Delhi High Court Quashes Section 270A Penalty Order Passed While ITAT Appeal Was Pending

The Delhi High Court has quashed a penalty order under section 270A of the Income-tax Act, 1961 because it was passed while the assessee's appeal against the assessment was still pending before the Income Tax Appellate Tribunal. In BT Global Communications India Pvt. Ltd. v. Assessment Unit, National Faceless Assessment Centre, W.P.(C) 4767/2023, decided on 13 October 2026, a Division Bench of Justice Dinesh Mehta and Dr Justice Aditi Choudhary held that section 275(1)(a) does not permit a penalty order while an appeal under section 253 is pending, and that it makes no difference whether the Assessing Officer had been told about the appeal. The penalty order dated 24 March 2023 was set aside, with liberty to the Assessing Officer to take up the penalty afresh if the Tribunal eventually decides the appeal against the company.

The sequence of dates is what decided the case. The assessment order for Assessment Year 2018-19 was passed on 28 July 2022 under section 143(3) read with section 144C(13). In the same order the Assessing Officer recorded satisfaction that penalty proceedings under section 270A should be initiated, and a penalty notice was issued the same day. The company replied to the notice on 17 August 2022. On 29 August 2022 it filed an appeal before the Tribunal under section 253 and informed the Assessing Officer of the filing on the same day. The penalty order nonetheless followed on 24 March 2023, seven months into the pendency of the appeal, and the company challenged it directly before the High Court in writ jurisdiction.

What the penalty order said about the appeal, and why the court rejected it

The Revenue's answer, through Senior Standing Counsel Anurag Ojha, rested on paragraph 3 of the impugned order, which stated that the assessee was in the process of filing an appeal. The argument was that the officer had proceeded on the footing that no appeal was yet on record. The Bench did not accept that reading. It found that the sentence in paragraph 3 appeared to have been lifted from the company's first reply of 17 August 2022, written before the appeal was filed, and not from anything the officer had checked when the order was passed in March 2023. It was undisputed before the court that the appeal had been filed on 29 August 2022 and that intimation had gone to the Assessing Officer that day.

The court then went a step further and treated the question of intimation as irrelevant. In its words, whether intimation was given or not is immaterial, because section 275(1)(a) plainly bars a penalty order while an appeal under section 253 is pending. The appeal was pending on the date of the penalty order and, as the judgment records, is still pending. On that basis the order was held to be contrary to section 275(1)(a), and the writ petition was allowed. Counsel Ankul Goyal and Tanvi Aggarwal appeared for the company; Hemlata Rawat and V.K. Saxena, Junior Standing Counsel, appeared with Mr Ojha for the Revenue.

Section 275(1)(a) as it stood when the penalty order was passed

The judgment reproduces the provision in the form that governed the March 2023 order. Under that text, no order imposing a penalty under Chapter XXI could be passed, where the relevant assessment or other order was the subject-matter of an appeal to the Joint Commissioner (Appeals) or Commissioner (Appeals) under section 246 or 246A or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings in the course of which penalty action was initiated were completed, or six months from the end of the month in which the appellate order was received by the Principal Commissioner or Commissioner, whichever period expired later. A proviso dealt with appeals before the Commissioner (Appeals) decided on or after 1 June 2003, where the outer limit became one year from the end of the financial year in which the appellate order was received, again whichever was later. The Bench did not rely on the proviso; the case turned on the main clause and the pending Tribunal appeal.

The practical reading the court adopted is that the clause does more than fix an outer time limit. Where an appeal under section 253 is on foot, the penalty proceedings have to wait for the Tribunal's order, because the limitation period is itself measured from the receipt of that order. A penalty order passed in the meantime is not merely premature; it is contrary to the section and liable to be quashed in writ jurisdiction without the assessee being pushed to the appellate route against the penalty.

Pending penalty orders: where the ruling can be used

The fact pattern is a common one in faceless penalty work. Satisfaction for section 270A is routinely recorded in the assessment order itself, the penalty notice goes out the same day, and the penalty order is then passed within the following financial year, which kept it inside the first limb of the old section 275(1)(a) whether or not a Tribunal appeal had been filed in the interval. The judgment gives an assessee in that position three things to check: the date the appeal under section 253 was filed, the date of the penalty order, and whether the Tribunal appeal was still pending on that date. If the penalty order falls between the filing and the disposal of the Tribunal appeal, the Delhi High Court's reasoning applies, and the intimation point cannot be used against the assessee even where the appeal was never brought to the officer's notice.

Two limits should be kept in view. The liberty granted in paragraph 15 means that quashing the order does not end the exposure: if the Tribunal decides the quantum appeal against the assessee, the Assessing Officer may initiate penalty proceedings afresh, subject to the law as it then stands. And the court's holding concerns an appeal to the Tribunal under section 253; the judgment reproduces the proviso on appeals before the Commissioner (Appeals) but does not decide any question about it.

Substituted section 275 from 1 April 2025 and section 472 of the 2025 Act

Section 275 was substituted in full by Act No. 7 of 2025 with effect from 1 April 2025, and the version now on the statute book, available on the Income Tax Department's page for section 275, measures every limitation period in quarters rather than financial years and months. No penalty order may be passed after six months from the end of the quarter in which, as the case may be, the proceedings are completed where the assessment is not appealed under section 246, 246A or 253; a revision order under section 263 or 264 is passed; an appellate order under section 246 or 246A is received by the jurisdictional Principal Commissioner or Commissioner and no further appeal under section 253 is filed; an order of the Appellate Tribunal under section 253 is received by that officer; or, in any other case, the penalty notice is issued. Sub-section (5) excludes the period of a court stay on the penalty proceedings until a certified copy of the order vacating the stay reaches the jurisdictional officer, along with time taken to give a rehearing under the proviso to section 129.

The structure therefore still ties the penalty clock to the appellate outcome when an appeal to the Tribunal exists, but the substituted text is not the one the Delhi High Court construed. Whether a penalty order passed during the pendency of a Tribunal appeal after 1 April 2025 is bad for the same reason is a question the judgment leaves open, because its reasoning is anchored in the words of the pre-substitution clause. For tax years governed by the Income-tax Act, 2025, the corresponding provision is section 472, which carries the same six-months-from-end-of-quarter design and the same stay exclusion. Assessment Year 2018-19 matters such as this one, and every penalty proceeding pending on 1 April 2026, continue under the 1961 Act, as the Department's transition FAQ on the Income-tax Act, 2025 confirms for penalty, revision and appeal proceedings.

The three versions of the rule differ on the trigger and the period, and the difference matters when a file straddles 1 April 2025 or 1 April 2026.

Illustration of the current rule: an assessment order is passed on 20 January 2026, in the quarter ending 31 March 2026. If no appeal is filed, the last date for a penalty order under the substituted section 275(1)(a) is six months from 31 March 2026, that is 30 September 2026. If instead the assessee appeals to the Tribunal and the Tribunal's order is received by the jurisdictional Commissioner on 10 August 2027, in the quarter ending 30 September 2027, the last date under clause (d) becomes six months from 30 September 2027, that is 31 March 2028. Any period during which a court stayed the penalty proceedings is added on top under sub-section (5).

For BT Global itself, the next date that matters is the Tribunal's decision in the quantum appeal filed on 29 August 2022. Until that order is received, the Revenue has no penalty order on record for Assessment Year 2018-19, and any fresh initiation will have to be tested against the limitation text in force at that time.

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