Property Plus Realtors Vs Union of India & Ors. (Delhi High Court)
Delhi High Court dismissed a petition filed by Property Plus Realtors, a real estate brokerage firm, challenging a penalty order issued under Section 271DA of the Income Tax Act, 1961. The firm had faced scrutiny following a search conducted by the Income Tax Department on the Gaursons Group, with whom they had business dealings. Subsequent assessment proceedings for AY 2022-23 resulted in a significantly higher net profit than the income originally returned by Property Plus Realtors. The Assessing Officer (AO) also initiated penalty proceedings related to alleged cash receipts by the firm, making a reference to the Additional Commissioner of Income Tax under Section 269ST read with Section 271DA.
The core issue before the High Court was whether the penalty order was time-barred under Section 275(1)(c) of the Act, which stipulates a limitation period for penalty orders. Property Plus Realtors argued that the limitation period should be counted from the date of the assessment order, where the decision to initiate penalty proceedings was recorded, and not from the date of the AO’s reference to the Additional Commissioner. They contended that the delay in making the reference could not extend the limitation period. They cited precedents like Principal Commissioner of Income Tax (Central-II) v. Thapar Homes Ltd. to support their argument that the decision to initiate penalty proceedings is embedded in the assessment order.
The High Court rejected this argument, relying on previous decisions like Principal Commissioner of Income Tax v. JKD Capital & Finlease Ltd. and Commissioner of Income Tax (TDS)-2 Delhi v. Turner General Entertainment Networks India Pvt. Ltd., which established that the initiation of penalty proceedings commences with the first step taken for such action. In this case, the Court held that the AO’s reference to the Additional Commissioner constituted the first step, and therefore, the limitation period should be calculated from the date of that reference. The Court emphasized the definition of “initiate” as “to begin, commence, enter upon” and highlighted that the reference clearly marked the start of the penalty action.
While the Court acknowledged that inordinate delays in initiating proceedings could raise concerns about extending the limitation period, it found no such issue in this case. The reference was made within eleven days of the assessment order, a period deemed reasonable. The Court clarified that its order would not prevent Property Plus Realtors from pursuing other grounds of appeal against the penalty order, except for the argument that it was time-barred. The petition was accordingly dismissed.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
