2022 (2) TMI 880 - HC - Income Tax

Revision u/s 263 to impose a penalty u/s 271(1)(c) - whether assessment order had not recorded the satisfaction for initiating penalty proceedings? - HELD THAT - Distinction between the proceedings under section 263 and the initiation of penalty un/s 271(1)(c). There is no quarrel that while issuing orders under section 263 of the Act the Principal Commissioner of Income Tax cannot direct penalty to be imposed. However when in the exercise of powers under section 263 of the Act an assessment order was set aside and remanded back to the assessing officer all the powers of an original assessing officer gets vested by operation of law. In such proceedings if the assessing officer expresses his satisfaction that penalty proceedings can be initiated then that satisfaction is certainly expressed before conclusion of proceedings under the Act and is within his authority. The satisfaction recorded by the assessing officer in Ext.P3 that proceedings for penalty must be initiated under section 271(1)(c) is clearly within his jurisdiction despite the fact that the original assessment order did not mention anything about initiating penalty proceedings. Ext.P3 assessment order issued after remand is a proceeding under this Act and satisfies the ingredients of section 271(1)(c) and hence the assessing officer was vested with the jurisdiction to record his satisfaction and thereafter initiate penalty proceedings. Coming to the instant case nowhere in Ext.P2 order has the Principal Commissioner of Income Tax expressed his satisfaction for initiating penalty proceedings. On the contrary he merely set aside the assessment order in its entirety and remanded the case for a fresh consideration by the assessing officer. Thus while issuing the order of assessment as per Ext.P3 the assessing officer was bestowed with all powers as in an original assessment including the power to express his satisfaction for initiating penalty proceedings. In such a view of the matter I find that the initiation of proceedings for imposing penalty and the consequent imposition was within the jurisdiction and authority of the assessing officer. Hence there is no merit in the challenge raised. WP dismissed.

Summary

Issues:
Can an assessing officer impose a penalty under section 271(1)(c) of the Income Tax Act 1961 while considering an assessment consequent to a remand ordered by the revisional authority under section 263 of the Act?

Analysis:
The petitioner, engaged in quarrying and sale of rock aggregates, had their assessment for the year 2015-16 revised under section 263 of the Income Tax Act. The Principal Commissioner of Income Tax found the original assessment erroneous and prejudicial to revenue, leading to a remand for fresh assessment. Subsequently, a penalty was proposed and imposed under section 271(1)(c) of the Act. The petitioner challenged the penalty order, arguing that the assessing officer lacked jurisdiction to initiate penalty proceedings post the remand under section 263.

The petitioner contended that the original assessment order did not express the necessary satisfaction for initiating penalty proceedings. Citing various legal precedents, the petitioner argued that the subsequent assessment order post the remand cannot confer jurisdiction for imposing penalties. On the other hand, the respondent argued that the assessing officer's satisfaction for penalty initiation was evident in the assessment order issued after the remand, fulfilling the requirements of section 271(1)(c) of the Act.

The court analyzed the remand order under section 263 and noted that it set aside the initial assessment entirely, allowing the assessing officer to pass fresh orders on all issues. The court rejected the petitioner's claim of a limited remand, emphasizing that the remand was open-ended. Referring to legal principles, the court highlighted that the assessing officer's satisfaction for penalty initiation must be expressed during the assessment proceedings. The court held that the assessing officer, post the remand, had the authority to initiate penalty proceedings based on his satisfaction expressed in the subsequent assessment order.

The court distinguished previous cases where the satisfaction for penalty initiation was not recorded in the assessment order itself. In the present case, the court found that the assessing officer's satisfaction for penalty initiation was within his jurisdiction, even though the original assessment order did not mention penalty proceedings. Consequently, the court dismissed the writ petition, upholding the assessing officer's authority to impose the penalty. The petitioner was granted liberty to pursue statutory remedies against the penalty order through appeal, ensuring due process of law.