Limitation for penalty imposition under Section 275(1)(c) and relief notifications rendered the later penalty order invalid.

Whether a penalty under Section 271D was time-barred turned on application of the outer limitation in Section 275(1)(c) and the extensions granted by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and its notification. The court held that a notice served within the extended window was saved by the notification but the extended outer limit expired by 31.03.2022, and an order dated 27.05.2022 was therefore beyond the extended limitation period. Outcome: the penalty order was held without authority of law and quashed in favour of the assessee.

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Issues: Whether the order imposing penalty under Section 271D of the Income-tax Act, 1961 dated 27.05.2022 is time barred insofar as limitation under Section 275(1)(c) of the Income-tax Act, 1961 and the notifications under Section 3(1)(a) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 are concerned.

Analysis: The assessment order was passed on 22.12.2019 and no notice to impose penalty was issued in that financial year. Section 275(1)(c) prescribes the outer time limit for passing a penalty order as the end of the financial year in which the proceedings in the course of which action for imposition of penalty are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever is later. The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and Notification S.O. No. 3814(E) dated 17.09.2021 extended relevant time limits for imposition of penalty under Chapter XXI of the Income-tax Act, 1961 so that the end date for completion of such action stood extended to 31.03.2022 (with 30.03.2022 as the end of the period during which the original time-limit fell). A notice issued on 26.11.2021 was therefore saved by the notification, but the extended outer limit for passing the penalty order expired on 31.03.2022 (or 30.03.2022 as applicable). The impugned order was passed on 27.05.2022, which is beyond the extended limitation period prescribed by the notification read with Section 275(1)(c).

Conclusion: The penalty order dated 27.05.2022 imposing penalty under Section 271D of the Income-tax Act, 1961 was passed beyond the extended period of limitation and is without authority of law; the impugned order is quashed and the writ petition is allowed in favour of the assessee.

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