Facts of the Case

The present appeal pertains to Assessment Year (AY) 2008–09. The assessment order was passed on 31.12.2010 under Sections 153A/143(3) of the Income Tax Act, 1961. During the assessment proceedings, the Assessing Officer (AO) initiated penalty proceedings under Sections 271AAA, 271D, and 271E.

Subsequently, a notice under Sections 274 and 271E was issued by the Additional Commissioner of Income Tax (ACIT) on 13.06.2011, and the penalty order under Section 271E was passed on 30.12.2011.

The Income Tax Appellate Tribunal (ITAT) deleted the penalty on the ground that it was barred by limitation under Section 275(1)(c) of the Act. Aggrieved, the Revenue filed an appeal before the Delhi High Court.

Issues Involved

  1. Whether the ITAT erred in law and on facts in deleting the penalty imposed under Section 271E on the ground of limitation?
  2. Whether the limitation period under Section 275(1)(c) should be calculated from the date of assessment order or from the date of issuance of notice by the competent authority (JCIT/ACIT)?

Petitioner’s Arguments (Revenue)

  • The Revenue contended that penalty under Section 271E can only be imposed by the Joint Commissioner (JCIT).
  • Therefore, limitation should commence from the date when the competent authority (JCIT/ACIT) issued notice i.e., 13.06.2011.
  • Based on this, the limitation would expire on 31.12.2011, and since the penalty order was passed on 30.12.2011, it was within time.

Respondent’s Arguments (Assessee)

  • The Assessee (represented through amicus curiae) supported the ITAT’s finding that limitation begins from the date of initiation of penalty proceedings i.e., the assessment order dated 31.12.2010.
  • It was argued that allowing limitation to depend on issuance of notice by JCIT would lead to arbitrary extension of limitation.

Court’s Findings / Order

  • Section 275(1)(c) provides two alternative limitation periods:
    • End of the financial year in which proceedings are completed; or
    • Six months from the end of the month in which penalty proceedings are initiated
      (whichever is later).
  • The Court held that:
    • Penalty proceedings were initiated on 31.12.2010 (date of assessment order).
    • Therefore:
      • First limb limitation expired on 31.03.2011.
      • Second limb limitation expired on 30.06.2011.
    • Hence, the last date for passing penalty order was 30.06.2011.
  • The penalty order dated 30.12.2011 was time-barred.
  • The Court rejected Revenue’s argument that limitation should start from the date of notice issued by JCIT.

Important Clarification

  • The Court clarified that limitation under Section 275(1)(c) cannot be extended at the discretion of the Revenue authorities by delaying issuance of notice.
  • Initiation of penalty proceedings occurs when the AO records satisfaction in the assessment order.
  • The statutory timeline cannot be manipulated by administrative delay.

Sections Involved

  • Section 271E – Penalty for repayment of loan/deposit in contravention of Section 269T
  • Section 269T – Mode of repayment of certain loans/deposits
  • Section 274 – Procedure for imposing penalty
  • Section 275(1)(c) – Limitation for imposing penalty
  • Sections 153A & 143(3) – Assessment provisions

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/60811092023ITA192021_171010.pdf


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