Section 274 and 275 of Income Tax Act 1961: Penalty Procedure and Limitation

Section 274 of the Income Tax Act, 1961 prescribes procedural safeguards for imposing penalties under Chapter XXI, including an opportunity of hearing and specified approval requirements. Section 275 prescribes the time limit within which a penalty order must be passed.

Applicable-law note: The Income Tax Act, 2025 came into force on 1 April 2026. This page explains Sections 274 and 275 of the Income Tax Act, 1961 for proceedings and periods governed by that Act. Section 275 was substantially substituted by the Finance Act, 2025 with effect from 1 April 2025, so the date relevant to the penalty proceeding is important.

Section 274 - Procedure for imposing penalty

Opportunity of hearing under Section 274(1)

Section 274(1) embodies a basic procedural safeguard: no order imposing a penalty under Chapter XXI can be made unless the assessee has been heard or has been given a reasonable opportunity of being heard. The penalty authority must therefore provide a meaningful opportunity to respond before imposing penalty.

Prior approval under Section 274(2)

Under Section 274(2), an Income-tax Officer cannot make an order imposing a penalty exceeding Rs. 10,000, and an Assistant Commissioner or Deputy Commissioner cannot make an order imposing a penalty exceeding Rs. 20,000, except with the prior approval of the Joint Commissioner.

Faceless and technology-based penalty procedure

Section 274 also contains enabling provisions concerning a scheme for imposing penalties with greater efficiency, transparency and accountability, including reduction of interface to the extent technologically feasible, functional specialisation and dynamic jurisdiction. Notifications and procedural rules applicable to the particular proceeding should be checked on the official Income Tax portals.

Copy of penalty order to Assessing Officer

Where an income-tax authority other than the Assessing Officer makes an order under Chapter XXI imposing penalty, Section 274 requires a copy of the order to be sent to the Assessing Officer.

Section 275 - Bar of limitation for imposing penalties

Major amendment from 1 April 2025: The Finance Act, 2025 substituted Section 275 to rationalise the limitation period. For the substituted provision, the limitation is generally computed as six months from the end of the relevant quarter specified in Section 275, rather than under the earlier multiple limitation rules.

Section 275 applicable from 1 April 2025

Under the substituted Section 275, no order imposing penalty under Chapter XXI may be passed after expiry of six months from the end of the quarter in which the relevant statutory event occurs. The triggering event depends on whether the underlying assessment or other order is unappealed, appealed or revised.

Situation	Relevant event for limitation
No appeal under Section 246, 246A or 253	Completion of the proceedings in the course of which action for imposition of penalty was initiated.
Appeal to Joint Commissioner (Appeals) or Commissioner (Appeals), with no further appeal to Tribunal	Receipt of the appellate order by the jurisdictional Principal Commissioner or Commissioner.
Appeal to the Appellate Tribunal	Receipt of the Tribunal's order by the jurisdictional Principal Commissioner or Commissioner.
Revision under Section 263 or Section 264	Passing of the revision order.

For each category, the exact language of the applicable version of Section 275 should be checked before calculating the final date.

Penalty order passed before final appellate or revision order

The substituted Section 275 also addresses cases in which an order imposing, enhancing, reducing or cancelling penalty, or dropping penalty proceedings, has already been passed before the relevant appellate order is received or revision order is passed. The penalty order may be revisited on the basis of the assessment as modified by the appellate or revision order, subject to the statutory hearing requirement and limitation period.

Opportunity of hearing for consequential penalty order

An order imposing or enhancing penalty in consequence of an appellate or revision order cannot be passed without hearing the assessee or giving a reasonable opportunity of being heard. The substituted provision also fixes a separate limitation measured from the end of the quarter in which the relevant appellate order is received or revision order is passed.

Excluded periods while computing limitation

Section 275 provides for exclusion of specified periods when computing limitation. These include the time taken in giving an opportunity of rehearing under the proviso to Section 129 and the period covered by a court-ordered stay of penalty proceedings, as specified in the applicable statutory text.

Earlier Section 275 before 1 April 2025

For cases governed by the earlier version, Section 275 contained different limitation rules depending upon whether the relevant assessment or other order was under appeal, revision, or fell within another category. In broad terms, the provision used combinations of the end of the financial year and periods calculated from receipt of an appellate order, passing of a revision order or initiation of penalty action.

The earlier provision also contained Section 275(1A), which permitted consequential modification of a penalty order after appellate or revision proceedings, subject to hearing and limitation requirements. Therefore, cases straddling the amendment date should be examined by reference to the exact statutory version applicable to the proceeding.

Section 274 and Section 275 - Practical distinction

Section	Subject	Key question
Section 274	Procedure for penalty	Was the assessee given a reasonable opportunity of hearing, and were applicable approval and procedural requirements followed?
Section 275	Limitation for penalty orders	Was the penalty order passed within the limitation period applicable to the relevant proceeding and statutory version?

Evidence law before Bharatiya Sakshya Adhiniyam, 2023

Sections 274 and 275 are procedural provisions of income-tax law. For matters in which the general law of evidence was relevant before the Bharatiya Sakshya Adhiniyam, 2023 came into force on 1 July 2024, the Indian Evidence Act, 1872 was the general evidence statute, subject to its applicability and the special provisions of the Income Tax Act. The validity of a penalty proceeding, however, primarily depends on the applicable Income Tax Act provisions, notices, orders, service records, appellate or revision events and statutory time limits.

Official references

Important: Limitation is date-sensitive. Identify the applicable statutory version, the proceeding in which penalty was initiated, the relevant appellate or revision history, dates of receipt or passing of orders, and any excludable period before computing the last permissible date.