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?
From his notice, on this judgment. The Kerala High Court held that because a penalty under s.271D or s.271E may be imposed only by the Joint Commissioner, only the Joint Commissioner can initiate the proceedings; the assessing officer cannot. It follows that the sentence in the assessment order saying that proceedings under those sections are initiated is inconsequential, and that limitation under s.275(1)(c) is measured from the Joint Commissioner's notice. On the dates before the Court - assessment order 6 November 2007, notice by the Joint Commissioner 28 March 2008, penalty orders 29 July 2008 - the penalty orders were in time. The appeals were rejected and the questions answered in favour of the Revenue.
Decided by the High Court (High Court of Kerala at Ernakulam; Antony Dominic and Shaji P. Chaly, JJ.) on 2015-08-07, reported as ITA Nos. 83 and 86 of 2014 (High Court of Kerala at Ernakulam); [2015] 63 taxmann.com 196 (Ker). It bears on section 271D, section 271E, section 275(1)(c), section 275, section 269SS, section 269T, section 273B of the Income Tax Act 1961, in Penalty matters.
Almost every s.271D and s.271E matter is fought on limitation before it is fought on the merits, and limitation turns entirely on when the proceedings are taken to have been initiated. This is the judgment that puts that moment at the Joint Commissioner's notice rather than at the assessment order, and it is the judgment the department relies on, with its own circular behind it. An assessee who assumes the clock started at the assessment order and finds himself before a court that follows this decision loses several months of limitation he thought he had. The argument has to be prepared both ways.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee, a firm, had received and repaid sums exceeding the statutory ceiling otherwise than by account payee cheque or draft, in contravention of s.269SS and s.269T, for assessment year 2005-06. The assessment order, dated 6 November 2007, concluded with the statement that penalty provisions of s.271D and s.271E are initiated. The Joint Commissioner, who alone can impose these penalties, issued notice on 28 March 2008 and passed the penalty orders on 29 July 2008. The assessee appealed to the High Court raising three questions: whether the penalty orders were passed within the time limit in s.275(1)(c); whether the existence of reasonable cause under s.273B had been properly examined, the assessee's case being that the sums came from partners and sister concerns; and whether receipts of that kind could be treated as loans or deposits at all. The Commissioner (Appeals) and the Tribunal had both decided against the assessee.
The questions of law framed by the assessee were answered against it and in favour of the Revenue, and the appeals were rejected. Only the Joint Commissioner is competent to impose a penalty under s.271D or s.271E, and it follows that only he can initiate proceedings for the levy of such a penalty. The statement in the assessment order that proceedings under s.271D and s.271E are initiated is inconsequential. Because the proceedings commenced with the notice issued by the Joint Commissioner on 28 March 2008, the penalty orders of 29 July 2008 were within the time prescribed by s.275(1)(c). On the second question, the concurrent finding that no reasonable cause had been established was not perverse and was upheld. The third question, on whether money taken from partners or sister concerns could be treated as loans or deposits, was also decided against the assessee.
The Court began with the structure of the two penalty sections. Sub-section (2) of each provides that the penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner. From that the Court drew the conclusion that the competent authority to levy the penalty being the Joint Commissioner, only the Joint Commissioner can initiate proceedings for levy of penalty. The assessing officer has no power to impose these penalties and therefore none to initiate them; if the assessment order were taken as the initiation, the initiation would be by an authority who is incompetent and everything after it would be without jurisdiction. That is why the recital in the assessment order is inconsequential. The Court distinguished the Supreme Court's decision in D.M. Manasvi v. CIT [1972] 86 ITR 557 on the footing that it was concerned with a penalty under s.271(1)(c), which the assessing officer himself imposes, so that the satisfaction recorded in the assessment order there was the satisfaction of the authority competent to levy. With initiation fixed at the Joint Commissioner's notice of 28 March 2008, the computation under s.275(1)(c) followed and the orders of 29 July 2008 were in time. On s.273B the Court set out that the provision excludes penalty where the assessee proves reasonable cause, examined the finding of the authorities below that no such cause had been made out, and declined to interfere, finding no perversity in it.
The statement in the assessment order that the proceedings under Section 271D and E are initiated is inconsequential.
