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Income Tax Appellate Tribunal, ‘I BENCH
Before: SHRI AMIT SHUKLA & SHRI GIRISH AGRAWAL
आदेश / O R D E R PER AMIT SHUKLA (J.M): This appeal by the assessee is directed against the order dated 28.03.2025 passed by the learned CIT(A)-56, Mumbai, confirming the penalty levied under section 271(1)(c) of the Income-tax Act, 1961, for A.Y. 2002–03. Though multiple grounds were originally raised, the sole issue pressed before us is the pure question of law as to whether the penalty order CommerzBank AG dated 27.10.2023 is hopelessly barred by limitation in terms of section 275(1)(a) of the Act.
The relevant facts lie within a narrow compass and are largely undisputed. The assessment under section 143(3) was completed on 28.02.2005, wherein penalty proceedings under section 271(1)(c) were initiated. The assessee preferred an appeal before the learned CIT(A), who, vide order dated 01.09.2006, granted partial relief. Aggrieved, the department filed an appeal before the Tribunal, and the Tribunal, vide order dated 31.08.2012, adjudicated the quantum issues in favour of the assessee. The department thereafter carried the matter further to the Hon’ble Bombay High Court under section 260A. Despite the conclusion of the entire appellate process in the quantum proceedings, the penalty order under section 271(1)(c) saw the light of day only on 27.10.2023— more than seventeen years after the CIT(A)’s order and more than eleven years after the Tribunal’s order.
3. Before the learned CIT(A), the assessee specifically contended that the penalty order was barred by limitation as prescribed under section 275(1)(a). The assessee relied upon Form No. 36 filed by the department itself in the quantum appeal, wherein the department had categorically mentioned that the CIT(A)’s order dated 01.09.2006 had been received on 22.11.2006. Accordingly, the outer limit for imposing penalty expired on 31.03.2008. It was argued that the penalty order dated 27.10.2023 was therefore wholly without jurisdiction and liable to be quashed as non-est.
1. CommerzBank AG 4. The learned CIT(A), instead of independently applying the statutory timelines mandated under section 275(1)(a), sought a remand report from the Assessing Officer. The Assessing Officer, while accepting the chronology of events furnished by the assessee, attempted to justify the belated penalty on the plea that the date of receipt of the CIT(A)’s order was not traceable in the office of the CIT(IT)-2, Mumbai, and therefore the limitation should be reckoned only from the date of receipt of the Tribunal’s order. The learned CIT(A), placing reliance primarily on this remand report, rejected the assessee’s contentions.
We have considered the relevant facts and material bearing upon the issue of limitation and have heard both the parties at length. For a clearer appreciation of the controversy, it is necessary to set out the undisputed chronology of events which forms the very substratum of the assessee’s contention that the penalty order is hopelessly time-barred. The assessee had furnished a detailed sequence of dates before the authorities below as well as before us, and significantly, the revenue has never disputed any part of this chronology. Sr. Particulars Date No.
1. The Appellant had filed its return of 31.10.2002 Return of income declaring total loss of Rs. 4,18,89,570/- 2. Assessment Order under section 28.02.2005 143(3) was passed determining total loss at Rs. 20, 74,391/- 3. Ld CIT(A) passed the appellate order 01.09.2006 CommerzBank AG allowing partial relief to the Appellant 4. Copy of order passed by Ld CIT(A) 22.11.2006 was served on the department 5. Department filed an appeal before 18.01.2007 the Hon'ble Appellate Tribunal, Mumbai 6. Hon'ble Appellate Tribunal passed 27.02.2023 the order in department's appeal 7. Penalty notice under section 11.10 2023 271(1)(c) was issued 16.10.2023 & 25.10.2023 8. Penalty order under section 27.10.2023 271(1)(c) was passed 9. Limitation period for passing the 31.03.2008 penalty order 5.1. It is further pertinent that while filing its appeal before the Tribunal in the quantum proceedings, the department itself annexed Form No. 36, wherein it unequivocally declared that the order of the learned CIT(A) dated 01.09.2006 had been received on 22.11.2006. This categorical disclosure emerging from the department’s own pleadings carries conclusive evidentiary value and binds the revenue for computing limitation.
