Limitation for penalty proceedings under income tax law runs from the penalty proposal date, not the later show-cause notice.

Penalty proceedings under the Income-tax Act cannot be kept open indefinitely where Section 275(1)(c) does not specify the commencement point for the six-month limit. The Delhi HC treated the word "initiated" as referring to the date on which the penalty proposal is made, not the later issue of the show-cause notice, because a contrary reading would let the Revenue choose the limitation start date. It also applied the principle that, when the statute is silent, penalty action must be taken within a reasonable period. On these facts, the proposed penalty was issued many years after the assessment and return, so the proceedings were held time-barred.

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Issues: Whether penalty proceedings under the Income-tax Act, 1961 were barred by limitation where the statute did not specify the commencement point for the six-month period under Section 275(1)(c), and whether the initiation of proceedings had to be treated as occurring on the date of the proposal for penalty.

Analysis: The assessment year involved was 2005-06. The return had been filed long before the penalty machinery was invoked, and the proposal for initiation of penalty proceedings was made more than eleven years after the assessment order and about fourteen years after the return was filed. The provision governing limitation did not fix a date for the commencement of the six-month period in the manner contended by the Revenue. The Court held that the word "initiated" in Section 275(1)(c) must be understood as the date on which the proposal for penalty is made, not the later date on which the show cause notice is issued, because otherwise the Revenue would be able to choose the starting point at will. The Court also applied the principle that, where the statute is silent, penalty action must be taken within a reasonable period.

Conclusion: The penalty proceedings were time-barred, and the appeal failed.

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