Section 275(1)(a) bars penalty orders while an assessment appeal is pending before the Tribunal.

For AY 2018–19, the Assessing Officer passed an assessment order on 28 July 2022 under Section 143(3) read with Section 144C(13) of the Income Tax Act, 1961, recorded satisfaction to initiate penalty proceedings, and issued a notice under Section 270A the same day.

The petitioner replied to the notice on 17 August 2022 and appealed the assessment order to the Income Tax Appellate Tribunal under Section 253 on 29 August 2022, informing the Assessing Officer of the appeal.

Despite the appeal being pending, the Assessing Officer imposed a penalty under Section 270A by order dated 24 March 2023.

The petitioner challenged that order under Article 226, contending that it contravened Section 275(1)(a).

1. Whether a penalty order under Section 270A could be passed while the assessment order on which the penalty proceedings were based was the subject of a pending appeal before the Tribunal under Section 253.

2. Whether the petitioner’s intimation to the Assessing Officer that the appeal had been filed was material to the application of Section 275(1)(a).

Section 275(1)(a) of the Income Tax Act, 1961 governs the time for imposing a penalty where the relevant assessment or other order is the subject of an appeal under Section 246, 246A, or 253.

The provision sets the applicable limitation by reference to completion of the proceedings in which penalty action was initiated and receipt of the appellate order, whichever period expires later.

The Court held that, while an appeal under Section 253 against the relevant order is pending, the penalty proceedings must be kept in abeyance.

The Court found that the petitioner had filed its Tribunal appeal on 29 August 2022 and that it remained pending when the penalty order was made.

It considered the Assessing Officer’s reference to the petitioner being “in the process of filing appeal” to have been taken from the petitioner’s earlier reply, but held that this did not affect the outcome.

Whether the Assessing Officer had been informed of the filed appeal was immaterial: the appeal’s pendency brought the case within Section 275(1)(a), and the penalty order was therefore contrary to that provision.

It left the Assessing Officer free to take up the penalty proceedings afresh if the Tribunal decides the appeal against the petitioner and the law permits.