Anup Kumar Vs JCIT (Karnataka High Court)
The Karnataka High Court quashed a penalty notice & order issued u/s 271DA for alleged violation of Section 269ST, holding that the initiation of penalty was time-barred in light of the binding ruling in PCIT v. K. Umesh Shetty [2025] 170 Taxmann.com 748 (Karnataka).
Background
The Petitioner challenged:
- Notice u/s 271DA dated 06.10.2024,
- Penalty order u/s 271DA dated 28.03.2025, &
- Notice of demand u/s 156 dated 28.03.2025,
all issued by the JCIT, Central Range, Mangaluru for A.Y. 2022-23.
The contention was that the penalty proceedings were initiated belatedly & hence barred by limitation prescribed u/s 275(1)(c).
Court’s Observations
Justice M. Nagaprasanna noted that the issue of limitation for penalty proceedings is no longer res integra, being covered by the Division Bench ruling in PCIT v. K. Umesh Shetty. The Bench in that case, after detailed analysis of Section 275(1)(c) & Delhi HC rulings in Turner General Entertainment Networks India Pvt. Ltd. & Clix Capital Services Pvt. Ltd., had held that:
- Though Section 275(1)(c) specifies limitation for completion of penalty proceedings, initiation cannot be left to the “whims & fancies” of the Department.
- The reference by the AO to the higher authority is the triggering point for initiation.
- Delay or inaction in issuing the penalty notice after such reference amounts to laches & renders subsequent proceedings time-barred.
- The law of limitation is based on justice, convenience & diligence, preventing indefinite exposure to litigation.
Since the Revenue did not dispute that the issue was squarely covered by K. Umesh Shetty, the Court held that the penalty notice & order were without jurisdiction being barred by limitation.
