B.R. Arora, J. - (1.) THE Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, in the case of the assessee, M. A. Presstressed Works, Mandore Mandi, Jodhpur, for the assessment year 1976-77, referred the following question of law for the opinion of this court ; " Whether, on the facts and in the circumstances of the case and on a correct and true interpretation of Section 275, the Appellate Tribunal erred in law in confirming the view of the learned Commissioner of Income-tax (Appeals) that the limitation period of two years was to be taken from the end of the financial year in which the assessment proceedings were completed and not six months from the end of the month in which the order of the Commissioner (Appeals) in the registration matter was received by the Commissioner ?"
(2.) IN order to appreciate the controversy, it is necessary to state in brief the events which culminated in the imposition of the penalty and the reference made by the Tribunal. M. A. Presstressed Works, Mandore Mandi, Jodhpur ("the assessee"), was a registered firm. For the assessment year 1976-77, by the order dated August 27, 1977, the assessee was assessed under Section 143(3) of the Act on the total INcome of Rs. 57,270. Subsequently, the assessment was reopened and an ex parte assessment was completed on July 30, 1983, under Section 144/147(a) of the INcome-tax Act. During the course of reassessment proceedings, notice under Section 274 of the Act was issued asking the assessee why the penalty may not be imposed. The assessee preferred an appeal before the Commissioner of INcome-tax (Appeals), Jodhpur, against the assessment order. The appeal filed by the assessee challenging the quantum was dismissed by the Commissioner of INcome-tax (Appeals) on February 24, 1984. The Assessing Officer, thereafter, by his order dated November 20, 1984, cancelled, the registration of the assessee-firm which was granted on August 27, 1977. Aggrieved with the cancellation of the registration, the assessee preferred an appeal before the Commissioner of INcome-tax (Appeals), Jodhpur, which was dismissed by the Commissioner of INcome-tax (Appeals) by his order dated September 25, 1987. After the dismissal of the appeal, in which the order of cancellation of the registration was challenged, the INcome-tax Officer, 'B' Ward, Jodhpur, by his three orders of March 24, 1988, imposed penalties against the assessee under Sections 271(1)(b), 271(1)(c) and 273(b) amounting to Rs. 7,440, Rs. 74,470 and Rs. 5,220, respectively. Aggrieved with the orders passed by the INcome-tax Officer,' "B" Ward, Jodhpur, imposing the penalties against the assessee, the assessee preferred three appeals before the Commissioner of INcome-tax (Appeals), Jodhpur. The appeals filed by the assessee were allowed by the Commissioner of INcome-tax (Appeals) on the ground that the order passed by the INcome-tax Officer, imposing the penalties, was barred by time in view of Section 275 of the INcome-tax Act. The Revenue preferred an appeal against the order of the Commissioner of INcome-tax (Appeals) dated August 9, 1988, before the INcome-tax Appellate Tribunal, Jaipur Bench, Jaipur, and the Tribunal, by its order dated January 19, 1990, dismissed the appeal filed by the Revenue and held that the assessment proceedings were completed on July 30, 1983, and the appellate order was passed on February 24, 1984, while the order imposing the penalty was passed on March 24,1988, and, therefore, it was admittedly passed after the expiry of the period of two years from the end of the financial year in which the proceedings were completed and after six months from the end of the month in which the order of the Commissioner of INcome-tax (Appeals) was, passed and, therefore, it is clearly barred by time. It was, also, observed ,by the Tribunal that the expression "in the course of which action for imposing the penalty has been initiated" refers to the assessment order and not the registration order which has been emphasised by the Department. The Tribunal, therefore, upheld the order passed by the Commissioner of INcome-tax (Appeals) and held that the order dated March 24, 1988, passed by the INcome-tax Officer imposing the penalties upon the assessee, was clearly barred by limitation and the INcome-tax Officer has no such power to pass the order after the expiry of the period in view of Section 275 of the Act. It is contended by learned counsel for the Revenue that in a case where the assessment order or any other order is the subject-matter of appeal to the Commissioner of Income-tax (Appeals), the period of limitation is six months from the end of the month in which the order of the Commissioner of Income-tax (Appeals) is received by the Commissioner. The term "any other order" includes the order of cancellation of the registration, also. The order of cancellation of the registration in the case of the assessee was received in the office of the Commissioner on September 25, 1987, and the order imposing the penalty was passed on March 24, 1988, which is well within the period of six months and the learned Members of the Tribunal as well as the Commissioner of Income-tax (Appeals), Jodhpur, therefore, erred in holding that the appeal was barred by time. We have considered the submissions made by learned