Shaik Abdul Khader Vs ITO (ITAT Hyderabad)
Penalty Initiated in December, Order Passed in December Next Year – ITAT Hyderabad Quashes 270A Penalty as Time-Barred u/s 275(1)(c)
Assessee, challenged the validity of a penalty order passed u/s 270A on the ground of limitation prescribed under section 275(1)(c) of the Income Tax Act. The assessment order u/s 143(3) was passed on 04.12.2020, wherein AO clearly recorded at para 7 that he was “satisfied that Assessee underreported his income” & therefore “penalty u/s 270A is initiated.” Further, the penalty notice u/s 274 r.w.s. 270A was also issued on 08.12.2020. Thus, both initiation in the assessment order & issuance of notice took place in December 2020.
Assessee submitted that section 275(1)(c) provides two possible limitation periods: (i) expiry of the financial year in which penalty was initiated- i.e., 31.03.2021, or (ii) six months from the end of the month in which penalty was initiated – i.e., 30.06.2021. Since the provision mandates choosing the later of the two, the outer limit for passing the penalty order expired on 30.06.2021. However, the penalty order was actually passed on 30.12.2021, i.e., almost six months beyond the statutory deadline, rendering it time-barred. Assessee therefore prayed that penalty be quashed.
