Rayala Corpn. (P.) Ltd. vs Union of India

K. Mohan Ram, J.—The prayer in the writ petition is for the issuance of a writ of declaration declaring that in the petitioner''s case where an appeal IT Appeal No. 103 (Madras) of 2005 is pending u/s 253 of the income tax Act, 1961, before the income tax Appellate Tribunal, Chennai, the proviso to section 275(1)(a) of the income tax Act, 1961 (hereinafter referred to as "the Act"), does not nullify the availability to the third respondent of the period of limitation of six months from the end of the month when the order of the income tax Appellate Tribunal, Chennai, is received by the third respondent herein. With the consent of both learned counsel, the writ petition itself is taken up for final disposal.

The facts that are necessary for the disposal of the above writ petition are set out below:

Against the assessment order of the third respondent dated 29-3-2004, and the penalty proceedings initiated u/s 271(1)(c) of the Act, the petitioner-company has filed an appeal u/s 246A of the Act to the Commissioner of income tax (Appeals). Admittedly, the appeal was disposed of by the Commissioner of income tax (Appeals)-V, by partly allowing the appeal. Aggrieved by the order of the Commissioner of income tax (Appeals), the petitioner-company has filed the statutory appeal u/s 253 of the Act before the income tax Appellate Tribunal, Madras Bench, and the said appeal has been admitted and numbered as IT Appeal No. 103 (MDS) of 2005. According to the petitioner, the appeal is pending before the Tribunal.

It is the further case of the petitioner that by an order dated 17-11-2005, passed in WPMP No. 39766 of 2005 in WP No. 37145 of 2005, this Court has stayed the demand, made by the third respondent in the assessment order, in question. It is the further case of the petitioner that on 3-3-2006, the third respondent issued a notice of hearing of the penalty proceeding initiated u/s 271(1)(c) of the Act, fixing the date of hearing as 14-3-2006. The petitioner appeared before the third respondent and filed a memo dated 10-3-2006, requesting the third respondent to keep the penalty proceedings in abeyance till the disposal of the appeal filed by the petitioner in IT Appeal No. 103 (MDS) of 2005 before the income tax Appellate Tribunal, Madras Bench, u/s 253 of the Act. It is the case of the petitioner that the third respondent during the hearing, informed the representative of the petitioner-company that he would not be able to keep the proceedings in abeyance in view of the insertion of the proviso to section 275(1)(a) of the Act by the Finance Act, 2003, with effect from 1-6-2003, curtailing the limitation period provided u/s 275(1)(a) of the Act.

In the said circumstances, the above writ petition has been filed for a declaration, declaring that in the petitioner''s case where an appeal is pending before the income tax Appellate Tribunal, Chennai, the proviso to section 275(1)(a) of the Act, does not nullify the availability to the third respondent of the period of limitation of six months from the end of the month when the order of the income tax Appellate Tribunal, Chennai, is received by the third respondent herein.

The contention of the petitioner is that the proviso to section 275(1)(a) is not applicable to the cases where further appeal has been preferred to the income tax Appellate Tribunal under the provisions of section 253 against the orders of the Commissioner of income tax (Appeals). In the event an appeal is filed by an assessee u/s 253 before the income tax Appellate Tribunal against an order of the Commissioner of income tax (Appeals), the limitation period for the levy of penalty will be as provided for in section 275(1)(a), i.e., six months from the end of the month in which the order of the Appellate Tribunal is received by the Chief Commissioner.

Learned counsel for the petitioner took me through the provisions contained in section 275(1) of the Act and reiterated the abovesaid contentions.

Mrs. Pushya Sitaraman, learned senior standing counsel for the income tax Department, fairly agreed with the interpretation sought to be placed by learned counsel for the petitioner and submitted that the relief sought for by the petitioner in this writ petition may be granted.

Section 275(1)(a) of the income tax Act, 1961, reads as follows:

Bar of limitation for imposing penalties. -(1) No order imposing a penalty under this Chapter shall be passed-

(a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) u/s 246 or section 246A or an appeal to the Appellate Tribunal u/s 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the Commissioner (Appeals) or as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later.

A reading of the abovesaid provision makes it clear that the interpretation placed by learned counsel for the petitioner on the said provision is acceptable. There is no dispute in this case that the petitioner has filed an appeal before the Tribunal and the same is pending. In such a case, the limitation period for the levy of penalty will be as provided for u/s 275(1)(a), i.e. six months from the end of the month in which the order of the Appellate Tribunal is received by the Chief Commissioner. There cannot be any doubt on this aspect. Accordingly, this Court is of the view that the proviso to section 275(1)(a) of the Act, does not nullify the availability to the third respondent of the period of limitation of six months from the end of the month when the order of the income tax Appellate Tribunal, Chennai, is received by the third respondent herein. Accordingly, this writ petition is disposed of. Consequently, the connected WPMP is also closed. No costs.