R.K. Bali, A.M. - (1.) THIS is an appeal by the assessee against the order dt. 24th December, 1997, passed by the CIT(A) wherein the learned first appellate authority has upheld the penalty of Rs. 6,75,695 levied by the AO under s. 271(1)(c) of the Act. The assessee has raised the following grounds : (1) On the facts and in the circumstances of the case as well as law on the subject, learned CIT(A) erred in confirming the action of AO in levying penalty of Rs. 6,73,695 under s. 271(1)(c) of IT Act. (2) On the facts and in the circumstances of the case as well as law on the subject, learned CIT(A) erred in upholding the validity of penalty order by rejecting the plea of the assessee that the penalty order has been passed after limitation period prescribed under s. 275 of the IT Act. (3) It is therefore, prayed that the penalty of Rs. 6,73,695 may please be deleted and the penalty order may please be annulled being barred by limitation.
(2.) The learned authorised representative of the assessee submitted that the order passed by the AO was barred by limitation as prescribed under s. 275 and the assessee has taken ground of appeal Nos. 2 and 3 specifically in this regard. Briefly the facts are that Dr. Rasiklal T. Acharya-the deceased assessee was an orthopaedic surgeon. His wife Smt. Shardaben R. Acharya is also doctor with B.A.M.S. degree. Both husband and wife purchased a piece of land with equal share and built hospital known as 'Acharya Hospital' over the land. A part of the hospital was converted into hotel known as 'Hotel Surat'. There was a search and seizure operation in the case of the assessee when the assessee disclosed a sum of Rs. 10 lacs in the statement recorded under s. 132(4) on 20th December, 1990, for asst. yr. 1991-92. Thereafter the assessee filed the return of income on 30th August, 1991, declaring loss of Rs. 1,36,398 including the undisclosed income of Rs. 10 lacs. In the return of income, against the regular income and disclosed income of Rs. 10 lacs, the assessee claimed set off of the business loss of Rs. 2,20,402 and depreciation loss of Rs. 10,10,870 relating to the business of "Hotel Surat". These claims were disallowed by the AO who framed the assessment at a total income of Rs. 12,31,427 vide order, dt. 25th March, 1994. The AO treated the business of "Hotel Surat" as belonging to the partnership firm consisting of the assessee and his wife and not belonging to the assessee alone and, therefore, disallowed the loss relating to "Hotel Surat" for set off against the income of the assessee. On appeal, the CIT(A) confirmed the above finding of the AO vide order, dt. 15th February, 1995. On further appeal by the assessee, the Tribunal upheld the action of the CIT(A) in this regard vide order dt. 30th May, 1996. On an application for reference under s. 256(1) by the assessee the Tribunal allowed the reference application by its order dt. 18th February, 1997, in R.A. No. 455/Ahd/1996 (arising out of ITA No. 1982/Ahd/1995).
(3.) IT was submitted by the learned authorised representative of the assessee that the order of the Tribunal in the quantum appeal dt. 30th May, 1996, was received by the CIT on 16th August, 1996, and accordingly as per the provisions of s. 275 the order of penalty has to be passed by the AO on or before 28th February, 1997. IT was submitted that in the case of the assessee the penalty order under s. 271(1)(c) was passed by the AO only on 14th May, 1997, and as such the same is clearly barred by limitation. IT was submitted that the AO was aware of the receipt of the Tribunal's order as is apparent from his letter dt. 6th December, 1996, which was duly replied by the assessee on 18th December, 1996, and the assessee's explanation was thus filed well in time. IT was submitted that the CIT(A) has rejected the plea of this assessee with regard to the action of the AO in passing the penalty order having become time-barred on the plea that the Tribunal's order has not become final because reference has been granted by the Tribunal and the final order will have to be passed by the Tribunal under s. 260 only, on the basis of certain decisions which have been referred by the CIT(A) in paras 7 and 8 of the impugned order. IT was submitted that the CIT(A) has not properly appreciated the provisions of s. 275. IT was pleaded that s. 275 does not say that the order of the Tribunal which is to be considered for the purpose of limitation, is the order passed under s. 260. IT was pleaded that in s. 275 reference is made to s. 253 only which prescribes the filing of appeal before the Tribunal and the Tribunal passes the order under s. 254 in relation to appeals filed under s. 253. Therefore, for the purpose of limitation under s. 275 an order of the Tribunal is the order under s. 254 and not the order under s. 260. IT was submitted that the decisions relied upon by the CIT(A) were in a totally different context. IT was accordingly submitted that the penalty levied by the AO as upheld by the CIT(A) is clearly barred by limitation and the order should be quashed.;