Case Law Details
Property Plus Realtors Vs Union of India & Ors. (Delhi High Court)
Delhi High Court has set aside a penalty of ₹14.63 crore imposed on Property Plus Realtors under Section 271DA of the Income Tax Act, 1961, for alleged violations of Section 269ST. The court ruled that the order, issued on October 17, 2024, was beyond the statutory limitation period prescribed under Section 275(1)(c) of the Act. It held that the penalty proceedings should be considered initiated from the date the reference was received by the Additional Commissioner of Income Tax—January 18, 2023—not a later date claimed by the Revenue.
The case arose from an income tax search conducted on March 2, 2022, on the Gaursons Group and related entities, including Property Plus Realtors. During scrutiny, the Assessing Officer (AO) found alleged violations of Section 269ST, which restricts cash transactions exceeding ₹2,00,000. The AO forwarded a penalty recommendation to the Additional Commissioner on January 18, 2023. However, no immediate action was taken, and the penalty notice was issued only in April 2024, with the final order passed in October 2024. The petitioner contended that the penalty order was time-barred as it was issued more than six months after the initiation of penalty proceedings, as per Section 275(1)(c).
The High Court relied on its own precedents in Principal Commissioner of Income Tax v. JKD Capital & Finlease Ltd. (2015) and Commissioner of Income Tax (TDS)-2 Delhi v. Turner General Entertainment Networks India Pvt. Ltd. (2024). These cases established that the limitation period for penalty orders begins from the date the reference is received. The court rejected the Revenue’s argument that the reference date should be considered as May 8, 2024, when additional documents were submitted. It observed that the delay in taking action was on the part of the authorities and could not be used to extend the statutory limitation period.
The ruling underscores the importance of adherence to procedural timelines in tax matters. The court criticized the unexplained delay by the tax authorities and ruled that the penalty proceedings were void due to the expiration of the limitation period. Consequently, the penalty order was quashed, and all pending applications related to the case were disposed of. This decision reinforces the principle that tax authorities must act within prescribed time limits to ensure fairness in tax enforcement.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. The petitioner has filed the present petition, inter alia, impugning the notices dated 09.09.2024 and 27.09.2024 issued under Section 271DA read with Section 274 of the Income Tax Act, 1961 (hereafter the Act) as well as an order dated 17.10.2024 (hereafter the impugned order) passed under Section 271DA of the Act, imposing a penalty of ₹14,63,23,861/- in respect of the assessment year (AY) 2020-21 in contravention of the provisions of Section 269ST of the Act.
2. It is the petitioner’s case that the impugned order is barred by limitation.
3. The petitioner is a partnership firm, which was constituted on 01.01.2017. The petitioner firm is engaged in the business of acting as a real estate broker and claims that it acts as a broker for various developers, including Gaursons Group of Companies (hereafter Gaursons Group).
4. On 02.03.2022, a search was conducted under Section 132 of the Act on Gaursons Group and related entities. Simultaneously, the search was also conducted in the premises of the petitioner as well as the premises of its constituent partners.
5. The petitioner’s return for the AY 2020-21, had earlier been selected for scrutiny and the assessment proceedings were transferred to the Assessing Officer (hereafter the AO) for assessment. The AO had passed an assessment order dated 18.01.2023 under Section 143(3) of the Act. During the course of the proceedings, it appeared that the petitioner was liable for penalty for violation of Section 269ST of the Act. Accordingly, on 18.01.2023, the AO forwarded a reference to the Additional Commissioner of Income Tax, Central Range-4, New Delhi (respondent 3) proposing for initiation of the penalty proceedings under Section 269ST read with Section 271DA of the Act. Respondent no. 3 did not take any immediate steps thereafter. However, after a lapse of more than one year, respondent no. 3 sent a letter dated 09.04.2024, acknowledging that it had received a reference in the case of the petitioner for the AY 2020-21 and further seeking evidence regarding receipt of the sale proceeds on account of sale of flats/units/shops as well as earning of commission/brokerage income above the prescribed limit of ₹2,00,000/-. This was followed by a communication dated 08.05.2024 sent by the concerned AO to respondent no.3.
6. The impugned order was passed on 10.2024. The limited question to be examined is whether the impugned order was passed beyond the period of limitation as prescribed under Section 275(1)(c) of the Act. The said provision is set out below:-
“275. Bar of limitation for imposing penalties.
(1) No order imposing a penalty under this Chapter shall be passed-
(a) xxxxxxx
(b) xxxxxxx;
(c) in any other case, 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 action for imposition of penalty is initiated, whichever period expires later.”
7. The controversy, as to the date on which the penalty proceedings are to be construed as initiated, is no longer res integra. The said issue is covered by the decision of this court in Principal Commissioner of Income Tax v. JKD Capital & Finlease Ltd: 2015 SCC OnLine Del 14476 as well as the decision in Commissioner of Income Tax (TDS)-2 Delhi v. Turner General Entertainment Networks India Pvt. Ltd.: 2024 SCC OnLine Del 7760.
8. In terms of the said decisions, the date of receipt of the reference is required to be considered as the date of initiation of the proceedings. The order of penalty was required to be passed within six months from the end of the month in which the reference was received. There is no dispute that the reference was received by respondent no. 3 from the AO on 18.01.2023. Paragraph no. 5 of the said letter clearly indicates the above. The same is reproduced below:
“In view of the above, proposal of initiating proceedings u/s 269 ST of the Income Tax Act, 1961 in the case of the Assessee for A.Y.2020-21 is being forwarded for initiation of penalty proceedings and taking remedial action in this case.”
9. However, Mr. Sanjay Kumar, the learned counsel appearing for the Revenue contends that since the reference did not include the necessary particulars, the date of reference ought to be considered as 08.05.2024. This is the date on which the AO had submitted the copies of certain documents, as was requested by respondent no. 3 in terms of the letter dated 09.04.2024. He submits that if the date of reference is considered as 08.05.2024, the impugned order would be within the period of limitation as prescribed under Section 275(1)(c) of the Act.
10. We are not persuaded to accept the said contention. As noted above, the proposal to initiate the penalty proceedings was forwarded by the AO to respondent no. 3 on 18.01.2023. Further, this court is also unable to countenance the inordinate delay on the part of respondent no.3. As noted above, respondent no. 3 had not taken any steps to conclude the penalty proceedings immediately after receipt of the said Respondent no.3 had waited more than one year to ask for further documents. This was much after the period prescribed for passing the impugned order under Section 271DA of the Act, had expired.
11. In view of the above, the present petition is allowed and the impugned order is set aside. Pending application, if any, also stands disposed of.
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