C.S. SRINIVASAN,TRICHY vs. JCIT, CIRCLE-1,, TRICHY

आदेश / O R D E R

PER MANU KUMAR GIRI, JM:

This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), NFAC, Delhi dated 16.05.2025 confirming the penalty levied under section 271E of the Income-tax Act, 1961 for the Assessment Year 2015-16. 2. Facts of the case are that the assessee filed the return of income for A.Y. 2015–16 on 30.09.2015, declaring a total income of Rs.19,58,400/-. The case was selected for Limited Scrutiny, and assessment u/s. 143(3) was completed on 13.05.2017, accepting the returned income. As per Form 3CB (Tax Audit

ITA No 1477/Chny/2025 (AY 2015-16) C S Srinivasan Vs JCIT C 1(1) :: 2 :: Report), particularly Clause 31(b), it was reported that the assessee had made repayment of loan/deposit exceeding the prescribed limit otherwise than by account payee cheque/draft or electronic mode, thereby attracting provisions of section 269T. The assessee had repaid a loan in cash as under:

o Lender: Moorthy M (PAN: ABKPM5153F) o Amount repaid in cash: Rs.99,32,800/-

Accordingly, penalty proceedings u/s. 271E read with section 269T were initiated, and show cause notice was issued on 25.08.2021. The assessee initially did not respond to the notice. Subsequently, another notice dated 20.12.2021 was issued, in response to which the assessee submitted explanations on 11.01.2021. The assessee submitted that he was engaged in the business of running prasadam stalls in temples, where sales were predominantly in cash. The lender, who was managing one of the stalls, used cash collections to recover loan amounts. Repayments were made out of daily cash collections, often beyond banking hours. Interest payments were subject to TDS. The assessee claimed that such cash repayments were beyond his direct control. It was also submitted that due to lockdown, the assessee suffered heavy losses and requested waiver of penalty on grounds of hardship. The AO observed that the assessee had clearly violated provisions of section 269T by repaying loan in cash exceeding the prescribed limit. The AO held that the violation was deliberate and in defiance of law. The contravention was also confirmed by the Tax Auditor in Form 3CB. Regarding the assessee’s claim of reasonable cause u/s. 273B, the AO held that the assessee failed to furnish supporting documentary evidence to justify that cash repayment was due to business exigencies. He further note that no evidence was provided to establish why repayment through account payee cheque/draft or banking channels was not possible. The AO rejected the contention that repayments were beyond the control of the assessee, holding

ITA No 1477/Chny/2025 (AY 2015-16) C S Srinivasan Vs JCIT C 1(1) :: 3 :: that responsibility for compliance with statutory provisions lies with the assessee. The plea of financial hardship due to lockdown was also rejected on the ground that the assessee had reported substantial income in subsequent years viz; in A.Y. 2018–19 of Rs.22,91,210/-, in A.Y. 2019–20 of Rs.16,04,480/- and in A.Y. 2020–21 of Rs.11,81,260/-. Hence, the claim of hardship was not substantiated. Accordingly, the AO concluded that the assessee failed to prove reasonable cause u/s. 273B. The provisions of section 269T were violated, attracting penalty u/s. 271E. The AO levied a penalty equal to the amount of loan repaid in cash, i.e. Penalty imposed of Rs.99,32,800/- u/s. 271E of the Act.

Now assessee is in further appeal before us.

