The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) deleted the penalty, noting that the Joint Commissioner of Income Tax ( JCIT ) ought to have passed the order on or before 31.03.2015, and since the penalty order was passed on 25.02.2016, it was barred by limitation, deemed invalid.
The issue to be decided was whether the CIT (A) was justified in holding that the penalty levied under Section 271C of the Income Tax Act, 1961 was barred by limitation.
The assessee Turner General Entertainment Networks India Pvt. Ltd is engaged in the business of broadcasting television channel “Imagine TV” and had filed its return of income for the Asst. Year 2011-12 on 30.11.2011 declaring total loss of Rs.262,04,18,432/-. As per clause 27(b) of Tax Audit Report, the Tax Auditor had reported that tax of Rs.5, 00, 40,103/- was deductible and not deducted at source by the assessee. The AO held this to be an admission of fact that there had been a default on the part of the assessee as it had not deducted TDS.
Therefore, a reference was made by the AO i.e. DCIT, Circle 16(1), Delhi to the JCIT, Range 76, Delhi on 25.09.2014 that the assessee has not deducted TDS of Rs.5,00,40,103/- though it was deductible and consequently provisions of section 271C of the Income Tax Act gets attracted. Accordingly, a show cause notice was issued by the JCIT on 4.8.2015 to the assessee as to why penalty under Section 271C of the Income Tax Act should not be levied on the aforesaid default of not deducting tax at source.
The bench found that there are two distinct periods of limitation for passing of penalty order and one that expires later will apply. One is the end of the financial year in which the quantum proceedings are completed. In the instant case, the quantum proceedings were completed on 26.03.2014 and hence one deadline would be 31.03.2014. The second date would be expiry of 6 months from the month in which penalty proceedings were initiated.
Further the two member bench of the tribunal comprising Saktijit Dey ( Vice President) and M. Balaganesh ( Accountant member) found that If a 6 months period is constructed from this date, then the JCIT (TDS) ought to have passed the order on or before 31.03.2015 and since the penalty order was passed on 25.02.2016, it would be barred by limitation. Further found that this dispute has been directly addressed by the Jurisdictional High Court in the case of PCIT vs. JKD Capital & Finlease Ltd. wherein the limitation period mentioned in provisions of Section 275(1) (c) of the Income Tax Act was subject matter of interpretation in the context of levy of penalty under Section 271E of the Income Tax Act.
Since the penalty order was held to be barred by limitation, the other grounds raised by the assessee challenging the validity of levy of penalty on merits need not be adjudicated into at this stage as the same would be academic in nature. Accordingly, the appeal of the revenue was dismissed.
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