2024 (12) TMI 316 - HC - Income Tax

Bar of limitation for imposing penalties - Penalty u/s 271DA - Contravention of the provisions of Section 269ST - whether the impugned order was passed beyond the period of limitation as prescribed u/s 275 (1) (c) ? - HELD THAT - The controversy, as to the date on which the penalty proceedings are to be construed as initiated, is no longer res integra. The said issue is covered by the decision of this court in JKD Capital Finlease Ltd 2015 (10) TMI 1281 - DELHI HIGH COURT and Turner General Entertainment Networks India Pvt. Ltd 2024 (11) TMI 506 - DELHI HIGH COURT the date of receipt of the reference is required to be considered as the date of initiation of the proceedings. The order of penalty was required to be passed within six months from the end of the month in which the reference was received. There is no dispute that the reference was received by respondent no. 3 from the AO on 24.03.2023. As the proposal to initiate the penalty proceedings had been forwarded by the AO to respondent no. 3 on 24.03.2023. Further, this court is also unable to countenance that respondent no. 3 had not taken any steps immediately after receipt of the said reference and it waited almost one year to ask for further documents, which was beyond the period prescribed for passing the impugned order u/s 271DA of the Act. Assessee appeal allowed.

Summary

Issues:
1. Impugning notices and order under Income Tax Act
2. Barred by limitation - Penalty order
3. Date of initiation of penalty proceedings
4. Interpretation of Section 275(1)(c) of the Act

Analysis:
The petitioner challenged notices and an order issued under the Income Tax Act, pertaining to a penalty imposed for contravention of Section 269ST of the Act for the assessment year 2021-22. The petitioner contended that the penalty order was barred by limitation. The petitioner, a partnership firm, was engaged in real estate brokerage and was searched along with related entities. The assessment proceedings revealed potential liability for penalty under Section 269ST, leading to a reference for penalty initiation under Section 271DA of the Act.

The key issue revolved around the date of initiation of penalty proceedings. The respondent argued that the date of reference should be considered as 04.09.2024, based on the submission of additional documents by the AO. However, the court relied on precedents to establish that the date of receipt of the reference, which was 24.03.2023, should be deemed as the initiation date. The court emphasized that the reference contained the necessary particulars for initiating penalty proceedings, rejecting the respondent's argument regarding the later date.

Interpretation of Section 275(1)(c) of the Act played a crucial role in determining the validity of the penalty order. The court highlighted that the penalty order must be passed within the prescribed time limit from the date of initiation of proceedings. Despite the respondent's contention that the later date should be considered, the court found that the delay in seeking additional documents and the lapse of almost a year indicated non-compliance with the statutory time frame. Consequently, the court allowed the petition, setting aside the impugned order due to being beyond the limitation period specified under the Act.