ITA No 1477/Chny/2025 (AY 2015-16) C S Srinivasan Vs JCIT C 1(1) :: 4 :: is without jurisdiction, the question of limitation flowing from such initiation does not arise. 3. During the course of rebuttal, the Revenue appears to have proceeded on the premise that penalty proceedings u/s. 271E are independent of the assessment proceedings, and that limitation must invariably be computed from the date of initiation by the Joint Commissioner. The appellant respectfully submits that such an approach does not accord with the statutory scheme, binding CBDT instructions, or the consistent judicial view taken by the jurisdictional High Court. 4. The Madras High Court has consistently held that penalty proceedings u/s.s 271D and 271E are incidental and ancillary to the assessment proceedings, and that the jurisdiction to initiate such penalty must necessarily arise during the course of assessment proceedings in which the alleged default is examined. The foundation for initiation of penalty is therefore the satisfaction of the Assessing Officer, which must be discernible from the assessment record. 5. In the present case, the assessment for AY 2015-16 was completed u/s. 143(3) on 13.05.2017. The issue of unsecured loans formed part of the scrutiny proceedings. Despite such examination, the assessment order is completely silent with regard to any alleged violation of section 269T. There is no observation, satisfaction, recommendation, or even a prima facie indication that penalty proceedings u/s. 271E were contemplated. This silence is not a mere procedural lapse, but a substantive jurisdictional defect. 6. The Madras High Court in GPR Textiles Pvt. Ltd. v. ACIT (Madras High Court, 2024) has categorically held that recording of satisfaction is a condition precedent for valid initiation of penalty proceedings u/s. 271E. The Hon'ble Court held that initiation of penalty proceedings without recording reasons or satisfaction is unsustainable in law, and emphasized that satisfaction is not an empty formality but a substantive safeguard against arbitrary invocation of penal provisions. 7. The above legal position is further reinforced by CBDT Circular No. 9/2016 dated 26.04.2016, which governs the manner of initiation of penalty u/s.s 2710 and 271E. The Circular contemplates that upon noticing a violation during assessment proceedings, the Assessing Officer shall make a reference to the competent authority. The Circular does not envisage initiation of penalty proceedings as a detached or belated exercise, long after completion of assessment, without any originating satisfaction or reference. 8. The appellant respectfully submits that administrative approvals or internal departmental procedures cannot cure a

ITA No 1477/Chny/2025 (AY 2015-16) C S Srinivasan Vs JCIT C 1(1) :: 5 :: jurisdictional defect. The Madras High Court has repeatedly emphasized that where the statute and binding circular prescribe a particular manner of initiation, deviation therefrom renders the proceedings vulnerable. In the present case, the initiation of penalty proceedings after a lapse of more than four years from the completion of assessment, without any intervening discovery or fresh material, strongly indicates that the initiation was not contemporaneous with assessment, but an afterthought. 9. In this context, reliance is also placed on the judgment of the Hon'ble Supreme Court reported in (2016) 286 CTR 159, wherein it has been held that satisfaction for initiation of penalty proceedings must emanate from the proceedings in which the alleged default is examined, and that penalty proceedings cannot be initiated as an afterthought or in a manner divorced from the primary proceedings 10. The appellant respectfully submits that the judicial precedents relied upon by the Revenue, wherein limitation has been computed from the date of initiation by the Joint Commissioner, are clearly distinguishable on facts. In those cases, the assessment orders themselves contained findings or observations regarding violation, or satisfaction was recorded during assessment proceedings, or the penalty proceedings followed the assessment within reasonable proximity of time. None of these features are present in the appellant's case. 11. The Revenue's contention that the appellant did not object to limitation or jurisdiction before the Joint Commissioner is respectfully submitted to be of no legal consequence, It is a settled principle that there can be no estoppel against statute, and that issues of jurisdiction and limitation are pure questions of law, which can be raised at any stage of the proceedings, including before the appellate authorities. 12. Without prejudice to the above jurisdictional submissions, the appellant further submits that the Madras High Court has also examined the substantive applicability of section 271E and has cautioned against mechanical imposition of penalty. In Anamallais Bus Transports (P.) Ltd. v. Principal Commissioner of Income-Tax, reported in 158 Taxmann.com 245 (Madras, 2024), the Hon'ble High Court held that where there is no actual cash transaction, and repayment of loan is effected through accounting entries duly recorded in the books of account, the statutory conditions of section 269T are not satisfied and penalty u/s. 271E cannot be sustained. This decision underscores that penal provisions must be strictly construed.

ITA No 1477/Chny/2025 (AY 2015-16) C S Srinivasan Vs JCIT C 1(1) :: 6 :: 13. The Madras High Court has also recognized, in Commissioner of Income-Tax v. Shri T. Perumal and Commissioner of Income-Tax v. Lakshmi Trust Co., that penalty u/s.s 271D and 271E is not automatic, and that the presence of reasonable cause u/s. 273B and absence of mala fide intent are relevant considerations. These decisions reinforce the principle that penal provisions must be applied judiciously and not mechanically. 14. The appellant therefore respectfully reiterates that the initiation of penalty proceedings u/s. 271E in the present case suffers from a fundamental jurisdictional infirmity, namely absence of satisfaction during assessment proceedings and belated initiation without statutory foundation. Once the initiation itself is held to be invalid, the question of computing limitation from such initiation does not arise. 15. The appellant humbly prays that these clarifications and rejoinder submissions may kindly be taken on record and considered while adjudicating the appeal.

