2017 (8) TMI 1622 - AT - Income Tax

Penalty u/s 271AAA - Unexplained investment in pawn broking to the share of assessee - assessment order is passed under section 143 read with section 153C - HELD THAT - We find that the Assessing Officer has issued a notice in respect of impugned assessment under section 153C read with 153A(1)(b) of the Act and the assessment was completed under section 143(3) read with section 153C of the Act and subsequently penalty is imposed under section 271AAA. It is very clear that where there is a search has been initiated under section 132 penalty can be imposed under section 271AAA of the Act. In this case from the paper book filed by the assessee at page No. 62 the Assessing Officer has issued notice to complete assessment of the assessee under section 153C read with 153A(1)(b) and not under section 132 of the Act. Therefore the initiation of penalty is void abinitio and therefore the order under section 271AAA has to be quashed. Accordingly we quash the penalty order passed by the Assessing Officer under section 271AA. Thus this ground of appeal filed by the assessee is allowed.

Summary

Issues:
1. Assessment under section 143(3) read with section 153C of the Income Tax Act, 1961.
2. Imposition of penalty under section 271AAA after completion of assessment.
3. Validity of penalty imposition under section 271AAA.

Analysis:
1. The appeals were filed against separate orders of the Commissioner of Income Tax (Appeals) for the Assessment Year 2009-10. The Assessing Officer made an addition of ?6,86,400 as 'unexplained investment' in pawn broking to the share of the assessee. The CIT(A) and ITAT confirmed the order. Penalty proceedings were initiated under section 271AAA, imposing a penalty of ?68,460. The assessee contended that no penalty can be levied under section 271AAA after completion of assessment under section 143(3) read with section 153C of the Act.

2. The Assessing Officer completed the assessment under section 143(3) read with section 153C of the Act, and subsequently imposed a penalty under section 271AAA. The main argument was that once the assessment is completed under section 143 read with section 153C, no penalty can be imposed under section 271AAA. The Tribunal found that the initiation of penalty was void ab initio as the notice was issued under section 153C read with 153A(1)(b) and not under section 132 of the Act. Therefore, the penalty order under section 271AAA was quashed.

3. In another case, the assessment was completed under section 143(3) read with section 153C of the Act, and a notice under section 271AAA was issued for imposing a penalty. The Tribunal, in line with the previous case, quashed the notice for initiating penalty proceedings under section 271AAA. Consequently, both appeals filed by the assessees were allowed, leading to the quashing of the penalty orders.

This judgment clarifies that the imposition of a penalty under section 271AAA after completion of assessment under section 143(3) read with section 153C of the Income Tax Act is not valid. The Tribunal emphasized the importance of correct initiation procedures for penalties, ensuring adherence to the relevant sections of the Act.