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Facts
The assessee's assessment for AY 2012-13 was completed under Section 144 r.w. Section 143(3) on 17/12/2019, with an addition for unexplained income. Penalty proceedings under Section 271(1)(b) were initiated, and a penalty order was passed on 01/03/2022. The assessee contended that the penalty order was barred by limitation under Section 275 of the Act.
Held
The Tribunal held that the penalty order passed under Section 271(1)(b) was indeed barred by limitation. Despite arguments from the Ld. DR regarding procedural delays, the Tribunal found no provision in Section 275 to justify such delays.
Key Issues
Whether the penalty order passed under Section 271(1)(b) was barred by limitation as per Section 275 of the Income-tax Act, 1961.
Sections Cited
144, 143(3), 68, 271(1)(b), 274, 275
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI ANIKESH BANERJEE & SHRI OMKARESHWAR CHIDARA
Date of hearing : 12/08/2025 Date of pronouncement : 14/08/2025 O R D E R Per Anikesh Banerjee (JM):
The instant appeal of the assesse was filed against the order of the National Faceless appeal Centre (NFAC), Delhi [(in short, ‘the Ld.CIT(A)] passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) for Assessment Year 2012-13, date of order 08/05/2025. The impugned order emanated from the order of the National Faceless Assessment Centre, Delhi (for brevity, ‘Ld. AO’) passed under section 271(1)(b) of the Act, date of order 01/03/2022.
2 ITA 4226/Mum /2025 Narendrakumar Lalchand Jain 2. We heard the rival submissions and considered the documents available on the record. For the impugned assessment year, the assessee’s assessment was completed under section 144 read with section 143(3) of the Act on 17/12/2019 and the income was computed at Rs.2,37,700/-. The addition of Rs.2,37,700/- was made on account of unexplained income under section 68 of the Act. Penalty proceedings under section 271(1)(b) of the Act were initiated and notice under section 274 read with section 271(1)(b) was also issued on 18/12/2019 for noncompliance of the statutory notice dated 27/11/2019 and served on the assessee accordingly. Failing to get any reply, the Ld. AO issued another notice on 24/05/2020 and finally, the assessee submitted reply. The Ld.AO framed the penalty order under section 271(1)(b) of the Act levying penalty of Rs.10,000/- on order dated 01/03/2022.
The Ld.AR submitted that the assesse had not filed an appeal before the Ld.CIT(A) and agitated that the impugned penalty order passed under section 271(1)(b) of the Act on 01/03/2022 was barred by limitation in view of provisions of section 275 of the Act. The specific ground was raised by the assessee before the Ld.CIT(A). But without considering the said ground, the Ld.CIT(A) passed the order upholding the penalty order.
The Ld.AR argued that the assessment order under section 144 read with section 143(3) of the Act was passed on 17/12/2019. The assesse had not filed any appeal before any of the authority and accepted the demand. So the penalty order was passed beyond limitation, which is contravening provisions of section 275 of the Act.
3 ITA 4226/Mum /2025 Narendrakumar Lalchand Jain 5. The Ld.DR filed a written submission on 12/08/2025. The relevant part of the written submission is reproduced below:- “Ground 2: Penalty Order is Ab Initio Void as Show-Cause Notice is Barred by Limitation The appellant argues that the show-cause notice issued under section 271(1)(b) is barred by limitation. This contention is misconceived. As per section 275(1)(c) of the Act, the limitation period for passing a penalty order, where no appeal is filed against the assessment order, is the end of the financial year in which the assessment proceedings are completed or six months from the end of the month in which the penalty proceedings are initiated, whichever is later. The assessment order was completed on 17.12.2019, and the penalty proceedings were initiated on 18.12.2019. The penalty order was passed on 01.03.2022, well within the limitation period, as the relevant financial year ended on 31.03.2020, and six months from December 2019 extended to 30.06.2020. However, the faceless assessment regime, coupled with procedural delays, justifies the condonation of any perceived delay, as the appellant was granted multiple opportunities to comply, aligning with the principles of natural justice. The procedural delays in penalty proceedings, especially when opportunities are provided to the assessee, do not render the proceedings void, provided the principles of natural justice are adhered to. The limitation under section 275(1)(c) must be interpreted in light of the procedural context, and delays caused by systemic issues or the assessee's non-cooperation do not invalidate the penalty order.”
In our considered view, the assessment was completed on 17.12.2019, and the penalty proceedings under Section 271(1)(b) of the Act were initiated on 18.12.2019. The penalty order was required to be passed on or before 30.06.2020. However, the Ld. AO passed the penalty order only on 01.03.2022. In the course of 4 ITA 4226/Mum /2025 Narendrakumar Lalchand Jain submissions, the Ld. DR candidly admitted that the penalty order was time-barred, though he attempted to justify the delay by providing certain reasons. However, the provisions of Section 275 of the Act do not contemplate or permit any justification or explanation for delay in passing a penalty order under Section 271(1)(b) of the Act. Accordingly, we hold that the penalty order under Section 271(1)(b) is barred by limitation. The impugned appellate order is set aside, and the impugned penalty order is hereby quashed.