Section 271(1)(c), section 275(1)(a) – CIT(A)
enhanced assessee’s income and initiated penalty proceedings –
Assessee’s plea to keep penalty proceedings in abeyance till disposal of
appeal by Tribunal was rejected – Held – as per section 275(1)(a), the
CIT(A) will get six months time to dispose of penalty proceedings from
end of month in which order of Tribunal is received by Commissioner or
Chief Commissioner – The CIT(A) was directed to keep penalty proceedings
in abeyance till disposal of quantum appeal by Tribunal.
Facts:
Assessment
u/s. 143(3) was completed by the AO by making a few disallowances. On
further appeal, the CIT(A) deleted certain disallowances but also
enhanced the income of the assessee. The CIT(A) initiated penalty
proceedings u/s. 271(1)(c) of the Act for disallowances made by him.
The
assessee contended before the CIT(A) that since the assessee proposed
to file an appeal before the Tribunal on the quantum proceedings, the
penalty should be kept in abeyance till the disposal of appeal by
Tribunal. Reliance was placed on the section 275(1)(a), wherein it is
provided that where an appeal has been filed before Tribunal, the time
limit for disposal of penalty proceeding is six months from the end of
the month in which the order of the Tribunal is received by the
Commissioner/Chief Commissioner. However, the request of the assessee
was not accepted by ld. CIT(A) and hence the assessee filed a stay
petition.
Held:
As per the section 275(1)(a) of the
Act, the AO cannot pass an order imposing penalty u/s. 271(1)(c) of the
Act till relevant assessment is subject matter of appeal before ld.
CIT(A) (i.e., the first appellate authority). By the same analogy, the
assessee’s prayer for stay of penalty proceedings undertaken by ld.
CIT(A) till the disposal of appeal by the Tribunal does not appear to be
unreasonable.
If the CIT(A) is allowed to proceed with the
penalty proceedings, prejudice will cause to the assessee as it will
have to face multiplicity of the proceedings. In case assessee succeeds
in quantum appeal, the penalty order passed by CIT(A) will have no legs
to stand while in a situation the assessee fails, CIT(A) will get ample
time of six months to dispose of the penalty proceedings. Therefore, to
prevent multiplicity of proceedings and harassment to the assessee, the
CIT(A) was directed to keep the penalty proceedings in abeyance till the
disposal of quantum appeal by the Tribunal.