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Handle my notice → Ask a CA on WhatsAppFrom his notice, on this judgment. The Kerala High Court held that because a penalty under s.271D or s.271E may be imposed only by the Joint Commissioner, only the Joint Commissioner can initiate the proceedings; the assessing officer cannot. It follows that the sentence in the assessment order saying that proceedings under those sections are initiated is inconsequential, and that limitation under s.275(1)(c) is measured from the Joint Commissioner's notice. On the dates before the Court - assessment order 6 November 2007, notice by the Joint Commissioner 28 March 2008, penalty orders 29 July 2008 - the penalty orders were in time. The appeals were rejected and the questions answered in favour of the Revenue. This was decided by the High Court (High Court of Kerala at Ernakulam; Antony Dominic and Shaji P. Chaly, JJ.) and bears on section 271D, section 271E, section 275(1)(c), section 275, section 269SS, section 269T, section 273B of the Income Tax Act 1961. It is reported as ITA Nos. 83 and 86 of 2014 (High Court of Kerala at Ernakulam); [2015] 63 taxmann.com 196 (Ker). Almost every s.271D and s.271E matter is fought on limitation before it is fought on the merits, and limitation turns entirely on when the proceedings are taken to have been initiated. This is the judgment that puts that moment at the Joint Commissioner's notice rather than at the assessment order, and it is the judgment the department relies on, with its own circular behind it. An assessee who assumes the clock started at the assessment order and finds himself before a court that follows this decision loses several months of limitation he thought he had. The argument has to be prepared both ways. If it applies to you, the first step is this: Get the file dates before you argue limitation: the date of the assessment order, the date of the reference or note to the Joint Commissioner or Additional Commissioner, and the date of his own notice. The whole argument is those three dates.
The assessee, a firm, had received and repaid sums exceeding the statutory ceiling otherwise than by account payee cheque or draft, in contravention of s.269SS and s.269T, for assessment year 2005-06. The assessment order, dated 6 November 2007, concluded with the statement that penalty provisions of s.271D and s.271E are initiated. The Joint Commissioner, who alone can impose these penalties, issued notice on 28 March 2008 and passed the penalty orders on 29 July 2008. The assessee appealed to the High Court raising three questions: whether the penalty orders were passed within the time limit in s.275(1)(c); whether the existence of reasonable cause under s.273B had been properly examined, the assessee's case being that the sums came from partners and sister concerns; and whether receipts of that kind could be treated as loans or deposits at all. The Commissioner (Appeals) and the Tribunal had both decided against the assessee. The matter was decided on 2015-08-07 by the High Court (High Court of Kerala at Ernakulam; Antony Dominic and Shaji P. Chaly, JJ.). On those facts the High Court held as follows. The questions of law framed by the assessee were answered against it and in favour of the Revenue, and the appeals were rejected. Only the Joint Commissioner is competent to impose a penalty under s.271D or s.271E, and it follows that only he can initiate proceedings for the levy of such a penalty. The statement in the assessment order that proceedings under s.271D and s.271E are initiated is inconsequential. Because the proceedings commenced with the notice issued by the Joint Commissioner on 28 March 2008, the penalty orders of 29 July 2008 were within the time prescribed by s.275(1)(c). On the second question, the concurrent finding that no reasonable cause had been established was not perverse and was upheld. The third question, on whether money taken from partners or sister concerns could be treated as loans or deposits, was also decided against the assessee.
