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2025 (1) TMI 1496 - HC - Income TaxPenalty proceedings 271DA beyond the period of limitation - whether the impugned order is beyond the period of limitation as prescribed in 275 (1) (c)? - HELD THAT - Undoubtedly in the present case the proceedings during the course of which decision for that proceedings for levy of penalty u/s 269ST should be initiated had taken place during the financial year 2023-24 as it is reflected in the assessment order dated 28.03.2024. The assessment order clearly reflects that the penalty proceedings are being initiated separately. The order records that separate reference is being sent to the office of Addl. CIT-Central Range-04 Delhi for initiation of penalty proceedings U/s 269ST. 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. There is merit in the petitioner s contention that the date of initiation of the penalty proceedings cannot be extended arbitrarily and indefinitely. Clearly in cases where there is an inordinate delay in initiation of the proceedings it would be necessary to examine whether the period of limitation would stand extended on account of such delay. As settled law that in cases where no limitation period is mentioned for acts to be done the same are required to be done within a reasonable period. See State of Punjab Ors. vs. Bhatinda District Cooperative Milk Producers Union Ltd. 2007 (10) TMI 300 - SUPREME COURT Thus in cases where the initiation of the penalty proceedings are inordinately and inexplicably delayed beyond a reasonable period the said issue may rise for consideration. In the present case no such issue arises for consideration of this court as the penalty proceedings were initiated within a period of eleven days of the culmination of the assessment proceedings whereas the decision to make a reference for initiation of the penalty proceedings was taken. We are unable to accept that this period can be termed as unreasonable. No merit in the present petition. The same is accordingly dismissed.
ISSUES PRESENTED and CONSIDERED
The primary issue considered in this judgment is whether the impugned order imposing a penalty under Section 271DA of the Income Tax Act, 1961, is beyond the period of limitation as prescribed under Section 275(1)(c) of the Act. The court also examines whether the initiation of penalty proceedings was timely and if the date of initiation should be considered as the date of the assessment order or the date when the reference for initiation was made. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The legal framework revolves around Section 269ST, which restricts cash transactions above a certain threshold, and Section 271DA, which provides for penalties for violations of Section 269ST. Section 275(1)(c) prescribes the limitation period for imposing penalties, stating that no order imposing a penalty shall be passed after the expiry of the financial year in which the proceedings were completed or six months from the end of the month in which the penalty action was initiated, whichever is later. The court referenced several precedents, including Principal Commissioner of Income Tax v. JKD Capital & Finlease Ltd. and Commissioner of Income Tax (TDS)-2 Delhi v. Turner General Entertainment Networks India Pvt. Ltd., which interpret the initiation of penalty proceedings as the first step taken towards such action. Court's Interpretation and Reasoning The court interpreted the term "initiation of penalty proceedings" as the commencement of action for imposing a penalty. It emphasized that the initiation refers to the first step, such as making a reference for penalty, rather than the date of the assessment order. The court found that the reference made on 08.04.2024 marked the initiation of penalty proceedings, not the date of the assessment order on 28.03.2024. Key Evidence and Findings The court noted that the assessment order dated 28.03.2024 mentioned the initiation of penalty proceedings but specified that a separate reference would be sent for this purpose. The actual reference was made on 08.04.2024, and the show cause notices were subsequently issued on 09.09.2024 and 27.09.2024. Application of Law to Facts The court applied the legal principles to the facts, determining that the limitation period should be calculated from the date of the reference for penalty initiation (08.04.2024) rather than the assessment order date. This interpretation aligns with the statutory language and ensures that the limitation period is not arbitrarily extended. Treatment of Competing Arguments The petitioner argued that the initiation should be considered as the date of the assessment order, citing potential for arbitrary extension of the limitation period. The court acknowledged this concern but found that the eleven-day gap between the assessment order and the reference was reasonable and did not constitute an arbitrary extension. SIGNIFICANT HOLDINGS The court held that the initiation of penalty proceedings is marked by the first action taken towards imposing a penalty, which in this case was the reference made on 08.04.2024. It concluded that the limitation period should be calculated from this date, not the assessment order date. The court also emphasized that while the limitation period cannot be extended arbitrarily, the eleven-day period between the assessment order and the reference was reasonable and did not warrant a finding that the penalty was imposed beyond the limitation period. The petition was dismissed, with the court clarifying that the petitioner could pursue other grounds in appellate proceedings, except for the claim that the order was passed beyond the limitation period.
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