Date Of Assessment Order Recommending Penalty For Accepting Cash Above ₹2 Lakh Not Relevant For Determining Limitation U/S 275 Of Income Tax Act: Delhi HC

The Delhi High Court has held that the date of the assessment order, wherein an Assessing Officer recommended separate penalty proceedings against the assessee under Section 271DA of the Income Tax Act, 1961 for accepting more than ₹2 lakh in cash, is not relevant for determining the limitation period under Section 275(1)(c).Section 275(1)(c) prescribes the period of limitation within which penalty proceedings are to be completed.A division bench of Acting Chief Justice Vibhu Bakhru and Justice Tushar Rao Gedela said a plain reading of Section 275(1)(c) indicates that the time limit for completion of the action for imposition of penalty is to be reckoned from: (a) the end of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated are completed; or (b) six months from the end of the month in which action for imposition of penalty is initiated, whichever expires later. It thus declined the Revenue's claim that the date of initiation of action should be reckoned from the date when the assessment order was passed, merely on the ground that a recommendation to initiate separate action under Section 271D was made therein.In the facts of the case, vide search assessment order dated 28.03.2024, the AO recommended it is a fit case for initiation of penalty proceedings under Section 269ST read with Section 271DA against the Petitioner, a partnership firm engaged in a business of real estate brokers.The AO made a reference to the Additional Commissioner (ACIT) in this regard on 08.04.2024.The ACIT issued notice to the Petitioner after about four months, on 09.09.2024 and the penalty order came to be passed on 17.10.2024.In the present proceedings, the Petitioner contended that the penalty order is beyond limitation as prescribed in 275(1)(c).It submitted that the date for initiation of penalty must be considered as the date on which the assessment order was passed, i.e. 28.03.2024. It submitted that the decision to initiate the proceedings under Section 269ST of the Act was taken by the AO at the time of passing of the assessment order and the delay in making reference for any such initiation cannot extend the period of limitation.Disagreeing, the High Court observed, “Undoubtedly in the present case, the proceedings during the course of which decision for that proceedings for levy of penalty under Section 269ST of the Act should be initiated, had taken place during the financial year 2023-24 as it is reflected in the assessment order dated 28.03.2024. However, the assessment order clearly reflects that the penalty proceedings are being initiated separately.The AO has done so by making a reference on 08.04.2024. Thus, clearly the period of six months is required to be reckoned from the date of the reference, that is, from 08.04.2024 as that is the period which expires later than the end of the financial year in which the proceedings, during the course of which the decision was taken to initiate the penalty proceedings, were completed,” Court said.It relied on the Commissioner of Income Tax Vs. Turner General Entertainment Network India Pvt. Ltd. (2024) where a coordinate bench of the High Court held that the initiation of proceedings for imposition of penalty refers to the date on which the first introductory step for such action is taken. It was held that the reference made for initiation of penalty under Section 269ST of the Act is required to be considered as the first step.Accordingly, the petition was dismissed.Appearance: Mr. Deepak Kapoor, Advocate for Petitioner; Mr. Sanjay Kumar, SSC, Ms. Monica Benjamin and Ms. Easha Kadian, JSCs for RespondentCase title: Property Plus Realtors v. Union Of India & OrsCitation: 2025 LiveLaw (Del) 130Case no.: W.P.(C) 17371/2024Click here to read order

Date Of Assessment Order Recommending Penalty For Accepting Cash Above ₹2 Lakh Not Relevant For Determining Limitation U/S 275 Of Income Tax Act: Delhi HC

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