5.2. Additionally, the learned CIT(A) had sought a remand report from the Assessing Officer solely on the question of limitation, and the Assessing Officer responded by accepting the chronology furnished by the assessee, though attempting to justify the belated penalty on the plea that the records of the CIT(IT)-2 did not reflect the date of receipt of the CIT(A)’s order.
CommerzBank AG “2. The assessee vide its submission before the Ld. CIT(A) has contended that as per the time lines set down u/s 275 of the Act, the order passed in the case of the assessee u/s 271(1)(c) dated 27/10/2023 is beyond the period of limitation and therefore liable to be treated as non-est.
The arguments preferred by the assessee before your Honour imply that the order u/s 271(1)(c) should have been passed by the AO within 6 months of appellate order and not beyond 31/03/2007, which is 6 months from the end of the month in which the order has been passed thereby making the penalty order bad in law.
Although the assessee's claim regarding the time line of al orders passed in its case for AY 2002-03 with regard to Appellate Order and Penalty Order is correct but its interpretation with regard to Section 275 is principally incorrect on the following counts (a) The period of 6 (six months) has to be counted from the date of receipt of order of the appellate authority being CIT(A) or ITAT as the case may be and not the date of order as claimed by the assessee. (b) In the present case, the appellate order was passed on 01/09/2006 therefore, proviso to Section 275(1)(a) shall be applicable and the time period for passing the order u/s 271(1)(c) shall be passed either before the end of the financial year in which the penalty proceedings are initiated as within one year (1 year) from the end of the financial year in which the order of the appellate Authority is received, whichever is later. The assessee reliance on Section 275(1)(a) and not the proviso to the said Section is misplaced.
5. As regards, the issue of whether the penalty order u/s 271(1)(c) dated 27/10/2023 is barred by limitation or not, it is essential to ascertain as to when the order of the CIT(A) was received by the PCIT/CIT and calculate the period therefrom as the case may be. In its submissions before the Ld CIT(A), the assessee has contended that Six (6 months) should be counted from the date of order of the CIT(A), whereas as it has already been stated above, the limitation period for passing of order u/s 271(1)(c) has to be calculated from the date of receipts of CommerzBank AG appellate order by the PCIT or CIT and not from the date of the Appellate order 6. On verification of records of the case, it is seen that Appeal Order No. CIT (A) XXXI/DDIT (IT) 1(2)/IT-03/05-06/06-07 was passed in the assessee's case on 01/09/2006 against the quantum addition made in the assessment order passed by the DCIT (IT) 1(2), Mumbai. There is no record which would indicate as to when the order was received by the PCIT/CIT. Furthermore, it is seen from records that the above order of the CIT(A) was adjudicated by the ITAT in favour of the assessee and an appeal was preferred before the Hon'ble HC of Bombay by the department. 6.1 While finalizing the appeal to the High Court, the AO during the course of examination of various appellate order especially the order of the CIT (A) (Sapara) came to know that penalty proceeding was initiated and a show-cause was issued to the assessee vide letters dated 11/10/2023 & 25/10/2023 without receiving any reply, resulting into an ex-parte penalty order u/s 271(1)(c) dated 27/10/2023. The assessee's reply received on 5/4/2024 sating that it had closed its operations in 2002 December. (Has been found on record and copy is enclosed) 7. Further, from the records it is seen that while filing appeal with the High Court, this office could not locate Form 35 either in its records or in the records of the Tribunal and had to file the appeal without Form 35. A copy of letter addressed to the DCIT (IT) Judicial-2 Mumbai dated 4/12/2023 is enclosed for reference, which is indicative of the fact that orders were not readily available with the AO CIT(IT)-2, Mumbai at the time of filing appeal to the Bombay HC against the ITAT order deleting the quantum addition.
