Case Law Details
Babu Ram Vs ITO (ITAT Delhi)
Summary: In the case of Babu Ram vs. Income Tax Officer (ITO), the ITAT Delhi addressed the validity of a penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961. The case originated when the Income Tax Department reopened the assessment of Babu Ram, an individual taxpayer, who had not filed his income tax return despite having taxable income. Subsequently, a notice under Section 148 was issued, prompting him to declare a total income of ₹2,19,408 in response. The Assessing Officer (AO) completed the assessment under Sections 147/143(3) and initiated penalty proceedings for concealment of income. A penalty of ₹43,641 was levied on April 1, 2022. The taxpayer appealed the penalty before the Commissioner of Income Tax (Appeals) [CIT(A)], arguing that the penalty order was barred by limitation under Section 275(1)(c) of the Act. However, the CIT(A) upheld the penalty, stating that the taxpayer had failed to voluntarily file a return under Section 139(1), thereby concealing income. Dissatisfied with this ruling, the taxpayer approached the ITAT. The taxpayer contended that the limitation for passing the penalty order had expired on September 30, 2020. The limitation was extended due to the COVID-19 pandemic under the Central Board of Direct Taxes (CBDT) notifications, with a final deadline set for March 31, 2022. The taxpayer argued that the penalty order, issued on April 1, 2022, was beyond this deadline and therefore invalid. The Assessing Officer’s failure to meet the stipulated timeline rendered the order unenforceable. The ITAT examined the relevant provisions and the extended timelines established by CBDT notifications. It concluded that the penalty order was indeed time-barred. Relying on the Supreme Court’s rulings on procedural compliance and time limits, the ITAT held that the penalty could not be sustained as it violated statutory deadlines. Consequently, the penalty order was quashed.
Brief facts:
That the assessee is an individual and no return of income was filed, though he has taxable income and, accordingly, the case was reopened by issue of notices u/s 148 of the Act on 28/03/2019. In response, the assessee has filed his return of income declaring total income of Rs. 2,19,408/- on 20.11.2019. The assessment was completed on 28/11/2019 u/s 147/143(3) of the Income Tax Act, 1961 wherein the income declared by the assessee in the return of income filed, in response to notice u/s 148 of the Act was accepted. The AO initiated penalty proceedings u/s 271(1)(c) of the Act as assessee has failed to file the return of income u/s 139 of the Act even though he has taxable income. Thereafter, vide penalty order dated 01/04/2022, the AO concluded the penalty proceedings and levied penalty of Rs. 43,641/- by holding that assessee has concealed the income to this extent.
Aggrieved the assessee preferred the appeal before the Ld. CIT(A), who vide its order dated 13/09/2024 has confirmed the penalty by observing in para 6.2.3 that assessee has not discharge of initial onus of filing voluntary return u/s 139(1) of the Act, thus, he concealed his income.
Argument by appellant :-
The assessment order was passed on 28/11/2019 which was not appealed by the assessee and, accordingly, as per the provisions of section 275(1)(c), the time limit passing of such order expires within six months from the end of the month in which the action for levy of the penalty is initiated or expiry of the year in which proceedings for imposition of penalty has been initiated whichever is later. In the instant case, the limitation expired on 30th September, 2020 when six months from the end of relevant year expires. Since, when the limits were expired, there was Covid-19 period and, accordingly, the CBDT has extended limitation expiring during this period and finally as per the Notification No.113/2021/f.No.370142/35/2020-TPL-Part-1] on page-2 the time limit was finally extended up to 31st March, 2022
Held:
The assessment was completed u/s 147/143(3) of the Act on 28/11/2019 and as per the provisions of section 275(1) (c) the time limit for passing the penalty order would be up to 30th Sept. 2020. Due to Covid-19, the time limits for levy of penalty under any provision of the Act falling during the period of continuation of Covid-19 were extended by various Circulars and finally in terms of Notification No.113/2021/f.No.370142/35/2020-TPL-Part-1], it was extended till 31st March, 2022 which is the end date up to which the limit for completion of order imposing penalty chargeable under the Act was extended.
As penalty order was passed as on 1st April, 2022, the same is beyond the time limit extended by the CBDT. In view of the above notification and considering the facts of the case, we are of the view that the penalty order so passed is barred by limitation, therefore, the same is hereby quashed.
FULL TEXT OF THE ORDER OF ITAT DELHI
This is appeal filed by the Assessee against the order Ld. CIT, NFAC, Delhi in appeal No. NFAC/2011-12/10126549 dated 13/09/2024 for Assessment Year 2012-13.
2. The assessee has preferred the appeal against the levy of penalty of Rs.43,641/- u/s 271(1) vide order dated 01/04/2022.
3. Brief facts of the case are that the assessee is an individual and no return of income was filed, though he has taxable income and, accordingly, the case was reopened by issue of notices u/s 148 of the Act on 28/03/2019. In response, the assessee has filed his return of income declaring total income of Rs.2,19,408/- on 20.11.2019. The assessment was completed on 28/11/2019 u/s 147/143(3) of the Income Tax Act, 1961 wherein the income declared by the assessee in the return of income filed, in response to notice u/s 148 of the Act was accepted. The AO initiated penalty proceedings u/s 271(1)(c) of the Act as assessee has failed to file the return of income u/s 139 of the Act even though he has taxable income. Thereafter, vide penalty order dated 01/04/2022, the AO concluded the penalty proceedings and levied penalty of Rs.43,641/- by holding that assessee has concealed the income to this extent.
