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2016 (1) TMI 980 - AT - Income TaxPenalty under section 271(1)(c) - Held that - The assessment was completed by the Assessing Officer, who had not recorded any satisfaction for initiating the penalty for concealment under section 271(1)(c) of the Act, with regard to the additional income offered. Thereafter, in the order levying penalty also, the Assessing Officer had not levied any penalty. The CIT(A) while deciding the appeal against the order levying penalty under section 271(1)(c) of the Act was only abrest of the penalty order passed by the Assessing Officer and while deciding the said appeal, he had no jurisdiction to initiate and levy penalty under section 271(1)(c) of the Act on an issue against which, the assessment was made by the Assessing Officer. - Decided in favour of assessee.
Issues Involved:
1. Initiation and levy of fresh penalty under section 271(1)(c) of the Income Tax Act, 1961. 2. Treatment of income declared in revised return as concealed income. 3. Authority of CIT(A) to initiate and levy penalty under section 271(1)(c) of the Act. Detailed Analysis: 1. Initiation and Levy of Fresh Penalty under Section 271(1)(c): The appeal was filed against the order of CIT(A), Aurangabad, which confirmed the penalty levied under section 271(1)(c) of the Income Tax Act, 1961. The assessee originally filed a return declaring an income of Rs. 82,842, which was later revised to Rs. 1,25,39,650 following a survey action. The Assessing Officer accepted the revised return but initiated penalty proceedings for unexplained investment and unproved agricultural income. The CIT(A) deleted the penalty for unexplained investment but upheld it for the unproved agricultural income. The CIT(A) also initiated fresh penalty proceedings on the additional income declared in the revised return, which was not initially penalized by the Assessing Officer. 2. Treatment of Income Declared in Revised Return as Concealed Income: The CIT(A) noted that the additional income declared in the revised return was not voluntary but a result of the survey action, thus constituting concealed income. The CIT(A) held that the assessee had concealed income of Rs. 1,24,56,810, which was not declared in the original return but included in the revised return filed after the survey. 3. Authority of CIT(A) to Initiate and Levy Penalty under Section 271(1)(c): The CIT(A) issued a notice under section 251 of the Act, proposing to enhance the penalty on the undisclosed income revealed during the survey. The CIT(A) justified the initiation and levy of penalty under section 271(1)(c) on the grounds that the additional income was concealed in the original return. The CIT(A) argued that under section 271(1)(c), the authority to initiate and levy penalty extends to the CIT(A) if satisfied that the income was concealed. Legal Precedents and Tribunal's Findings: The Tribunal referred to the Hon'ble Karnataka High Court's decision in CIT & Anr. Vs. Manjunath Cotton and Ginning Factory, which clarified that the satisfaction for initiating penalty proceedings must be recorded in the assessment order. The Tribunal emphasized that the CIT(A) could not initiate and levy penalty on an issue for which the Assessing Officer had not recorded satisfaction. The Tribunal held that the CIT(A) overstepped its jurisdiction by initiating and levying penalty on the additional income declared in the revised return, as the Assessing Officer had not done so during the assessment. Conclusion: The Tribunal concluded that the CIT(A) exceeded its jurisdiction by initiating and levying penalty under section 271(1)(c) on the additional income, which was not penalized by the Assessing Officer. The appeal filed by the assessee was allowed, and the order of the CIT(A) to levy penalty was set aside. The Tribunal reiterated that the initiation of penalty proceedings must be done by the authority completing the assessment, and the CIT(A) cannot initiate and levy penalty afresh during appellate proceedings.
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