Penalty Imposed by AO u/s 271(1)(b) Income Tax Act for Non- Compliance to Notices issued during Assessment is within the Limitation Period: ITAT Dismisses Appeal [Read Order]

The Raipur Bench of Income Tax Appellate Tribunal (ITAT) held that the penalty imposed by Assessing Officer (AO) during assessment proceeding under Section 271 of Income Tax Act,1961 is within the period of limitation contemplated in clause (a) of subsection (1) to Section 275 of the Income Tax Act.

The assessee Santosh Jain was engaged in manufacturing and trading of iron and steel items had carried out substantial business transactions during the year but had failed to file his income return, therefore the AO initiated proceedings under Section 147 of the Income Tax Act. Notice under Section 148 of the Income Tax Act was issued to the assessee.

The AO, while culminating the assessment, inter alia, initiated penalty proceedings under Section 271(1)(b) of the Income Tax Act.

Considering the non-compliance of the assessee to the notices issued during assessment proceedings, the AO called upon him to explain why the penalty under Section 271(1)(b) of the Income Tax Act may not be imposed. As the explanation filed by the assessee did not find favor with the AO, he vide order passed under Section 271(1)(b) of the Income Tax Act imposed a penalty aggregating to Rs. 70,000/- i.e @ Rs.10,000/- for each of the seven defaults.

Aggrieved the assessee carried the matter in appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], who upheld the penalty that was imposed against the assessee for his failure to comply with the notices that were issued on six occasions in the course of the assessment proceedings by the A.O. Accordingly, the CIT(A), based on his observations above, scaled down the penalty under Section 271(1)(b) of the Income Tax Act to Rs.60,000/-.

Aggrieved by the order the assessee filed an appeal before the Tribunal.

The Authorised Representative of the assessee submitted that the penalty imposed by the A.O under Section 271(1)(b) of the Income Tax Act was barred by limitation, averred by the AR that as the time limit for imposing penalty under Section 271(1)(b) of the Income Tax Act was provided in Section 275(1)(c) of the Income Tax Act therefore, the penalty imposed by the AO was beyond the stipulated period and barred by limitation.

The Departmental Representative (DR) relied on the orders of the lower authorities.

The bench comprising of Ravish Sood, Judicial Member and Arun Khodpia, Accountant Member observed that the CIT(A) and, rightly so, the limitation for imposing penalty under Section 271(1)(b) of the Income Tax Act as per the time period contemplated in clause (a) of subsection (1) to Section 275 of the Income Tax Act, i.e six months from the end of the month in which appellate order was received. The ITAT order dated 17.12.2014, expired on 31.07.2015, therefore, the order dated 27.07.2015 imposing the aforesaid penalty was well within the limitation period.

It was held that unable to concur with the solitary contention advanced by the AR, i.e the penalty imposed by the A.O under Section 271(1)(b) of the Income Tax Act was barred by limitation, the Tribunal upheld the view taken by the lower authorities.

Thus, the appeal of the assessee was dismissed.

To Read the full text of the Order CLICK HERE

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