When does the s.275(1)(c) clock start for a s.271D penalty — the AO's satisfaction in the assessment order, or the Joint Commissioner's first notice?
From the Assessing Officer's satisfaction. The Tribunal held that the imposition of a s.271D penalty is not a one-stroke process but a series of steps, that the recording of satisfaction by the Assessing Officer is a pre-requisite to the proceeding, and that the date of that satisfaction is the date on which action for imposition of penalty is initiated. Counting from an assessment order dated 30 December 2022, the two limbs of s.275(1)(c) expired on 31 March 2023 and 30 June 2023, the later being 30 June 2023, so the penalty order of 30 August 2023 was barred.
Decided by the ITAT (S.R. Raghunatha, Accountant Member and Aby T. Varkey, Judicial Member) on 2025-10-30, reported as ITA No.1899/Chny/2025 with Cross-Objection No.65/Chny/2025; Assessment Year 2021-22; Income Tax Appellate Tribunal, Chennai 'C' Bench. It bears on section 275(1)(c), section 271D, section 269SS, section 271E of the Income Tax Act 1961, in Cash Transaction Limits, Penalty, Appeals and Search, Survey & Block Assessment matters.
This is the single most useful limitation point in a s.271D or s.271E case, and the Department's standard answer is that time runs from the Joint Commissioner's show-cause notice, which is usually months later. The Tribunal rejected that. It also confirmed, on CBDT Circular No. 10/2016 dated 26 April 2016, that s.275(1)(c) and not s.275(1)(a) governs these penalties, so the clock does not wait for the appellate order — a Circular that binds the Assessing Officer. Note the arithmetic carefully: s.275(1)(c) gives the later of (a) the end of the financial year in which the proceedings in the course of which the penalty action was initiated are completed, and (b) six months from the end of the month in which the penalty action was initiated. Both limbs are counted from the same initiating event, and the taxpayer's benefit comes from identifying that event as early as possible. Do not compute the dates yourself from the section without checking what the order actually holds — the same counting produced the opposite result for the Revenue in Dr. Sanjiv Keshav Karande v. ITO, where the assessment year fell such that the first limb was the later one.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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In the course of search and seizure proceedings at the Jayapriya Chit Funds building at Neyveli, a remote cloud server was identified and its data seized. On examining that data the Department found that the group had received cash fixed deposits of Rs 43,20,84,227 during the financial year 2020-21 in violation of s.269SS, and the Assessing Officer referred the issue to the Additional Commissioner of Income Tax, Central Range-2, for initiation of penalty under s.271D. The satisfaction was recorded in the assessment order dated 30 December 2022, passed with the approval of the Addl. CIT. The Joint Commissioner issued the first show-cause notice on 10 February 2023 and passed the penalty order on 30 August 2023. Before the Tribunal the Revenue's grounds included that the CIT(A) had failed to appreciate that Explanation (iv) to s.269SS defines 'specified sum' as any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place, and that the deposits in dispute were advances for transfer of immovable property falling squarely within that definition. The assessee raised limitation by cross-objection.
The Revenue's appeal was dismissed and the assessee's cross-objection allowed (para 34). The recording of satisfaction by the Assessing Officer, in the assessment order or otherwise, is a pre-requisite to conducting penalty proceedings under s.271D or s.271E, and the date of that recording is the date on which action for imposition of penalty is to be treated as initiated (para 20). Counted from 30 December 2022, the limitation under s.275(1)(c) expired on 30 June 2023 and the penalty order passed thereafter was barred. Because the cross-objection succeeded on a point going to the root of jurisdiction, the Revenue's appeal and the remaining cross-objections became academic (para 33).
The Tribunal took the limitation ground first because, if good, it went to the root of the jurisdiction to levy the penalty (para 8). It accepted CBDT Circular No. 10/2016 dated 26 April 2016, which had clarified that the time limits in s.275(1)(c) — and not s.275(1)(a), which governs orders that are the subject matter of appeal, or s.275(1)(b), which governs revision — apply to penalties under ss.271D and 271E, and treated that Circular as binding on all income-tax authorities including the Assessing Officer (paras 10 and 19). It then identified the real question as what date counts as the date on which action for imposition of penalty is initiated, the assessee saying the date of the Assessing Officer's satisfaction in the assessment order and the Revenue saying the date of the Joint Commissioner's first notice (para 19). It held that the action for imposition of penalty under s.271D is not a one-stroke process but takes place in a series of steps — the recording of satisfaction or finding of fact by the Assessing Officer regarding the violation of s.269SS, intimation of that satisfaction to the competent authority, and issue of a show-cause notice by the competent authority — and that since the satisfaction is a pre-requisite to the whole proceeding, its date is the date of initiation (para 20).
the date of recording of satisfaction by the AO, in our considered view, is to be taken as the date on which 'action for imposition of penalty is considered as initiated'.