counsel for the Revenue. Section 274 of the Income-tax Act provides the procedure for imposing the penalty while Section 275 sets out the time-limit within which the penalty proceedings must be completed. Section 275 requires to complete the penalty proceedings within two years from the end of the financial year in which the proceedings in the course of which the action for imposition of penalty has been initiated, are completed. But where the assessment order or any other order is the subject-matter of appeal before the Deputy Commissioner (Appeals) or the Commissioner of Income-tax (Appeals) or to the Income-tax Appellate Tribunal, the period for completing the penalty proceedings will be either a two year period from the end of the financial year in which the proceedings, in the course of which the action for imposition of the penalty was taken, are completed, or a period of six months from the end of the month in which the order of the appellate authority is received by the Commissioner, whichever period expires later. Section 275, which applies to the case of the assessee, reads as under : "275. Bar of limitation for imposing penalties.--(1) No order imposing a penalty under this Chapter shall be passed-- (a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the Deputy Commissioner (Appeals) or the Commissioner (Appeals) under Section 246 or an appeal to the Appellate Tribunal under Sub-section (2) of Section 253, after the expiration of the period of- (i) two years from the end of the financial year in which the proceedings, in the course of which the action for imposition of penalty has been initiated, are completed, or (ii) six months from the end of the month in which the order of the Deputy Commissioner (Appeals) or the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later ; (b) in any other case, after the expiration of two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed." Section 275 divides the cases into two categories : the first category of cases is where the assessment order or the order to which proceedings for imposition of penalty relate, was the subject-matter of appeal under Section 246 or an appeal under Section 253. The limitation for the cases falling under this category, is two years from the end of the financial year in which the proceedings, in the course of which the action for imposition of penalty has been initiated, were completed ; or six months from the end of the month in which the order of the appellate authority was received by the Commissioner, whichever period expires later. The second category covers all other cases not falling within category No. 1 and the limitation provided for these cases is within two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed. The words "in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed" used in Section 275 indicate the proceedings in which the Income-tax authority is satisfied about the default which attracts the penalty and not with respect to any other proceeding in which the order like the cancellation of the registration, etc., has been passed. It is the assessment order or any other order passed in the proceeding in the course of which it is found that the assessee has brought himself within the mischief of the penalty proceedings.
(3.) IN the present case, the order, in which the proceedings for imposition of penalty were initiated, was passed on July 30, 1983, which was subjected to appeal and the appeal was dismissed on February 24, 1984. The period for completion of the penalty proceedings, therefore, expired long before the order imposing the penalty was passed. Even the proceedings for cancellation of the registration were initiated after the expiry of the period of limitation. The Revenue cannot take shelter of cancellation order which was subjected to appeal, for the purpose of imposition of the penalties. The limitation of two years is provided from the assessment order or any other order in which the INcome-tax authorities were satisfied about the default which attracted the penalty and not the order of cancellation of the registration. Section 275 aims at avoiding hardship to the assessee and to ensure that penalty proceedings are completed well within the time. It enables the authority to pass a penalty order within the stipulated period provided under the Act after completion of the assessment. The assessment order or any other order indicates the order in which the penalty proceedings were initiated and not the order of cancellation of the registration as is in the present case. The Tribunal as well as the Commissioner of INcome-tax (Appeals), Jodhpur, were, therefore, justified in holding that the penalty proceedings were clearly barred by time. Consequently, the reference is answered in the affirmative, i.e., in favour of the assessee and against the Revenue, and it is held that the Income-tax Appellate Tribunal was right in affirming the view of the Commissioner of Income-tax (Appeals), Jodhpur, that the limitation of two years was to be taken from the end of the financial year in which the assessment proceedings were completed and not six months from the end of the month in which the order of the Commissioner of Income-tax (Appeals), Jodhpur, in the registration matter, was received by the Commissioner.;