ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL-2, RAIPUR, NAWA RAIPUR vs. HARSHIT SINGHANIA BUILDCON, RAIPUR
What did the Tribunal hold?
The Tribunal held that the Ld. CIT(A) was not justified in quashing the penalty order on the grounds of limitation. The Tribunal reversed the finding of the Ld. CIT(A) that the penalty order under Section 271D was barred by limitation. The reasoning was based on the interpretation of Section 275(1)(c) and the relevant dates of initiation of penalty proceedings. The Tribunal found that the AO recorded satisfaction in the assessment order dated March 31, 2024, a proposal was sent to the Joint CIT/Addl. CIT on April 22, 2024, the penalty notice was issued on May 1, 2024, and the penalty was levied on November 23, 2024. These actions were considered to be within reasonable time and in accordance with the law. The Tribunal applied the ratio laid down in JCIT Vs. Ganesh Agrawal and others (Karnataka High Court). The impugned order of the Ld. CIT(A) was set aside, and the case was remitted back to the Ld. CIT(A) for adjudicating all other grounds raised in Form-35, other than the issue of limitation.
What were the facts?
The Revenue appealed an order of the CIT(Appeals) for Assessment Year 2022-23. The assessee, Harshit Singhania Buildcon, a real estate developer, filed its return declaring an income of Rs. 88,29,550/-. A search under Section 132 on January 6, 2023, led the Assessing Officer (AO) to identify alleged cash receipts of Rs. 1,11,85,299/- from sale of units, not recorded in books. The AO treated these as unexplained money under Section 69A and violations of Section 269SS. The AO recorded satisfaction for penalty proceedings under Section 271D in the assessment order dated March 31, 2024. A reference was made to the Additional CIT on April 22, 2024, who subsequently issued notices and levied a penalty of Rs. 1,11,85,299/- under Section 271D on November 23, 2024.
What were the issues?
1. Whether the penalty order under Section 271D is barred by limitation as prescribed under Section 275(1)(c) of the Income Tax Act, 1961. Assessee's Contention: The penalty order is barred by limitation. The assessee argued that the limitation period under Section 275(1)(c) should be reckoned from the date of recording satisfaction in the assessment order or the date of reference to the competent authority, citing decisions in PCIT vs. Rishikesh Buildcon Pvt. Ltd., CIT vs. Thapar Homes Limited, and CIT vs. Shri Jitendra Singh Rathore. Revenue's Contention: The Revenue contended that the penalty proceedings were initiated within the prescribed time. The Tribunal, in its analysis, considered the Supreme Court's decision in Armour Security (India) Ltd. and decisions of the Delhi High Court in JKD Capital & Finlease Ltd. and M/s. Adma Solutions Pvt. Ltd., distinguishing them on facts. The Tribunal also referred to its own decision in Jagdish Prasad Singhania Vs. Addl. CIT(TDS).
Which sections of the Income-tax Act were involved?
Section 132,Section 69A,Section 269SS,Section 271D,Section 274,Section 275(1)(c),Section 143(3),Section 250(4),Section 250(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAIPUR BENCH “DB”, RAIPUR
Before: SHRI PARTHA SARATHI CHAUDHURY & SHRI AVDHESH KUMAR MISHRA
आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM:
The present appeal preferred by the Revenue emanates from the order of the Ld.CIT(Appeals), Raipur-3, dated 16.04.2026 for the assessment year 2022-23 as per the grounds of appeal on record.
Brief facts in this case are as follows: “The brief facts of the case are that the assessee is a partnership firm engaged in the business of real estate development. The return of income for A.Y. 2022-23 was filed on 22.10.2022 declaring total income of Rs.88,29,550/-. A search and seizure operation u/s 132 of the Income Tax Act, 1961 [herein after referred as the Act] was conducted on 06.01.2023 in the case of Singhania Group, including the premises situated at Shyam Chamber, Hirapur, Raipur. During the course of search proceedings, various documents were found &seized and data backup of electronic devices were taken. On examination of the seized documents namely LPS-2, LPS-19, LPS-85, LPS-88, LPS-91, LPS-103, LPS-105, LPS-108, LPS-116, LPS-123 and LPS-125, the Assessing Officer observed that the appellant had allegedly received cash amounts aggregating to Rs. 1,11,85,299/- (Rs.1,04,28,624/- + Rs.7,56,675/-) from various customers against sale of units in its project "Harshit Neo City". The Assessing Officer held that the said cash receipts were not recorded in the regular books of accounts and treated the same as unexplained money u/s 69A of the Act. Further, it was alleged that such receipts were in violation of provisions of section 269SS of the Act, being acceptance of specified sum otherwise than through prescribed banking channels. Simultaneously, the Assessing Officer recorded satisfaction in the assessment order dated 31.03.2024 for initiation of penalty proceedings under section 271D for alleged violation of section 269SS. Thereafter, a reference proposal was made by the Assessing Officer to the Additional Commissioner of Income Tax (Central), Raipur on 22.04.2024 for initiation of penalty proceedings. Pursuant thereto,
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notices under section 274 read with section 271D were issued from time to time, and after considering the replies of the assessee, the Additional CIT passed the penalty order dated 23.11.2024 levying penalty of 1,11,85,299/- under section 271D.”
The Ld.CIT(Appeals) after considering the submissions of the assessee and the penalty order, provided relief to the assessee by observing as follows: “I have carefully gone through the assessment order, the penalty order passed u/s.271D against which the present appeal is preferred, reply of the assessee, Legal Paper Book and Paper Book submitted by the assessee and the judicial precedents relied upon by the assessee. The facts, in brief, are that a search under section 132 was conducted in the case of the assessee on 06.01.2023. During the course of search, certain documents were seized which, according to the Assessing Officer, indicated receipt of on- money in cash from sale of real estate units. The Assessing Officer treated such receipts as violation of provisions of section 269SS and, accordingly, recorded satisfaction in the assessment order passed under section 143(3) dated 31.03.2024 for initiation of penalty proceedings under section 271D. Subsequently, the Assessing Officer made a reference to the Additional Commissioner of Income Tax (Central), Raipur vide letter dated 22.04.2024 for initiation and levy of penalty under section 271D. Thereafter, notice under section 274 r.w.s. 271D was issued on 01.05.2024, 28.05.2024 and 07.11.2024 and the Additional CIT passed the penalty order imposing penalty under section 271D on 23.11.2024. The appellant has challenged the validity of the penalty order, inter alia, on the ground that the same is barred by limitation as prescribed under section 275(1)(c) of the Act. I have carefully considered the provisions of section 275(1)(c), which provide that the penalty order shall be passed before the expiry of:
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(i) the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed; or (ii) six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. It is an undisputed fact that the assessment proceedings were completed on 31.03.2024. Accordingly, the limitation under the first limb expires on 31.03.2024. As regards the second limb, there exist divergent views as to the point of initiation of action for imposition of penalty proceedings—whether it is the date of recording of satisfaction in the assessment order or the date of reference by the Assessing Officer to the competent authority or the date of issuance of show cause notice by the competent authority. I have carefully considered the facts of the case in PC1T vs. Rishikesh Buildcon Pvt,, Ltd (Delhi High Court), it is observed that the Ld. A.O. recorded satisfaction for initiation of penalty proceedings in the ,quantum assessment order dated 17 12.2008. Subsequently, a reference was made to the prescribed authority on 18.03.2009 and the show cause notice was issued by the competent authority on 24.03.2009, the Hon'ble High Court held that, the date of initiation of penalty proceedings for the purpose of section 275(1)(c) is to be reckoned from the date on which satisfaction for initiation is recorded in the assessment proceedings, i.e., 17.12.2008, accordingly, the last permissible date of Order u/s 271D expired on30.06.2009, whereas, the penalty order has been passed on 29.09.2009, is beyond the prescribed period of limitation. In the case of PUT (CENTRAL -II), Delhi Vs Thapar Homes. Limited (Delhi High Court), it is observed that the Ld. A.O. recorded satisfaction for initiation of penalty proceedings in the quantum assessment order dated 31.12.2010 and the show cause notice was issued by the competent authority on 13.06.2011. The Hon'ble High Court held that prior to triggering the penalty proceedings, the Assessing Officer had obtained approval from the ACIT, who is of a rank equivalent to the Joint Commissioner. Thus, the decision to initiate penalty proceedings stood crystallized and embedded in the assessment order itself dated 31.12.2010, which-.was passed
