SUBRAMANIAM MANOHARAN,TIRUPUR vs. ITO, WARD- 1(4), TIRUPUR

Brief facts of the case are as follows: The assessee is as individual. For the assessment year 2016-17, return of income was filed on 31.01.2018 declaring total income of Rs.3,94,720/-. The assessee during the relevant assessment year had sold a property and received Rs.7,00,000/- in cash (Rs.3 lakhs on 27.12.2015 and Rs.4 lakhs on 11.03.2016) thereby violating the provisions of section 269SS of the Act. The assessment unit vide order dated 11.03.2023 imposed penalty of Rs.7,00,000/- u/s.271D of the Act for violation of provisions of section 269SS of the Act.

Aggrieved, assessee filed appeal before the First Appellate Authority (FAA). The FAA partly-allowed the appeal of the assessee. The FAA deleted a sum of Rs.4,00,000/- [cash received on 11.03.2016] by following the dictum laid in the order of the Chennai Bench of the Tribunal in the case of ITO vs. Shri Dhinagharan (HUF) in ITA No.3329/Chny/2019 (order dated 29.12.2023). The Tribunal in the above mentioned order had concluded expression “specified sum” defined in Explanation (IV) to section 269SS of the Act, covers only advance money received in relation to transfer of immovable property

Aggrieved by the order of FAA in sustaining the addition of Rs.3,00,000/- imposed u/s.271D of the Act, assessee has filed the present appeal before the Tribunal. The assessee has filed a legal ground namely Ground No.6 stating that order passed u/s.271D is barred by limitation.

The Ld. AR, placing reliance on the decision of the Chennai Bench of the Tribunal in the case of Shri B. Anand Babu vs. DCIT in ITA Nos.2085 to 2087/Chny/2025, order dated 22.12.2025, contended that the penalty order passed by the Assessment Unit is barred by limitation in terms of section 275(1)(c) of the Act. The Ld. AR submitted that the show-cause notice initiating the penalty proceedings was issued on 29.08.2022 and, reckoning the limitation with reference to the second limb of section 275(1)(c) of the Act, the penalty ought to have been imposed within six months from the end of the month in which the action for imposition of penalty was initiated. Accordingly, the penalty order was required to be passed on or before 28.02.2023. However, in the instant case, the penalty order u/s. 271D of the Act was passed only on 11.03.2023. Therefore, the Ld. AR submitted that the penalty order being barred by limitation needs to be quashed.

The Ld.DR was unable to controvert the assertion of the Ld.AR.

We have heard rival submissions and perused the material on record. The time limit for imposition of penalty under section 271D of the Act is governed by the provisions of section 275 of the Act. Clause (a) of sub-section (1) of section 275 deals with the limitation for imposition of penalty in cases where the penalty proceedings are initiated in the course of assessment proceedings or in pursuance of an order of assessment or reassessment, or other order referred to therein, and such order is the subject matter of appeal. Clause (b) of sub- section (1) of section 275 deals with cases where the relevant assessment or other order is the subject matter of revision under section 263 or section 264 of the Act. Clause (c) of sub-section (1) of section 275 is residuary in nature and governs other cases namely penalty proceedings in other cases. The relevant provision, namely, section 275(1)(c) of the Act, reads as under:- “ 275(1) No order imposing a penalty under this Chapter shall be passed- (a) ………… (b) ………… (c) in any other case, no order imposing a penalty shall be passed after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later.”

Since the penalty order has been quashed on the legal ground of limitation, the other grounds raised by the assessee are left open.

In the result, the appeal filed by the assessee is partly-allowed.