It depends on which limb of s.275 applies, and that turns on what happened to the assessment. Under the text that governed penalties until 31 March 2025, a s.271(1)(c) or s.270A penalty initiated in an assessment that went on appeal fell under s.275(1)(a): the later of the end of the financial year in which the assessment was completed, or six months from the end of the month in which the appellate order was received by the Principal Commissioner or Commissioner, with a proviso giving one year from the end of the financial year of receipt where the matter stopped at the CIT(A). Where the assessment was never appealed, s.275(1)(c) applies instead. The Finance Act 2025 replaced the whole of s.275 with a single six-months-from-the-end-of-the-quarter rule from 1 April 2025, and s.472 of the Income-tax Act 2025 carries that design forward.
The opening words are the ones that decide the argument: "No order imposing a penalty under this Chapter shall be passed—". Everything in s.275 is a bar on the order, not on the notice. There is no statutory time limit at all on issuing the show-cause notice under s.274, which is why the fight is always about when the order was passed and from what date the period is counted.
**Clause (a): the assessment went on appeal.** This is the limb that governs almost every s.271(1)(c) and s.270A penalty, because both are initiated in the course of the assessment and the assessment is then appealed. It bars an order "in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever period expires later". Note the date that matters: receipt by the Commissioner, not the date of the appellate order and not the date the assessee got it.
**The proviso.** Where the appeal was to the CIT(A) and that order was passed on or after 1 June 2003, the proviso substitutes a longer period: "an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Commissioner (Appeals) is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever is later".
**What the proviso does not do.** The Delhi High Court in CIT v. Mohair Investment & Trading Co held that the proviso does not nullify the six months available from the end of the month in which the Tribunal's order is received. Where successive appeals are filed, limitation runs from the last of them; the proviso's one-year period is the exception for a case that ends at the CIT(A). Practitioners who measure from the CIT(A) order and declare the penalty stale, while a Tribunal appeal was pending all along, are measuring from the wrong order.
**Clause (b): revision.** Where the assessment is the subject-matter of revision under s.263 or s.264, the bar is "after the expiry of six months from the end of the month in which such order of revision is passed". This is the one limb keyed to the date the order is passed rather than the date it is received.
**Clause (c): everything else.** "in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later." This governs a s.271(1)(c) or s.270A penalty where the assessment was never appealed, and it governs the free-standing penalties — ss.271C, 271D, 271E — that are not attached to an assessment order at all. The Delhi High Court in CIT (TDS) v. Turner General Entertainment Networks India held that "action for imposition of penalty is initiated" points to the date of the first introductory step, which in that case was the Assessing Officer's reference to the Joint Commissioner and not the show-cause notice issued a year later.
**What stops the clock, and what does not.** The Explanation is short and closed: "In computing the period of limitation for the purposes of this section,— (i) the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129; (ii) any period during which the immunity granted under section 245H remained in force; and (iii) any period during which a proceeding under this Chapter for the levy of penalty is stayed by an order or injunction of any court, shall be excluded." Three exclusions, nothing else. In particular the period during which an application for immunity under s.270AA is pending is not excluded — s.249 excludes that period for the purpose of the appeal time limit, but s.275 does not exclude it for the purpose of the penalty order.
**Sub-section (1A): the second bite.** Where a penalty order is passed before the appellate or revisional order arrives, the penalty may be revised on the basis of the assessment as revised, and the revising order must be passed within six months from the end of the month in which the appellate or revisional order is received. The assessee must be heard first.
**What changed on 1 April 2025.** The Finance Act 2025 substituted s.275. The substituted sub-section (1) bars a penalty order under Chapter XXI "after the expiry of six months from the end of the quarter" in which the relevant event occurs, the events being: the proceedings in the course of which penalty was initiated are completed, where the assessment is not the subject-matter of an appeal; the revision order under s.263 or s.264 is passed; the CIT(A) order is received by the jurisdictional Principal Commissioner or Commissioner where no further appeal is filed under s.253; and the Tribunal order is received where there is a s.253 appeal. One clock, quarterly, for every limb. A Taxsutra commentary records that for penalty proceedings already on foot the older arguments about the date of initiation "would continue to be available", and points out that the substituted section still leaves no statutory limit on when the penalty notice may be issued.
**The Income-tax Act 2025.** Section 472 of the new Act reproduces the design: no penalty order after six months from the end of the quarter in which the connected proceedings are completed, a revision order under s.377 or s.378 is passed, an appellate order under s.356, s.357 or s.362 is received, or — in any other case — the penalty notice is issued. Sub-section (5) keeps a shortened set of exclusions: time given for a rehearing under s.244(2), and any period during which the proceeding is stayed by a court.
The date that controls the computation is a date the assessee does not hold. Under the old text it is the date on which the CIT(A) or Tribunal order was received by the jurisdictional Principal Commissioner; under the substituted text it is the same date, rounded to a quarter. That date has to be asked for in writing, and the department has to be put to proof of it. A limitation ground is also the cheapest ground in a penalty appeal: it needs no evidence, no merits and no explanation of the addition, and it disposes of the penalty entirely.
My society runs a college and ended the year with a surplus. Does that surplus mean we no longer exist solely for educational purposes and not for profit?
The penalty provision was made harsher after my assessment year but before I filed the return. Which version applies to my concealment penalty?
Valuables were found at my premises and I say they are not mine. Who has to prove ownership?
A reassessment was done in between. Does the two-year clock for s.263 restart from it?
Can the Commissioner revise on a ground that was not in the show cause notice?
My explanation for a cash deposit was rejected in the assessment and an addition was made — does that by itself mean penalty for concealment follows?
Is penalty under s.271(1)(c) criminal, quasi-criminal or civil?
The Commissioner's show cause notice before revising my assessment was defective. Does that knock out his jurisdiction to revise at all?
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