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after due approval. The subsequent issuance of notice is merely a consequential procedural step and does not determine the point of initiation. In light of the judicial pronouncement, the relevant date for initiation of penalty proceedings for the purpose of section 275(1)(c) is the date on which satisfaction is recorded in the assessment proceedings, i.e., 31.12.2010, and not the date of issuance of show cause notice, accordingly, the last permissible date of Order u/s 271D expired on 30.06.2011. However, the penalty order has been passed on 30.12.2011, was beyond the prescribed period of a limitation. I have carefully considered the facts of the case in CIT, Udaipur vs. Shri Jitendra Singh Rathore (Rajasthan High Court), it is observed that the Ld.A.O recorded satisfaction for initiation of penalty proceedings in the quantum assessment order dated 25.03.2003. Subsequently, a reference was made to the prescribed authority on 22.03.2004, the Hon’ble High Court held that, the date of initiation of penalty proceedings for the purpose of section 275(1)(c) is to be reckoned from the date on which satisfaction for initiation is recorded in the assessment proceedings, i.e., 25.03.2003, accordingly, the last permissible date of Order u/s 271D expired on 30.09.2003. However, the penalty order has been passed on 28.05.2004, was beyond the prescribed period of limitation. In the present case, I find that the Assessing Officer had clearly recorded satisfaction regarding violation of section 269SS in the assessment order itself, which was passed with the approval of the Additional CIT (Central). The recording of such satisfaction, in my considered opinion, constitutes initiation of action for imposition of penalty. The appellant has relied upon various judicial pronouncements wherein it has been held that the date of recording of satisfaction in the assessment order is to be considered as the date of initiation of action for imposition of penalty for the purposes of section 275(1)(c). The decisions relied upon by the appellant are found to be supporting the case of the assessee. Respectfully following the judicial precedents relied upon by the appellant, I hold that the period of six months is to be reckoned from the end of the month in which the assessment order was passed, i.e., from 31.03.2024. Accordingly, the limitation period under the second limb expired on 30.09.2024.
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Even if the alternative view is taken that the date of reference by the Assessing Officer, i.e., 22.04.2024, is considered as the date of initiation, the limitation expired on 31.10.2024. However, in the facts of the present case, since the satisfaction was recorded in the assessment order itself, the earlier date of initiation is to be adopted. Thus, the limitation expired on 30.09.2024.Since the penalty order has been passed on beyond the prescribed period of 23.11.2024, i.e., limitation, the same is clearly barred by limitation and is therefore bad in law. Accordingly, the penalty order passed under section 271D is hereby quashed on the ground of limitation. Since the appeal is allowed on the legal ground of limitation, the other grounds raised by the appellant on merits are not adjudicated. 1. 1 Ground No. 1 to 5:-In view of the foregoing discussion, I have already deleted the penalty. Consequently, ground 1 to 5 raised by the assessee have become infructuous and do not require further consideration. 2. The appeal of the appellant is allowed.”
The Ld. CIT(Appeals) relied on the decisions of the Hon’ble High Court of Delhi in the cases of viz. (i) Pr. CIT Vs. Rishikesh Buildcon Pvt. Ltd., ITA No. 577/2018, 580/2018 and 583/2018; & (ii) Pr. CIT (Central- II), Delhi Vs. Thapar Homes Limited, 2023 (10) TMI 1321 and also decision of the Hon’ble High Court of Rajasthan in the case of CIT, Udaipur Vs. Shri Jitendra Singh Rathore, Income Tax Appeal No.90/2007, dated 10.01.2013 and placing reliance on the aforesaid decisions, held that for purpose of Section 275(1)(c) of the Act, the date of recording of satisfaction in the assessment order has to be considered as the date of initiation of action for imposition of penalty. Accordingly, First Appellate Authority held that the
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period of six months is to be calculated from the end of the month, in which, the assessment order was passed, i.e., from 31.03.2024 and accordingly, the limitation period under the second limb expired on 30.09.2024. The Ld. CIT(Appeals) also held that even otherwise also, since reference made by the A.O had been made to the competent authority on 22.04.2024 that has to be considered as date of initiation of penalty and for that, the limitation expired on 31.10.2024. Since penalty order had been passed on 23.11.2024, therefore, such penalty order u/s. 271D of the Act was quashed on the ground of limitation.
The Ld. CIT-DR has brought to the notice of the Bench at Page 42 of the assessment order wherein, the A.O writes as follows: “Since the assessee has received sums in contravention of section 269SS of the Act. Therefore, I am satisfied that the assessee is liable for penalty u/s.271D of the Act. Accordingly, proposal to initiate penalty proceedings u/s. 271D of the Act will be sent separately on the aforesaid issue to the prescribed authority.”
He further submitted that the A.O has not initiated penalty and he has simply forwarded the proposal to initiate penalty u/s. 271D of the Act to the competent authority. Therefore, observation of the Ld. CIT(Appeals) that the date of reference by the A.O has to be considered as date of initiation of penalty is wrong since the A.O has not initiated penalty and he has simply forwarded the proposal to initiate penalty.
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5.1 That further, the Ld. CIT-DR has placed on record Circular No.09/DV/2016, dated 26th April, 2016 which reads as follows:
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In the said circular, two important parameters are highlighted. Firstly, that relying on the decision of the Hon’ble High Court of Kerala in the case of Grihalaxmi Vision V. Addl. Commissioner of Income Tax, Range-1, Kozhikode, order dated 08.07.2015, ITA Nos. 83 & 86 of 2014, it has been held that only Joint Commissioner can initiate proceedings for levy of penalty. Such initiation of proceedings could not have been done by the A.O. The statement in the assessment order that the proceedings u/s. 271D & E are initiated is inconsequential. The said Departmental Circular (supra) issued by the CBDT are binding on all the officials of the Department. In the said Circular (supra), it has been categorically stated that it is only the Joint Commissioner who can initiate proceedings for levy of penalty and in statement to the fact that penalty u/s. 271D & E are initiated, even it appears in the assessment order, it shall be inconsequential. Secondly, that this Circular of CBDT (supra) shall not be operative in the area falling in the jurisdiction of the relevant High Court which held the view in favour of the assessee.
In the present case before us, there is no decision of the Hon’ble Jurisdictional High Court in favour of the assessee which means that this Circular of CBDT and the view as prescribed therein shall be applicable and binding on the officials of the Department i.e. both the A.O as well as the Ld. CIT(Appeals). The observation of the Ld. CIT(Appeals) that the date
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of reference by the A.O has to be considered as date of initiation of penalty is wrong and perverse against the CBDT Circular which is binding on him. Though the Ld.CIT(Appeals) had placed reliance on the decisions of the Hon’ble High Court of Delhi and Hon’ble High Court of Rajasthan (supra), since in the state of Chhattisgarh, there is no decision of the Hon’ble Jurisdictional High Court in this regard in favour of the assessee, therefore, clearly the mandate of CBDT circular dated 26th April, 2016 shall apply to the officials of the Department and hence, findings of the Ld. CIT(Appeals) contradicting the circular of CBDT is misplaced and incorrect. At the same time, since the Ld. CIT(Appeals) had relied on the decisions of the Superior Forums and had overlooked the relevant CBDT circular (supra), the date of Circular being 26th April, 2016 whereas, the date of passing order of the Ld. CIT(Appeals) is 16.04.2026, therefore, in the interest of substantive justice, keeping the scales of justice balanced, we are inclined to set aside the findings of the Ld. CIT(Appeals) and provide one final opportunity to the Department through the Ld. CIT(Appeals) to revisit the findings in the case of the assessee in light of the CBDT Circular (supra) and the Ld. CIT(Appeals) shall pass a speaking order in terms with Section 250(4) & (6) of the Act as per law while complying with the principles of natural justice. We order accordingly.
