Section 275 — Bar of Limitation for Imposing Penalties
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live and recast. Section 275 fixes the time limits for passing penalty orders. It was substituted by the Finance Act, 2025 (w.e.f. 1-4-2025) into a simplified, quarter-based scheme: as a rule, no penalty order may be passed after six months from the end of the quarter in which the relevant trigger (completion of proceedings; receipt of the appellate order; revision order; or issue of the penalty notice) occurs.
Finance Act, 2026: No amendment by the Finance Act, 2026 to this section of the Income-tax Act, 1961. (The "section 275" appearing in the later clauses of the Finance Act, 2026 — with references to the Dispute Resolution Panel, section 273(3) and section 274(6) — pertains to the Income-tax Act, 2025, a separate statute, and not to this provision.)
Mechanism: Penalty order must be passed within six months from the end of the quarter in which: (a) the proceedings are completed (no appeal); (b) the section 263/264 revision order is passed; (c) the appellate order (section 246/246A) is received by the PCIT/CIT (no further appeal); (d) the Tribunal’s order (section 253) is received by the PCIT/CIT; or (e) the penalty notice is issued, in any other case. Sub-sections (2)-(5) deal with revision of penalty on appellate effect, opportunity of hearing, and exclusions (stay periods; section 129 re-hearing time).
Litigation profile: Heavily litigated, both under the pre-2025 (month/financial-year based) version and the new quarter-based version. Settled themes: the penalty order is void if passed beyond the limitation; the meaning of "initiation" of penalty action for limb (e)/(c)-type cases; and the exclusion of stay periods.
A. COMMENTARY
A hard, jurisdictional time-bar
Section 275 is a limitation that goes to jurisdiction: a penalty order passed after the prescribed period is void, not merely irregular, and the bar cannot be waived by consent. The Finance Act, 2025 recast the section for orders on or after 1 April 2025 into a uniform "six months from the end of the quarter" scheme, replacing the earlier, more complex financial-year/one-year/six-month-from-month structure. The earlier version continues to govern penalty proceedings whose limitation had already begun to run under it; both are reproduced/known in practice and the correct version must be applied to the facts.
The triggers and the appellate-pendency rule
The limitation runs from a defined trigger: completion of the proceedings (where there is no appeal); receipt by the PCIT/CIT of the appellate (CIT(A)/JCIT(A) or Tribunal) order; the passing of a section 263/264 revision order; or the issue of the penalty notice in residual cases. Penalty proceedings are, in effect, kept alive during the pendency of an appeal/revision and must be completed within the stipulated period after the appellate/revisional order — a structure designed to await the outcome that fixes the quantum on which penalty depends.
"Initiation" of penalty action and the residual limb
For the residual limb (the "any other case" trigger), the limitation runs from the issue/initiation of the penalty action. The Delhi High Court has held that "action for imposition of penalty is initiated" refers to the date on which the first introductory step (typically the issue of the show-cause notice or the recording of satisfaction) is taken; a penalty passed beyond the period reckoned from that date is time-barred.
Exclusions: stay and re-hearing
Sub-section (5) excludes, in computing limitation, the time taken in giving the assessee an opportunity to be re-heard under the proviso to section 129, and the period during which the penalty proceeding was stayed by a court order or injunction (ending on receipt of the certified copy of the order vacating the stay). These exclusions are strictly construed; the Revenue must establish the precise excluded period.
B. STATUTORY TEXT (verbatim)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025; Finance Act, 2026 changes are noted above.
Bar of limitation for imposing penalties.
275. (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
(4) The provisions of sub-section (2) of section 274 shall apply to the order imposing or enhancing or
reducing penalty under sub-section (2).
(5) In computing the period of limitation for the purposes of this section, the following period shall be
excluded:—
(a) the time taken in giving an opportunity to the assessee to be reheard under the proviso to section
129;
(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 the jurisdictional Principal Commissioner or
Commissioner.
