Madras High Court Affirms Applicability of Section 275(1)(a) for Penalty Limitation in Search Cases

The Madras High Court recently delivered a significant judgment regarding the computation of the limitation period for imposing penalties under the Income Tax Act 1961. In the case of Chandrasekaran Joseph Vijay Vs DCIT, the Court adjudicated whether the limitation for a penalty initiated during assessment proceedings is governed by Section 275(1)(a) or the residuary clause under Section 275(1)(c).

The High Court dismissed the writ petition filed by the famous actor, upholding the penalty order of Rs. 1.5 crore passed under Section 271AAB, ruling that the order was passed within the statutory time limit prescribed under Section 275(1)(a).

Factual Background of the Case

The dispute originated from a search and seizure operation conducted by the Income Tax Department under Section 132 during the Financial Year (FY) 2015-16. During the course of these proceedings, the assessee provided a sworn statement admitting to the receipt of undisclosed income amounting to Rs. 15 crore in cash.

Subsequently, the assessee filed the Return of Income for the Assessment Year (AY) 2016-17, incorporating the admitted undisclosed amount. The Assessing Officer (AO) completed the assessment via an order dated December 30, 2017. While processing the assessment, the AO made certain additions to the income and explicitly recorded the initiation of penalty proceedings under Section 271AAB.