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In the result, appeal of the Revenue is allowed for statistical purposes. Order pronounced in the open court on_______ September, 2026.
______ Sd/- AVDHESH KUMAR MISHRA PARTHA SARATHI CHAUDHURY (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; �दनांक / Dated : ________September, 2026. SB, Sr. PS आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : 1. अपीलाथ� /The Appellant. 2. ��यथ� /The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G.) 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, रायपुर ब�च, रायपुर / DR, ITAT, Raipur Bench, Raipur. 5. गाड� फ़ाइल / Guard File. आदेशानुसार / BY ORDER,
Senior Private Secretary आयकर अपील�य अ�धकरण, रायपुर / ITAT, Raipur.
Concurring Order ITA No. 560/RPR/2026 Assessment Year: 2022-23 ACIT, Central Circle-2, Raipur Vs. Harshit Singhania Buildcon
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PER AVDHESH KUMAR MISHRA, AM
I am unable to persuade myself with the complete finding of Ld. Brother in the case of ACIT, Central Circle-2, Raipur vs. Harshit Singhania Buildcon in ITA No. 560/RPR/2026. However, the final outcome; i.e. remitting the matter back to the CIT(A) subject to the finding herein after remain same. The Ld. Brother allowed the appeal of Revenue for statistical purposes as under:
“7. In the present case before us, there is no decision of the Hon'ble Jurisdictional High Court in favour of the assessee which means that this Circular of CBDT and the view as prescribed therein shall be applicable and binding on the officials of the Department i.e. both the A.O as well as the Ld. CIT(Appeals). The observation of the Ld. CIT(Appeals) that the date of reference by the A.O has to be considered as date of initiation of penalty is wrong and perverse against the CBDT Circular which is binding on him. Though the Ld. CIT (Appeals) had placed reliance on the decisions of the Hon'ble High Court of Delhi and Hon'ble High Court of Rajasthan (supra), since in the state of Chhattisgarh, there is no decision of the Hon'ble Jurisdictional High Court in this regard in favour of the assessee, therefore, clearly the mandate of CBDT circular dated 26th April, 2016 shall apply to the officials of the Department and hence, findings of the Ld. CIT(Appeals) contradicting the circular of CBDT is misplaced and incorrect. At the same time, since the Ld. CIT(Appeals) had relied on the decisions of the Superior Forums and had overlooked the relevant CBDT circular (supra), the date of Circular being 26th April, 2016 whereas, the date of passing order of the Ld. CIT(Appeals) is 16.04.2026, therefore, in the interest of substantive justice, keeping the scales of justice balanced, we are inclined to set aside the findings of the Ld. CIT(Appeals) and provide one final opportunity to the Department through the Ld. CIT(Appeals) to revisit the findings in the case of the assessee in light of the CBDT Circular (supra) and the Ld. CIT(Appeals) shall pass a speaking order in terms with Section 250(4) & (6) of the Act as per law while complying with the principles of natural justice. We order accordingly.”
The issue in dispute before us is that whether the penalty levied under section 271D of the Income Tax Act, 1961 (‘Act’) by the Joint/Additional Commissioner of Income
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Tax (Joint CIT/Addl. CIT), Central Range, Raipur is barred by limitation. The grounds raised by the Revenue read as under:
“1. Whether on the facts and circumstance of the case and in law, the Ld. CIT(A) was justified in deleting the penalty of Rs.1,11,85,299/- imposed vide order dated 23.11.2024 u/s 271D of the Income Tax Act, holding that the penalty order was passed beyond the prescribed period of limitation, ignoring: (a) that the AO neither initiated the said penalty proceedings u/s 271D in the assessment order nor he is competent authority for initiation of such penalties and therefore the date of recording of satisfaction in the assessment order cannot be the date of initiation of penalty proceedings? (b) that Joint / Addl. Commissioner, being the competent authority for Section 271D penalties, after receiving the reference from the AO for initiating and levying the penalty u/s 271D, issued show cause notice (SCN) dated 01.05.2024 to the assessee and therefore, the date of the said SCN was the date of initiation of penalty proceeding u/s 271D and accordingly the penalty order dated 23.11.2024 of the Addl. Commissioner was within the time prescribed in section 275(1)(c) of the Income Tax Act, 1961? (c) the clarification issued by the CBDT vide circular no. 10/2016 dated 26.04.2016? 2. Whether on the facts and circumstance of the case and in law, the Ld. CIT(A) was justified in deleting the penalty of Rs. 1,11,85,299/-imposed vide order dated 23.11.2024 u/s 271D of the Income Tax Act, holding that the penalty order was passed beyond the prescribed period of limitation, ignoring that: (a) That from the statutory provisions of section 271D of the Income Tax Act, 1961 it is clear that the impugned penalty proceedings can be initiated only by the Joint / Addl. Commissioner, and such proceedings could not have been initiated by the AO who is clearly incompetent in this regard, and accordingly the initiation of the penalty proceedings is only with the issuance of the notice dated 01.05.2024 by the Addl. Commissioner to the assessee to which it has filed reply and therefore the penalty order dated 23.11.2024 of the Addl. Commissioner was within the time prescribed in section 275(1)(c) of the Income Tax Act, 1961? (b) The judgement in the case of Grihalakshmi Vision [2015] 63 taxmann.com 196 (Kerala) wherein the Hon'ble High Court has held: (i) that only the joint Commissioner can initiate proceedings for levy of such penalty; (ii) that such initiation of proceedings could not have been done by the
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Assessing Officer; (iii) that accordingly the statement in the assessment order that the proceedings under sections 271D and 271E are initiated is inconsequential; (iv) that, therefore, 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; and (v) that, if that be so, the initiation of the penalty proceedings is only with the issuance of the notice issued by the Joint Commissioner to which assessee has filed reply? 3. Any other ground(s) of appeal that may be add, amend, or alter, or to urge fresh grounds at the time of appellate proceedings”
At the outset, Shri Rituparna Namdeo, Ld. CIT-DR, reiterating the Circular No.09/DV/2016 dated 26.04.2016, submitted that the Ld. CIT(A) had acted against this Circular wherein the Departmental View on the issue in dispute had been categorically mentioned that the date on which the competent authority i.e. Joint CIT/Addl. CIT issued the penalty notice under section 271D and 271E of the Act had to be treated as the date of initiation of penalty proceedings. He therefore, contended that the said Circular was binding on the Income Tax Authority including the CIT(A). However, the Ld. CIT(A) allowed the assessee’s appeal ignoring the Circular No. 09/DV/2016. The impugned order was contrary to the view opined in the Circular No. 09/DV/2016. Thus, the Ld. CTI(A) had erred in quashing the penalty levied under section 271D of the Act on the reasoning that the same was barred by limitation. Further, the Ld. CIT-DR referred the decision of Hon’ble Supreme Court in the case of Armour Security India Limited vs. Commissioner of GST, Delhi [SLP(C) No. 6092 of 2025] order dated 14.08.2025 and the decision of Hon’ble Karnataka High Court in the case of Joint Commissioner of Income Tax vs. Ganesh Agrawal and others (WA Nos. 1991, 1977 and 1980 and Seven Others) dated 07.07.2026 and wanted to submit the copies of these decisions in support of his arguments/contentions that the Revenue had a strong case wherein it had been held that
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the date on which the Joint CIT/Addl. CIT issued the penalty notice, for the first time, after receiving the reference from the AO had to be treated as the date of initiation penalty. The penalty had to be levied within 6 months from the end of month in which the said penalty had been initiated. The Revenue’s appeal had to be allowed, he contended. However, the Ld. Brother, Presiding Member of the Bench, did not allow the submission of copies of these case laws opining that we were intending to remand the matter back to the Ld. CIT(A) for fresh adjudication; hence, the case laws were not required to be submitted.
