The Finance Minister Nirmala Sitharaman unveiled the Union Budget 2025 on February 1st, 2025, at 11:00 AM in Parliament, marking her 8th consecutive budget under the Modi Government 3.0.
One of the key proposals in the Budget is the rationalization of time limits for imposing penalties under the Income-tax Act, specifically through an amendment to section 275. Currently, section 275 includes multiple timelines for penalty imposition depending on the type of case. For example, in cases under appeal before the Income Tax Appellate Tribunal (ITAT), penalties must be imposed either by the end of the financial year in which the connected proceedings are completed or within six months from the end of the month in which the appellate order is received, whichever is later.
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Similar timelines apply for cases in appeal before the Joint Commissioner of Income Tax (JCIT) or the Commissioner (Appeals). This complexity makes it difficult to track and manage the deadlines effectively.
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To streamline the process, the Budget proposes a uniform time limit for penalty imposition. The amended section 275 will ensure that no penalty order will be passed after six months from the end of the quarter in which the connected proceedings are completed, or the order of appeal or revision is received, or the penalty notice is issued—whichever occurs later. This change aims to simplify tax administration and improve the efficiency of penalty imposition.
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In addition, Clause 83 of the Bill seeks to substitute section 275 entirely. It outlines that any order imposing a penalty under Chapter XXI will follow the new six-month limit, consolidating the various timelines into one clear framework.
Further, Clause 69 of the Bill amends section 246A of the Income-tax Act, which pertains to appealable orders before the Commissioner (Appeals). This amendment includes changes related to penalties imposed under sub-section (2) of section 275, making them appealable before the Commissioner (Appeals).
These amendments will take effect from April 1, 2025, and are aimed at simplifying and improving the effectiveness of the penalty imposition process.
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