The assessee's case was selected for scrutiny under CASS and the assessment was completed on 13.05.2017 accepting the return of income filed by the assessee. It was observed in the Form-3CD for the relevant assessment that the assessee had repaid loan in cash exceeding the specified limits u/s 269T amounting to Rs.99,32,800/- which was qualified in the audit report. Based on the above information, show-cause notice u/s 274 r.w.s 271E was issued on 25.08.2021 imposing a penalty of Rs.99,32,800/-. The assessee preferred an appeal before the CIT(A) against the penalty order. The CIT(A) decided the appeal of the assessee in favour of the Department. The assesse preferred an appeal before the Honourable ITAT against the CIT(A)'s order. The assessee's main contention is that the order ought to have been passed within six month from the end of the month in which the assessment was passed. The assessee has placed its reliance on the decision in the case of CIT v. Hissaria Brothers [386 ITR 719 (SC)], wherein the Hon'ble Supreme Court affirmed that the limitation u/s. 275(1)(c) starts from the date of completion of assessment where penalty proceedings were not initiated therein and initiation of penalty at a later stage does not extend limitation. In this context it may be pertinent to cite the case law Tvl. Chandro Process v. Deputy Commissioner of Income-tax

ITA No 1477/Chny/2025 (AY 2015-16) C S Srinivasan Vs JCIT C 1(1) :: 7 :: [2025] 173 taxmann.com 976 (Madras) and to refer to para 46 and 47 of the above judgement. The content of para 46 and 47 is reproduced below for ready reference: “46. The attention of the Hon'ble Supreme Court was not brought to that portion of the decision of the Division Bench of the Rajasthan High Court which had allowed the contention of the assessee that the practice adopted was in line with Circular No.556, dated 23.02.1990 of the Central Board of Direct Taxes. Similarly, attention of the Hon'ble Supreme Court was not brought to the express views of the Central Board of Direct Taxes in Circular No. 56 dated 19.03.1971. 47. Thus the decision in Hissaria Bros (Supra) which was passed upholding the obiter dicta of the Division Bench of the Rajasthan High Court in Hissaria Bros (supra) (Rajasthan) without clear discussion on Section 275(1) of the IT Act, cannot be said to have a binding precedential value. The case of Grihalakshmi Vision v. Additional Commissioner of Income-tax, Range 1, Kozhikode ([2015] 63 taxmann.com 196 [Kerala]) is referred and the relevant portion of judgement is placed below:- “Question to be considered is whether proceedings for levy of penalty, are initiated with the passing of the order of assessment by the Assessing Officer or whether such proceedings have commenced with the issuance of the notice by the Joint Commissioner. From statutory provision, it is clear that the competent authority to levy penalty being the Joint Commissioner. Therefore, only the joint Commissioner can initiate proceedings for levy of penalty. Such initiation of proceedings could not have been done by the Assessing Officer. The statement in the assessment order that the proceedings u/s.s 271D and 271E are initiated is inconsequential. On the other hand, if the assessment order is taken as the initiation of penalty proceedings, such initiation is by an authority who is incompetent and the proceedings thereafter would be proceedings without jurisdiction. If that be so, the initiation of the penalty proceedings is only with the issuance of the notice issued by the

ITA No 1477/Chny/2025 (AY 2015-16) C S Srinivasan Vs JCIT C 1(1) :: 8 :: Joint Commissioner to the assessee to which he has filed his reply. [Para 10].” In view of the above citation the contention of the assessee that the penalty was not passed within the stipulated time limit does not hold good. Further, the Central Board of Direct Taxes vide Circular No. 09/DV/2016 (Departmental View) dated 26.04.2016 has issued a clarification on Commencement of limitation of penalty proceedings u/s.s 271D and 271E of the Income-tax Act, 1961. The relevant extract of the above is placed below for ready reference:- 2 On careful examination of the matter, the hoard is of the view that for the sake of clarity and uniformity, the conflict needs to be resolved by way of a "Departmental View". 3 The Hon'ble Kerala High Court in the case of Grihalaxmi Vision v. Addl. Commissioner of Income Tax, Range 1. Kozhikode, vide its order dated 8.7.15 in ITA No.83486 of 2014, observed that. "Question to be considered it whether proceedings for levy of penalty with passing of the order of assessment by the Assessing Officer or whether such proceedings have commenced with the issuance of the notice tuned by the Joint Commissioner. From statutory provision, it is clear that the competent authority to levy penalty being the Joint Commissioner. Therefore, only the Joint Commissioner can initiate proceedings for levy of penalty. Such initiation of proceedings could not have been done by the Assessing Officer. The statement in the assessment order that the proceedings under that the proceedings u/s. 271D and E are initiated is inconsequential. On the other hand if the assessment order is taken as the initiation of penalty proceedings, such initiation is by an authority who is incompetent and the proceedings thereafter would be proceedings without Jurisdiction. If that be so, the initiation of the penalty proceedings is only with the issuance of the notice issued by the Joint Commissioner to the assessee to which he has filed his reply. 4 The above judgment reflects the "Departmental View". Accordingly, the Assessing Officers (below the rank of Joint Commissioner of Income Tax.) may be advised to make a reference to the