On the other hand, Shri Veekaas S Sharma, CA, Ld. Authorized Representative (AR) of the assessee, placing reliance on the CBDT Circular No. 10/2016, dated 26.04.2016, submitted that the said penalty was barred by limitation. He further contended that the CBDT Circular No. 10/2016 was binding on all the Revenue’s Authorities including the CIT(A); therefore, the Ld. CIT(A) had rightly held that the penalty was barred by limitation. To buttress his contention, he placed reliance on the decisions of Hon’ble Supreme Court in the cases of Commissioner Customs Vs. IOC Ltd. & Others Civil Appeal Nos/ 2342 to 2362 of 2001 and UCO Bank Vs CIT Civil Appeal Nos. 235 of 1996, 9885- 9887 of 1996 & 10408 of 1996 and the decision of Hon’ble Chhattisgarh High Court in the case of DCI Vs. Sunita Finlease Ltd. Tax Case (Appeal) No. 21 of 2008.
The Ld. AR contented that the penalty proceedings got initiated at the stage when the Assessing Officer (‘AO’) recorded the satisfaction in the assessment order regarding the alleged default and any subsequent notice or action by the Joint CIT/Addl. CIT thereafter, merely consequential, could not alter the date of initiation of penalty proceedings. The Ld. AR placed reliance on the decision of Hon’ble Delhi High Court in the cases of PCIT vs. Rishikesh in ITA Nos. 577, 580 and 583/2018, PCIT vs. Thapar Homes Limited reported in 2023 (10) TMI 1321, PCIT vs. JKD Capital & Finlease Ltd. 2015 (10)
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TMI 1281 and CIT vs. M/s. Adma Solutions Pvt. Ltd. reported in 2024 (11) TMI 703. He prayed for dismissal of the Revenue’s appeal as the Ld. CIT(A) had rightly held the penalty levied under section 271D of the Act barred by the limitation.
I have heard both parties and have perused the material available on the record. I have also perused the case laws relied upon by both parties.
The first contention/argument raised by both parties is that the CBDT Circular has binding precedent on Income Tax Authorities including the CIT(A). The Revenue is relying on the Circular No. 09/DV/2016 and the respondent assessee on the Circular No. 10/2016. I am not in agreement with the Ld. Brother’s finding (in para 7 of the draft order), wherein he has held that “there is no decision of the Hon'ble Jurisdictional High Court in this regard in favour of the assessee, therefore, clearly the mandate of CBDT circular dated 26th April, 2016 shall apply to the officials of the Department and hence, findings of the Ld. CIT(Appeals) contradicting the circular of CBDT is misplaced and incorrect. At the same time, since the Ld. CIT(Appeals) had relied on the decisions of the Superior Forums and had overlooked the relevant CBDT circular (supra), the date of Circular being 26th April, 2016 whereas, the date of passing order of the Ld. CIT(Appeals) is 16.04.2026, therefore, in the interest of substantive justice, keeping the scales of justice balanced, we are inclined to set aside the findings of the Ld. CIT(Appeals) and provide one final opportunity to the Department through the Ld. CIT(Appeals) to revisit the findings in the case of the assessee in light of the CBDT Circular (supra) and the Ld. CIT(Appeals) shall pass a speaking order in terms with Section 250(4) & (6) of the Act as per law while complying with the principles of natural justice.”, because these Circulars are the Departmental view on a particular issue and further, neither the Circular 09/DV/2016 nor the Circular No. 10/2016 has been issued under section 119 of the Act. In the case of Keshavji Ravji and Co. v. CIT [1990]
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183 ITR 1, the Hon’ble Supreme Court (three judges bench) has held that circulars beneficial to the assessee which tone town the rigour of the law and are issued in exercise of the statutory powers under Section 119 of the Act are binding on the authorities in the administration of the Act. The benefit of such circulars is admissible to the assessee even though the circulars might have departed from the strict tenor of the statutory provision and mitigated the rigour of the law. The Hon’ble Supreme Court, however, clarified that the Board cannot pre-empt a judicial interpretation of the scope and ambit of a provision of the Act. The circular cannot impose on the tax-payer a burden higher than what the Act itself, on a true interpretation, envisages. The task of interpretation of the laws is the exclusive domain of the courts. However, the Board has the statutory power under section 119 of the Act to tone down the rigour of the law for the benefit of the assessee by issuing circulars to ensure a proper administration of the fiscal statute and such circulars would be binding on the authorities administering the Act. So far as the issue of binding nature of circulars on Courts and Tribunals are concerned, the Hon’ble Supreme Court in the case of Bengal Iron Corp. v. CTO AIR 1993 SC 2414 has held that Clarifications/Circulars issued by the Central Government and/or State Government regarding taxability of certain item represent merely their understanding of the statutory provisions. They are not binding upon the Courts. The understanding of the Government, whether in favour or against the assessee, is nothing more than its understanding and opinion, It is doubtful whether such clarifications and circulars bind the quasi-judicial functioning of the authorities under the Act. While acting in quasi-judicial capacity, they are bound by law and not by any administrative instructions, opinions, clarifications or circulars. Law is what is declared by the Hon’ble Supreme Court and the Hon’ble High Courts. Since neither the Circular 09/DV/2016 nor the Circular No. 10/2016 has been issued under section 119 of the Act;
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therefore, I am of the considered view that these Circular are not binding on the CIT(A). Even the first proviso to section 119 of the Act says that the CBDT cannot issue instructions or directions that interfere with the independent discretion of the CIT(A) in deciding appeals.
The core issue is that whether the penalty levied under section 271D of the Act is barred by limitation. I find merit in the submission of Ld. CIT-DR that the date on which the penalty notice issued, for the first time, by the Competent Authority i.e. Joint CIT/Addl. CIT, to whom the Ld. AO referred the penalty proceedings, is the date of initiation of the penalty proceedings. The Karnataka High Court in the case of JCIT Vs. Ganesh Agrawal and others (supra), placing emphasis on the decision of the Hon’ble Supreme Court in the case of Armour Security India Ltd. (supra) has held that a proposal/reference made by the AO to the Joint CIT/Addl. CIT is not the initiation of penalty proceedings. Penalty proceedings commence only when the Joint CIT/Addl. CIT issues a notice under section 274 of the Act. The Hon’ble High Court has interpreted section 275(1)(c) of the Act to mean that the six- month limitation for passing the penalty order starts from the end of the month in which the Joint CIT/Addl. CIT issues the notice under section 274 of the Act, since the Joint CIT/Addl. CIT alone is the competent authority to initiate and levy penalty. However, the Hon’ble High Court, at the same time, to prevent indefinite delay by the Joint CIT/Addl. CIT in initiation of penalty proceedings, has further held that the Joint CIT/Addl. CIT must issue the notice under section 274 of the Act within six months from the end of the month in which the AO’s proposal/reference is received. If the notice itself is issued beyond this period, the entire penalty proceedings are barred by limitation. If the notice under section 274 of the Act is issued within this period, the penalty order must thereafter be passed within six months from the end of the month of such notice.
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The relevant part of the decision of Hon’ble Karnataka High Court in the case of JCIT Vs. Ganesh Agrawal and others (supra) reads as under:
“16. The meaning of the expression "initiation of proceedings" has been extensively considered by the Hon'ble Supreme Court in Armour Security (India) Limited v. Commissioner, CGST, Delhi [2025 SCC Online SC 1700]. While examining the said expression, the Hon'ble Supreme Court held that initiation of proceedings commences with the issuance of a show cause notice and does not encompass the issuance of summons or the conduct of any search or seizure proceedings.
