In the latest judgment that has been passed by the High Court of Kerala, the income tax order imposing penalty under section 271 B of the Income Tax Act, 1961 as it was time-barred.
The petitioner, M/S. Vee Ess Hardwares, has challenged the penalty imposed under Section 271B of the Income Tax Act, 1961, on the ground of limitation. The petitioner was engaged in the trade of hardware and ceramic tiles.
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A survey was conducted under Section 133 A of the Income Tax Act and more than 4 years later, a notice was passed under Section 274 of the Income Tax Act, and later on, a penalty of Rs. 1.5 lakhs was imposed on the petitioner for not filing the audit report in the prescribed form as required under section 44AB of the Act.
The counsel on behalf of the petitioner contended that the penalty was imposed on the petitioner after more than 4 years, which was beyond the time limit stipulated in section 275(1)(c) of the Act.
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It was submitted that, even if the benefit of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, is applied, still, the respondent cannot have an extended period till 2024.
The judge noted that penalty proceedings must be initiated within a reasonable time after the assessment order.
Also, the High Court held that since the assessment order did not mention penalty proceedings, the show cause notice should have been issued within a reasonable period, and due to the relaxation under the 2020 Act, the latest reasonable time for issuance was in 2022 and the notice was issued only on 21.03.2024, exceeding the statutory limit.
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The bench allowed the writ petition and held that the penalty order is time-barred under Section 275(1)(c) and is invalid. The judgement was passed by Justice Bechu Kurian Thomas.
The petitioner was represented by Adv. John Varghese and the respondents by Sri. Jose Joseph and Sri. Navaneeth N.Nath.
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