2019 (8) TMI 293 - AT - Income Tax

Revision u/s 263 - dropping of penalty u/s 271(1)(c) - CIT issued SCNby pointing out the dropping of the penalty proceedings was in a routine manner and was not in accordance with the law - HELD THAT - The assessment orders for both the assessment years do not mention the ground under which the penalty proceedings were initiated, viz., for concealing of particulars of income or furnishing inaccurate particulars of income. The relevant portion in the show cause notices issued u/s 274 on 30.03.2016 for both the assessment years were struck off before issuance. Hence neither the assessment order nor the show cause notice in this case did specify the charges leveled, whether it is for concealment of income or for furnishing inaccurate particulars of income for which the assessee has to show cause. The omission to mention the specific charges in the show cause notice would make the whole proceedings void. The above view taken by the Cochin Bench of the Tribunal in the case of M/s.Rajadhani Hotels Tourist Enterprises Pvt. Ltd. v. ACIT 2019 (8) TMI 190 - ITAT COCHIN by following the judgment of the Hon ble Apex Court in the case of CIT Anr. V. M/s.SSA s Emerald Meadows 2016 (8) TMI 1145 - SC ORDER . Since the penalty proceedings initiated is void, it would not serve any purpose to uphold the order of the CIT passed u/s 263 and the same is quashed. - Decided in favour of assessee.

Issues:
1. Penalty proceedings under section 271(1)(c) of the Income Tax Act were initiated against the assessee.
2. Validity of the penalty proceedings initiated by the Assessing Officer.
3. Lack of inquiry by the Assessing Officer before dropping the penalty proceedings.
4. Direction to pass a speaking penalty order within the time limit specified in section 153 of the Act.
5. Defects in the show cause notice issued under section 274 read with section 271(1)(c).
6. Whether the Principal Commissioner of Income Tax (Pr.CIT) can pass a revision order in respect of an order concluding an invalid proceeding.

Analysis:

1. The appeals were directed against two orders of the Commissioner of Income-tax, passed under section 263 of the Income Tax Act, concerning the assessment years 2012-2013 and 2013-2014. The appeals were heard together due to a common issue raised, and a consolidated order was issued.

2. The penalty proceedings under section 271(1)(c) were initiated against the assessee, who cooperated with the Department and voluntarily declared additional income to rectify errors in accounting. The Assessing Officer dropped the penalty proceedings, citing higher income declared in revised returns.

3. The Commissioner of Income-tax found lack of inquiry by the Assessing Officer before dropping the penalty proceedings, deeming the order erroneous and prejudicial to revenue interests. The CIT set aside the orders and directed the Assessing Officer to pass a speaking order within the specified time limit.

4. The assessee challenged the direction to pass a speaking penalty order within the time limit specified in section 153 of the Act, arguing that section 153 pertains to assessment time limits, not penalty proceedings.

5. The assessee raised objections regarding defects in the show cause notice issued under section 274 read with section 271(1)(c), stating that the penalty proceedings were invalidly initiated without specifying charges of concealing or furnishing inaccurate particulars of income.

6. The Tribunal, following precedent, held that the penalty proceedings initiated were void ab initio due to the defective show cause notice. Consequently, the order of the CIT under section 263 was quashed, as the penalty proceedings were deemed invalid.

In conclusion, the Tribunal allowed the appeals filed by the assessee, emphasizing the invalidity of the penalty proceedings due to defects in initiation, thereby rendering the CIT's order under section 263 ineffective.

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