ITA No 1477/Chny/2025 (AY 2015-16) C S Srinivasan Vs JCIT C 1(1) :: 9 :: Range Head, regarding any violation of the provisions of section 26955 and section 269T of the Act, as the case may be, in the course of the assessment proceedings (or any other proceedings sunder the Act). The Assessing Officer, (below the rank of Joint Commissioner of Income Tax) shall not issue the notice in this regard. The Range Head will issue the penalty notice and shall dispose complete the proceedings within the limitation prescribed w/s 275(1)(c) of the Act. 5. Where any High Court decides this is issue contrary to the "Departmental View", the "Departmental View" thereon shall not be operative in the area falling in the jurisdiction of the relevant High Court. However, the CCIT concerned should immediately bring the judgment to the notice of the Central Technical Committee. The CTC shall examine the said judgment on priority to decide as to whether filing of SLP to the Supreme Court will be adequate response for the time being or some legislative amendment is called for. It may be pertinent to mention here section 275 of the Income-tax Act, 1961, dealing with the bar of limitation for imposing penalties and the same is reproduced below for ready reference: - "275. Bar of limitation for imposing penalties: - (1) No order imposing a penalty under this Chapter shall be passed- (a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the Joint Commissioner (Appeals) or to the Commissioner (Appeals) u/s. 246 or section 246A or an appeal to the Appellate Tribunal u/s. 253, 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 the order of the Joint Commissioner (Appeals) or the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Principal Commissioner or Commissioner, whichever period expires later:

ITA No 1477/Chny/2025 (AY 2015-16) C S Srinivasan Vs JCIT C 1(1) :: 10 :: Provided that in a case where the relevant assessment or other order is the subject-matter of an appeal to the Joint Commissioner (Appeals) or to the Commissioner (Appeals) u/s. 246 or section 246A, and the Joint Commissioner (Appeals) or the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Joint Commissioner (Appeals) or the Commissioner (Appeals) is received by the Principal Commissioner or Commissioner, whichever is later; (b) in a case where the relevant assessment or other order is the subject-matter of revision u/s. 263 or section 264, after the expiry of six months from the end of the month in which such order of revision is passed; (c) in any other case, 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." The instant case is covered under 275(1)(c) for calculating the period of limitation to pass the penalty order u/s 271E of the Income-tax Act, 1961. The notice to initiate penalty u/s 274 r.w.s 271E of the Income-tax Act, 1961 was issued on 25.08.2021 by Range-1, Trichy. The Addl. Commissioner of Income-tax, Range -1, Trichy issued a show cause notice dated 20.12.2021 to the assessee to make his submission by 24.12.2021. The penalty order u/s 271E dated 23.01.2022 was passed levying penalty of Rs.99,32,800/- and served on the assessee. It can be seen from the above discussions that the penalty order was passed well within the 6 months period as mentioned in section 275(1)(c) from the date of initiation of penalty. In view of the above submissions, it is submitted that the appeal of the assessee is legally untenable and requires to be quashed.

ITA No 1477/Chny/2025 (AY 2015-16) C S Srinivasan Vs JCIT C 1(1) :: 11 :: 6. Rejoinder by Assessee to written submissions filed by the Ld. Departmental Representative is as under: (On Limitation u/s. 275 in respect of Penalty u/s. 271E)

This rejoinder is respectfully submitted in response to the written submissions filed by the Learned Departmental Representative, particularly with reference to (i) the decision in Chandro Process, (ii) the decision in Grihalakshmi Vision, and (iii) CBDT Circular No. 9/DV/2016. At the outset, it is submitted that the Revenue's submissions, though framed as a namely, whether the jurisdictional defense, do not address the core statutory issue penalty proceedings in the present case are barred by limitation u/s. 275 of the Act. There is no dispute that the Joint Commissioner is the competent authority to impose penalty u/s. 271E. However, jurisdiction to impose penalty and the temporal limits within which such jurisdiction may be exercised are two distinct statutory controls. The existence of jurisdiction does not dispense with compliance with limitation.