It was further held that the mere issuance of summons does not imply that the Department has taken a decision to proceed against the taxpayer for recovery of liability. The issuance of summons, by no stretch of imagination, can be regarded as initiation of proceedings, since, at that stage, the Department still retains the discretion whether or not to initiate proceedings. A mere contemplation or possibility of initiating action cannot be equated with initiation of proceedings. Any such interpretation would undermine the statutory framework governing the exercise of powers under the Act.
The principles enunciated by the Hon'ble Supreme Court in the aforesaid decision lend support to the view that a proposal/reference made by the Assessing Officer to the Joint Commissioner cannot, by itself, be construed as initiation of penalty proceedings under Section 271DA of the Act. Initiation, in the context of Section 271DA read with Sections 274 and 275(1)(c) of the Act, can only be understood as the issuance of a notice by the Joint Commissioner calling upon the assessee to show cause against the proposed imposition of penalty.
Reference in this regard may be made to relevant paragraphs extracted below of the judgment in Armour Security (India) Limited (supra),
"57. Section 70 of the CGST Act empowers a proper officer to summon any person whose presence is considered necessary for giving evidence or producing documents or any other relevant material in an inquiry. The issuance of summons is one of the instruments employed by the Department to obtain information, documents, or statements in cases
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involving suspected tax evasion. Such summons may be issued to the person under investigation or to a person considered a witness in investigation against another person.
A summons is not the culmination of an investigation, but merely a step in its course. It is in this context that the Legislature has used the term "inquiry" in section 70, as at the stage of issuing a summons, the Department is primarily engaged in gathering information regarding a possible contravention of law, which may subsequently form the basis for proceedings against an assessee. Since the objective is to collect information, the Department has, in certain instances, advised resorting to a letter of requisition in place of a formal summons.
At the stage of issuing a summons, the Department is yet to determine whether proceedings should be initiated against the assessee. Such evidence-gathering and inquiry do not constitute "proceedings" within the meaning of section 6(2)(b) of the CGST Act. The mere issuance of a summons cannot be equated with proceedings barred under the Act, as the subject-matter cannot be ascertained solely through summons. That said, summons should not be issued in routine matters or for documents readily available on the GST portal. They ought to be issued after much thought and consideration as to the exact information required. We acknowledge that the issuance of multiple, cyclostyled summons may indicate a roving inquiry.
We affirm and appreciate the view taken by the High Court of Allahabad in G.K. Trading [G.K. Trading Company v. Union of India, (2021) 88 GSTR 293 (All); 2020 SCC OnLine All 1907.] and the High Court of Kerala in K.T. Saidalavi [K.T. Saidalavi v. State Tax Officer, SGST Department, (2025) 145 GSTR 369 (Ker); 2024 SCC OnLine Ker 5674.] respectively. The High Court of Allahabad rightly held that the issuance of summons cannot be conflated with a statutory step taken upon conclusion of an inquiry. Similarly, the High Court of Kerala was correct in holding initiation of inquiry or the issuance of summons does not amount to the initiation of "any proceedings". The phrase "initiation of any proceedings" refers specifically to the issuance of a notice under the relevant provisions of the GST enactment.
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At this juncture, we wish to refer to the Guidelines on Issuance of Summons under section 70 of the CGST Act issued by the Central Board of Indirect Taxes and Customs (GST--Investigation Wing) dated August 17, 2022. In view of the facts of the present case in hand, we would like to inject thrust into the Guidelines dated August 17, 2022, and direct the concerned Departments to adhere to the said Guidelines, in both letter and spirit.
In the present case, the petitioner was served with a show-cause notice dated November 18, 2024 by respondent No. 2 under section 73 of the CGST Act, thereby initiating proceedings. The petitioner has impugned the summons dated January 16, 2025 and January 23, 2025 respectively issued by respondent No. 1 for production of documents. At the summons stage, it cannot be predicated with certainty that the subject-matter of the proceedings will be identical; the mere presence of an overlapping aspect under investigation does not ipso facto render the subject-matter "same".
The High Court correctly held that the term "any proceedings" does not encompass summons issued pursuant to a search or investigation, as at the stage of issuance of summons the Department is merely engaged in gathering information. We are in agreement with the finding that a case of search is clearly distinct and separate from proceedings initiated only after issuance of a show-cause notice.
We may now proceed to elaborate on our understanding of "initiation of any proceedings" within the meaning of section 6(2)(b) of the CGST Act. P. Ramanatha Aiyar's, 6th Edition, pages 4415-4420, defines "proceedings" as under:
"It is not a technical expression with defined meaning attached to it but the one ambit of whose meaning will be governed by the statute. The word 'proceedings' can be given a narrow or wide import depending upon the nature and scope of an enactment in which it is used and in the particular context of the language of the enactment in which it appears."
(emphasis supplied)
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We may quote an extract from the Black's Law Dictionary, 4th Edition, page 1368, it stated as under:
"An act which is done by the authority or direction of the court, express or implied; an act necessary to be done in order to attain a given end; a prescribed mode of action for carrying into effect a legal right."
A show-cause notice is a document served on a noticee, requiring them to explain why a particular action should not be initiated against them. Under the GST regime, issuance of a show-cause notice is a mandatory pre-condition for raising a demand. It forms the bedrock for proceedings related to the recovery of tax, interest, and penalty. The notice ensures adherence to the principles of natural justice by granting the assessee an opportunity to present their case before any adverse action is taken. In essence, it serves as both a procedural safeguard and a legal necessity, marking the commencement of quasi-judicial adjudication under the Act.
A show-cause notice sets the law in motion concerning the liability under the statute, containing charges that a specific person is called upon to answer. In other words, it sets out the alleged violations of legal provisions and requires the assessee to explain why the duty should not be recovered from them. Thus, a show-cause notice cannot be vague, nor can any allegations be made without evidence being commensurate with the gravity of the charges levelled against the noticee.
It sets forth the framework for the proceedings proposed to be undertaken and provides the noticee with an opportunity to submit their explanation before the adjudicating authority. It outlines the background for the initiation of such proceedings, whether arising from an audit of accounts by the internal audit wing, scrutiny of returns, or intelligence gathered by officers of the Audit and Intelligence Commissionerate. It is further mandated that the authority issuing the notice must meticulously set out all relevant legal provisions under which the alleged contraventions are framed. The materials obtained through summons and relied upon for issuing the show-cause notice must be appended and disclosed to the assessee. In essence, a show-cause notice enumerates the charges levelled against the notice. …..
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….. 73. The statutory framework of the CGST Act does not admit of any interpretation of the phrase "initiation of proceedings" under section 6(2)(b) other than one which ties it to the issuance of a show-cause notice. An action qualifies as "proceedings" only when it is undertaken with the object of attaining a determinate outcome. In the present context, the issuance of a show-cause notice partakes the character of proceedings, as it is inherently required to culminate in a definitive determination; there must exist a point of finality or conclusion thereto.
Proceedings, by their very nature, cannot be said to be initiated in the absence of certainty, nor can they culminate without adherence to the principles of natural justice. A show-cause notice marks the commencement of a process that culminates in an order passed by the adjudicating authority. The legislative intent to prevent the subjugation of a taxpayer to parallel proceedings and to avoid contradictory orders can only be realized only when the Department is clear about the subject-matter it seeks to pursue, a certainty that arises only at the stage of issuance of the show- cause notice.
In the facts of the present case, the mere issuance of summons does not imply that the Department has decided to proceed against the taxpayer for recovery of liability. Therefore, issuance of summons, by no stretch, can be considered as the initiation of proceedings, since at that stage, the Department still retains the discretion not to initiate any proceedings. A mere contemplation or possibility of initiating action cannot be equated with "proceedings", as doing so would undermine the framework of cross- empowerment under the Act. Even when a discovery is made during the search proceedings under section 67 of the CGST Act, the Department is required to bring such proceedings to a definitive conclusion, either by issuing a show-cause notice under section 74 or by dropping the matter altogether. …... …… 97. We summarize our final conclusion as under: (i) Clause (b) of sub-section (2) of section 6 of the CGST Act and the equivalent State enactments bars the "initiation of any proceedings" on the "same subject-matter".
