Delayed penalty proceedings without prescribed limitation may stand, but interest on the penalty starts only from the penalty order.

Penalty proceedings under section 45(6) were not invalidated merely because they were initiated belatedly, as no express limitation period was prescribed and the assessee showed no prejudice from the delay. The penalty was therefore sustained. However, interest on the penalty amount could not be imposed for the interregnum before the penalty order, and any interest liability was confined to commence only from the date of the order. The note thus distinguishes validity of delayed penalty initiation from the separate question of when interest on the penalty may start running.

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Issues: Whether penalty under section 45(6) could be sustained despite delayed initiation of proceedings, and whether interest on the penalty amount could run for the interregnum period before the penalty order.

Analysis: No express limitation period was prescribed for imposing the penalty. The delayed initiation of proceedings did not by itself vitiate the penalty in the absence of demonstrated prejudice to the assessee. The penalty was therefore upheld. At the same time, the assessee was not to be burdened with interest for the period prior to the penalty order, and interest, if otherwise payable, was directed to commence only from the date of the penalty order.

Conclusion: The penalty under section 45(6) was confirmed, but the liability to pay interest on the penalty was restricted to commence from 11.04.2001.

Final Conclusion: The challenge to the penalty failed on merits, but limited relief was granted on the date from which interest on the penalty could be charged.

Ratio Decidendi: In the absence of a prescribed limitation period and absent demonstrated prejudice, belated penalty proceedings are not invalid merely for delay, though interest on the penalty cannot be charged for the period preceding the penalty order.

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