I. The Undisputed Factual Position

The assessment u/s. 143(3) was completed on 13.05.2017. No appeal was filed against that assessment order. The assessment order does not contain any satisfaction regarding violation of Section 269T. There is no reference to initiation of penalty proceedings, nor any indication that the Assessing Officer considered the matter fit for penalty action during assessment proceedings.

The first notice u/s. 271E was issued only on 25.08.2021 more than four years after completion of assessment and the penalty order was passed on 23.01.2022. Thus, the initiation of penalty proceedings is entirely disconnected from the assessment proceedings and arises after a substantial lapse of time.

II. Applicability of Section 275(1)(c)

Since no appeal was filed against the assessment order, the case falls within Section 275(1)(c), which governs limitation in "any other case."

ITA No 1477/Chny/2025 (AY 2015-16) C S Srinivasan Vs JCIT C 1(1) :: 12 :: Even in Chandro Process, relied upon by the Revenue, the Court clearly states (Para 54) that where no appeal is filed, limitation is governed by Section 275(1)(c). That legal position is unambiguous. The Revenue's reliance on Paras 46 and 47 of the same judgment, which deal only with the authority competent to impose penalty, cannot override the statutory classification recognised by the Court itself. Jurisdiction determines who may act. Limitation determines when that action must be taken. The Revenue's submissions conflate the two.

III. Chandro Process-Contextual Distinction

In Chandro Process, the Court proceeded on the factual premise that the assessment order itself contained a clear statement that penalty proceedings would be initiated. The matter also arose in the context of an appellate proceeding attracting Section 275(1)(a). In the present case, the assessment order is completely silent. There was no recorded satisfaction, no direction, and no contemporaneous initiation. Therefore, the factual foundation which justified application of Section 275(1)(a) in that case does not exist here. The correct clause applicable here is Section 275(1)(c).

Selective reliance on certain paragraphs of the judgment without applying its full reasoning does not alter this statutory position.

IV. Grihalakshmi Vision-Not a Case of Delayed Initiation After Silence. The decision in Grihalakshmi Vision v. Addi. CIT was rendered in a materially different factual setting. It did not concern a situation where the assessment order was completely silent and penalty proceedings were initiated after four years without any reference during assessment.

The present case involves precisely such a situation. Even assuming there are divergent judicial views on certain aspects of Section 275, the principle laid down by the Hon'ble Supreme Court in CIT v. Vegetable Products Ltd. squarely applies: where two reasonable interpretations are possible,

ITA No 1477/Chny/2025 (AY 2015-16) C S Srinivasan Vs JCIT C 1(1) :: 13 :: the interpretation favourable to the assessee must be adopted.

The Chennai Bench of the Tribunal in ITA Nos. 1345- 1347/Chny/2024 has applied this very principle in choosing to follow the view in favour of the assessee where conflicting High Court views were cited.

V. Hissaria Bros and JKD Capital-Directly Applicable

In CIT v. Hissario Bros., the Rajasthan High Court held that penalty proceedings u/s.s 271D/271E are independent of assessment proceedings and are therefore governed by Section 275(1)(c). The dismissal of SLP by the Supreme Court lends finality to that classification.

In PCIT v. JKD Capital & Finlease Ltd., the Delhi High Court emphasised that initiation cannot be indefinitely postponed and that limitation must be strictly applied in order to preserve statutory discipline.

The ratio emerging from these authorities is clear; while penalty u/s. 271E is independent, it is not temporally unregulated. It must be initiated within the statutory framework of Section 275(1)(c), and the authority cannot revive proceedings after a prolonged and unexplained delay.

The present case, where initiation occurs more than four years after assessment and without any recorded satisfaction, falls squarely within this principle.

VI. CBDT Circular No. 9/DV/2016 The Circular clarifies that where violation of Sections 269SS/269T is noticed during assessment, the Assessing Officer should make reference to the Range Head, who shall issue notice and dispose of the proceedings within limitation u/s. 275(1)(c). The Circular presupposes contemporaneous detection and prompt reference during assessment proceedings. In the present case, no such reference was made during assessment. The administrative scheme contemplated by the Circular was not followed. The Circular does not authorise initiation at any distant future date disconnected from assessment proceedings.

ITA No 1477/Chny/2025 (AY 2015-16) C S Srinivasan Vs JCIT C 1(1) :: 14 ::

VII. The Structural Consequence of the Revenue's Interpretation If the Revenue's interpretation is accepted that limitation begins only from the date the Joint Commissioner chooses to issue notice then the statutory safeguard u/s. 275(1)(c) becomes illusory.

