Extended limitation applies to pending penalty proceedings when the original period is still running on the amendment date.

Where the limitation period for imposing penalty was still running on 1 April 1971, the amended section 275 of the Income-tax Act, as enlarged by section 50 of the Taxation Laws (Amendment) Act, 1970, governed the pending proceeding. The High Court applied the principle that an amendment extending limitation applies when the original period has not expired on the date the amendment takes effect. On that basis, the penalty order was held not to be barred by limitation and the referred question was answered against the assessee.

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Issues: Whether the penalty order was barred by limitation under section 275 of the Income-tax Act, 1961, as amended by section 50 of the Taxation Laws (Amendment) Act, 1970, where the original limitation period was still running on 1 April 1971.

Analysis: The reference was governed by the principle that when the period of limitation was still subsisting on the date the amendment came into force, the enlarged limitation period under the amended section 275 applied. Since the assessment proceedings had not exhausted the limitation period by 1 April 1971, the amended provision controlled the validity of the penalty order.

Conclusion: The penalty order was not barred by limitation and the answer to the referred question was in the negative, against the assessee.

Ratio Decidendi: Where a limitation period for imposing penalty is still running on the date an amendment enlarging that period comes into force, the amended limitation provision applies to the pending proceeding.

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