2022 (3) TMI 1035 - HC - Income Tax

Penalty issued u/s 271(1)(c) - assessment proceedings having been initiated pursuant to the proceedings under section 263 - HELD THAT - It is profitable to bear in mind the distinction between the proceedings under section 263 and the initiation of penalty under section 271(1)(c). There is no quarrel that while issuing orders under section 263 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, the same is, in my considered view, within his jurisdiction and 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.

Summary

Issues:
Challenge to penalty order under section 271(1)(c) of the Income Tax Act, 1961 in a writ petition under Article 226 of the Constitution of India.

Analysis:
1. Jurisdiction to Initiate Penalty Proceedings:
- The petitioner contended that the assessing officer lacked jurisdiction to initiate penalty proceedings under section 271(1)(c) of the Act following a remand order under section 263.
- Citing various decisions, the petitioner argued that the satisfaction for penalty initiation was not expressed in the original assessment order, hence the subsequent assessment order could not confer such jurisdiction.
- The respondent, on the other hand, argued that the satisfaction was evident in the assessment order issued after remand, fulfilling the requirements of section 271(1)(c).

2. Assessment Proceedings and Remand Order:
- The remand order under section 263 set aside the initial assessment order entirely, directing a fresh assessment.
- The assessing officer was observed to have passed a "sketchy order" without proper examination or inquiries, leading to the remand.
- The remand order was deemed an open remand, empowering the assessing officer to decide on all issues, not limited to excess depreciation as contended by the petitioner.

3. Satisfaction for Penalty Initiation:
- The assessing officer, in the subsequent assessment order, expressed satisfaction for initiating penalty proceedings under section 271(1)(c).
- The satisfaction recorded after the remand was considered valid, granting the officer jurisdiction to initiate and impose the penalty.

4. Legal Precedents and Distinctions:
- The judgment distinguished cases where satisfaction for penalty initiation was not recorded in the original assessment order, unlike the present case where the satisfaction was expressed after remand.
- Previous cases cited by the petitioner were deemed inapplicable due to differing factual circumstances.

5. Conclusion:
- The court held that the assessing officer had the jurisdiction to initiate penalty proceedings based on the satisfaction expressed in the assessment order issued after the remand.
- The writ petition challenging the penalty order was dismissed, with the petitioner granted liberty to pursue statutory remedies through appeal.

In summary, the High Court of Kerala upheld the jurisdiction of the assessing officer to initiate penalty proceedings under section 271(1)(c) following a remand order under section 263, as the satisfaction for penalty initiation was expressed in the subsequent assessment order. The court dismissed the writ petition, allowing the petitioner to seek redress through statutory remedies via appeal.