ACIT Vs Nanda Feeds Pvt. Ltd. (Karnataka High Court)
Whichever Limitation Clock You Pick, Penalty Still Arrives Late: Karnataka HC Strikes Down Section 271DA Orders u/s 275(1)(c)
Relevant Facts
In Additional Commissioner of Income Tax v. Nanda Feeds Pvt. Ltd., the Karnataka High Court’s Division Bench decided three Revenue appeals arising from a common order of the Single Judge dated 18.09.2025. The assessee had challenged penalty orders & demand notices issued u/s 271DA for alleged violation of section 269ST.
During assessment proceedings for AYs 2019-20, 2020-21 & 2022-23, the Department alleged that the assessee received cash exceeding ₹2 lakh. The aggregate amounts were ₹1,26,50,850, ₹4,25,65,566 & ₹54,11,422 respectively. Assessment orders were passed on 18.03.2024 & 24.03.2024. The Joint Commissioner subsequently issued show-cause notices u/s 274 r.w.s. 271DA on 12.12.2024, followed by penalty orders & demands dated 23.05.2025 & 26.05.2025.
The Single Judge quashed the penalties as time-barred, relying upon Principal Commissioner of Income Tax v. K. Umesh Shetty, (2025) 170 taxmann.com 748 (Karnataka). Revenue carried the matter in intra-Court appeals.
Issue Before the Division Bench
The principal issue was when penalty proceedings u/s 271DA are regarded as initiated for computing limitation u/s 275(1)(c): when the AO makes a reference or proposal to the competent Joint Commissioner, or only when the Joint Commissioner issues notice u/s 274.