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Handle my notice → Ask a CA on WhatsAppFrom the Assessing Officer's satisfaction. The Tribunal held that the imposition of a s.271D penalty is not a one-stroke process but a series of steps, that the recording of satisfaction by the Assessing Officer is a pre-requisite to the proceeding, and that the date of that satisfaction is the date on which action for imposition of penalty is initiated. Counting from an assessment order dated 30 December 2022, the two limbs of s.275(1)(c) expired on 31 March 2023 and 30 June 2023, the later being 30 June 2023, so the penalty order of 30 August 2023 was barred. This was decided by the ITAT (S.R. Raghunatha, Accountant Member and Aby T. Varkey, Judicial Member) and bears on section 275(1)(c), section 271D, section 269SS, section 271E of the Income Tax Act 1961. It is reported as ITA No.1899/Chny/2025 with Cross-Objection No.65/Chny/2025; Assessment Year 2021-22; Income Tax Appellate Tribunal, Chennai 'C' Bench. This is the single most useful limitation point in a s.271D or s.271E case, and the Department's standard answer is that time runs from the Joint Commissioner's show-cause notice, which is usually months later. The Tribunal rejected that. It also confirmed, on CBDT Circular No. 10/2016 dated 26 April 2016, that s.275(1)(c) and not s.275(1)(a) governs these penalties, so the clock does not wait for the appellate order — a Circular that binds the Assessing Officer. Note the arithmetic carefully: s.275(1)(c) gives the later of (a) the end of the financial year in which the proceedings in the course of which the penalty action was initiated are completed, and (b) six months from the end of the month in which the penalty action was initiated. Both limbs are counted from the same initiating event, and the taxpayer's benefit comes from identifying that event as early as possible. Do not compute the dates yourself from the section without checking what the order actually holds — the same counting produced the opposite result for the Revenue in Dr. Sanjiv Keshav Karande v. ITO, where the assessment year fell such that the first limb was the later one. If it applies to you, the first step is this: Get the assessment order and fix the exact date on which the Assessing Officer recorded satisfaction of the s.269SS or s.269T violation and referred the matter — that is your initiation date.
In the course of search and seizure proceedings at the Jayapriya Chit Funds building at Neyveli, a remote cloud server was identified and its data seized. On examining that data the Department found that the group had received cash fixed deposits of Rs 43,20,84,227 during the financial year 2020-21 in violation of s.269SS, and the Assessing Officer referred the issue to the Additional Commissioner of Income Tax, Central Range-2, for initiation of penalty under s.271D. The satisfaction was recorded in the assessment order dated 30 December 2022, passed with the approval of the Addl. CIT. The Joint Commissioner issued the first show-cause notice on 10 February 2023 and passed the penalty order on 30 August 2023. Before the Tribunal the Revenue's grounds included that the CIT(A) had failed to appreciate that Explanation (iv) to s.269SS defines 'specified sum' as any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place, and that the deposits in dispute were advances for transfer of immovable property falling squarely within that definition. The assessee raised limitation by cross-objection. The matter was decided on 2025-10-30 by the ITAT (S.R. Raghunatha, Accountant Member and Aby T. Varkey, Judicial Member). On those facts the ITAT held as follows. The Revenue's appeal was dismissed and the assessee's cross-objection allowed (para 34). The recording of satisfaction by the Assessing Officer, in the assessment order or otherwise, is a pre-requisite to conducting penalty proceedings under s.271D or s.271E, and the date of that recording is the date on which action for imposition of penalty is to be treated as initiated (para 20). Counted from 30 December 2022, the limitation under s.275(1)(c) expired on 30 June 2023 and the penalty order passed thereafter was barred. Because the cross-objection succeeded on a point going to the root of jurisdiction, the Revenue's appeal and the remaining cross-objections became academic (para 33).
The Tribunal took the limitation ground first because, if good, it went to the root of the jurisdiction to levy the penalty (para 8). It accepted CBDT Circular No. 10/2016 dated 26 April 2016, which had clarified that the time limits in s.275(1)(c) — and not s.275(1)(a), which governs orders that are the subject matter of appeal, or s.275(1)(b), which governs revision — apply to penalties under ss.271D and 271E, and treated that Circular as binding on all income-tax authorities including the Assessing Officer (paras 10 and 19). It then identified the real question as what date counts as the date on which action for imposition of penalty is initiated, the assessee saying the date of the Assessing Officer's satisfaction in the assessment order and the Revenue saying the date of the Joint Commissioner's first notice (para 19). It held that the action for imposition of penalty under s.271D is not a one-stroke process but takes place in a series of steps — the recording of satisfaction or finding of fact by the Assessing Officer regarding the violation of s.269SS, intimation of that satisfaction to the competent authority, and issue of a show-cause notice by the competent authority — and that since the satisfaction is a pre-requisite to the whole proceeding, its date is the date of initiation (para 20). In the words reproduced by the source cited on this page: "the date of recording of satisfaction by the AO, in our considered view, is to be taken as the date on which 'action for imposition of penalty is considered as initiated'." The decision followed or applied CBDT Circular No. 10/2016 [F.No.279/Misc./M-140/2015-ITJ] dated 26 April 2016 — applied as binding on the Assessing Officer (paras 10 and 19); CIT v. Hissaria Brothers — referred to on when penalty action is initiated.
