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Income Tax Appellate Tribunal, Hyderabad ‘DB-B‘ Bench, Hyderabad
Before: Shri Vijay Pal Rao, Vice- & Shri Madhusudan Sawdia
(िनधा�रण वष�/Assessment Year: 2018-19) Shri Shaik Abdul Khader Vs. Income Tax Officer Hyderabad Ward 13 (1) PAN:ARWPK7940C Hyderabad (Appellant) (Respondent) िनधा��रती �ारा/Assessee by: Advocate Mohd. Afzal राज� व �ारा/Revenue by:: Dr. Sachin Kumar, Sr. DR सुनवाई की तारीख/Date of hearing: 07/10/2025 घोषणा की तारीख/Pronouncement: 10/10/2025 आदेश/ORDER Per Madhusudan Sawdia, A.M.: This appeal is filed by Shri Shaik Abdul Khader (“the assessee”), feeling aggrieved by the order pass by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) (“Ld. CIT(A)") dated 08.07.2025 for the A.Y 2018- 19.
The assessee has raised the following grounds of appeal:
3. Ground Nos. 1 and 3 raised by the assessee are general in nature and were not pressed at the time of hearing. Accordingly, no adjudication is required on the same and both these grounds are dismissed as not pressed.
4. In ground No. 2 of the appeal, the assessee challenges the validity of the penalty order on the ground of limitation prescribed under section 275(1)(c) of the Income Tax Act, 1961 (“the Act”). In this regard, the Ld. AR submitted that, as per section 275(1)(c) of the Act, no order imposing a penalty shall be passed, after the expiry of the financial year in which the proceedings, in the course of which the penalty action was initiated, are completed; or six months from the end of the month in which the action for imposition of penalty is initiated, whichever period expires later. Accordingly, the Ld. AR invited our attention to para no.7 of the assessment order passed by the Ld. AO, wherein the initiation of penalty proceedings was recorded. The assessment order was dated 04.12.2020, and therefore, according
Page 2 of 6 to the Ld. AR, the initiation of penalty took place in December 2020 itself.
The Ld. AR further submitted that, the two relevant dates for computation of the limitation period are as follows: a. Date of expiry of financial year in which the penalty was initiated i.e. 31.03.2021 in the case of the assessee, and b. Six months from the end of the month in which the penalty was initiated i.e. 30.06.2021 in the case of the assessee.
The Ld.AR accordingly submitted that, since the provision mandates that whichever period expires later shall be considered, the outer limit for passing the penalty order in this case would be 30.06.2021. Hence, the Ld. AR submitted that the penalty order was passed on 30.12.2021, i.e., after the expiry of the limitation period, and therefore, the same is barred by limitation. The Ld. AR accordingly prayed that the penalty order be quashed as invalid and time-barred.
Per contra, the Learned Departmental Representative (Ld. DR) submitted that the date of passing of the assessment order cannot be treated as the date of initiation of penalty. Instead, the date of issue of notice for penalty proceedings should be considered as the date of initiation. In support of his contention, the Ld. DR relied upon the decision of the Hon’ble Kerala High Court in the case of Grihalakshmi Vision vs. Addl. CIT (ITA Nos. 83 & 86 of 2014, order dated 07.08.2015), wherein it was held that the date of issue of penalty notice by the Joint
Page 3 of 6 Commissioner should be regarded as the date of initiation of penalty proceedings. The Ld. DR also placed reliance on CBDT Circular No. 09/DV/2016 dated 26.04.2016, and accordingly submitted that the limitation should be reckoned from the date of issue of the notice for penalty.
We have heard the rival contentions and carefully gone through the material available on record. We have also examined the provisions of section 275(1)(c) of the Act, which reads as under:
No order imposing a penalty under this Chapter shall be passed— (i) two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, (a)………. (b)……… (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.” 9. From a plain reading of the provision, it is evident that two periods are relevant for determination of limitation and the later of the two shall be taken as the outer limit for passing the penalty order:
a. The expiry of the financial year in which the proceedings, in the course of which penalty was initiated, are completed; and b. Six months from the end of the month in which the action for imposition of penalty is initiated.
There is no dispute about the fact that the assessment order was passed by the Ld. AO on 04.12.2020. We have also gone through the para no.7 of the order of the Ld. AO which is to the following effect:
“7. I am satisfied that the assessee underreported his income to the extent of Rs. 2,36,141/-, hence penalty u/s 270A is also initiated separately.” 11. On perusal of the above, we find that the Ld. AO has clearly recorded the initiation of penalty proceedings. Therefore, as per the submission of the Ld. AR the month of initiation is December 2020. Further, we have also gone through the page no.2 of the penalty order, the relevant portion of which is reproduced as under:
“Penalty proceedings were initiated for under-reporting in consequence to misreporting vide issue of notice u/s. 274 r.w.s. 270A of the Act on 08.12.2020 which was duly served on the assessee “.
On perusal of the above, we find that the penalty notice has been issued on 8.12.2020. Therefore, even as per the submission of the Ld. DR, the penalty notice was also issued in December 2020. Thus, there is no dispute regarding the month of initiation of penalty being December 2020. Accordingly, in the present case, as per the provision of section 275(1)(c) of the Act the two limitation dates would be 31.03.2021 (expiry of the financial year), and 30.06.2021 (six months from the end of December 2020). Applying the provision of section 275(1)(c) of the Act, the later of the two dates, i.e., 30.06.2021, would be the outer limit for passing the penalty order. The penalty order, however, has been passed on 30.12.2021, which in our opinion, is well beyond the limitation period.
We also observe that there is no difference in the computation of the outer limitation period, whether one considers the assessee’s view (that initiation starts from the date of assessment order) or the Revenue’s view (that initiation starts from the date of issue of notice). Under both interpretations, the month of initiation remains December 2020, and the limitation expires on 30.06.2021. Therefore, as the outcome is identical under both views, we refrain from deciding the issue as to whether the date of initiation should be reckoned from the date of the assessment order or the date of the penalty notice, since the result remains the same either way.
In view of the above, we hold that the penalty order dated 30.12.2021 is barred by limitation and accordingly liable to be quashed.