The penalty under s.271D came more than six months after it was initiated. Is it automatically time-barred?
No. Section 275(1)(c) gives the Department the later of two periods, and where the proceedings in the course of which the penalty was initiated were completed in a financial year that ends after the six-month period, the financial-year limb governs. Here the penalty was initiated in April 2016, six months would have run out at the end of October 2016, but the relevant financial year was 2016-17, so a penalty order passed on 29 November 2016 was in time. The Tribunal also dismissed the reasonable-cause plea on the facts.
Decided by the ITAT (D. Karunakara Rao, Accountant Member and Laliet Kumar, Judicial Member) on 2020-02-06, reported as ITA No.1540/PUN/2017; Assessment Year 2013-14; Income Tax Appellate Tribunal, Pune 'B' Bench. It bears on section 275(1)(c), section 271D, section 269SS, section 273B of the Income Tax Act 1961, in Cash Transaction Limits, Penalty and Evidence & Burden of Proof matters.
This is the Revenue side of the s.275(1)(c) line, and it is the case that stops a practitioner from filing a limitation ground that will lose. The 'whichever is later' formula cuts both ways: an assessee whose penalty is initiated early in a financial year gets almost no benefit from the six-month limb, because the financial-year limb runs longer. Compute both limbs before you plead limitation. The second half of the order is equally worth carrying: the Tribunal held that the case law relied on by the assessee was distinguishable on facts and that, in penalty matters, reasons for taking loans vary from one assessee to the other and no two cases are identical. A reasonable-cause plea under s.273B has to be proved on the specific transaction with evidence — the assessee here pleaded urgency and compulsion, and the Tribunal recorded that there was no evidence to establish it.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee is a medical professional, a gynaecologist. He received loans totalling Rs 61,67,114 from four creditors, partly in cash and partly by electronic transfer. The CIT(A)'s order, extracted at para 12, deals with two of them as the assessee's brothers and confirms the penalty in respect of the remaining two parties. On a show-cause notice invoking s.271D read with s.269SS he pleaded urgency and compulsion, but produced no evidence to establish that reply. The Assessing Officer analysed each cash loan and each of the three creditors and examined the reasonable-cause issue before the Joint Commissioner levied the penalty by order dated 29 November 2016. In first appeal the CIT(A), by order dated 27 March 2017, gave part relief by deleting the penalty referable to Rs 27,72,655 received by NEFT and confirmed the balance. Before the Tribunal the assessee took limitation under s.275(1)(c) as his first ground, relying on the Delhi High Court in Pr.CIT v. Mahesh Wood Products Pvt. Ltd., and argued the merits in the alternative. The penalty was initiated in April 2016 and the relevant financial year was 2016-17.
The appeal was dismissed (para 14). On limitation, since s.275(1)(c) allows the later of the expiry of the financial year in which the proceedings are completed and six months from the end of the month in which the action for imposition of penalty is initiated, and the relevant financial year was 2016-17 with the month of initiation April 2016, the penalty order of 29 November 2016 was valid and not time barred (para 11). On the merits, the CIT(A)'s order was fair and reasonable and called for no interference, the case law relied on by the assessee being distinguishable on facts (para 13).
On limitation the Tribunal read clause (c) of s.275(1) as containing two alternative outer dates and applied whichever expired later, identifying the financial year as 2016-17 and the month of initiation as April 2016, from which it followed that the order of 29 November 2016 was within time (para 11). On the merits it declined to interfere, reasoning that in penalty matters the reasons for taking loans vary from one assessee to another and no two cases are identical, so the authorities the assessee had cited could not be transposed (para 13).
The relevant financial year, is 2016-17 in this case and the relevant month of initiation of penalty, is April, 2016. Therefore, the order passed by the Assessing Officer on 29.11.2016 is very much valid and not time barred.