C. AUTHORITIES
The authorities establish the jurisdictional, void-on-breach character of the time-bar, the meaning of "initiation", the special independent-of-assessment regime for sections 271D/271E, and the dependence of the penalty on the underlying assessment.
1. The bar is jurisdictional; a late order is void
Principle — penalty order beyond limitation is void
Proposition A penalty order passed after the period prescribed by section 275 is without jurisdiction and void; the limitation cannot be enlarged by consent or by the conduct of the assessee.
Use The complete defence where the order is shown to be time-barred.
CIT (TDS) v. Turner General Entertainment Networks India (P) Ltd (Delhi)(HC)
Holding The expression "action for imposition of penalty is initiated" in the residual limb refers to the date on which the first introductory step is taken; limitation is reckoned from that date.
Use Fixes the starting point for limitation in residual/"any other case" penalties.
2. Sections 271D/271E — penalty independent of the assessment
CIT v. Hissaria Bros (2007) 291 ITR 244 (Raj)(HC)
Holding Penalty proceedings under sections 269SS/269T (271D/271E) are not related to the assessment but are independent of it; the appeal/revision-pendency limbs do not apply, and limitation is governed by section 275(1)(c), reckoned from issue of the show-cause notice by the competent authority.
Use The leading authority on the limitation regime for 271D/271E.
Pr. CIT v. JKD Capital & Finlease Ltd (Delhi)(HC)
Holding Where the competent authority (Additional/Joint CIT) issued the section 271E show-cause notice long after the assessment and the penalty was passed beyond the section 275(1)(c) period reckoned from initiation, the penalty was time-barred.
Use Applies Hissaria Bros to delete a time-barred 271E penalty.
Pr. CIT v. Mahesh Wood Products (P) Ltd (Delhi)(HC)
Holding For section 271D/271E penalties the relevant date for limitation under section 275(1)(c) is the initiation by the competent authority; an order beyond the period is barred.
Use Reinforces the independent-of-assessment limitation computation.
CIT v. Worldwide Township Projects Ltd (Delhi)(HC)
Holding Penalty under section 271D/271E initiated long after completion of assessment, with the assessment order silent about it, was barred by limitation under section 275(1)(c).
Use Defeats a belatedly-initiated cash-transaction penalty.
3. Dependence on the assessment; exclusions strictly construed
CIT v. Jai Laxmi Rice Mills (2015) 379 ITR 521 (SC)
Holding Where the assessment founding the penalty is set aside, the penalty falls with it; a fresh, validly-founded satisfaction and a fresh limitation computation are required.
Use Defeats a penalty whose foundational assessment has been annulled.
Principle — stay and section 129 re-hearing exclusions
Proposition Only the periods expressly excluded by the section (the section 129 re-hearing time and the court-stay period ending on receipt of the certified copy of the vacating order) are to be left out; the Revenue must establish the precise excluded period.
Use Resists an attempt to extend limitation by vague reliance on "stay" or "re-hearing".
Principle — FA 2025 quarter-based recast
Proposition For orders on or after 1-4-2025 the limitation is six months from the end of the quarter in which the relevant trigger occurs; the earlier month/financial-year scheme governs proceedings whose limitation began under it.
Use Directs the correct version of section 275 to the facts.
Prepared for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced from the official Act; case-law holdings are the author’s summaries for professional use.
CHAPTER XXI — PENALTIES IMPOSABLE
Section 275 — Bar of Limitation for Imposing Penalties
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live and recast. Section 275 fixes the time limits for passing penalty orders. It was substituted by the Finance Act, 2025 (w.e.f. 1-4-2025) into a simplified, quarter-based scheme: as a rule, no penalty order may be passed after six months from the end of the quarter in which the relevant trigger (completion of proceedings; receipt of the appellate order; revision order; or issue of the penalty notice) occurs.
