of Sri Daya Shankar with the assessee -firm. The bearer cheques were issued in the name of Sri Daya Shankar for Rs. 2,89,450 in the year under consideration. As per provisions of Section 269T of the Act, the repayment should be made through account payee cheque or account payee draft, which was not done. For the alleged default of Section 269T of the Act the Income -tax Officer, the assessing authority issued the notice on 1 -8 -2003 under Section 271E of the Act. Thereafter, the Income -tax Officer, Raebareli on 19 -8 -2003 referred the matter to the Joint Commissioner, Income -tax, Sultanpur. The Joint Commissioner, Income -tax, Sultanpur issued a notice dated 3 -9 -2003 to the assessee fixing the date of hearing on 11 -9 -2003. The assessee filed the reply which had not been accepted by the Joint Commissioner, Income -tax and vide order dated 29 -3 -2004 a sum of Rs. 4,89,450 was imposed towards penalty under Section 271E of the Act. The assessee filed the appeal before the Commissioner of Income -tax (Appeals) Lucknow which was dismissed vide order dated 28 -2 -2005. Being aggrieved by the order of Commissioner of Income -tax (Appeals), the assessee filed the appeal before the Income -tax Appellate Tribunal, Allahabad Bench, Allahabad. The Tribunal by the impugned order dated 24 -8 -2005 allowed the appeal. The Tribunal held as follows: Hence after having heard both the parties A.R. and having considered the material on record and the order of the Income -tax Appellate Tribunal, and having considered the arguments, I hold that no penalty in the facts and circumstances of the case is leviable, since it is a time barring matter and there is no passing of the money.

(3.) LEARNED Standing Counsel submitted that the order of the Tribunal in holding that the penalty order passed was barred by limitation is patently illegal. He submitted that as per the provisions of Section 275(1)(c), the limitation to pass the penalty order was up to the end of the financial year in which penalty proceeding was initiated or six months from the end of the month in which the action for imposition of penalty is initiated whichever period expires later. In the present case the assessing authority issued the notice on 1 -8 -2003 and the Joint Commissioner of Income -tax on 3 -9 -2003, therefore, the penalty could be levied by 31 -3 -2004. He submitted that six months period is to be calculated from the date of the notice issued by the Joint Commissioner of Income -tax who was competent to levy the penalty under Section 271E of the Act and such period expires on 1 -4 -2004 while penalty order was passed on 29 -3 -2004 well within time. He further submitted that the Tribunal has not examined the matter on merit properly and, therefore, to decide the matter afresh on merit, the matter should be sent back to the Tribunal.