Law:

Section:

Section 275 of the Income-tax Act, 1961 - Penalty - Bar of limitation for imposition of - Assessment year 1995-96 - Whether in absence of any request for rehearing by an assessee, department cannot invoke Explanation 1 to section 275 unilaterally to compute period of limitation - Held, yes FACTS The assessee was deriving income mainly from salary. A notice under section 274 read with section 271 was served on the assessee on the ground that he failed to disclose the long term capital gains arising out of the sale of his residential site escaping capital gains for the assessment year 1995-96 within the meaning of section 147. Though notices were issued calling upon the assessee to furnish the details, there was no response. Finally, the assessment was completed under section 144, read with section 147 on 23-3-2000. Subsequently, penal action was initiated under section 271(1) on 28-3-2000. As there was no response from the assessee to the notice, department gave two more opportunities to the assessee by issuing notices under section 129. There was no response even to these notices and subsequently the department imposed a penalty under section 271(1) on 4-10-2002. The revision petition filed by the assessee under section 264 was rejected by the Commissioner. In the instant writ petition the assessee contended that the order levying the penalty was barred by time and that Explanation 1 to section 275 could not be made use by the department to save limitation when he had not requested the revenue to rehear the matter under section 129. HELD From the provision of section 275(1) it is clear that penalty can be imposed within six months from the end of the month in which action for imposition of penalty is initiated. It was not in dispute that the financial year came to an end on 31-3-2000 even though the assessment in respect of the assessee was completed on 23-3-2000. If the authorities were intending to impose any penalty in the case of the assessee, they had to levy the same under section 271(1)(c) of the Act within six months from 31-3-2000. In the instant case, penalty had been imposed beyond six months from 31-3-2000. Department made an attempt to support the…

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