Facts of the Case

The Revenue filed an appeal challenging the order of the Income Tax Appellate Tribunal (ITAT), which upheld the decision of the Commissioner of Income Tax (Appeals) [CIT(A)].

The case arose from alleged violations of Section 269SS, where the assessee, Thapar Homes Ltd., was accused of accepting loans/deposits from 29 parties amounting to ₹16.69 crore. This led to additions under Sections 68 and 69C.

Penalty proceedings were initiated under Sections 271D, 271E, and 271AAA. However, the CIT(A) ruled that the penalty order dated 30.12.2011 was barred by limitation, a finding later affirmed by the ITAT.

Issues Involved

  1. Whether the penalty order passed under Sections 271D/271E was time-barred under Section 275(1)(c).
  2. Whether the limitation period could be extended based on the date of notice issued by a competent authority (ACIT/JCIT).
  3. Whether the Assessing Officer’s initiation of penalty proceedings affects limitation computation.

Petitioner’s Arguments (Revenue)

  • The Revenue contended that the Assessing Officer (AO) was not competent to impose penalty under Section 271E(2); only the ACIT had such authority.
  • Therefore, limitation should start from the date when the ACIT issued notice (13.06.2011).
  • Based on this interpretation, the limitation expired on 31.12.2011, making the penalty order dated 30.12.2011 valid and within time.

Respondent’s Arguments (Assessee)

  • The assessee argued that the limitation period must be computed from the date of initiation of penalty proceedings during assessment.
  • The financial year ended on 31.03.2011, and six months from initiation expired on 30.06.2011.
  • Since the penalty order was passed on 30.12.2011, it was clearly time-barred.

Court’s Findings / Order

  • The limitation under Section 275(1)(c) cannot be extended artificially by delaying issuance of notice.
  • Accepting Revenue’s argument would lead to absurdity, allowing authorities to extend limitation at their discretion.
  • The relevant limitation expired on 30.06.2011, whereas the penalty order was passed on 30.12.2011, making it invalid.
  • The issue was already settled in a prior judgment involving the same assessee

Important Clarifications by Court

  • Limitation begins from initiation of penalty proceedings, not from issuance of notice by a higher authority.
  • Authorities cannot manipulate limitation periods by delaying procedural steps.
  • The statutory timeline under Section 275(1)(c) must be strictly adhered to.
  • Prior approval or involvement of higher authority does not shift the limitation trigger.
  • 275(1)(c).

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/60814122023ITA7632023_174205.pdf

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