Case Number: ITA 5422/DEL/2019
Appellant: CFM Materials LP (earlier known as GE Aviation Materials LP), Gurgaon
Respondent: DCIT circle-1(3)(1), New Delhi
Assessment Year: 2008-09
Case Filed On: 2019-06-17
Order Type: Final Tribunal Order
Date of Order: 2022-07-29
Pronounced On: 2022-07-29
The case revolves around the penalty imposed on CFM Materials LP (formerly known as GE Aviation Materials LP) for the assessment year 2008-09. The penalty was confirmed by the Commissioner of Income-Tax (Appeals)-42, New Delhi, under Section 271(1)(c) of the Income-Tax Act, 1961.
CFM Materials LP, a non-resident entity, was assessed under Section 143(3) of the Income-Tax Act. The assessing officer held that the assessee had a Permanent Establishment (PE) in India, and thus, the income attributable to the PE had to be taxed in India. The officer computed the profit on amounts received by the assessee for work executed in India at a rate of 3.5%. The assessee challenged this assessment, and the case eventually went to the Tribunal.
The Tribunal upheld the existence of the PE but reduced the attribution of income to the PE from 3.5% to 2.6% of sales. Following the Tribunal’s decision, the assessing officer initiated penalty proceedings under Section 271(1)(c) of the Act and imposed penalties for multiple assessment years, including 2008-09.
The assessee challenged these penalty orders before the Commissioner (Appeals), who upheld the imposition of the penalty. The assessee then appealed to the Tribunal.
The Tribunal’s review focused on whether the penalty orders were barred by limitation under Section 275(1) of the Income-Tax Act. According to Section 275(1), the assessing officer cannot pass an order imposing a penalty after the expiry of six months from the end of the month in which the order of the appellate authority (in this case, the Tribunal) is received by the Principal Commissioner or Commissioner.
The key date here was when the Tribunal’s order was received by the CIT. The appellant argued that the order was received on 17.04.2017, and thus, the penalty order passed on 26.04.2018 was beyond the prescribed period of limitation.
The Tribunal examined the communication dated 17.05.2018 from the Registry of the Tribunal, obtained under the Right to Information Act, 2005. This communication confirmed that the order was received by the CIT (Judicial), New Delhi, on 17.04.2017. The Department’s representative disputed this, suggesting that the order was not received by the concerned CIT until later.
The Tribunal, considering the evidence and the decision of the Hon’ble High Court in similar cases, concluded that the order was indeed received by the CIT on 17.04.2017. Therefore, the penalty orders issued on 26.04.2018 were barred by limitation.
The Tribunal noted that similar cases had been decided by the Hon’ble High Court, which quashed penalty orders on the grounds of being time-barred. The Tribunal found no reason to deviate from these precedents.
Consequently, the Tribunal quashed the penalty orders imposed under Section 271(1)(c) of the Income-Tax Act for being beyond the period of limitation.
The Tribunal’s decision highlights the importance of adhering to statutory timelines in the imposition of penalties under the Income-Tax Act. The case of CFM Materials LP demonstrates that penalties imposed beyond the prescribed period can be successfully challenged and quashed, ensuring that procedural fairness is maintained in tax administration.
This case serves as a reminder to tax authorities and taxpayers alike to be vigilant about statutory deadlines to avoid protracted legal battles and ensure compliance with the law.
The detailed analysis and application of the law by the Tribunal provide valuable insights into handling similar cases, reinforcing the principles of justice and due process in tax litigation.
CFM Materials LP vs DCIT: Penalty Order Barred by Limitation for Assessment Year 2008-09
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