Such an interpretation would permit: • Initiation after five or ten years, • Limitation controlled by administrative inaction, • Erosion of finality of completed assessments. The statute does not permit such elasticity.

Limitation provisions are enacted to ensure certainty, finality, and discipline in exercise of statutory power. They must be strictly applied.

Conclusion

The present case is one where:

The assessment order dated 13.05.2017 is silent regarding penalty.  No appeal was filed.  No satisfaction was recorded.  No reference was made during assessment.  Penalty notice was issued only on 25.08.2021. Applying the statutory scheme of Section 275(1)(c), as recognised even in the authorities cited by the Revenue, the initiation and consequential penalty order are barred by limitation. Even assuming two views are possible, the principle laid down in Vegetable Products mandates adoption of the interpretation favourable to the assessee. For these reasons, the penalty order u/s. 271E deserves to be set aside as time-barred. This may kindly be treated as the rejoinder in the matter. 7. We have heard the rival submissions, perused written submissions/rejoinder and case law paper book filed. In this case we find that the assessment order u/s 143(3) has been passed on 13.05.2017 wherein there was no satisfaction ever recorded by the AO regarding penalty under the Act. All of a sudden after more than five years from the assessment order

ITA No 1477/Chny/2025 (AY 2015-16) C S Srinivasan Vs JCIT C 1(1) :: 15 :: dated 13.05.2017, Addl.CIT issued penalty show cause notice u/s. 274 r.w.s. 271E of the Act dated 25.08.2021. Thereafter, the Addl.CIT passed the penalty order on 23.01.2022. 8. In a similar situation, the Hon’ble Delhi High Court in the case of Pr. CIT v. Mahesh Wood Products (P) Ltd 394 ITR 312 (Del) has held as under: “9. However, this question came up for consideration in JKD Capital & Finlease Ltd. (supra). The date on which the AO recommended the initiation of penalty proceedings was taken to be the relevant date as far as Section 275(1)(c) was concerned. There was no explanation for the delay of nearly five years in the ACIT acting on the said recommendation. The Court held that the starting point would be the 'initiation' of penalty proceedings. Given the scheme of Section 275(1)(c) it would be the date on which the AO wrote a letter to the ACIT recommending the issuance of the SCN. While it is true that the ACIT had the discretion whether or not to issue the SCN, if he did decide to issue a SCN, the limitation would begin to run from the date of letter of the AO recommending 'initiation' of the penalty proceedings.”

“11. In fact, when the AO recommended the initiation of penalty proceedings the AO appeared to be conscious of the fact that he did not have the power to issue notice as far as the penalty proceedings under section 271-E was concerned. He, therefore, referred the matter concerning penalty proceedings under Section 271-E to the Additional CIT. For some reason, the Additional CIT did not issue a show cause notice to the assessee under Section 271-E(1) till 20th March 2012. There is no explanation whatsoever for the delay of nearly five years after the assessment order in the Additional CIT issuing notice under Section 271-E of the Act. The Additional CIT ought to have been conscious of the limitation under Section 275(1)(c), i.e., that no order of penalty could have been passed under Section 271-E after the expiry of the financial year in which the quantum proceedings were completed or beyond six months after the month in which they were initiated, whichever was later. In a case where the proceedings stood initiated with the order passed by the AO, by delaying the issuance of the notice under Section 271-E beyond 30th June 2008, the Additional CIT defeated the very object of Section 275(1)(c).