Finance Act, 2026: No amendment by the Finance Act, 2026 to this section of the Income-tax Act, 1961. (The "section 275" appearing in the later clauses of the Finance Act, 2026 — with references to the Dispute Resolution Panel, section 273(3) and section 274(6) — pertains to the Income-tax Act, 2025, a separate statute, and not to this provision.)
Mechanism: Penalty order must be passed within six months from the end of the quarter in which: (a) the proceedings are completed (no appeal); (b) the section 263/264 revision order is passed; (c) the appellate order (section 246/246A) is received by the PCIT/CIT (no further appeal); (d) the Tribunal’s order (section 253) is received by the PCIT/CIT; or (e) the penalty notice is issued, in any other case. Sub-sections (2)-(5) deal with revision of penalty on appellate effect, opportunity of hearing, and exclusions (stay periods; section 129 re-hearing time).
Litigation profile: Heavily litigated, both under the pre-2025 (month/financial-year based) version and the new quarter-based version. Settled themes: the penalty order is void if passed beyond the limitation; the meaning of "initiation" of penalty action for limb (e)/(c)-type cases; and the exclusion of stay periods.
A. COMMENTARY
A hard, jurisdictional time-bar
Section 275 is a limitation that goes to jurisdiction: a penalty order passed after the prescribed period is void, not merely irregular, and the bar cannot be waived by consent. The Finance Act, 2025 recast the section for orders on or after 1 April 2025 into a uniform "six months from the end of the quarter" scheme, replacing the earlier, more complex financial-year/one-year/six-month-from-month structure. The earlier version continues to govern penalty proceedings whose limitation had already begun to run under it; both are reproduced/known in practice and the correct version must be applied to the facts.
The triggers and the appellate-pendency rule
The limitation runs from a defined trigger: completion of the proceedings (where there is no appeal); receipt by the PCIT/CIT of the appellate (CIT(A)/JCIT(A) or Tribunal) order; the passing of a section 263/264 revision order; or the issue of the penalty notice in residual cases. Penalty proceedings are, in effect, kept alive during the pendency of an appeal/revision and must be completed within the stipulated period after the appellate/revisional order — a structure designed to await the outcome that fixes the quantum on which penalty depends.
"Initiation" of penalty action and the residual limb
For the residual limb (the "any other case" trigger), the limitation runs from the issue/initiation of the penalty action. The Delhi High Court has held that "action for imposition of penalty is initiated" refers to the date on which the first introductory step (typically the issue of the show-cause notice or the recording of satisfaction) is taken; a penalty passed beyond the period reckoned from that date is time-barred.
Exclusions: stay and re-hearing
Sub-section (5) excludes, in computing limitation, the time taken in giving the assessee an opportunity to be re-heard under the proviso to section 129, and the period during which the penalty proceeding was stayed by a court order or injunction (ending on receipt of the certified copy of the order vacating the stay). These exclusions are strictly construed; the Revenue must establish the precise excluded period.
B. STATUTORY TEXT (verbatim)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025; Finance Act, 2026 changes are noted above.
Bar of limitation for imposing penalties.
275. (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 246 or section 246A or section 253;
(b) the order of revision under section 263 or section 264 is passed, if the relevant assessment or
other order is the subject matter of revision under the said sections;
(c) the order of appeal under section 246 or section 246A is received by the jurisdictional Principal
Commissioner or Commissioner, if the relevant assessment or other order is the subject matter of
an appeal under the said sections and no further appeal has been filed under section 253;
(d) the order of appeal under section 253 is received by the jurisdictional Principal Commissioner or
Commissioner, if the relevant assessment or other order is the subject matter of an appeal under
the said section;
(e) notice for imposition of penalty is issued, in any other case.
(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
passed under section 246 or section 246A or section 253 or section 260A or section 261 or revision under
section 263 or section 264, where the relevant assessment or other order is the subject matter of an appeal
or a revision under the said sections.
