Limitation under Section 275(1): clause (a) applies where penalty originates in an appealed assessment; penalty deemed within time.

Whether the penalty order was time-barred turned on which clause of Section 275(1) governed limitation. The court held clause (a) applies where the penalty proceedings originate in an assessment order that is the subject-matter of appeals; clause (c) is residuary and inapplicable. Because the penalty was initiated in the assessment order and that assessment was under appeal culminating in an appellate order received in December 2021, limitation under clause (a) ran to six months from receipt of the appellate order and therefore the penalty dated 30.06.2022 fell within time; the writ was dismissed.

---

---

Issues: Whether the penalty order under Section 271AAB of the Income-tax Act, 1961, dated 30.06.2022, is barred by limitation; and whether clause (a) or clause (c) of Section 275(1) of the Income-tax Act, 1961, governs computation of the limitation period in the present facts.

Analysis: The Court examined Section 275(1) and concluded that clause (c) is a residuary provision applicable only where clauses (a) and (b) do not apply. Clause (a) applies when (i) the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) or the Appellate Tribunal and (ii) the action for imposition of penalty was initiated in the course of the assessment or other proceedings culminating in that order. The Court analysed Section 271AAB and the factual matrix: search proceedings under Section 132 resulted in an admission of cash income; the assessment order dated 30.12.2017 initiated action for imposition of penalty under Section 271AAB and the same assessment order was appealed to the CIT(A) and further to the ITAT. As the penalty proceedings originated in the assessment order and the assessment order was the subject-matter of appeals culminating in a final ITAT order, clause (a) of Section 275(1) applied. Clause (b) was inapplicable because the revision order had been quashed, leaving clause (a) operative. Under clause (a) the limitation may be computed either from the end of the financial year in which the proceedings were completed or from six months from the end of the month in which the appellate order was received. The ITAT order was received in December 2021 (dated 22.12.2021); six months from the end of that month expired on 30.06.2022. The penalty order dated 30.06.2022 therefore fell within the limitation period prescribed by clause (a).

Conclusion: Clause (a) of Section 275(1) applies and the penalty order dated 30.06.2022 is within the period of limitation; the writ petition challenging the penalty is dismissed.

---