It was decided by the ITAT on 2025-10-30 and is reported as ITA No.1899/Chny/2025 with Cross-Objection No.65/Chny/2025; Assessment Year 2021-22; Income Tax Appellate Tribunal, Chennai 'C' Bench. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 275(1)(c), section 271D, section 269SS, section 271E, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The Revenue's appeal was dismissed and the assessee's cross-objection allowed (para 34). The recording of satisfaction by the Assessing Officer, in the assessment order or otherwise, is a pre-requisite to conducting penalty proceedings under s.271D or s.271E, and the date of that recording is the date on which action for imposition of penalty is to be treated as initiated (para 20). Counted from 30 December 2022, the limitation under s.275(1)(c) expired on 30 June 2023 and the penalty order passed thereafter was barred. Because the cross-objection succeeded on a point going to the root of jurisdiction, the Revenue's appeal and the remaining cross-objections became academic (para 33). It arises in Cash Transaction Limits, Penalty, Appeals and Search, Survey & Block Assessment matters, on section 275(1)(c), section 271D, section 269SS, section 271E of the Income Tax Act 1961, and was decided by S.R. Raghunatha, Accountant Member and Aby T. Varkey, Judicial Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Compute both limbs of s.275(1)(c) from that date and take the later: the end of that financial year, and six months from the end of that month. Cite CBDT Circular No. 10/2016 to close off any argument that s.275(1)(a) applies and that time runs from the appellate order. Raise limitation as a ground going to jurisdiction — the Tribunal took it up first and did not reach the merits at all. Where the Revenue is in appeal, take the limitation point by cross-objection as this assessee did; it survived even though the Revenue's own appeal was on the merits of 'specified sum'.
Searched for later treatment; none was found. That is not the same as a source affirming it. The citator returns nothing. A case-name search returns 15 documents; the later Chennai orders of 6 August 2026 in this group's name concern quantum additions for AYs 2013-14 to 2016-17 arising from the search and do not take up the limitation point. Nothing applies or doubts the holding that the s.275(1)(c) period runs from the Assessing Officer's satisfaction, and no s.260A appeal was traced. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The penalty order is dated 30-08-2023; that date appears in the CIT-DR's submission recorded at para 12. The figure 31.08.2023 which also appears at para 12 is not the order date but the Revenue's computed expiry of the second limb on its own case (six months from the end of February 2023, counting from the Addl. CIT's notice of 10-02-2023). The first limb is printed in the order at para 11 as expiring on 31-03-2023, which is the correct end of financial year 2022-23; nothing turns on it because the second limb, 30 June 2023, was the later. The quantum of the penalty (Rs 28,94,71,555) comes from the report's narrative, not from a paragraph I read verbatim. The Circular is described in the order as 'CBDT Circular No. 10/2016 [F.NO.279/Misc./M-140/2015-ITJ], dated 26-4-2016'; I have taken the number from the judgment and have not verified it against the CBDT's own publication. I read paragraphs 3, 4, 5, 8, 10, 19, 20, 33 and 34 verbatim; paragraphs 21 to 32 I did not see. The Tribunal's own rendering of the first limb at para 19 — 'expiry of the financial year in which the act of imposition of penalty proceedings is initiated' — compresses the statutory words, which fix that limb by the financial year in which the proceedings in the course of which the penalty action was initiated are completed. On these facts both readings give 31 March 2023, so nothing turns on it here; it matters where the assessment and the initiation fall in different financial years. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Revenue's appeal was dismissed and the assessee's cross-objection allowed (para 34). The recording of satisfaction by the Assessing Officer, in the assessment order or otherwise, is a pre-requisite to conducting penalty proceedings under s.271D or s.271E, and the date of that recording is the date on which action for imposition of penalty is to be treated as initiated (para 20). Counted from 30 December 2022, the limitation under s.275(1)(c) expired on 30 June 2023 and the penalty order passed thereafter was barred. Because the cross-objection succeeded on a point going to the root of jurisdiction, the Revenue's appeal and the remaining cross-objections became academic (para 33).
TaxSphere, “DCIT v Jayapriya Company”, https://taxnotice.vittsphere.com/caselaw/case/dcit-v-jayapriya-company-275-1-c-runs-from-the-ao-satisfaction/ (validity last checked 2026-09-08)
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My assessment order says penalty under sections 271D and 271E is initiated. The Joint Commissioner issued his notice months later and passed the penalty order after that. Does time run from the assessment order or from his notice?
The Joint Commissioner passed a penalty order months after the assessment was completed. From what date does the six-month limitation in section 275 actually run — the reference to him, or his own show-cause notice?
The liability was created by a journal entry and no money moved. Does 269SS still apply?
The penalty under s.271D came more than six months after it was initiated. Is it automatically time-barred?
