INCOME TAX ACT, 1961

Section 271E

Penalty under section 271E - Validity - Computation of limitation period to pass penalty order under section 271E - Exclusion of period lapsed due to rehearing of assessee's case on account of change in jurisdiction of AO

Assessee was a partnership firm and engaged in the business of financing services. Issue was as regards validity of penalty imposed by AO under section 271E. Assessee contended that penalty under section 271E was barred by limitation as provided under section 275. Held: In instant case, there was change in the jurisdiction of the AO under the provisions of section 129 from Central Range to Range 3 Baroda. Assessee, on change of jurisdiction, requested for rehearing the case as provided in the proviso to section 129. Effectively, the time of 162 days was consumed in the rehearing of the case of the assessee. Accordingly, such time had to be excluded as per the Explanation attached to section 275. In light of the above stated discussion the time limit for passing the order needed to be extended for another 162 days as per the Explanation provided in section 275. Thus, after considering such time, the time limit expired for passing the order as on 11-05-2004 but the AO passed the penalty order on 18-5-2004, which was delayed by 7 days. Accordingly, order passed by AO under section 271E imposing the penalty upon the assessee was not sustainable as it was barred by time.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2000-01

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