8. In summation, it can be inferred that the order of the CIT(A) was never received in the office of the CIT (IT)-2, Mumbai prior to the date of receipt of ITAT order and there is no proof of receipt in the O/o the CIT(IT) Mumbai either with this office or with this office and neither has the assessee provided any evidence which would substantiate its claim regarding the receipt of order of the CIT(A) by the CIT/PCIT CommerzBank AG 9 The contents clearly indicates that prior to receipt of the ITAT order in the case of the assessee, there is no record to indicate the date of receipt of the order of the CIT(A) in the O/o the CIT/PCIT. Therefore the date has to be calculated from the date of receipt of the order of the Appellate Tribunal as has been envisaged in Section 275(1) of the Act without invoking the proviso.
Based on the plain reading of facts and date of receipt of order of the appellate Tribunal, the penalty order u/s 271(1)(c) has been passed within time. Proof of receipt of order of the Appellate Tribunal is enclosed for kind reference. The order was received by the CIT(IT)-2, Mumbai on 20/4/2023 and the penalty order u/s 271(1)(c) was passed on 27/10/2023, which is within 1 year from the end of the month in which the appellate order was deemed to have been received in the office of the CIT(IT)-2, Mumbai.
In view of the above discussed facts, the contention of the assessee that the penalty order u/s 271(1)(c) passed by the then AO is barred by limitation is liable to be rejected.”
Once these dates are taken into account, the statutory framework of section 275(1)(a) becomes decisive. The provision mandates that the penalty order must be passed on or before the later of: (i) the end of the financial year in which the assessment was completed, or (ii) one year from the end of the financial year in which the order of the CIT(A) is received by the Principal Commissioner or Commissioner. The order of the learned CIT(A) was received on 22.11.2006; therefore, the limitation expired on 31.03.2008. The penalty order passed on 27.10.2023 is not merely delayed it falls outside a jurisdictional boundary that Parliament has expressly and mandatorily defined.
CommerzBank AG 7. The explanation offered in the remand report that the internal records of the CIT(IT)-2 did not indicate the date of receipt of the CIT(A)’s order cannot, in law, postpone or extend a statutory limitation. The department cannot simultaneously rely upon the CIT(A)’s order to file its appeal before the Tribunal by clearly recording the date of receipt in Form No. 36, and then claim absence of documentation to avoid the consequence of limitation. The commencement of limitation is pegged to actual receipt, not to the quality or existence of departmental record-keeping.
It is a well-settled principle that penalty provisions, being quasi-criminal in nature, must be construed strictly. Once the statutory period expires, the authority to impose penalty is lost irrevocably. Administrative lapses or internal disarray cannot breathe life into a proceeding that has become barred by time. The moment the department acted upon the CIT(A)’s order by filing Form No. 36, the date of receipt became incontrovertible. The subsequent plea of non- traceability cannot rewrite or extend the limitation prescribed by statute.
The learned CIT(A), in concurring with the Assessing Officer’s reasoning, has overlooked the decisive evidentiary value of Form No. 36 and the inescapable consequence that follows from section 275(1)(a). The jurisdiction to levy penalty extinguished on 31.03.2008. Any penalty order passed thereafter is void ab initio. What has been attempted in
10. In view of the aforesaid discussion, we hold that the penalty order dated 27.10.2023 is patently barred by limitation under section 275(1)(a) and is therefore null and void. The impugned order of the learned CIT(A) upholding such a time-barred penalty is unsustainable and is hereby set aside. The penalty imposed under section 271(1)(c) for A.Y. 2002–03 is accordingly quashed.
11. Having held the penalty order itself to be non-est for want of jurisdiction on account of limitation, the remaining grounds on the merits of the levy of penalty become wholly academic and are not adjudicated upon.
In the result, the appeal of the assessee is allowed.
Order pronounced on 13th November, 2025.