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Handle my notice → Ask a CA on WhatsAppNo. Section 275(1)(c) gives the Department the later of two periods, and where the proceedings in the course of which the penalty was initiated were completed in a financial year that ends after the six-month period, the financial-year limb governs. Here the penalty was initiated in April 2016, six months would have run out at the end of October 2016, but the relevant financial year was 2016-17, so a penalty order passed on 29 November 2016 was in time. The Tribunal also dismissed the reasonable-cause plea on the facts. This was decided by the ITAT (D. Karunakara Rao, Accountant Member and Laliet Kumar, Judicial Member) and bears on section 275(1)(c), section 271D, section 269SS, section 273B of the Income Tax Act 1961. It is reported as ITA No.1540/PUN/2017; Assessment Year 2013-14; Income Tax Appellate Tribunal, Pune 'B' Bench. This is the Revenue side of the s.275(1)(c) line, and it is the case that stops a practitioner from filing a limitation ground that will lose. The 'whichever is later' formula cuts both ways: an assessee whose penalty is initiated early in a financial year gets almost no benefit from the six-month limb, because the financial-year limb runs longer. Compute both limbs before you plead limitation. The second half of the order is equally worth carrying: the Tribunal held that the case law relied on by the assessee was distinguishable on facts and that, in penalty matters, reasons for taking loans vary from one assessee to the other and no two cases are identical. A reasonable-cause plea under s.273B has to be proved on the specific transaction with evidence — the assessee here pleaded urgency and compulsion, and the Tribunal recorded that there was no evidence to establish it. If it applies to you, the first step is this: Before pleading limitation, compute both limbs of s.275(1)(c) — the end of the financial year in which the proceedings were completed, and six months from the end of the month of initiation — and take the later.
The assessee is a medical professional, a gynaecologist. He received loans totalling Rs 61,67,114 from four creditors, partly in cash and partly by electronic transfer. The CIT(A)'s order, extracted at para 12, deals with two of them as the assessee's brothers and confirms the penalty in respect of the remaining two parties. On a show-cause notice invoking s.271D read with s.269SS he pleaded urgency and compulsion, but produced no evidence to establish that reply. The Assessing Officer analysed each cash loan and each of the three creditors and examined the reasonable-cause issue before the Joint Commissioner levied the penalty by order dated 29 November 2016. In first appeal the CIT(A), by order dated 27 March 2017, gave part relief by deleting the penalty referable to Rs 27,72,655 received by NEFT and confirmed the balance. Before the Tribunal the assessee took limitation under s.275(1)(c) as his first ground, relying on the Delhi High Court in Pr.CIT v. Mahesh Wood Products Pvt. Ltd., and argued the merits in the alternative. The penalty was initiated in April 2016 and the relevant financial year was 2016-17. The matter was decided on 2020-02-06 by the ITAT (D. Karunakara Rao, Accountant Member and Laliet Kumar, Judicial Member). On those facts the ITAT held as follows. The appeal was dismissed (para 14). On limitation, since s.275(1)(c) allows the later of the expiry of the financial year in which the proceedings are completed and six months from the end of the month in which the action for imposition of penalty is initiated, and the relevant financial year was 2016-17 with the month of initiation April 2016, the penalty order of 29 November 2016 was valid and not time barred (para 11). On the merits, the CIT(A)'s order was fair and reasonable and called for no interference, the case law relied on by the assessee being distinguishable on facts (para 13).
On limitation the Tribunal read clause (c) of s.275(1) as containing two alternative outer dates and applied whichever expired later, identifying the financial year as 2016-17 and the month of initiation as April 2016, from which it followed that the order of 29 November 2016 was within time (para 11). On the merits it declined to interfere, reasoning that in penalty matters the reasons for taking loans vary from one assessee to another and no two cases are identical, so the authorities the assessee had cited could not be transposed (para 13). In the words reproduced by the source cited on this page: "The relevant financial year, is 2016-17 in this case and the relevant month of initiation of penalty, is April, 2016. Therefore, the order passed by the Assessing Officer on 29.11.2016 is very much valid and not time barred." The decision followed or applied Pr.CIT v. Mahesh Wood Products Pvt. Ltd. (Delhi High Court) — relied on by the assessee and not applied.
