2023 (5) TMI 697 - AT - Income Tax

Levy of penalty u/s 271C - Period of limitation - Penalty for failure to deduct TDS - HELD THAT:- Penalty in question u/s 271C is independent of assessment proceedings and thus the limitation for levy of penalty u/s 271C would be governed by clause (c) of section 275(1). This clause provides that no order imposing the penalty shall be passed 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.

In the present case, since penalty u/s 271C has not been initiated during the course of any proceedings, first part of sec. 275(1)(c) would have no application and it is only the second part which would apply. Thus the penalty order ought to have been passed within a period of six months beginning from the end of the month in which the action for imposition of penalty was initiated. Since the show cause notice u/s 271C was issued on 21.01.2020, the period of six months would have to be reckoned from 01.02.2020 that would end to 31.07.2020. Therefore, penalty order passed on 16.12.2020 is barred by limitation and therefore, the same is quashed. Appeal of the assessee is allowed.