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April 2023

Penalty — Levy of penalty — Limitation — Limitation starts from date of assessment when the AO initiates penalty proceedings and not from date of sanction for penalty proceedings.

By K. B. Bhujle, Advocate
Reading Time 2 mins
5 Principal CIT Vs. Rishikesh Buildcon Pvt Ltd and Ors.
[2023] 451 ITR 108 (Del)
A. Y. 2006-07
Date of order 17th November 2022
Section 275 of ITA 1961

Penalty — Levy of penalty — Limitation — Limitation starts from date of assessment when the AO initiates penalty proceedings and not from date of sanction for penalty proceedings.

For A. Y. 2006-07, the AO passed the assessment order on 17th December, 2008 and recorded that penalty proceedings were to be initiated. A reference was made by the AO to the prescribed authority on 18th March, 2009. The prescribed authority issued a show-cause notice to the assessee on 24th March, 2009. The penalty order was passed on 29th September, 2009.

The Tribunal held that the penalty order was passed after the expiry of the time limit laid down under section 275(1)(c) of the Income-tax Act, 1961 and accordingly set aside the penalty order.

On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under:

“i)    Where the Assessing Officer has initiated penalty proceedings in his/her assessment order, that date is to be taken as the relevant date as far as section 275(1)(c) of the Income-tax Act, 1961 is concerned.

ii)    The quantum proceedings were completed by the Assessing Officer on December 17, 2008, and the Assessing Officer initiated the penalty proceedings in December, 2008. Thus,
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