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(ii) Any action arising from the audit of accounts or detailed scrutiny of returns must be initiated by the tax administration to which the taxpayer is assigned.
(iii) Intelligence based enforcement action can be initiated by any one of the Central or the State tax administrations despite the taxpayer having been assigned to the other administration.
(iv) Parallel proceedings should not be initiated by other tax administration when one of the tax administrations has already initiated intelligence- based enforcement action.
(v) All actions that are initiated as a measure for probing an inquiry or gathering of evidence or information do not constitute "proceedings" within the meaning of section 6(2)(b) of the CGST Act.
(vi) The expression "initiation of any proceedings" occurring in section 6(2)(b) refers to the formal commencement of adjudicatory proceedings by way of issuance of a show-cause notice, and does not encompass the issuance of summons, or the conduct of any search, or seizure, etc.
(vii) The expression "subject-matter" refers to any tax liability, deficiency, or obligation arising from any particular contravention which the Department seeks to assess or recover.
(viii) Where any two proceedings initiated by the Department seek to assess or recover an identical or a partial overlap in the tax liability, deficiency or obligation arising from any particular contravention, the bar of section 6(2)(b) would be immediately attracted.
(ix) Where the proceedings concern distinct infractions, the same would not constitute a "same subject-matter" even if the tax liability, deficiency, or obligation is same or similar, and the bar under section 6(2)(b) would not be attracted.
(x) The twofold test for determining whether a subject-matter is "same" entails, first, determining if an authority has already proceeded on an
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identical liability of tax or alleged offence by the assessee on the same facts, and secondly, if the demand or relief sought is identical."
As noticed hereinabove, the Hon'ble Supreme Court in Armour Security (India) Limited (supra) has authoritatively explained the scope of the expression "initiation of proceedings" and held that a mere contemplation of action or the taking of preliminary steps preceding the exercise of statutory power cannot be equated with initiation of proceedings. The Court has clarified that initiation occurs only when the competent authority manifests its decision to proceed by issuing the statutory notice contemplated under the relevant enactment. Consequently, the notice issued under Section 274 of the Act read with the relevant penal provision alone qualifies as the initiation of proceedings, as it reflects the decision of the competent authority to commence action with the object of attaining a determinative outcome. Until such notice is issued, the proceedings cannot be said to have been initiated in the eye of law.
No doubt, the aforesaid enunciation of law was rendered while interpreting the provisions of the CGST Act. However, the principles laid down therein would provide valuable guidance in understanding and ascribing meaning to the expression, "action for imposition of penalty is initiated", occurring in Section 275(1)(c) of the Act.
In circumstances of a similar nature, while dealing with the imposition of penalty under Sections 271D and 271E of the Act, the High Court of Kerala, in Grihalakshmi Vision v. Assistant Commissioner of Income Tax, Range I, Kozhikode [2015 SCC OnLine Ker 23752], had occasion to consider the scope and ambit of Section 275(1)(c) of the Act. The Court held as under:
"10. 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 issued by the Joint Commissioner. From the 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
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been done by the Assessing Officer. The statement in the assessment order that the proceedings under section 271D and section 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 Joint Commissioner to the assessee to which he has filed his reply."
The aforesaid decision, though rendered in the context of Sections 271D and 271E, assumes significance, as the penalties under those provisions are also required to be imposed by an authority other than the Assessing Officer. The reasoning adopted therein, therefore, lends support to the interpretation that the expression "action for imposition of penalty is initiated" cannot be understood as a mere proposal/reference made by the Assessing Officer, but must relate to the stage at which the competent authority initiates penalty proceedings in accordance with law.
Section 275 prescribes the period of limitation for penalties leviable under Chapter XXI of the Act. Section 273B of the Act, on the other hand, provides that notwithstanding anything contained in the provisions of the various sections referred to therein, no penalty shall be imposable on the person or the assessee, as the case may be, in respect of any failure referred to in the said provisions, if such person proves that there was reasonable cause for the said failure.
It is no doubt true that Section 271DA of the Act does not find place among the provisions enumerated in Section 273B of the Act. However, reference to Section 273B of the Act is both relevant and necessary for interpreting clause (c) of sub-section (1) of Section 275 of the Act.
If the commencement of limitation is to be reckoned from the date of proposal/reference made by the Assessing Officer, as urged by the learned counsel for the respondents-assessees, the Joint Commissioner would not, at that stage, have issued any notice seeking an explanation from the assessee. In such circumstances, the "action for imposition of penalty" can be said to have been initiated only when a notice is issued
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by the Joint Commissioner affording an opportunity to the assessee to explain the alleged default or granting an opportunity of being heard.
It is clarified that Section 273B of the Act has been referred to only as an aid to understand the scope and meaning of Section 275 of the Act, notwithstanding the fact that Section 271DA of the Act is not one of the provisions covered by Section 273B of the Act. It is also relevant to notice that several other provisions under Chapter XXI, where the jurisdiction to impose penalty is vested in the Joint Commissioner, are covered by Section 273B of the Act. One such provision is Section 271D of the Act.
When interpreting Section 275 of the Act, this Court must bear in mind that the said provision prescribes the period of limitation applicable to all penalties leviable under Chapter XXI of the Act. Therefore, a harmonious reading of Sections 271DA, 273B, 274 and 275 of the Act leads to only one conclusion, namely, that the "action for imposition of penalty" is initiated only upon issuance of a notice under Section 274 of the Act, either calling upon the assessee to furnish an explanation or affording an opportunity of being heard. Any other interpretation would render Sections 273B and 274 of the Act otiose in their operation and would dilute the requirement of compliance with the principles of natural justice before the competent authority proceeds to impose penalty. ….. ….. 34. The Act may not have expressly prescribed a period of limitation within which the Joint Commissioner is required to initiate proceedings under Chapter XXI with reference to the date of proposal/reference made by the Assessing Officer. This legislative silence may proceed on the reasonable expectation that the Joint Commissioner, being a senior officer and the head of the Range, would exercise such power judiciously, qualitatively and within a reasonable period of time. 35. However, in certain matters placed before this Court, initiation of proceedings by the Joint Commissioner has taken place more than one year after the date of proposal/reference made by the Assessing Officer. In the light of such circumstances, this Court finds it necessary to examine the concept of "reasonable time" and determine whether the exercise of power after such prolonged delay can be sustained in law. 36. It is a settled position of law that where the statute does not prescribe any specific timeline, it is open to the Court to read into the provision a requirement that the power