The Court began with the structure of the two penalty sections. Sub-section (2) of each provides that the penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner. From that the Court drew the conclusion that the competent authority to levy the penalty being the Joint Commissioner, only the Joint Commissioner can initiate proceedings for levy of penalty. The assessing officer has no power to impose these penalties and therefore none to initiate them; if the assessment order were taken as the initiation, the initiation would be by an authority who is incompetent and everything after it would be without jurisdiction. That is why the recital in the assessment order is inconsequential. The Court distinguished the Supreme Court's decision in D.M. Manasvi v. CIT [1972] 86 ITR 557 on the footing that it was concerned with a penalty under s.271(1)(c), which the assessing officer himself imposes, so that the satisfaction recorded in the assessment order there was the satisfaction of the authority competent to levy. With initiation fixed at the Joint Commissioner's notice of 28 March 2008, the computation under s.275(1)(c) followed and the orders of 29 July 2008 were in time. On s.273B the Court set out that the provision excludes penalty where the assessee proves reasonable cause, examined the finding of the authorities below that no such cause had been made out, and declined to interfere, finding no perversity in it. In the words reproduced by the source cited on this page: "The statement in the assessment order that the proceedings under Section 271D and E are initiated is inconsequential." The decision followed or applied D.M. Manasvi v. CIT [1972] 86 ITR 557 (SC) - distinguished, as a case on s.271(1)(c); CBDT Circular No. 09/DV/2016 dated 26 April 2016 - adopts this reasoning for the department; M/s. Meghana Avenues Private Limited v. CIT (Telangana High Court, 5 March 2026) - accepts the competence point, but applies Jai Laxmi Rice Mills on satisfaction.
It was decided by the High Court on 2015-08-07 and is reported as ITA Nos. 83 and 86 of 2014 (High Court of Kerala at Ernakulam); [2015] 63 taxmann.com 196 (Ker). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 271D, section 271E, section 275(1)(c), section 275, section 269SS, section 269T, section 273B, 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 department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The questions of law framed by the assessee were answered against it and in favour of the Revenue, and the appeals were rejected. Only the Joint Commissioner is competent to impose a penalty under s.271D or s.271E, and it follows that only he can initiate proceedings for the levy of such a penalty. The statement in the assessment order that proceedings under s.271D and s.271E are initiated is inconsequential. Because the proceedings commenced with the notice issued by the Joint Commissioner on 28 March 2008, the penalty orders of 29 July 2008 were within the time prescribed by s.275(1)(c). On the second question, the concurrent finding that no reasonable cause had been established was not perverse and was upheld. The third question, on whether money taken from partners or sister concerns could be treated as loans or deposits, was also decided against the assessee. It arises in Penalty matters, on section 271D, section 271E, section 275(1)(c), section 275, section 269SS, section 269T, section 273B of the Income Tax Act 1961, and was decided by High Court of Kerala at Ernakulam; Antony Dominic and Shaji P. Chaly, JJ.. 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. Work the clause both ways. Under s.275(1)(c) the outer date is the later of the end of the financial year in which the proceedings in the course of which the action for penalty was initiated are completed, and six months from the end of the month in which the action for imposition of penalty was initiated. Run it from the assessment and run it from the Joint Commissioner's notice, and see which of the two answers helps you. Know which side your High Court is on before you build the case on the earlier date. This judgment runs time from the Joint Commissioner and is against the assessee; a separate line of authority runs it from the assessment or the reference and is for him. Do not hang the case on the absence of a satisfaction recorded by the assessing officer if you are in Kerala. On this judgment that statement in the assessment order carries no weight either way. Keep the reasonable cause defence under s.273B alive on its own facts and evidence. It is a separate answer and the Court dealt with it separately.
High Courts differ on this point. This judgment is the leading authority for running limitation from the Joint Commissioner, and it has departmental backing: CBDT Circular No. 09/DV/2016 of 26 April 2016 adopts the reasoning, quoting it, and directs that an officer below the rank of Joint Commissioner who finds a contravention of s.269SS or s.269T is to make a reference to the Range Head rather than initiate the proceedings himself. The Telangana High Court in M/s. Meghana Avenues Private Limited v. CIT (5 March 2026) reproduces the same two sentences and accepts that the Joint Commissioner is the competent authority. The other side of the split runs limitation from the assessment or from the reference and is favourable to the assessee: the Rajasthan High Court in Hissaria Bros and the Delhi High Court in Thapar Homes are the decisions that line rests on, and this library's own record of DCIT v. Ashwani Gupta (ITAT Jaipur, 10 November 2025) is an application of it, holding a penalty barred whether computed from the reference or from the assessment. So the same set of facts can produce opposite answers in different jurisdictions, and a practitioner has to establish which High Court binds him before he computes anything. There is also a complication inside the pro-Revenue view itself. The Telangana High Court, while accepting the competence point, applied the Supreme Court's decision in Jai Laxmi Rice Mills to hold that satisfaction still has to be recorded in the original assessment order, and set the penalty orders aside on that footing. That is not what was decided here, and the two are not easily reconciled. The assessee's petitions to the Supreme Court against this judgment ended on 18 February 2022 when Special Leave Petition (C) Nos. 20402-20403 of 2016 were disposed of as withdrawn, so there is no Supreme Court ruling on it. Section 275 has since been substituted, by Act No. 7 of 2025 with effect from 1 April 2025, and the computation in a current matter must be made on the substituted text, which fixes six months from the end of the quarter and drops the later-of formula. 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.
