2018 (9) TMI 221 - HC - Income Tax

Penalty proceedings u/s 271(1)(c) - passing of specific order - whether noting in the file would not be sufficient for dropping a penalty proceeding, which is proposed by the assessing officer? - Held that - There is no dispute on the question that penalty proceeding is an independent proceeding under the Income Tax Act, 1961 and the proposal for initiating such proceeding does not by itself constitute initiation of such proceeding. In this case what we find is a noting by the assessing officer, which we have quoted in the preceding part of this judgment. This noting suggests dropping of the proceeding itself. But the commissioner s view was that no formal order was passed in dropping the proceeding for initiation of the same. This noting, in our opinion, has all the attributes of a formal order. Since the assessing officer has taken a conscious decision not to proceed with the penalty proceeding and the Tribunal did not find any error in the course which was taken by the assessing officer, we do not find any substantial question of law to be involved in this appeal.

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Legality of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961.
3. Invocation of revisional jurisdiction under Section 263 by the Commissioner of Income Tax.
4. Tribunal’s decision on the penalty proceedings.
5. Substantial question of law regarding the formal order for dropping penalty proceedings.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The court addressed the delay of 99 days in filing the appeal. After reviewing the application for condonation of delay (GA No. 3791 of 2017), the court found sufficient cause for the delay and accordingly condoned it, allowing the application.

2. Legality of Penalty Proceedings under Section 271(1)(c):
The assessing officer initially noted the initiation of penalty proceedings under Section 271(1)(c) in the assessment order but did not pursue them further. It was noted in the annexures to the stay petition that there was no concealment of income or inaccurate furnishing of particulars by the assessee, leading to the dropping of the penalty proceedings.

3. Invocation of Revisional Jurisdiction under Section 263:
The Commissioner of Income Tax invoked Section 263 of the Income Tax Act, 1961, to impose a penalty, setting aside the assessing officer's decision to drop the penalty proceedings. The matter was restored to the assessing officer for passing a fresh penalty order.

4. Tribunal’s Decision on Penalty Proceedings:
The assessee’s appeal before the Tribunal was allowed. The Tribunal concluded that there was no concealment of income or inaccurate particulars furnished by the assessee. The addition was due to a difference in views on the same set of facts, which were already on record. The Tribunal held that the penalty proceedings deserved to be dropped, and the assessing officer’s decision to drop the penalty proceedings was not erroneous. The Tribunal emphasized that the levy of penalty is not mandatory for every addition and that the assessing officer has the discretion to drop penalty proceedings.

5. Substantial Question of Law Regarding the Formal Order for Dropping Penalty Proceedings:
The court noted that the penalty proceeding is an independent proceeding under the Income Tax Act, 1961. The proposal for initiating such proceedings does not constitute initiation by itself. The court found that the assessing officer’s noting, which suggested dropping the proceeding, had all the attributes of a formal order. Since the assessing officer made a conscious decision not to proceed with the penalty and the Tribunal found no error in this course of action, the court concluded that there was no substantial question of law involved.

Conclusion:
The appeal and the stay petition were dismissed. The court upheld the Tribunal’s decision, affirming that the assessing officer’s decision to drop the penalty proceedings was neither erroneous nor prejudicial to the interest of the revenue, and that the invocation of Section 263 by the Commissioner was not justified.

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