2018 (2) TMI 1086 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - reopening of assessment - satisfaction recorded by the JCIT without application of own mind - Held that - Where re-assessment proceedings were initiated under section 148 of the Act against additional income offered by the assessee in the revised return of income, there was no assessment under section 143(1) of the Act itself. Hence, mention of Explanation 2(c) is incorrect. The JCIT had approved the same in an automatic fashion. We hold that in such circumstances, where the satisfaction had been recorded by the JCIT in mechanical manner and without application of mind for according his sanction for issuing notice under section 148 of the Act, reopening of assessment under section 147 / 148 of the Act is invalid. Accordingly, consequent penalty proceedings initiated and completed against the assessee under section 271(1)(c) of the Act are without jurisdiction and held to be invalid and bad in law. - Decided in favour of assessee.

Issues Involved:
1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Validity of Reassessment Proceedings under Section 147/148 of the Act.
3. Jurisdiction of Assessing Officer in initiating penalty proceedings.
4. Application of Mind by JCIT in granting approval for reassessment.
5. Validity of Assessment Orders and their impact on Penalty Proceedings.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The primary issue raised in these appeals was the levy of penalty under Section 271(1)(c) for concealment of income. The assessees argued that no concealment or furnishing of inaccurate particulars of income was evident from their returns. They contended that the additional income was voluntarily disclosed in response to the notice under Section 148 and that the penalty was unjustified.

2. Validity of Reassessment Proceedings under Section 147/148 of the Act:
A significant portion of the judgment dealt with the validity of the reassessment proceedings. The assessees challenged the reassessment on the grounds that reasons for reopening were recorded after the notice under Section 148 was issued, and in some cases, no reasons were recorded at all. The Tribunal examined whether the Assessing Officer had valid jurisdiction to reopen the assessments and whether the approval for reopening was granted mechanically without independent application of mind by the JCIT.

3. Jurisdiction of Assessing Officer in Initiating Penalty Proceedings:
The Tribunal addressed whether the assessees could challenge the jurisdiction of the Assessing Officer in penalty proceedings. It was argued that if the reassessment proceedings were invalid, the consequent penalty proceedings would also be without jurisdiction. The Tribunal relied on various judicial precedents to conclude that the validity of the assessment could be challenged in penalty proceedings.

4. Application of Mind by JCIT in Granting Approval for Reassessment:
The Tribunal scrutinized the process of approval by the JCIT for reopening the assessments. It was found that the JCIT had granted approval in a mechanical manner without proper application of mind. The Tribunal referred to the decision of the Hon’ble Supreme Court in CIT Vs. S. Goyanka Lime & Chemicals Ltd., where it was held that mechanical approval invalidates the reassessment proceedings.

5. Validity of Assessment Orders and Their Impact on Penalty Proceedings:
The Tribunal observed that in cases where the reassessment proceedings were initiated without proper jurisdiction, the assessment orders themselves were invalid. Consequently, any penalty proceedings based on such invalid assessments were also without jurisdiction and bad in law. The Tribunal emphasized that the issue of jurisdiction goes to the root of the matter and can be raised at any stage, including during penalty proceedings.

Conclusion:
The Tribunal concluded that the reassessment proceedings in the cases under appeal were invalid due to the lack of proper jurisdiction and mechanical approval by the JCIT. As a result, the penalty orders passed under Section 271(1)(c) were quashed. The Tribunal directed the Assessing Officer to delete the penalties levied in the hands of the respective assessees for all the assessment years in question. The appeals of the assessees were allowed in their entirety.

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