ITA No 1477/Chny/2025 (AY 2015-16) C S Srinivasan Vs JCIT C 1(1) :: 16 :: 10. Further, the Hon’ble Delhi High Court in the case of Turner General Entertainment Networks India (P) Ltd. 302 Taxman 187 (Del) CIT has held as under: “11. The question as to when a penalty proceeding can be stated to be initiated is squarely covered in favour of the assessee by the decision of this Court in Principal Commissioner of Income Tax-5 v. JKD Capital & Finlease Ltd.; (2015) 378 ITR 614 (Del). The relevant extract of the said decision is set out below: “10. Considering that the subject matter of the quantum proceedings was the non-compliance with Section 269 T of the Act, there was no need for the appeal against the said order in the quantum proceedings to be disposed of before the penalty proceedings could be initiated. In other words, the initiation of penalty proceedings did not hinge on the completion of the appellate quantum proceedings. This position has been made explicit in the decision in CIT v. Worldwide Township Projects Limited (supra) in which the Court concurred with the view expressed in Commissioner of Income- Tax v. Hissaria Bros. (2007) 291 ITR 244(Raj) in the following terms: “The expression other relevant thing used in s. 275(1)(a) and cl. (b) of Sub-s. (1) of S. 275 is significantly missing from cl. (c) of s. 275(1) to make out this distinction very clear. We are, therefore, of the opinion that since penalty proceedings for default in not having transactions through the bank as required under ss. 269SS and 269T are not related to the assessment proceeding but are independent of it, therefore, the completion of appellate proceedings arising out of the assessment proceedings or the other proceedings during which the penalty proceedings under ss. 271D and 271E may have been initiated has no relevance for sustaining or not sustaining the penalty proceedings and, therefore, cl. (a) of sub-s. (1) of s. 275 cannot be attracted to such proceedings. If that were not so cl. (c) of s. 275(1) would be redundant because otherwise as a matter of fact every penalty proceeding is usually initiated when during some proceedings such default is noticed, though the final fact finding in this proceeding may not have any bearing on the issues relating to establishing default e.g. penalty for not deducting tax at source while making payment to employees, or contractor, or for that matter not making payment through cheque or demand draft where it is so required to be made. Either of the contingencies does not affect the computation of taxable income and levy of correct tax on chargeable income; if cl. (a) was to be invoked, no necessity of cl. (c) would arise.” 11. In fact, when the AO recommended the initiation of penalty proceedings the AO appeared to be conscious of the fact that he did not have the power to issue notice as far as the penalty proceedings u/s. 271-E was concerned. He, therefore, referred the matter concerning penalty proceedings u/s. 271-E to the

ITA No 1477/Chny/2025 (AY 2015-16) C S Srinivasan Vs JCIT C 1(1) :: 17 :: Additional CIT. For some reason, the Additional CIT did not issue a show cause notice to the Assessee u/s. 271-E (1) till 20th March 2012. There is no explanation whatsoever for the delay of nearly five years after the assessment order in the Additional CIT issuing notice u/s. 271-E of the Act. The Additional CIT ought to have been conscious of the limitation u/s. 275 (1) (c), i.e., that no order of penalty could have been passed u/s. 271-E after the expiry of the financial year in which the quantum proceedings were completed or beyond six months after the month in which they were initiated, whichever was later. In a case where the proceedings stood initiated with the order passed by the AO, by delaying the issuance of the notice u/s. 271- E beyond 30th June 2008, the Additional CIT defeated the very object of Section 275 (1) (c). 12. In that view of the matter, the order of the CIT (A) which has been affirmed by the impugned order of the ITAT does not suffer from any legal infirmity.” 12. Mr. Sharma, the learned counsel appearing for the Revenue sought to distinguish the case of Principal Commissioner of Income Tax-5 v. JKD Capital & Finlease Ltd. (supra) on the ground that the delay in the said case was over five years. However, we are unable to accept that the ratio decidendi of the said decision is inapplicable in the facts of this case. Although, the delay in the case of Principal Commissioner of Income Tax5 v. JKD Capital & Finlease Ltd. (supra) was more than five years and there was no explanation to the said delay, the said decision also rests on the principle that the initiation of penalty proceedings cannot be delayed in an arbitrary manner. And, the initiation of proceedings must be considered as on date on which a reference was made to the concerned officer if not earlier. 13. In the present case, the learned JCIT, after receipt of the reference for penalty proceedings, had not taken immediate steps for concluding the said proceedings. He issued the show cause notice almost a year after receiving of the reference. 14. The expression initiated is not defined under the Act and must be construed in its normal sense. 15. The word ‘initiated’ is a past tense of the word ‘initiate’. The Shorter Oxford English Dictionary defines the word ‘initiate’ as under: “to begin, commence, enter upon, to introduce, set going, originate. 16. In Webster’s Third New International Dictionary, the word ‘initiate’ has, inter alia, been defined thus: “to begin or set going: make a beginning of: perform or facilitate the first actions, steps, or stages of:” 17. The Words and Phrases (Permanent Edition) defines ‘initiate’ to mean: “an introductory step or action, a first move; beginning; start, and to initiate as meaning – to commence.”