(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 passed under section
246 or section 246A or section 253 or section 260A or section 261 is received by the
jurisdictional Principal Commissioner or Commissioner, or the order of revision under section
263 or section 264 is passed.
(4) The provisions of sub-section (2) of section 274 shall apply to the order imposing or enhancing or
reducing penalty under sub-section (2).
(5) In computing the period of limitation for the purposes of this section, the following period shall be
excluded:—
(a) the time taken in giving an opportunity to the assessee to be reheard under the proviso to section
129;
(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 the jurisdictional Principal Commissioner or
Commissioner.
C. AUTHORITIES
The authorities establish the jurisdictional, void-on-breach character of the time-bar, the meaning of "initiation", the special independent-of-assessment regime for sections 271D/271E, and the dependence of the penalty on the underlying assessment.
1. The bar is jurisdictional; a late order is void
Principle — penalty order beyond limitation is void
Proposition A penalty order passed after the period prescribed by section 275 is without jurisdiction and void; the limitation cannot be enlarged by consent or by the conduct of the assessee.
Use The complete defence where the order is shown to be time-barred.
CIT (TDS) v. Turner General Entertainment Networks India (P) Ltd (Delhi)(HC)
Holding The expression "action for imposition of penalty is initiated" in the residual limb refers to the date on which the first introductory step is taken; limitation is reckoned from that date.
Use Fixes the starting point for limitation in residual/"any other case" penalties.
2. Sections 271D/271E — penalty independent of the assessment
CIT v. Hissaria Bros (2007) 291 ITR 244 (Raj)(HC)
Holding Penalty proceedings under sections 269SS/269T (271D/271E) are not related to the assessment but are independent of it; the appeal/revision-pendency limbs do not apply, and limitation is governed by section 275(1)(c), reckoned from issue of the show-cause notice by the competent authority.
Use The leading authority on the limitation regime for 271D/271E.
Pr. CIT v. JKD Capital & Finlease Ltd (Delhi)(HC)
Holding Where the competent authority (Additional/Joint CIT) issued the section 271E show-cause notice long after the assessment and the penalty was passed beyond the section 275(1)(c) period reckoned from initiation, the penalty was time-barred.
Use Applies Hissaria Bros to delete a time-barred 271E penalty.
Pr. CIT v. Mahesh Wood Products (P) Ltd (Delhi)(HC)
Holding For section 271D/271E penalties the relevant date for limitation under section 275(1)(c) is the initiation by the competent authority; an order beyond the period is barred.
Use Reinforces the independent-of-assessment limitation computation.
CIT v. Worldwide Township Projects Ltd (Delhi)(HC)
Holding Penalty under section 271D/271E initiated long after completion of assessment, with the assessment order silent about it, was barred by limitation under section 275(1)(c).
Use Defeats a belatedly-initiated cash-transaction penalty.
3. Dependence on the assessment; exclusions strictly construed
CIT v. Jai Laxmi Rice Mills (2015) 379 ITR 521 (SC)
Holding Where the assessment founding the penalty is set aside, the penalty falls with it; a fresh, validly-founded satisfaction and a fresh limitation computation are required.
Use Defeats a penalty whose foundational assessment has been annulled.
Principle — stay and section 129 re-hearing exclusions
Proposition Only the periods expressly excluded by the section (the section 129 re-hearing time and the court-stay period ending on receipt of the certified copy of the vacating order) are to be left out; the Revenue must establish the precise excluded period.
Use Resists an attempt to extend limitation by vague reliance on "stay" or "re-hearing".
Principle — FA 2025 quarter-based recast
Proposition For orders on or after 1-4-2025 the limitation is six months from the end of the quarter in which the relevant trigger occurs; the earlier month/financial-year scheme governs proceedings whose limitation began under it.
Use Directs the correct version of section 275 to the facts.
Prepared for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced from the official Act; case-law holdings are the author’s summaries for professional use.