2023 (9) TMI 424 - AT - Income Tax

Rectification of mistake - Levy penalty u/s 271AAC or u/s 270 - addition applying the GP rate of 26.63% on the declared turnover as against the GP rate of 25.38% declared by the assessee - HELD THAT - CIT (A) has no power to issue direction in case where no proceedings are pending before him and thus in this way pendency of proceedings of proceedings is a sine quo non for passing any order by ld. CIT (A). Therefore, in view of the above legal provision, the action of the ld. CIT (A) for initiation of penalty proceedings under section 270A of the Act is not a rectification of order but a revision of appeal order earlier passed by his predecessor CIT (A) which is not permissible under the provisions of the IT Act. Therefore, the directions given by ld. CIT (A) for initiation of penalty proceedings u/s 270A of the Act and in this regard order passed under section 154 of the Act is palpably wrong, invalid and bad in law and without jurisdiction. There is a difference between rectification of an order and revision of an order. The rectification of any mistake can only be passed in order to put something right. However, revision means, the changing of something in order to correct or improve it. Thus, in our view, any change in the order can only be done by invoking the powers of revision and not by passing order of rectification u/s 154 of the Act. Since in the present case no proceedings are pending before the CIT (A), therefore, the ld. CIT (A) was not right in passing order of rectification by directing to initiate the penalty proceedings under section 270A of the IT Act in place of penalty proceedings u/s 271AAC of the Act when admittedly vide her initial order dated 28.02.2022 has categorically held that addition made on account of alleged unaccounted sale under section 68 is totally unjustified and consequently not covered u/s 115BBE of the Act and there was no income chargeable to tax under section 115BBE. After culmination of proceedings, the ld. CIT (A) was not within jurisdiction to order initiation of penalty proceedings under section 270A of the IT Act by passing rectification order under section 154 of the Act as the said action of CIT (A) is without jurisdiction and out of purview of the provisions of section 154 of the Act. Therefore, the same deserves to be quashed and set aside. Consequently, the appeal filed by the assessee stands allowed.

Summary

Issues Involved:
1. Validity of CIT(A)'s order under section 154 of the IT Act.
2. Initiation of penalty proceedings under section 270A of the IT Act.

Summary:

Issue 1: Validity of CIT(A)'s order under section 154 of the IT Act

The assessee contested the order dated 28.02.2022 by CIT(A)-4, Jaipur, passed under section 154 of the IT Act for the assessment year 2017-18, arguing that no proceedings were pending before CIT(A) and no directions were issued in the original appeal order to initiate such proceedings. The Tribunal noted that the CIT(A) is a quasi-judicial authority with appellate jurisdiction over AO's orders and can only exercise powers when an appeal is pending. The Tribunal concluded that the CIT(A) had no jurisdiction to pass orders or issue directions in the absence of pending proceedings, rendering the order under section 154 invalid and without jurisdiction.

Issue 2: Initiation of penalty proceedings under section 270A of the IT Act

The Tribunal examined the CIT(A)'s direction to initiate penalty proceedings under section 270A of the IT Act. The initial assessment by the AO included additions under sections 68 and 41(1), with penalties under sections 271AAC and 270A. The CIT(A) in her order dated 28.02.2022, reduced the additions and held that the provisions of section 68 and the 60% tax rate under section 115BBE were not applicable. The AO subsequently requested the CIT(A) to initiate penalty proceedings under section 270A for the trading addition sustained. The Tribunal found that the CIT(A) lacked the jurisdiction to direct such initiation under section 154, as it constituted a revision rather than a rectification of the order. The Tribunal emphasized the distinction between rectification and revision, citing relevant case law, and held that the CIT(A)'s action was beyond her authority and invalid.

Conclusion:

The Tribunal allowed the appeal, quashing the CIT(A)'s order under section 154 and the direction to initiate penalty proceedings under section 270A, as it was without jurisdiction and contrary to the provisions of the IT Act.