ITA No 1477/Chny/2025 (AY 2015-16) C S Srinivasan Vs JCIT C 1(1) :: 18 :: 18. In Om Prakash Jaiswal v. D.K. Mittal & Anr.: (2000) 3 SCC 171, the Supreme Court had considered the meaning of the expression ‘initiate any proceedings for contempt’ by referring to the dictionary meaning of the said word. It is relevant to refer to paragraph 10 of the said decision, which is set out below: “10. The expression—"initiate any proceedings for contempt” is not defined in the Act. Words and Phrases (Permanent Edition) defines “initiate” to mean – an introductory step or action, a first move; beginning; start, and “to initiate” as meaning to commence. Black's Law Dictionary (6 th Edn.) defines “initiate” to mean commence; start; originate; introduce; inchoate. In section 20, the word “initiate” qualifies “any proceedings for contempt”. It is not the initiation of just any proceedings; the proceedings initiated have to be proceedings for contempt.” 19. The expression ‘action for imposition of penalty is initiated’ must, thus, clearly refers to the date on which the first introductory step for such action is taken, it must necessarily mean the start of such action. It must mean the commencement of action for imposition of penalty. As noted above, the AO had found that it was the admitted case that the assessee had defaulted in deduction of TDS, which it was obliged to do. It had, accordingly, made a reference to the learned JCIT. This was obviously for the purposes of imposition of penalty. The reference, thus, clearly marked the first step for initiation of action for imposition of penalty. The Show Cause Notice issued subsequently was to provide the assessee an opportunity to show cause why penalty not be imposed. 20. In the given context, this was in the beginning of the action for imposition of penalty. The same had commenced earlier with the AO determining that there was a cause for such imposition. 21. In view of the above, we find no infirmity with the decision of the learned ITAT that the penalty proceedings had been initiated at the earliest on 25.09.2014 and the order of penalty passed by the learned JCIT (TDS) was barred by limitation. 22. In view of the above, no substantial question of law arises for consideration of this Court in this appeal. 23. Accordingly, the present appeal is dismissed.

ITA No 1477/Chny/2025 (AY 2015-16) C S Srinivasan Vs JCIT C 1(1) :: 19 :: the first step or commencement of action for imposition of penalty. In the present case, no step whatsoever was taken during assessment proceedings. The first action occurred only on 25.08.2021, after an inordinate delay of more than four years. Since no appeal was filed against the assessment order, the present case falls under section 275(1)(c). As per the statutory provision, penalty must be imposed within the financial year in which proceedings are completed, or within six months from the end of the month in which action for imposition of penalty is initiated, whichever is later. However, the critical question is: When did the “action for imposition of penalty” actually commence?

The Hon’ble Delhi High Court in JKD Capital & Finlease Ltd. and subsequent decisions has held that initiation cannot be indefinitely delayed. Where the Assessing Officer records satisfaction or makes a reference, that constitutes initiation. Delay by the competent authority cannot defeat the limitation provisions. Further, it has been emphasized that limitation provisions are intended to ensure certainty and finality, and cannot be rendered otiose by administrative delays. In the present case, there is no explanation whatsoever for the delay of more than four years. No reference or satisfaction exists on record. The contention of ld.DR for the revenue that only the Joint Commissioner can initiate penalty proceedings does not address the core issue. While jurisdiction lies with the Joint Commissioner, the trigger for such jurisdiction must arise during assessment proceedings. Acceptance of Revenue’s contention would imply that initiation can be done at any time in

ITA No 1477/Chny/2025 (AY 2015-16) C S Srinivasan Vs JCIT C 1(1) :: 20 :: future, rendering section 275(1)(c) meaningless. Such an interpretation cannot be accepted. The delay in the present case is substantial. Assessment completed on 13.05.2017 while Penalty notice issued on 25.08.2021. This delay remains unexplained and defeats the legislative intent behind limitation provisions. Considering the totality of facts and legal position, we hold that the initiation of penalty proceedings is not in accordance with law, due to absence of satisfaction during assessment. The proceedings suffer from inordinate and unexplained delay. The penalty order is barred by limitation under section 275(1)(c). Accordingly, the penalty of Rs.99,32,800/- levied under section 271E of the Act is hereby deleted.

Order pronounced in the open court on the 16th day of April, 2026 in

Chennai.

Sd/- Sd/- (एस. आर. रघुनाथा) (मनु कुमार िग�र) (S.R.RAGHUNATHA) (MANU KUMAR GIRI) लेखा सद%य/ACCOUNTANT MEMBER &या�यक सद%य/JUDICIAL MEMBER

चे&नई/Chennai, (दनांक/Dated: 16th April, 2026. SNDP, Sr. PS

ITA No 1477/Chny/2025 (AY 2015-16) C S Srinivasan Vs JCIT C 1(1) :: 21 :: आदेश क� ��त)ल*प अ+े*षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF