Hardik Dayanand Patil Vs ITO (ITAT Mumbai)
Summary: ITAT Mumbai allowed the assessee’s appeal and quashed the penalty order dated 23.11.2021 passed under section 271(1)(c) of the Income Tax Act, 1961 as barred by limitation under section 275. The assessee, an individual, had filed his return declaring income of Rs.14,31,583 and was originally assessed under section 143(3). Reassessment proceedings were subsequently initiated under sections 147 and 148 and reassessment was completed on 30.12.2019 at Rs.24,00,830. During reassessment, income relating to capital gains arising from a development agreement was found not to have been reflected in the original return. According to the assessee, the relevant documents had been furnished to his Chartered Accountant and the omission was inadvertent; on becoming aware of it, he furnished a revised computation and discharged the resulting tax liability.
Nevertheless, penalty proceedings under section 271(1)(c) were initiated in the reassessment order dated 30.12.2019 and the penalty order was eventually passed on 23.11.2021. Since the assessee had not appealed against the reassessment order, the Tribunal held that limitation was governed by section 275(1)(c). Under the normal statutory period, limitation expired on 30.06.2020. The Tribunal then considered the pandemic-related extensions under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and the CBDT circulars referred to in the order.
Even after granting the Revenue the full benefit of those extensions, the Tribunal held that the outer limitation expired on 30.09.2021. The Revenue’s reliance on the Supreme Court’s orders in Suo Motu Writ Petition (Civil) No.3 of 2020 was rejected because the Tribunal considered the specific statutory limitation regime under section 275, read with TOLA and the CBDT relaxations, to govern the penalty proceedings. As the penalty order was passed only on 23.11.2021, it was beyond the extended statutory deadline. The Tribunal held that expiry of limitation went to the Assessing Officer’s jurisdiction to impose penalty and consequently quashed the penalty order as void beyond limitation.
Cases Discussed
- In Re: Cognizance for Extension of Limitation (Supreme Court); Suo Motu Writ Petition (Civil) No.3 of 2020
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. The present appeal has been preferred by the assessee against the order dated 16.10.2025 passed by the National Faceless Appeal Centre, Delhi, arising out of penalty proceedings initiated under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2012–13. The principal grievance raised by the assessee in the present appeal is that the penalty order dated 23.11.2021 passed by the learned Assessing Officer is barred by limitation in terms of the provisions contained in section 275 of the Act, and therefore the said penalty order deserves to be quashed as void ab initio. Since the issue relating to limitation strikes at the very root of the jurisdiction of the Assessing Officer to impose penalty, the same has been raised as the primary ground before this Tribunal.
2. The brief facts giving rise to the present controversy are that the assessee, being an individual, filed his return of income declaring total income of Rs.14,31,583 on 10.08.2013. The original assessment came to be completed under section 143(3) on 14.11.2014 determining the total income at Rs.15,30,970. Subsequently, information came to the possession of the department which led to the initiation of reassessment proceedings under section 147, and accordingly notice under section 148 was issued on 31.03.2019. Pursuant thereto, reassessment proceedings were carried out and the reassessment order was ultimately passed on 30.12.2019 determining the total income at Rs.24,00,830.
3. During the course of reassessment proceedings it was noticed that certain income relating to capital gains arising out of a development agreement entered into by the assessee had not been reflected in the original return of income. The consistent explanation of the assessee, as borne out from the material placed before the authorities below, is that the relevant documents had been furnished to the Chartered Accountant at the time of filing of the return and that the omission to reflect the capital gain arose due to inadvertence. The assessee has also contended that upon becoming aware of this omission during the reassessment proceedings he voluntarily furnished a revised computation offering the said income and discharged the tax liability thereon so as to bring finality to the dispute.
4. Notwithstanding the aforesaid disclosure during reassessment proceedings, the Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act in the reassessment order itself dated 30.12.2019. Subsequently, the Assessing Officer passed the impugned penalty order on 23.11.2021 holding that the assessee had furnished inaccurate particulars of income.
5. Since the assessee did not prefer any appeal against the reassessment order, the limitation for passing the penalty order falls within the ambit of section 275(1)(c) of the Act. In order to appreciate the controversy relating to limitation, the relevant statutory provision contained in section 275 is reproduced hereunder:
“275(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 Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 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 Commissioner (Appeals) or the Appellate Tribunal is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever period expires later;
(b) in a case where the relevant assessment or other order is the subject matter of revision under section 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.”
6. From a plain reading of the aforesaid statutory provision it becomes evident that where the assessment order is not the subject matter of an appeal, the limitation for passing the penalty order is governed by clause (c) of section 275(1). In such cases, the penalty order must be passed within six months from the end of the month in which the action for imposition of penalty is initiated, or before the expiry of the financial year in which the proceedings during which such action was initiated are completed, whichever period expires later.
7. In order to appreciate the application of the aforesaid statutory provision to the facts of the present case, the chronology of events emerging from the record is reproduced hereunder:
| Sr. No. | Particulars | Date |
|---|---|---|
| 1. | Notice issued under section 148 /Reassessment proceedings initiated | 31.03.2019 |
| 2. | Reassessment order passed under section 147 r.w.s. 143(3) | 30.12.2019 |
| 3. | Penalty proceedings initiated under section 271(1)(c) | 30.12.2019 |
| 4. | End of month in which penalty proceedings initiated | 31.12.2019 |
| 5. | Six months from end of month of initiation | 30.06.2020 |
| 6. | Extended limitation under TOLA and CBDT Circulars | 30.09.2021 |
| 7. | Penalty order actually passed | 23.11.2021 |
8. From the aforesaid chronology it is evident that under the normal statutory regime the limitation for passing the penalty order would expire on 30.06.2020, being six months from the end of the month in which the penalty proceedings were initiated. However, it is equally a matter of record that the outbreak of the COVID-19 pandemic resulted in the enactment of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), whereby the Central Government was empowered to extend certain statutory time limits under fiscal statutes including the Income Tax Act.
9. In exercise of the powers conferred under the aforesaid statute, the Central Board of Direct Taxes issued Circular No. 9/2021 dated 20.05.2021, whereby the time limits for completion of certain proceedings were extended up to 30.06.2021. Subsequently, by CBDT Circular No. 17/2021 dated 09.09.2021, the Board further extended the relevant statutory timelines up to 30.09.2021. These circulars were issued specifically within the framework of TOLA for the purpose of regulating statutory deadlines during the pandemic period. Therefore, even if the benefit of the aforesaid statutory relaxations is granted to the Revenue in full measure, the outer limit for passing the penalty order in the present case would stand extended only up to 30.09.2021.
10. The impugned penalty order, however, has been passed on 23.11.2021, which is clearly beyond the extended statutory limitation period. The Revenue has attempted to justify the delay by placing reliance upon the orders passed by the Hon’ble Supreme Court in Suo Motu Writ Petition (Civil) No.3 of 2020 whereby limitation periods were extended during the pandemic. However, in our considered opinion, the said contention cannot be accepted in the factual context of the present case. The orders passed by the Hon’ble Supreme Court were primarily intended to extend limitation in respect of judicial and quasi-judicial proceedings before courts and tribunals during the pandemic period. In contrast, the limitation governing the passing of penalty orders under the Income Tax Act is specifically regulated by the statutory framework contained in section 275 read with the relaxations granted under TOLA and the circulars issued by the CBDT.
11. It is a settled principle of statutory interpretation that where a special statute prescribes a specific limitation regime, such statutory scheme must prevail over a general extension of limitation. The TOLA enactment together with the CBDT circulars issued thereunder constitutes a special legislative mechanism enacted precisely for regulating statutory timelines under fiscal statutes during the pandemic period. Once the competent authority itself extended the relevant limitation only up to 30.09.2021, the departmental authorities cannot enlarge the limitation beyond what is expressly permitted by law.
12. In the present case, therefore, the statutory position emerges with clarity. Even after granting the benefit of all extensions available under TOLA and the CBDT circulars, the penalty order ought to have been passed on or before 30.09.2021. Since the impugned penalty order has admittedly been passed on 23.11.2021, the same is clearly beyond the limitation prescribed under section 275 of the Act. The limitation provided under the said provision is not merely procedural but goes to the very jurisdiction of the Assessing Officer to impose penalty, and once the statutory time limit expires the authority to pass such order ceases to exist.
13. In view of the foregoing discussion and having regard to the statutory scheme governing limitation for levy of penalty, we are of the considered opinion that the impugned penalty order dated 23.11.2021 passed under section 271(1)(c) is clearly barred by limitation in terms of section 275(1)(c) of the Act read with the statutory extensions granted under TOLA and the CBDT circulars. Consequently, the said penalty order cannot be sustained in the eyes of law and is liable to be quashed.
14. Accordingly, the impugned penalty order passed by the Assessing Officer under section 271(1)(c) is quashed as being barred by limitation.
15. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 16th March, 2026.