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be exercised within a reasonable period and, where necessary, to indicate the contours of such reasonable time for initiation or completion of proceedings. 37. Section 275 of the Act prescribes the period of limitation for completion of penalty proceedings. However, the provision is conspicuously silent with regard to the period within which such proceedings are required to be initiated. It is this legislative silence that has given rise to the present batch of litigation. Here, it would be apposite to refer to the judgment of the Hon’ble Supreme Court in State of Punjab v. Bhatinda District Coop. Milk Producers Union Ltd., [(2007) 11 SCC 363]; “18. It is trite that if no period of limitation has been prescribed, statutory authority must exercise its jurisdiction within a reasonable period. What, however, shall be the reasonable period would depend upon the nature of the statute, rights and liabilities thereunder and other relevant factors. 19. Revisional jurisdiction, in our opinion, should ordinarily be exercised within a period of three years having regard to the purport in terms of the said Act. In any event, the same should not exceed the period of five years. The view of the High Court, thus, cannot be said to be unreasonable. Reasonable period, keeping in view the discussions made hereinbefore, must be found out from the statutory scheme. As indicated hereinbefore, maximum period of limitation provided for in sub-section (6) of Section 11 of the Act is five years.” 38. When this Court considers what would constitute a reasonable period for initiation of proceedings, the answer, in our considered view, lies within the scheme of Section 275 of the Act itself. When Section 275 of the Act provides a period of six months for completion of penalty proceedings from the end of the month in which action for imposition of penalty is initiated, this Court finds it reasonable to adopt a similar timeline for initiation of such proceedings by the Joint Commissioner, reckoned from the end of the month in which the proposal/reference is received from the Assessing Officer for consideration of imposition of penalty under Chapter XXI of the Act. 39. While arriving at the aforesaid conclusion, this Court has taken into consideration the overall object underlying Chapter XXI, the prescription of limitation under Section 275 of the Act, and the procedural safeguards contained in Sections 273B and 274 of the Act. This Court has also borne in mind the administrative realities that the Joint Commissioner ordinarily supervises several Assessing Officers and is required to deal with proposals/references received from such officers recommending initiation of penalty proceedings vested in the Joint Commissioner. The Joint Commissioner is also entrusted with various other supervisory and administrative functions and approvals mandated under the Act. 40. Having regard to all these circumstances, this Court finds it reasonable to hold that initiation of proceedings by the Joint Commissioner should ordinarily take place within
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a period of six months from the end of the month in which the proposal/reference from the Assessing Officer is received for consideration of action for imposition of penalty under Chapter XXI of the Act. Any initiation beyond the said period, the exercise of power would be vulnerable to challenge on the ground that it was not undertaken within a reasonable time. 41. In the present batch of cases before us, as noticed in the earlier part of this judgment, notices under Section 274 read with Section 271DA of the Act were issued to the assessees, affording them an opportunity of being heard. Pursuant thereto, the assessees filed detailed replies, which were considered by the Joint Commissioner before passing orders under Section 271DA of the Act. 42. The sequence of events in the cases on hand clearly demonstrates that the issuance of notice under Section 274 of the Act constituted the commencement of the penalty proceedings. It is only upon issuance of such notice that the assessee is informed of the proposed action, called upon to furnish an explanation, and afforded an opportunity of being heard in compliance with the mandate of Section 274 of the Act and the principles of natural justice. 43. This factual position fortifies the view taken by this Court that initiation of proceedings for imposition of penalty under Section 271DA of the Act commences only upon issuance of a notice under Section 274 of the Act by the competent authority. Such initiation cannot be traced back to the date on which the Assessing Officer addressed a letter or made a proposal to the Joint Commissioner forwarding the material for consideration of initiation of penalty proceedings under Section 271DA of the Act. 44. The proposal made by the Assessing Officer is merely a communication of information and material for the consideration of the competent authority. It neither determines the rights of the assessee nor manifests a final decision by the Joint Commissioner to proceed with the imposition of penalty. The decision to initiate proceedings remains that of the Joint Commissioner and attains legal expression only upon issuance of the statutory notice under Section 274 of the Act. 45. Much reliance has been placed by the learned counsel for the respondents- assessees on the judgment of this Court in the case of K. Umesh Shetty (supra). In the said decision, this Court interpreted Section 275 of the Act in the context of penalty proceedings under Section 271D of the Act. It was held that where notice was issued by the Joint Commissioner after a period of one year from the date of reference made by the Assessing Officer, the proceedings were beyond the period of limitation prescribed under Section 275 of the Act. In that context, it was held that the order passed under Section 271D of the Act was barred by limitation under Section 275 of the Act.
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To the aforesaid extent, and for the reasons assigned hereinabove, we concur with the conclusion reached therein. However, insofar as the observations made in the said judgment to the effect that the period of limitation under Section 275 of the Act would commence from the date of reference made by the Assessing Officer are concerned, we are of the considered view that the same cannot be applied in light of the law subsequently elucidated by the Hon'ble Supreme Court in Armour Security (India) Limited (supra). 47. In the light of the principles laid down by the Hon'ble Supreme Court, the proposal/reference made by the Assessing Officer to the Joint Commissioner can only be regarded as a contemplation or possibility of initiating penalty proceedings and cannot, by itself, be equated with the initiation of such proceedings. The decision whether to initiate penalty proceedings remains within the exclusive jurisdiction and discretion of the Joint Commissioner. It is only upon the issuance of notice under Section 274 of the Act read with relevant penal provisions that the competent authority manifests its decision to commence proceedings with the object of arriving at a determinative outcome. Until such notice is issued, the proceedings cannot be said to have been initiated in the eye of law. 48. A proposal/reference made by the Assessing Officer, in the absence of a notice under Section 274 of the Act issued by the Joint Commissioner, does not result in any determinative consequence. Therefore, the interpretation placed on the expressions initiated in K. Umesh Shetty (supra), treating the date of reference by the Assessing Officer as the point of commencement for computing limitation under Section 275 of the Act is inconsistent with the law declared by the Hon’ble Supreme Court in Armour Security (India) Ltd., (supra). Consequently, the law laid down by this Court in K. Umesh Shetty (supra), to that extent, cannot be regarded as governing the issue that arises for consideration in the present batch of cases. 49. Further reliance has been placed by the learned counsel for the respondents- assessees on the judgment of the Delhi High Court in Principal Commissioner of Income Tax-5 v. JKD Capital & Finlease Limited, (2017) 81 taxmann.com 80 (Delhi). However, as the said decision proceeds on the premise that the reference made by the Assessing Officer constitutes initiation of penalty proceedings for the purpose of computing limitation under Section 275 of the Act. The above judgment does not lend any support to the case of the respondent in view of the law enunciated by the Hon’ble Supreme Court in Armour Security (India) Ltd., (supra). 50. Therefore, to the extent the view expressed by the Delhi High Court in JKD Capital & Finlease Limited (supra) is inconsistent with the interpretation placed by the Hon'ble Supreme Court in Armour Security (India) Limited (supra), the same cannot govern the issue arising for consideration in the present batch of cases. Accordingly, the decision
32 ACIT, Central-2, Raipur (C.G.) Vs. Harshit Singhania Buildcon ITA No.560 /RPR/2026
in JKD Capital & Finlease Limited (supra) is distinguishable and does not advance the case of the Revenue in the facts and circumstances of the present matter. 51. The learned counsel for the assessees have relied upon the judgment of the Hon'ble Supreme Court in Armour Security (India) Limited (supra) to contend that unless the show cause notice specifically sets out the alleged violations of the statutory provisions and calls upon the assessee to explain why the liability should not be fastened upon them, such notice would be unsustainable in law. 52. The said contention requires careful examination. The Hon'ble Supreme Court, while considering the validity and essential components of a show cause notice, was interpreting the mandatory requirements of show cause notices contemplated under Sections 73, 74 and 76 of the CGST Act. In that context, it was held that the contents of the show cause notice must disclose the allegations and the basis of the proposed action so as to enable the noticee to effectively respond to the same. 53. However, the position in the present case is materially different. The notices in question have been issued under Section 274 read with Section 271DA of the Income- tax Act, 1961. Neither Section 271DA nor Section 274 of the Act contemplates the issuance of a show cause notice in the manner envisaged under Sections 73, 74 and 76 of the CGST Act. What Section 274 of the Act mandates is that before any order imposing penalty is passed, the assessee shall be heard or shall be afforded a reasonable opportunity of being heard. 54. For the said purpose, notices under Section 274 of the Act were issued to the assessees. Pursuant thereto, the assessees submitted their replies and explanations. Upon consideration of the replies so furnished, orders imposing penalty under Section 271DA of the Act came to be passed. Therefore, the statutory requirement contemplated under Section 274 of the Act stood complied with. 55. It is a settled principle of interpretation that while construing a fiscal statute, the plain meaning of the statutory text has to be given effect to. When Sections 271DA, 274 and 275 of the Act do not contemplate issuance of a detailed show cause notice, but merely require that the assessee be afforded a reasonable opportunity of being heard before imposition of penalty, the Court cannot import into those provisions additional procedural requirements not contemplated by the legislature. Therefore, the contention that a separate show cause notice ought to have been issued, or that the notice under Section 274 of the Act should necessarily contain all particulars and details akin to a show cause notice under the CGST Act, cannot be accepted. ….. ….. 63. We conclude our findings as under;
