Facts of the Case

The Revenue filed an appeal under Section 260A of the Income-tax Act, 1961 challenging the order dated 27.11.2024 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘G’, for Assessment Year 2009-10. The ITAT had dismissed the Revenue’s appeal and upheld the order of the Commissioner of Income Tax (Appeals), which set aside a penalty of ₹3,44,15,000 imposed under Section 271E for alleged violation of Section 269T.

The assessment order under Section 143(3) was passed on 31.12.2010, recording that penalty proceedings would be initiated separately. The Assessing Officer made a reference to the Additional Commissioner of Income Tax on 07.06.2011. Pursuant thereto, the Additional Commissioner issued notice and passed the penalty order on 30.12.2011. The CIT(A) held the penalty to be barred by limitation under Section 275(1)(c), which view was affirmed by the ITAT.

Issues Involved

Whether the limitation period under Section 275(1)(c) for imposition of penalty under Section 271E commences from the date of initiation of penalty proceedings by the Assessing Officer or from the date of issuance of notice by the Joint/Additional Commissioner, and whether the impugned penalty order was time-barred.

Appellant’s Arguments

The Revenue contended that since the power to levy penalty under Section 271E vests with the Joint/Additional Commissioner, limitation should be computed from the date on which the competent authority issued notice. It was argued that the penalty order dated 30.12.2011 was within six months from the JCIT/ACIT’s notice and therefore within limitation.

Respondent’s Arguments

The assessee supported the orders of the CIT(A) and ITAT, submitting that limitation under Section 275(1)(c) begins from the date on which the Assessing Officer initiates penalty proceedings in the course of assessment. Reliance was placed on binding Delhi High Court precedent and CBDT Circular No. 9 dated 26.04.2016, which clarifies that where the jurisdictional High Court has taken a contrary view, the departmental view is inapplicable.

Court Order / Findings

The Delhi High Court examined the statutory scheme of Section 275(1)(c) and noted that there are two alternative limitation periods, the later of which applies. The Court reiterated that for penalties under Sections 271D and 271E, limitation commences when the Assessing Officer initiates penalty proceedings in the assessment order, even if the competent authority to levy penalty is the Joint/Additional Commissioner.

The Court relied on its earlier decision in Pr. Commissioner of Income Tax (Central-II), Delhi vs. Thapar Homes Limited (AY 2008-09), where identical facts were considered and it was held that the Revenue cannot extend limitation at its discretion by delaying issuance of notice by the JCIT/ACIT. Applying the same reasoning, the Court held that in the present case, the penalty ought to have been imposed on or before 30.06.2011. The penalty order dated 30.12.2011 was therefore clearly beyond limitation.

The Court distinguished the decision in Property Plus Realtors v. Union of India on facts, noting that in that case the delay between assessment and reference for penalty was only eleven days and not inordinate, whereas in the present case the facts were squarely covered by earlier Thapar Homes precedent.

Important Clarification

The Court clarified that while the Joint/Additional Commissioner is the competent authority to levy penalty under Section 271E, the initiation of penalty proceedings for the purpose of limitation under Section 275(1)(c) is traced to the Assessing Officer’s action in the assessment proceedings. The Revenue cannot defeat statutory limitation by delaying issuance of notice.

Final Outcome

The appeal filed by the Revenue was dismissed. The Delhi High Court held that the penalty imposed under Section 271E was barred by limitation under Section 275(1)(c), upheld the orders of the CIT(A) and the ITAT, and decided the matter in favour of Thapar Homes Pvt. Ltd. and against the Revenue.

Link to download order - https://www.mytaxexpert.co.in/uploads/1769678542_PR.COMMISSIONEROFINCOMETAX7VsTHAPERHOMESPVT.LTD.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.