Penalty limitation under section 275(1)(c) runs from initiation of proceedings; belated order made the penalty time-barred.

Penalty proceedings under section 271C are governed by the limitation period in section 275(1)(c), which runs from the end of the month in which penalty action is initiated. Strict construction applies in fiscal matters, and a later show-cause notice does not postpone limitation where the penalty reference has already been made. On the facts, the penalty order was passed beyond the prescribed period, so the penalty was time-barred and unsustainable.

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Issues: Whether the penalty under section 271C of the Income-tax Act, 1961 was barred by limitation under section 275(1)(c) of the Income-tax Act, 1961 on the facts of the case.

Analysis: The relevant limitation under section 275(1)(c) runs from the end of the month in which action for imposition of penalty is initiated, and the provision requires strict construction in fiscal matters. The initiation of penalty proceedings is the first introductory step taken for the purposes of penalty, and a later show-cause notice does not defer the commencement where the reference for penalty has already been made. On the facts found, the penalty order was passed beyond the prescribed limitation period.

Conclusion: The penalty under section 271C was time-barred and unsustainable; the issue was decided in favour of the assessee.

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