Limitation for penalty proceedings treated as a machinery provision; penalty order upheld as not time-barred.

Section 275 was treated as a machinery provision prescribing the period for imposing penalty under section 271(1)(c), so strict construction applicable to charging and penalty provisions did not alter its operation. The earlier High Court interpretation of section 275 was followed, and the Supreme Court observation relied on by the assessee was not accepted as displacing that binding view. On that basis, the penalty order was not time-barred and the limitation objection failed.

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Issues: Whether the order imposing penalty under section 271(1)(c) was barred by limitation under section 275.

Analysis: The relevant provision of section 275 was treated as a machinery provision governing the period within which penalty could be imposed. The principle of strict construction of fiscal statutes was held to apply to charging and penalty provisions, but not to machinery provisions prescribing limitation. The earlier decision of the same High Court on the construction of section 275 was followed, and the Supreme Court observation cited by the assessee was held not to displace that binding view.

Conclusion: The penalty order was not time-barred, and the question was answered in the negative, in favour of the Revenue.

Final Conclusion: The reference was answered against the assessee on limitation and disposed of accordingly.

Ratio Decidendi: A provision prescribing the period of limitation for imposing penalty is a machinery provision, so the rule of strict construction applicable to penal provisions does not alter its operation where binding precedent has already settled its interpretation.

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