2025 (4) TMI 333 - HC - Income Tax

Validity of Penalty order u/s 271D beyond period of limitation - case of the petitioner that the limitation period u/s 275(1)(c) of the IT Act for passing the impugned Penalty Order expired on 31.03.2020 and the impugned Penalty Order dated19.08.2021 was without jurisdiction - HELD THAT - As period of limitation to pass order(s) stood extended from time to time. Therefore the limitation prescribed under Section 275(1)(a) of the IT Act which would have otherwise expired during the period between 30.03.2020 and 30.03.2022 stood extended till 31.03.2022 in view of Clause A of the Notification No. 113/2021 in S.O.3814(E) dated 17.09.2021 issued under Section 3(1)(a) of TOLA 2020. The argument of the petitioner that the limitation for passing the impugned Penalty Order u/s 271D of the IT Act was to be reconciled in terms of the limitation period prescribed u/s 275(1)(c) of the IT Act has to be held without merits. That apart the arguments that the respondents should have awaited for the order of Appellate Commissioner in the appeal filed against the Assessment Order and that the impugned Penalty Order is premature is also of no solace as limitation stood extended till 31.03.2022 in view of Clause A of the Notification No.113/2021 dated 17.09.2021. Since the impugned Penalty Order was passed on 19.08.2021 it has to be held that it has been passed well before the extended period of limitation in terms of the above Notification. Given that the impugned Penalty Order has been passed before the expiry of the limitation period it can be revised after the appeal is disposed by the Appellate Authority against the Assessment Order dated 30.12.2019 in terms of Section 275(1A) of the IT Act. Therefore the impugned order imposing penalty is not required to await the order of the Appellate Authority in the appeal filed by the petitioner against the Assessment Order dated 30.12.2019. By the same token it cannot be also said that the impugned Penalty Order is premature. Consequently this Writ Petition has to fail. Writ Petition is dismissed with liberty to the petitioner to challenge the impugned Penalty Order dated 19.08.2021 by way of filing an appeal before the Appellate Commissioner under Section 246A of the IT Act within a period of 30 days from the date of receipt of a copy of this order.

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

Whether the penalty order dated 19.08.2021, imposing a penalty under Section 271D of the Income Tax Act, 1961, was passed beyond the limitation period prescribed under Section 275 of the IT Act.
Whether the impugned penalty order was premature, given the pending appeal against the assessment order dated 30.12.2019.
Whether the extended limitation period under the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA, 2020) applied to the penalty proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Limitation Period for Penalty Order:

Relevant legal framework and precedents: The limitation for imposing penalties under the IT Act is governed by Section 275. The petitioner argued that the limitation expired on 31.03.2020, or alternatively, on 31.08.2020, based on Section 275(1)(c). The respondent countered that the limitation period was extended due to TOLA, 2020.
Court's interpretation and reasoning: The Court analyzed the applicability of Section 275(1)(a) versus Section 275(1)(c), concluding that Section 275(1)(a) applied because the assessment order was under appeal. The Court noted that the limitation period was extended by TOLA, 2020, and subsequent notifications.
Application of law to facts: The Court found that the impugned penalty order was issued within the extended limitation period, as the original deadline was extended to 31.03.2022.
Treatment of competing arguments: The Court rejected the petitioner's argument that the limitation period under Section 275(1)(c) applied, emphasizing the specific provisions of Section 275(1)(a) for cases under appeal.
Conclusions: The penalty order was not time-barred due to the extended limitation period under TOLA, 2020.

Prematurity of the Penalty Order:

Relevant legal framework and precedents: The petitioner argued that the penalty order was premature because the appeal against the assessment order was pending. The Court referred to Section 275(1A) of the IT Act, which allows revision of a penalty order post-appeal.
Court's interpretation and reasoning: The Court held that the penalty order could be revised after the appeal is disposed of, and thus the order was not premature.
Application of law to facts: Since the penalty order was issued within the extended limitation period, it was not required to await the appellate decision.
Treatment of competing arguments: The Court dismissed the argument of prematurity, stating that the order could be revised post-appeal.
Conclusions: The penalty order was not premature and could be revised if necessary after the appellate decision.

3. SIGNIFICANT HOLDINGS

Core principles established: The Court clarified that the limitation period for penalty proceedings, when an appeal is pending, is governed by Section 275(1)(a) of the IT Act. The period can be extended by legislative measures such as TOLA, 2020.
Final determinations on each issue: The Court determined that the penalty order was issued within the valid limitation period and was not premature. The writ petition was dismissed, allowing the petitioner to challenge the penalty order on merits before the Appellate Commissioner.

In conclusion, the Court upheld the penalty order, emphasizing the applicability of Section 275(1)(a) and the extended limitation period under TOLA, 2020, while granting the petitioner the liberty to appeal the penalty order on merits.

← Previous Next →