Case Note & Summary
The appeals arose from orders passed by a single judge of the High Court of Karnataka in ten writ petitions. The respondents, individual assessees and a partnership firm, had challenged penalty notices issued under Section 271DA of the Income Tax Act, 1961 by the Joint Commissioner of Income Tax on the ground that they were issued beyond the period of limitation prescribed under Section 275 of the Act. The facts were that the Assessing Officer (Assistant Commissioner) had, upon completing scrutiny assessments, initiated penalty proceedings under Section 270A and also made a proposal to the Joint Commissioner for initiating penalty under Section 271DA, as the Joint Commissioner has the exclusive jurisdiction to impose such penalty. The Joint Commissioner then issued notices under Section 274 read with Section 271DA. The assessees succeeded before the single judge, who, relying on a coordinate bench decision in Principal Commissioner of Income Tax v. K. Umesh Shetty (2025) 170 taxmann.com 748 (Karnataka), held that limitation must be computed from the date of the proposal/reference made by the Assessing Officer to the Joint Commissioner, and quashed the notices as time-barred. The Revenue filed writ appeals under Section 4 of the Karnataka High Court Act, 1961, contending that the K. Umesh Shetty case was not applicable because there the proceedings after proposal suffered inordinate delay, and further that the interpretation of Section 275 cannot be the same where penalty is to be imposed by an authority other than the Assessing Officer; the proposal/reference is not final and the Joint Commissioner exercises discretion. The division bench identified the common question of law concerning the interpretation of Section 275 in the context of Section 271DA, heard the parties, and reserved judgment; the judgment was pronounced on 07.07.2026 but the operative part and reasoning are not included in the available text.
Headnote
A) Income Tax - Penalty - Limitation under Section 275 - Section 271DA, Income Tax Act, 1961 - Interpretation of Section 275 in case where penalty is to be imposed by Joint Commissioner upon reference by Assessing Officer - The single judge held that limitation runs from the date of proposal/reference made by the Assessing Officer to the Joint Commissioner, following Principal Commissioner of Income Tax v. K. Umesh Shetty (2025) 170 taxmann.com 748 (Karnataka). The Revenue contended that K. Umesh Shetty is distinguishable as it involved inordinate delay after proposal, and that different principles should apply where penalty authority is separate. The division bench heard and reserved the appeals; the final order is not contained in the provided text. (Paras 3-5)
Issue of Consideration
Interpretation of Section 275 of the Income Tax Act, 1961 in the context of Section 271DA of the said Act, particularly concerning limitation for imposition of penalty when the penalty authority differs from the Assessing Officer.
Law Points
- Limitation under Section 275 of Income Tax Act for penalty under Section 271DA
- Interpretation of Section 275 in context of Section 271DA
- Jurisdiction of Joint Commissioner to levy penalty under Section 271DA
- Meaning of proposal/reference by Assessing Officer to Joint Commissioner for penalty limitation
- Penalty can be imposed by authority other than Assessing Officer on proposal
- Difference between penalty initiated by Assessing Officer and penalty imposed on proposal