4. Aggrieved the assessee preferred the appeal before the Ld. CIT(A), who vide its order dated 13/09/2024 has confirmed the penalty by observing in para 6.2.3 that assessee has not discharge of initial onus of filing voluntary return u/s 139(1) of the Act, thus, he concealed his income. Against such order the present appeal is filed by the assessee before us on the strength of following grounds of appeal:
“1. That on the facts and circumstances of the case and in law, the impugned order dated 01.04.2022 issued u/s 271(1)(c) of the Income Tax Act, 1961 (“the Act”) imposing a penalty of Rs. 43,641/-is arbitrary, bad in law and liable to be quashed.
2. That on the facts and circumstances of the case and in law, the impugned order dated 01.04.2022 is barred by limitation as per provisions of Section 275 of the Act, and is thus untenable, and liable to be quashed.
3. That on the facts and circumstances of the case and in law, the AO has failed to record a clear and specific satisfaction as required u/s 271(1)(c) of the Act, which is a mandatory prerequisite for levying penalty, thereby rendering the impugned order legally unsustainable.”
4. That on the facts and circumstances of the case and in law, the AO has failed to appreciate that no penalty is leviable in the instant matter as the income returned by the Appellant of Rs. 2,19,408/-has been duly accepted as assessed income vide assessment order passed u/s 147 r.w.s 143(3) of the Act.
5. Without prejudice, on the facts and circumstances of the case and in law, the AO has incorrectly computed the penalty as Rs. 43,641/, which is liable to be quashed.”
The Appellant craves leave to add, delete, modify or vary any of the grounds of appeal at any time during the pendency of the appeal or at the time of hearing.”
5. Ground No.1 is general in nature and Ground No.2, the assessee is challenged the penalty order as barred by limitation.
6. During the course of hearing, the Ld. AR submitted that the assessment order was passed on 28/11/2019 which was not appealed by the assessee and, accordingly, as per the provisions of section 275(1)(c), the time limit passing of such order expires within six months from the end of the month in which the action for levy of the penalty is initiated or expiry of the year in which proceedings for imposition of penalty has been initiated whichever is later. In the instant case, the limitation expired on 30th September, 2020 when six months from the end of relevant year expires. Since, when the limits were expired, there was Covid-19 period and, accordingly, the CBDT has extended limitation expiring during this period and finally as per the Notification No.113/2021/f.No.370142/35/2020-TPL- Part-1] on page-2 the time limit was finally extended up to 31st March, 2022. The relevant extract of notification as under:
“(A) where the specified Act is the Income Tax Act, 1961 (43 of 1961) (hereinafter referred to as the Income-tax Act) and, –
(a) the completion of any action, referred to in clause (a) of sub-section (1) of section 3 of the said Act, relates to passing of any order for imposition of penalty under Chapter XXI of the Income-tax Act, –
(i) the 30th day of March, 2022 shall be the end date of the period during which the time-limit specified in, or prescribed or notified under, the Income-tax Act falls for the completion of such action; and
(ii) the 31st day of March, 2022 shall be the end date to which the time-limit for completion of such action shall stand extended;
(b) the compliance of any action, referred to in clause (b) of sub-section (1) of section 3 of the said Act, relates to intimation of Aadhaar number to the prescribed authority under sub-section (2) of section 139AA of the Income-tax Act, the time-limit for such the compliance of such action shall stand extended to the 31st day of March, 2022.”
The Ld. AR thus, prayed that in the case of the assessee, the penalty order was passed on 1st April 2022 whereas the time limit were extended for imposing the penalty u/s 271(1)(c) was up to 31st March, 2022 and therefore, the order passed on 1st April, 2022 is barred by limitation and the consequent orders deserves to be quashed.
7. On the other hand, the Ld. Sr. DR vehemently supported the orders of the lower authorities.
8. We have heard the rival submissions and perused the materials available on record. In the instant case, the assessment was completed u/s 147/143(3) of the Act on 28/11/2019 and as per the provisions of section 275(1) (c) the time limit for passing the penalty order would be up to 30th Sept. 2020. Due to Covid-19, the time limits for levy of penalty under any provision of the Act falling during the period of continuation of Covid-19 were extended by various Circulars and finally in terms of Notification No.113/2021/f.No.370142/35/2020-TPL-Part-1], it was extended till 31st March, 2022 which is the end date up to which the limit for completion of order imposing penalty chargeable under the Act was extended. As penalty order was passed as on 1st April, 2022, the same is beyond the time limit extended by the CBDT. In view of the above notification and considering the facts of the case, we are of the view that the penalty order so passed is barred by limitation, therefore, the same is hereby quashed.
9. In the result, the appeal of the assesse is allowed.
Order pronounced on 28/02/2025.
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