The assessee, engaged in providing call centre services, contested the penalty order, arguing that it was issued beyond the statutory time frame. The assessee contended that the penalty order was barred by limitation as it was passed well after the six-month period specified under Section 275(1)(c) of the Income-tax Act. The revenue, however, argued that the limitation period for issuing the penalty order should start from the date of the Show Cause Notice (SCN), not from the date of the survey or the initiation of penalty proceedings as claimed by the Assessee.

The Hon’ble Tribunal ruled that the penalty order was invalid, as it was issued beyond the six-month statutory limit from the initiation of penalty proceedings.

The Hon’ble High Court upheld the Tribunal’s decision, agreeing that the penalty order was time-barred due to the delay in issuing the SCN and passing the order, rendering it unsustainable.  (.AY 2006-07)