Penalty limitation under section 275(1)(c) defeated a section 271D order where no quantum proceedings were pending.

Penalty under section 271D was held time-barred under section 275(1)(c) because no relevant quantum assessment proceedings were pending for the years under appeal. The applicable period was the second limb of section 275(1)(c), giving six months from the end of the month in which penalty action was initiated by notice under section 274 read with section 271D on 14.08.2024. That limitation expired on 28.02.2025, but the penalty order was passed on 19.03.2025. The order was therefore quashed as barred by limitation.

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

Analysis: The penalty proceedings were initiated by notice under section 274 read with section 271D of the Income-tax Act, 1961 on 14.08.2024. There were no relevant quantum assessment proceedings for the assessees' years under appeal, so the applicable period was the second limb of section 275(1)(c), namely six months from the end of the month in which action for imposition of penalty was initiated. On that basis, the limitation expired on 28.02.2025. The penalty order was passed on 19.03.2025, after the expiry of the prescribed limitation period.

Conclusion: The penalty order was barred by limitation and was quashed; the issue was decided in favour of the assessee.

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