Penalties based on cancelled/annulled assessments - Authorisation by the Board for taking action in respect of such penalties under section 154 beyond the time limit specified under section 154(7) - Order under section 119(2)(a)/(b)
Circular No. 87 was issued by the Central Board of Direct Taxes on 19 June 1972. Its subject is Penalties based on cancelled/annulled assessments - Authorisation by the Board for taking action in respect of such penalties under section 154 beyond the time limit specified under section 154(7) - Order under section 119(2)(a)/(b).
This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.
Carries a revised Board order under section 119(2)(a) and (b), superseding the order of 28-2-1972, on penalties that survive the assessment they rest on. Where the assessment on which a penalty was based is itself cancelled or annulled and the penalty order still stands, the authority concerned may cancel the penalty under section 154: the Income-tax Officer, Appellate Assistant Commissioner or Inspecting Assistant Commissioner where his own order is final, but the Appellate Assistant Commissioner or the Commissioner or Additional Commissioner where the latest order is his, having regard to section 154(1A). Because such action was often barred by section 154(7), the Board authorises those authorities to act suo motu, or to admit an assessee's section 154 application, waiving the time limit so far as necessary. The order does not apply to a penalty confirmed by the Appellate Tribunal, a High Court or the Supreme Court, to a penalty based on an assessment set aside to be framed de novo, or to a penalty where the appeal on the assessment is still pending.
It was brought to the Board's notice that penalty orders survive assessments that have been cancelled or annulled, and that section 154 action to cancel them was sometimes impossible because the section 154(7) time limit had expired, causing genuine hardship.
Penalties based on cancelled/annulled assessments - Authorisation by the Board for taking action in respect of such penalties under section 154 beyond the time limit specified under section 154(7) - Order under section 119(2)(a)/(b)
I am directed to invite a reference to the Board’s Circular No. 71 [F.No. 245/25/ 71-A & PAC], dated 26-3-1972 and to say that the CBDT have passed a revised order of date in supersession of their earlier order dated 28-2-1972, a copy of which was sent with the Board’s above-noted Circular dated 26-3-1972. A copy of this revised order is attached herewith. This may be brought to the notice of ITOs/AACs/IACs in your charge.
Circular : No. 87 [F.No. 245/25/71-A & PAC], dated 19-6-1972 in supersession of Circular No. 81 [F.No. 245/25/71-A & PAC], dated 26-3-1972.
ANNEX - ORDER REFERRED TO IN CLARIFICATION
1. The Board’s Order F.No. 245/25/71-A & PAC, dated 28-2-1972 under section 119(2)(a)/(b ) is hereby superseded and substituted by the following order :
2. It has been brought to the notice of the CBDT that sometimes the income-tax assessment, on the basis of which an order of penalty has been passed, is itself either cancelled or annulled and yet the order of penalty survives. Where such a penalty order has not been made subject of appeal or where it has been confirmed on appeal by the Appellate Assistant Commissioner or on revision petition by the Commissioner/Additional Commissioner, there will be justification for cancellation of the penalty order by the income-tax authority concerned under section 154; if the penalty order of the ITO/AAC/IAC is final, the respective authority will be entitled to cancel it, but if the latest position is as per appellate order of AAC or revision order of CIT/Addl. CIT, the competent authority to act under section 154 will be the AAC or the Commissioner/Additional Commissioner having regard to the provisions of section 154(1A).
3. In the above context it has been pointed out that action under section 154 by the aforesaid authorities in the types of cases mentioned above cannot sometimes be taken because of expiry of time limit under section 154(7). To obviate genuine hardship in such cases, the Board in exercise of the powers vested in them by section 119(2)(a)/( b), hereby authorise the ITOs/AACs/IACs/Addl. CITs/CITs to take action under section 154 suo motu or to admit applications under section 154 filed by the assessees seeking cancellation of penalty orders of the type mentioned above, waiving for this purpose, as may be necessary, the time limit prescribed under section 154(7). It is clarified that this order will not apply to—
(a) penalties which stand confirmed by the Income-tax Appellate Tribunal/High Court/Supreme Court ;
(b) penalties based on assessments which have been set aside for being framed de novo ; and
(c) penalties in respect of assessments for which appeals are still pending.
On an application to cancel an old penalty after the assessment behind it has been annulled in appeal.
Source: the Income Tax Department’s own published text — its page for this instrument.