A date correction first, because a reader who follows the link will meet a wrong one. The document is served with a date of 6 November 2007; that is the date of the assessment order discussed inside the judgment, not the date of the judgment. The date printed at the foot of the judgment is 7 August 2015 and the cause title is ITA Nos. 83 and 86 of 2014. The judgment was read in full on its own address, three times and on different questions, and the account above is taken from that reading. It was then cross-checked against a court document from another State: the Telangana High Court in M/s. Meghana Avenues Private Limited v. CIT of 5 March 2026, W.P. No. 24403 of 2025, which reproduces the same sentences, gives the report reference as [2015] 63 taxmann.com 196 (Kerala), and records the CBDT circular that followed. The Kerala judgment runs to numbered paragraphs, and the whole of the reasoning on who initiates and on when limitation starts is in paragraph 10, which is where both of the sentences quoted in this entry sit; that is how it should be cited. Next, a correction to a common description of this case. It is often summarised as deciding that satisfaction for a s.271D or s.271E penalty must be recorded in the assessment order. It decides close to the opposite. Because the assessing officer is not the authority that imposes these penalties, the Kerala High Court held he cannot initiate them either, and the statement in his assessment order that he has done so is inconsequential. The consequence for the assessee was unfavourable: initiation moved forward to the Joint Commissioner's notice and the penalty orders, which would have been out of time on the earlier date, were held to be in time. The appeals were rejected. Anyone who cites this case expecting it to help an assessee on limitation has misread it. Finally, on the statute. Section 275 has been substituted with effect from 1 April 2025, so the clause numbering and the formulas in the judgment are those of the earlier text; and the Income-tax Act, 1961 having been repealed on 1 April 2026, s.536(2)(c) of the Income-tax Act, 2025 continues it for any tax year beginning before that date, which is every year in which this question can still arise. The Court decided when the proceedings begin. It did not decide what, if anything, the assessing officer must record before making a reference to the Joint Commissioner, and it did not consider the line of Supreme Court authority on recorded satisfaction that a later High Court has brought to bear on the same question. It does not say what happens where the Joint Commissioner acts without any reference from the assessing officer at all. It does not address clause (a) of s.275(1), or the relationship between clause (a) and clause (c), and it makes no finding on whether a s.271D penalty is or is not connected with the assessment for the purpose of choosing between them. On the merits limbs the Court did no more than decline to interfere with concurrent findings, so it lays down nothing general about when money from a partner or a sister concern is a loan or deposit, and nothing general about what amounts to reasonable cause under s.273B. It is a judgment on the text of s.275 as it then stood. 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 questions of law framed by the assessee were answered against it and in favour of the Revenue, and the appeals were rejected. Only the Joint Commissioner is competent to impose a penalty under s.271D or s.271E, and it follows that only he can initiate proceedings for the levy of such a penalty. The statement in the assessment order that proceedings under s.271D and s.271E are initiated is inconsequential. Because the proceedings commenced with the notice issued by the Joint Commissioner on 28 March 2008, the penalty orders of 29 July 2008 were within the time prescribed by s.275(1)(c). On the second question, the concurrent finding that no reasonable cause had been established was not perverse and was upheld. The third question, on whether money taken from partners or sister concerns could be treated as loans or deposits, was also decided against the assessee.
TaxSphere, “Grihalakshmi Vision v Addl CIT”, https://taxnotice.vittsphere.com/caselaw/case/grihalakshmi-vision-v-addl-cit-who-initiates-a-271d-penalty/ (validity last checked 2026-09-23)
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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?
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?
I took and repaid small cash loans from my family's sister concern, all recorded in the books. Must penalty follow automatically under sections 271D and 271E?
