Rationalization of Time limits to Impose Income Tax Penalties

The existing provisions of section 275 provide for the time limit for passing the order imposing penalties. There are multiple time lines for imposition of penalties in various cases. This makes it difficult to keep track of multiple time barring dates for effective and efficient tax administration.

In view of the foregoing, it proposed to substitute the provision of Section 275 to provide that any order imposing a penalty under Chapter XXI (Penalty Imposable) shall not be passed after the expiry of six months from the end of the quarter in which the connected proceedings are completed, or the order of appeal is received by the jurisdictional Principal Commissioner or Commissioner, or the order of revision is passed, or the notice for imposition of penalty is issued, as the case maybe.

Thus, amendment has brought clarity on the time limits to impose penalty and has providing single time limit to impose penalties.

This amendment will take effect from 1^st April, 2025.

Certain penalties to be imposed by an Assessing Officer:

At present, the penalty under following Sections is imposed only by the Joint Commissioner of Income tax, but due to amendment made from 1^st April, 2025, Income tax Officer can pass an order for penalty.

• Section 271C – Penalty for failure to deduct tax at source
• Section 271CA – Penalty for failure to collect tax at source
• Section 271D – Penalty for failure to comply with the provisions of Section 269SS
• Section 271DA – Penalty for failure to comply with the provisions of Section 269ST
• Section 271DB – Penalty for failure to comply with the provisions of Section 269SU (Acceptance of payment through prescribed electronic modes)
• Section 271E – Penalty for failure to comply with the provisions of Section 271T

Presently the assessment in such cases is being made by the assessing Officer while the penalty under above sections were being imposed by the Joint Commissioner.

In order to regionalize the process, it is proposed to amend Section 271C, 271CA, 271D, 271DA, 271DB, and 271E, so that penalties under these sections shall be levied by the Assessing Officer/Assistant Commissioner/Deputy Commissioner with the prior approval of Joint Commissioner. Prior permission of Joint Commissioner is required before imposing penalty by Assessing Officer where the penalty exceeds Rs. 10,000 and the Assistant Commissioner/Deputy Commissioner where the penalty exceeds Rs. 20,000.

This amendment will take effect from 1^st April, 2025.

Omission of Section 271BB to impose penalty for the failure to subscribe to the eligible issues of capital:

Section 271BB provides that, any person who fails to subscribe any amount to the units issued under any scheme referred to in Section 88A (1) of the Act within the period of Six months specified therein, may be directed by the Joint Commissioner to any penalty, a sum equal t0 20% of the such amount.

However, Section 88A has already been omitted vide Finance (no-2) Act, 1996, with retrospective effect from 1^st April, 1994. In the absent of the parent section, relevance of the penalty section in the case of any failure does not exist. Therefore, it is proposed to omit the Section 271BB.

The omission of Penalty provision is proposed after almost 29 years of omission parent section.

The amendment will take effect from 1^st April, 2025.

Providing clarity about no-applicability of Penalty provisions in certain cases:

Section 271AAB of the Act provides for penalty in case of search under section 132 of the Act, initiated on or after 15^th December, 2016.

However after introduction of search under the provisions of Block Assessment under section 158BC of the Act, w.e.f. September, 2024, and separate provisions have been pronounced for penalty as well as other proceedings in such search cases. Thus, the provisions of Section 271AAB cannot be applicable to such cases. Yet, there is some ambiguity in interpretation about the applicability of provisions of this section.

In order to remove such ambiguity and to provide clarity, it is proposed to amend section 271AAB and to provide that the said provisions shall not be applicable to the cases of search under section 132 initiated on or after 1^st September, 2024.

The above amendments are made applicable retrospectively w.e.f. 1^st September, 2024.