Bar of limitation for imposing penalties.
472(1)
No order imposing a penalty under this Chapter shall be passed after the expiry of six months from the end of the quarter in which—
- (a) the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, if the relevant assessment or other order is not the subject-matter of an appeal under section 356 or 357 or 362;
- (b) the order of revision is passed, if the relevant assessment or other order is the subject-matter of revision under section 377 or 378;
- (c) the order of appeal is received by the jurisdictional Principal Commissioner or Commissioner, if the relevant assessment or other order is the subject-matter of an appeal under section 356 or 357 or 362;
- (d) notice for imposition of penalty is issued, in any other case.
472(2)
The order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty may be revised on the basis of assessment as revised by giving effect to the order under section 356 or 357 or 362 or 365 or 367 or revision under section 377 or 378, where the relevant assessment or other order is the subject-matter of an appeal or revision under the said sections.
472(3)
No order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty under sub-section (2) shall be passed—
- (a) unless the assessee has been heard, or has been given a reasonable opportunity of being heard;
- (b) after the expiry of six months from the end of the quarter in which the order under section 356 or 357 or 362 or 365 or 367 is received by the jurisdictional Principal Commissioner or Commissioner or the order of revision under section 377 or 378 is passed.
472(4)
The provisions of section 471(2) shall apply to the order imposing or enhancing or reducing penalty under this section.
472(5)
In computing the period of limitation for the purposes of this section, following period shall be excluded—
- (a) the time taken in giving an opportunity to the assessee to be reheard under the section 244 (2);
- (b) the period commencing on the date on which stay on proceeding for levy of penalty was granted by an order or injunction of any court and ending on the date on which certified copy of the order vacating the stay was received by jurisdictional Principal Commissioner or Commissioner.
Section Summary:
Section 472 of the new income tax law sets a time limit (limitation period) for tax authorities to impose penalties under the relevant chapter. It specifies the deadlines for passing penalty orders based on different scenarios, such as the completion of proceedings, appeals, or revisions. The section also outlines the conditions under which penalty orders can be revised, enhanced, reduced, or canceled, and ensures that taxpayers are given a fair opportunity to be heard before any penalty order is passed.
Key Changes:
- Introduction of a Six-Month Limitation Period: The section introduces a clear six-month deadline from the end of the relevant quarter for imposing penalties, depending on the stage of proceedings (e.g., completion of assessment, appeal, or revision).
- Revision of Penalty Orders: Penalty orders can now be revised, enhanced, reduced, or canceled based on revised assessments or orders from appeals or revisions.
- Exclusion of Certain Periods: Specific periods, such as time taken for rehearing or court-ordered stays, are excluded when calculating the limitation period.
Practical Implications:
- For Taxpayers:
- Taxpayers now have clarity on the timeline within which penalty orders can be imposed, reducing uncertainty.
- They must ensure timely responses to notices or hearings to avoid delays in proceedings.
- For Tax Authorities:
- Authorities must adhere to the six-month limitation period, ensuring timely action on penalty matters.
- They must provide taxpayers with a reasonable opportunity to be heard before imposing or revising penalties.
- For Businesses:
- Businesses involved in appeals or revisions must monitor timelines closely to ensure compliance and avoid penalties.
Critical Concepts:
- Limitation Period: The six-month deadline starts from the end of the quarter in which specific events occur (e.g., completion of proceedings, receipt of appeal orders, or issuance of penalty notices).
- Reasonable Opportunity of Being Heard: Taxpayers must be given a fair chance to present their case before any penalty order is passed.
- Exclusion of Time: Certain periods, such as court-ordered stays or rehearing processes, are excluded when calculating the six-month limitation period.
Compliance Steps:
- For Taxpayers:
- Respond promptly to any notices or communications from tax authorities.
- Participate in hearings or provide necessary documentation when requested.
- For Tax Authorities:
- Ensure penalty orders are issued within the six-month limitation period.
- Provide taxpayers with a reasonable opportunity to be heard before passing any penalty order.
- Exclude periods such as court-ordered stays or rehearing processes when calculating the limitation period.
Examples:
- Scenario 1: A taxpayer's assessment is completed on March 31, 2024. The tax authority initiates penalty proceedings in the same quarter. The penalty order must be passed by September 30, 2024 (six months from the end of the quarter in which proceedings were completed).
- Scenario 2: A taxpayer files an appeal, and the appeal order is received by the jurisdictional Principal Commissioner on June 30, 2024. The penalty order must be passed by December 31, 2024 (six months from the end of the quarter in which the appeal order was received).
- Scenario 3: A court grants a stay on penalty proceedings from January 1, 2024, to March 31, 2024. This period is excluded when calculating the six-month limitation period.
This section ensures a structured and time-bound approach to penalty imposition, balancing the interests of taxpayers and tax authorities.