33 ACIT, Central-2, Raipur (C.G.) Vs. Harshit Singhania Buildcon ITA No.560 /RPR/2026
(i) The limitation under Section 275(1)(c) of the Act commences only from the date of issuance of notice under Section 274 of the Act by the Joint Commissioner proposal/reference of Income forwarding Tax. information The or material by the Assessing Officer to the Joint Commissioner, for consideration of initiation of penalty proceedings under Section 271DA of the Act, cannot, be construed as initiation of proceedings for imposition of penalty under Section 271DA of the Act. (ii) The proceedings under Section 271DA of the Act can be said to have been initiated only upon issuance of notice under Section 274 of the Act by the Joint Commissioner of Income Tax. The period of six months prescribed under Section 275(1)(c) of the Act for passing the penalty order shall commence from the end of the month in which such notice under Section 274 of the Act is issued by the Joint Commissioner. (iii) The Joint Commissioner shall issue the notice under Section 274 of the Act within a period of six months from the end of the month in which the proposal/reference is received from the Assessing Officer for the purpose of considering initiation of proceedings for imposition of penalty under Section 271DA of the Act. (iv) The notice issued under Section 274 read with Section 271DA of the Act which is beyond the period of six months from the end of the month in which the proposal/reference was received by the Joint Commissioner from the Assessing Officer, the proceedings shall be liable to be declared as timebarred. Where the notice under Section 274 of the Act is issued within the aforesaid period and the order imposing penalty under Section 271DA of the Act is passed within six months from the end of the month in which such notice is issued, the order shall be regarded as having been passed within the period of limitation prescribed under Section 275 of the Act.” [Emphasis supplied] 10. I have perused the decisions of Hon’ble Delhi High Court in the cases of Rishikesh (supra), Thapar Homes Limited (supra), JKD Capital & Finlease Ltd. (supra) and M/s. Adma Solutions Pvt. Ltd. (supra), on which the Ld. AR has relied upon to submit that the penalty order under section 271D of the Act in the case in hand is barred by limitation. As noticed hereinabove, the controversy arising in the present case has to be examined in the light of the principles authoritatively laid down by the Hon’ble Supreme Court in Armour Security (India) Ltd., (supra). The Hon’ble Supreme Court categorically explained the
34 ACIT, Central-2, Raipur (C.G.) Vs. Harshit Singhania Buildcon ITA No.560 /RPR/2026
scope of the expressions “initiation of proceedings” and held that mere preliminary steps, contemplation of action, or communication preceding the exercise of statutory power cannot be construed as initiation of proceedings. Initiation occurs only when the competent authority manifests its decision to proceed by issuing the statutory notice contemplated under the relevant enactment. Therefore, insofar as the reasoning in these four case laws relied upon by the Ld. AR proceeds on an interpretation inconsistent with the law declared by the Hon’ble Supreme Court in Armour Security (India) Ltd., (supra); hence, I am of the considered view that these four case laws relied upon by the Ld. AR are of no help to the assessee. Further, in the decisions of Hon’ble Delhi High Court in the cases of JKD Capital & Finlease Ltd. (supra) and M/s. Adma Solutions Pvt. Ltd. (supra), there are delay of 5 years in initiation of penalty proceedings by the Joint CIT/Addl. CIT after the receipt of proposal/reference of the AO for initiation of penalty proceedings. Hence, these case laws are of no relevance here. In this regard, it is worth mentioning that the Tribunal in the case of Jagdish Prasad Singhania Vs. Addl. CIT(TDS), Raipur in ITA No. 81/RPR/2023 has held as under:
“6. The para 3 of the decision of the Hon’ble Delhi High Court in the case of JKD Capital & Finlease Ltd. (supra) clearly mentions that the Assessing Officer who completed the assessment has issued the direction to initiate the penalty proceedings under sections 271(1)(c) and 271E of the Act in the assessment order. However, later the Assessing Officer referred the penalty proceedings under section 271E of the Act to his Range Head. Here, in this case, the Hon’ble Delhi High Court, in para 11 of its order, had held that the Range Head issued show-cause after the delay of 5 years from the reference of the Assessing Officer though the Assessing Officer vide assessment order initiated the penalty proceedings under section 271E of the Act. The inordinate delay of 5 years by the Range Head, in absence of any valid explanation for the same, has been held to have defeated the object of section 275(1)(c) of the Act by the Hon’ble Delhi High Court. Here, in the present case the Ld. AO has not given any reference of the penalty under section 271C of the Act in the assessment order; therefore, even the deemed initiation of penalty proceedings did get triggered by the assessment order. Thus, I am of the considered view that the
35 ACIT, Central-2, Raipur (C.G.) Vs. Harshit Singhania Buildcon ITA No.560 /RPR/2026
decision of the Hon’ble Delhi High Court in the case of JKD Capital & Finlease Ltd. (supra) is distinguishable on the facts and thus, this decision is held non-applicable in the case in hand as there is no reference of the penalty under section 271C of the Act in the assessment order. Thus, the initiation of penalty cannot be taken as the date of assessment order where there is no reference of the penalty under section 271C of the Act.”
Facts of the case laws JKD Capital & Finlease Ltd. (supra) and M/s. Adma Solutions Pvt. Ltd. (supra) are quite similar. Hence, these two case laws are held distinguishable on facts and thus are of no help to the assessee.
In the present case, the assessment order under section 143(3) of the Act was passed on 31.03.2024. Thereafter, the Ld. AO sent the proposal to Joint CIT/Addl. CIT, on 22.04.2024, for initiation of penalty proceedings under section 271D of the Act. The Joint CIT/Addl. CIT issued the penalty notice on 01.05.2024 and levied the penalty on 23.11.2024. All these actions are well within the reasonable time and in accordance with the law. Hence, after thoughtful consideration, it is held that the ratio laid down in the decision of Hon’ble Karnataka High Court in the case of JCIT Vs. Ganesh Agrawal and others (supra) is squarely applicable in the case in hand.
In view of the foregoing para and facts of the case, I am of the considered view that the Ld. CIT(A) is not justified in quashing the penalty order passed under section 271D of the Act on the reasoning that the same is barred by limitation. Hence, keeping in view the decision of Hon’ble Karnataka High Court in the case of JCIT Vs. Ganesh Agrawal and others (supra) and reasoning therein, the finding of Ld. CIT(A) that the penalty order passed under section 271D of the Act barred by limitation is reversed. Accordingly, the impugned order is set aside and is remitted back to the Ld. CIT(A) for adjudicating all
36 ACIT, Central-2, Raipur (C.G.) Vs. Harshit Singhania Buildcon ITA No.560 /RPR/2026
grounds raised in Form-35 other than the above mentioned issue of limitation in accordance with the provisions of section 250(4) and 250(6) of the Act.
In the result, the Revenue’s appeal is allowed subject to the above for statistical purposes. Sd/- Avdhesh Kumar Mishra Accountant Member
The appeal of the Revenue is disposed of accordingly.
Order pronounced in the open court on 14th October, 2026.
Sd/- Sd/- AVDHESH KUMAR MISHRA PARTHA SARATHI CHAUDHURY (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; �दनांक / Dated : 14th October, 2026. SB, Sr. PS आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : 1. अपीलाथ� /The Appellant. 2. ��यथ� /The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G.) 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, रायपुर ब�च, रायपुर / DR, ITAT, Raipur Bench, Raipur. 5. गाड� फ़ाइल / Guard File. आदेशानुसार / BY ORDER, SAMIRA Digitally signed by SAMIRAN BERA N BERA Date: 2026.10.14 // True Copy // 12:41:21 +05'30' Senior Private Secretary आयकर अपील�य अ�धकरण, रायपुर / ITAT, Raipur.
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