Limitation for income-tax penalty orders turns on amended procedural time limit, and a timely order was upheld.

The limitation period for passing a penalty order under sections 274(2) and 275 of the Income-tax Act was held to be governed by the amended section 275, which prescribed two years from the end of the financial year in which the relevant proceedings were completed. As the assessment was completed on 29 January 1972, the penalty order could be passed up to 31 March 1974. The order dated 30 March 1974 was therefore within time. The amendment fixing the limitation period was treated as procedural and applicable to the case, so the limitation objection failed and the issue was answered in favour of the Revenue.

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Issues: Whether, on a true interpretation of sections 274(2) and 275 of the Income-tax Act, 1961, the penalty order was barred by limitation.

Analysis: The reference was confined to the limitation for passing the penalty order, and the question whether penalty should be imposed was outside its scope. Section 275, as amended by the Taxation Laws (Amendment) Act, 1970 with effect from 1 April 1971, prescribed a period of two years from the end of the financial year in which the relevant proceedings were completed. Since the assessment was completed on 29 January 1972, the penalty order could validly be passed up to 31 March 1974. The order having been passed on 30 March 1974, it was within time. The amendment fixing the limitation period was procedural in nature and governed the case.

Conclusion: The answer was in the affirmative, and the limitation objection failed; the finding was in favour of the Revenue and against the assessee.

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