The initiation of tax penalty proceedings is based on the date of referral receipt, and delays beyond statutory limits render penalty orders invalid.

VIBHU BAKHRU, J. (ORAL)

1. The petitioner has filed the present petition, inter alia, impugning the notices dated 09.09.2024 and 27.09.2024 issued under Section 271DA read with Section 274 of the Income Tax Act, 1961 (hereafter the Act) as well as an order dated 17.10.2024 (hereafter the impugned order) passed under Section 271DA of the Act, imposing a penalty of ₹14,63,23,861/- in respect of the assessment year (AY) 2020-21 in contravention of the provisions of Section 269ST of the Act.

2. It is the petitioner’s case that the impugned order is barred by limitation.

3. The petitioner is a partnership firm, which was constituted on 01.01.2017. The petitioner firm is engaged in the business of acting as a real estate broker and claims that it acts as a broker for various developers, including Gaursons Group of Companies (hereafter Gaursons Group).

4. On 02.03.2022, a search was conducted under Section 132 of the Act on Gaursons Group and related entities. Simultaneously, the search was also conducted in the premises of the petitioner as well as the premises of its constituent partners.

5. The petitioner’s return for the AY 2020-21, had earlier been selected for scrutiny and the assessment proceedings were transferred to the Assessing Officer (hereafter the AO) for assessment. The AO had passed an assessment order dated 18.01.2023 under Section 143 (3) of the Act. During the course of the proceedings, it appeared that the petitioner was liable for penalty for violation of Section 269ST of the Act. Accordingly, on 18.01.2023, the AO forwarded a reference to the Additional Commissioner of Income Tax, Central Range-4, New Delhi (respondent no.3) proposing for initiation of the penalty proceedings under Section 269ST read with Section 271DA of the Act. Respondent no. 3 did not take any immediate steps thereafter. However, after a lapse of more than one year, respondent no. 3 sent a letter dated 09.04.2024, acknowledging that it had received a reference in the case of the petitioner for the AY 2020-21 and further seeking evidence regarding receipt of the sale proceeds on account of sale of flats/units/shops as well as earning of commission/brokerage income above the prescribed limit of ₹2,00,000/-. This was followed by a communication dated 08.05.2024 sent by the concerned AO to respondent no.3.

6. The impugned order was passed on 17.10.2024. The limited question to be examined is whether the impugned order was passed beyond the period of limitation as prescribed under Section 275 (1)(c) of the Act. The said provision is set out below:-

“275. Bar of limitation for imposing penalties.

(1) No order imposing a penalty under this Chapter shall be passed-

(a) xxxxxxx

(b) xxxxxxx;

(c) 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.”

7. The controversy, as to the date on which the penalty proceedings are to be construed as initiated, is no longer res integra. The said issue is covered by the decision of this court in Principal Commissioner of Income Tax v. JKD Capital & Finlease Ltd: 2015 SCC OnLine Del 14476 as well as the decision in Commissioner of Income Tax (TDS)-2 Delhi v. Turner General Entertainment Networks India Pvt. Ltd.: 2024 SCC OnLine Del 7760.

8. In terms of the said decisions, the date of receipt of the reference is required to be considered as the date of initiation of the proceedings. The order of penalty was required to be passed within six months from the end of the mon