SECTION 271D, READ WITH
SECTION 271E, OF THE INCOME-TAX ACT, 1961 - FAILURE TO COMPLY WITH PROVISIONS
OF SECTION 269SS - PENALTY FOR - COMMENCEMENT OF LIMITATION FOR PENALTY
PROCEEDINGS UNDER SECTIONS 271D AND 271E
CIRCULAR NO.9/DV/2016 [F.NO.279/MISC./M-116/2012-ITJ], DATED 26-4-2016
It has
been brought to the notice of the Central Board of Direct Taxes (hereinafter
referred to as the Board) that there are conflicting interpretations of various
High Courts on the issue whether the limitation for imposition of penalty under
sections 271D and 271E of the Income tax Act, 1961 (hereafter referred to as
the Act) commences at the level of the Assessing Officer (below the rank of
Joint Commissioner of Income Tax.) or at level of the Range authority i.e. the
Joint Commissioner of Income Tax./Addl. Commissioner of Income Tax.
Some
High Courts have held that the limitation commences at the level of the
authority competent to impose the penalty i.e. Range Head while others have
held that even though the Assessing Officer is not competent to impose the
penalty, the limitation commences at the level of the Assessing Officer where
the Assessing Officer has issued show cause notice or referred to the
initiation of proceedings in assessment order.
2. On careful examination of
the matter, the Board is of the view that for the sake of clarity and
uniformity, the conflict needs to be resolved by way of a "DepartmentalView".
3. The Hon'ble Kerala High
Court in the case of Grihalaxmi
Vision v. Addl. Commissioner of Income Tax, Range 1, Kozhikode1, vide its order dated 8-7-2015 in ITA Nos. 83
& 86 of 2014, observed that, "Question to be considered is whether
proceedings for levy of penalty, are initiated with the passing of the order of
assessment by the Assessing Officer or whether such proceedings have commenced
with the issuance of the notice issued by the Joint Commissioner. From
statutory provision, it is clear that the competent authority to levy penalty
being the Joint Commissioner. Therefore, only the Joint Commissioner can
initiate proceedings for levy of penalty. Such initiation of proceedings could
not have been done by the Assessing Officer. The statement in the assessment
order that the proceedings under sections 271D and E are initiated is
inconsequential. On the other hand, if the assessment order is taken as the
initiation of penalty proceedings, such initiation is by an authority who is
incompetent and the proceedings thereafter would be proceedings without
jurisdiction. If that be so, the initiation of the penalty proceedings is only
with the issuance of the notice issued by the Joint Commissioner to the
assessee to which he has filed his reply."
4. The above judgment
reflects the "Departmental View". Accordingly, the Assessing Officers
(below the rank of Joint Commissioner of Income Tax.) may be advised to make a
reference to the Range Head, regarding any violation of the provisions of
section 269SS and section 269T of the Act, as the case may be, in the course of
the assessment proceedings (or any other proceedings under the Act). The
Assessing Officer, (below the rank of Joint Commissioner of Income Tax) shall
not issue the notice in this regard. The Range Head will issue the penalty
notice and shall dispose/complete the proceedings within the limitation
prescribed under section 275(1)(c) of the Act.
5. Where any High Court decides
this issue contrary to the "Departmental View", the
"Departmental View" thereon shall not be operative in the area
falling in the jurisdiction of the relevant High Court. However, the CCIT
concerned should immediately bring the judgment to the notice of the Central
Technical Committee. The CTC shall examine the said judgment on priority to
decide as to whether filing of SLP to the Supreme Court will be adequate
response for the time being or some legislative amendment is called for.
6. The above clarification
may be brought to the notice of all officers.
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