The Central Board of Direct Taxes (CBDT), Ministry of Finance, has issued a Circular being No. 09/DV/2016 on 26.4. 2016 in which it has expressed the observation, by relying on the judgment passed on 8.7.15 of the Kerala High Court in the case of Grihalaxmi Vision vs. Additional Commissioner of Income Tax, ITA No. 83 and 86 of 2014, that the period of limitation for imposing penalty under sections 271D and 271E of the Income Tax Act, 1961 does not start at the level of the Assessing Officer i.e. below the rank of Joint Commissioner of lncome Tax but it starts at the level of the Joint Commissioner of Income Tax or Addl. Commissioner of Income Tax.
The CBDT has advised the Assessing Officers to make a reference to the Range Head in case of violation of the provisions of section 269SS and section 269T of the Income Tax Act at the time of the assessment proceedings or any other proceedings under the Income Tax Act.
It has directed that the Assessing Officer shall not issue the notice in connection with the initiation of penalty proceedings.
The Joint Commissioner of Income Tax or Addl. Commissioner of Income Tax will issue the penalty notice and shall dispose of the said proceedings within the time stipulated under section 275(1)(c) of the Act.
View of High courts:
Upon examination of the matter, the CBDT has stated that for the purpose of clarity, the conflict should be resolved through a “Departmental View”.
The Hon’ble Kerala High Court in the case of Grihalaxmi Vision vs. Addl. Commissioner of Income Tax, by its order dated 8.7.15 passed in ITA Nos. 83 and 86 of 2014, observed that, the issue to be adjudicated is whether proceedings for levy of penalty are started as soon as the order of assessment is passed by the Assessing Officer or whether such proceedings have started with the issuance of the notice issued by the Joint Commissioner.
The statute provides that the competent authority to levy penalty is the Joint Commissioner of Income Tax. Therefore, only the Joint Commissioner can start proceedings for levy of penalty. So initiation of proceedings should not be done by the Assessing Officer.
If the assessment order is taken as the initiation of penalty proceedings, initiation by an authority that is incompetent and the proceedings thereafter would be beyond law without jurisdiction. The initiation of the penalty proceedings is lawful only with the issuance of the notice issued by the Joint Commissioner to the assessee to which the assessee has filed his reply.
The aforesaid judgment reflects the view of the Department. The Assessing Officers may make a reference to the Range Head in case of violation of the provisions of section 269SS and section 269T of the Act during the assessment proceedings or any other proceedings, as the case may be.
The Range Head will complete the proceedings within the limitation period stipulated under section 275(1) (c) of the Act.
Where any High Court decides an issue against the “Departmental View”, the same shall not be operative in the area which comes within the jurisdiction of the concerned High Court.
However, the authority should immediately inform about the judgment to the notice of the Central Technical Committee. The said judgment shall be examined on priority to decide as to whether filing of Special leave petition to the Hon’ble Apex Court will be proper response for the time being or some amendment should be sought for.