It was decided by the ITAT on 2020-02-06 and is reported as ITA No.1540/PUN/2017; Assessment Year 2013-14; Income Tax Appellate Tribunal, Pune 'B' 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 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 appeal was dismissed (para 14). On limitation, since s.275(1)(c) allows the later of the expiry of the financial year in which the proceedings are completed and six months from the end of the month in which the action for imposition of penalty is initiated, and the relevant financial year was 2016-17 with the month of initiation April 2016, the penalty order of 29 November 2016 was valid and not time barred (para 11). On the merits, the CIT(A)'s order was fair and reasonable and called for no interference, the case law relied on by the assessee being distinguishable on facts (para 13). It arises in Cash Transaction Limits, Penalty and Evidence & Burden of Proof matters, on section 275(1)(c), section 271D, section 269SS, section 273B of the Income Tax Act 1961, and was decided by D. Karunakara Rao, Accountant Member and Laliet Kumar, 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. Where the initiation falls early in a financial year, expect the financial-year limb to govern and do not waste the ground. Prove reasonable cause transaction by transaction with contemporaneous evidence of the urgency: the payment that had to be made, the date it fell due, the absence of banking access at that moment. Do not rely on a favourable decision on similar-sounding facts without matching it transaction for transaction — this Tribunal distinguished the assessee's authorities on exactly that basis. Note that partial relief is available: the CIT(A) here deleted the penalty on the amounts received by electronic transfer, of Rs 27,72,655, and confirmed it only on the cash. Segregate the cash from the banked amounts before you argue anything else.
Validity check could not be completed. Validity check could not be completed. I did not locate any later decision considering this order and did not check whether it was carried to the High Court. It cannot be said whether its reading of the initiation date agrees with DCIT v. Jayapriya Company (ITAT Chennai, 30 October 2025), which fixes initiation at the Assessing Officer's recorded satisfaction: this order asserts that the month of initiation was April 2016 without identifying the event, and does not give the date of the assessment order, of any recorded satisfaction, or of any show-cause notice. What the two orders do share is method — both count the financial-year limb and the six-month limb from the same initiating event, and both take the later. 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.
Paragraphs 11, 13 and 14 were returned verbatim in a fenced block and paragraph 11 was confirmed word for word on a second, independent pass; the earlier paragraphs came back as a mixture of paraphrase and short quoted fragments, so the facts stated here are taken from that narrative and are not quoted. The Tribunal's paraphrase of the first limb of s.275(1)(c) at para 11 — 'after expiry of the financial year, in which the proceedings are completed' — compresses the statutory words, which refer to the financial year in which the proceedings in the course of which action for the imposition of penalty has been initiated are completed. The order does not say why the relevant financial year was 2016-17 rather than the year of the assessment; a reader relying on this should check the assessment order date in his own case. Para 1 records that the Jt.CIT levied the penalty under s.271D; para 11 describes the same order of 29.11.2016 as 'the order passed by the Assessing Officer'. Treat that as a slip: s.271D(2) reserves the power to the Joint Commissioner. The order also never states what happened in April 2016 to constitute initiation, nor the date of the assessment order. 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 appeal was dismissed (para 14). On limitation, since s.275(1)(c) allows the later of the expiry of the financial year in which the proceedings are completed and six months from the end of the month in which the action for imposition of penalty is initiated, and the relevant financial year was 2016-17 with the month of initiation April 2016, the penalty order of 29 November 2016 was valid and not time barred (para 11). On the merits, the CIT(A)'s order was fair and reasonable and called for no interference, the case law relied on by the assessee being distinguishable on facts (para 13).
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