ORDER
J. Kathuria, Accountant Member
1. These three appeals – one pertaining to assessment year 1977-78 and two relating to assessment year 1979-80 are directed against three separate orders passed by the Commissioner of Income-tax (Appeals)-XV Delhi, all dated 22-12-1987. While appeal for assessment year 1977-78 relates to penalty imposed by the assessing officer under Section 271 (1)(a), the appeals for assessment year 1979-80 relate to penalties imposed under Section 271 (1)(a) and 273(a) of the Income-tax Act. As the issue involved in these appeals is common, these appeals are disposed of by a consolidated order, for the sake of convenience.
2. The Assessing Officer imposed penalties for default under Section 271 (1)(a) of the Act at Rs. 2,590 for assessment year 1977-78 and Rs. 22,795 for assessment year 1979-80. Penalty under Section 273(a) was imposed at Rs. 5,000. All these penalties were cancelled by the learned Commissioner of Income-tax (Appeals) on the ground that the penalty orders passed by the Assessing Officer were barred by limitation.
3. It was submitted before the learned CIT(A) that the appeals for assessment years 1977-78 and 1979-80 were disposed of in March 1984 and the penalty orders were passed on 29-10-1985. The learned Commissioner of Income-tax (Appeals), after allowing a margin of two months for the service of the order of the first appellate authority on the Commissioner of Income-tax held that there was a considerable time gap between the service of such orders on the learned Commissioner and the imposition of penalties on 29-10-1985. According to him the time lag was more than 6 months and hence the penalty orders were barred by limitation. Though the learned CIT(Appeals) has not quoted the section, obvious reference appears to be to Section 275(a)(ii)of the Act.
4. We have heard the learned representatives of the parties and perused the material placed before us. The facts found by us are as follows:
Originally the assessments for assessment years 1977-78 and 1979-80 were made under Section 144 in March 1980 which were subsequently reopened under Section 146. Fresh assessments were made on 12-3-1981. The assessee filed appeals before the CIT(Appeals) who vide his consolidated order dated 30-12-1982 set aside the assessments for assessment years 1975-76, 1977-78,1978-79 and 1979-80. We are concerned with assessment years 1977-78 and 1979-80. We find that for assessment year 1977-78 the assessee had raised two grounds pertaining to the disallowances of Rs. 1,031 and Rs. 13,588 in the original memorandum of appeal. During the pendency of the appeal the assessee had raised an additional ground for that year to the effect whether the correct status of the assessee was of an industrial company or otherwise. For assessment year 1979-80 as assessee had raised a number of grounds challenging the disallowances of Rs. 22,236, Rs. 893, Rs. 8,564, Rs. 8,979 and Rs. 6,288. Besides, the ground regarding the status of the company as an industrial company or trading company was also raised in the original memorandum of appeal. The learned CIT(Appeals) admitted the additional ground of appeal for assessment year 1977-78 and held as under :-
The assessments are, therefore, set aside as the issue whether the appellant company is an industrial company or not widely affects its tax liability. The Assessing Officer is directed to examine the issue and decide the same on merits while making fresh assessments.
In the aforesaid order of 30-12-1982 the learned CIT(Appeals) did not deal with the other grounds of appeal raised by the assessee. A careful reading of the order of the learned Commissioner of Income-tax (Appeals) against the back-drop of the grounds of appeal clearly shows that the learned CIT(Appeals) had fully set aside the orders of the Assessing Officer for assessment years 1977-78 and 1979-80 and not partially. The Assessing Officer made fresh assessments on 29-8-1983.
5. The question to be decided is whether the period of limitation has to be reckoned from 29-8-1983 when fresh assessments were made or from the service of the order of the Commissioner of Income-tax (Appeals) sometime in 1984. Neither the learned counsel for the assessee nor the learned Departmental Representative were able to assist us on the exact date of service of order of the learned CIT(Appeals) on the learned Commissioner of Income-tax. Be that as it may, that may not be very relevant to the disposal of the present appeals as would be noticed presently. According to Section 275(a)(i) the order of penalty can be passed before the expiry of two years from the end of the financial year in which the proceedings in the course of which action for imposition of penalty was initiated/are completed. The other limitation mentioned in Section 275(a)(ii) is a period of six months from the end of the month in which the order of the first appellate authority is received by the Commissioner. The section makes it very clear that the period which expires later has to be taken into consideration while working out the limitation.
6. If one were to go by the reasoning of the learned Commissioner of Income-tax (Appeals) and by his observation that the Commissioner of Income-tax (Appeals)’s order would have been served on the Commissioner sometime in May 1984, then obviously the penalty orders passded on 29-10-1985 would be beyond the aforesaid period of six months and the cases would be barred by limitation. But under Section 275(a)(i) we have to see as to when the assessment proceedings were completed. We find that the Assessing Officer passed the fresh assessment orders on 29-8-1983 after the earlier orders had been set aside fully by the learned CIT(Appeals). It is also significant to note that penalty proceedings for the aforesaid defaults were initiated in the course of proceedings of the orders dated 29-8-1983. In the light of these facts the only in-escapable conclusion is that the assessment proceedings in the course of which action for imposition of penalty was initiated had been completed on 29-8-1983 and the Assessing Officer had the time of two years from the end of the financial year in which the assessment proceedings were completed to pass the penalty orders. Thus, according to Section 275(a)(i) of the Act the Assessing Officer could impose penalties upto 31-3-1986. The penalties were, however, levied on 29-10-1985 and were, therefore, much before the period of limitation expired. Since the period computed under Section 275(a)(i) expired later than the period contemplated by Section 275(a)(ii) we have to go by the period which expired later. The penalties imposed on 29-10-1985 were, therefore, within time and not barred by limitation as wrongly held by the Commissioner of Income-tax (Appeals). We accept the Revenue’s contention in this behalf and reverse the finding of the learned CIT(Appeals).
7. We, however, find that the learned CIT(Appeals) has disposed off the appeals relating to penalties on the ground of limitation and has not decided the matters on merits. These matters will now go back to the learned Commissioner of Income-tax (Appeals) for proper disposal, in accordance with law, on the merits of the case. We hold accordingly.
8. In the result, the appeals are allowed, to the extent indicated above.