Section 275 of the Income-tax Act governs the timeframe within which penalties can be imposed. It stipulates that penalties cannot be levied if an appeal is pending before the Commissioner of Income tax (Appeal), beyond the financial year in which the relevant proceedings conclude, or six months from the date the appeal order is received by tax authorities. The proposed amendment to sub-sections (1) and (1A) of this section seeks to remove references to the Principal Chief Commissioner or Chief Commissioner, addressing concerns over calculation ambiguities in penalty timelines. Effective October 1, 2024, this change aims to provide clarity and uniformity in penalty imposition practices under Indian tax laws.
Budget 2024: Rationalisation of provisions relating to period of limitation for imposing penalties
Section 275 of the Act provides for the period of limitation for imposing penalties. Sub-section (1) of the said section, inter-alia, states that no order imposing a penalty shall be made in a case where the relevant assessment order or other order is the subject-matter of an appeal before the Joint Commissioner (Appeals) or the Commissioner (Appeals) under section 246 or section 246A, respectively, or before the Appellate Tribunal (ITAT) 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 JCIT(A) or the CIT(A) or, as the case may be, the Appellate Tribunal is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever period expires later. Similarly, at three other places in the said section, for the purposes of limitation, the date of receipt of order passed by appellate authority is given as, ‘date of receipt of order in the office of Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner’.
2. Suggestions have been received from the field formations that the reference to the office of Principal Chief Commissioner of Income-tax, Chief Commissioner of Income-tax and Principal Commissioner of Income-tax poses ambiguity for the purposes of calculation of the number of days for imposition of penalties as a consequence of the orders referred to in the said section. Therefore, it is proposed to amend section 275 of the Act to omit the reference to the date of receipt of order by the Principal Chief Commissioner or Chief Commissioner.
3. This amendment will take effect from the 1st day of October, 2024.
Proposed Amendment of section 275 of Income Tax Act, 1961 vide Finance Bill, 2024
In section 275 of the Income-tax Act, with effect from the 1st day of October, 2024,––
(a) in sub-section (1), in clause (a), the words “Principal Chief Commissioner or Chief Commissioner or” at both the places where they occur shall be omitted;
(b) in sub-section (1A), the words “Principal Chief Commissioner or Chief Commissioner or the” at both the places where they occur shall be omitted.
Extract of Clause 83 of Finance Bill 2024
Clause 83 of the Bill seeks to amend section 275 of the Income-tax Act relating to bar of limitation for imposing penalties.
The said section, inter alia, provides that no penalty can be imposed in a case where appeal is preferred before the Commissioner of Income tax (Appeal) under section 246 or section 246A after 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, or six months from the end of the month in which the order of the Commissioner of Income tax (Appeal) is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever period expires later.
It is proposed to amend sub-sections (1) and (1A) of the said section so as to omit the reference of the Principal Chief Commissioner or Chief Commissioner from the said subsections.
These amendments will take effect from 1st October, 2024.
