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TMI Blog2017 (1) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... er that the AO had some kind of ‘satisfaction’ for initiating proceedings or levying penalty u/s 271 (1) (c). - Decided in favour of assessee - ITA No.878/Mum/2015 - - - Dated:- 13-12-2016 - SRI AMIT SHUKLA, JM AND SRI RAJESH KUMAR, AM For The Appellant : Miss Dinkle Heriya, AR For The Respondent : Shri Vaibhaqv Jain, DR ORDER PER AMIT SHUKLA, JM: The aforesaid appeal has been filed by the assessee against the impugned order dated 21-08-2013 passed by the learned CIT (A)-39, Mumbai in relation to the penalty proceedings u/s 271 (1) (c) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) for the assessment year 2006-07. The assessee is mainly aggrieved by the levy of penalty of ₹ 6,73,121/- on account of adhoc addition of ₹ 19,99,76/-. The grounds of appeal as raised by the assessee reads as under:- 1. The learned Commissioner of Income Tax (Appeals) has grossly erred in confirming the Penalty levied by the Assistant Commissioner of Income Tax u/s 271 (1) (c) of the Income Tax Act, 1961 on adhoc addition of ₹ 19,99,776/- in Original Assessment u/s 143(32). 2. a) The learned Commissioner of Income Tax (Appeal) e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide order dated 30-12-2008, albeit, in consequence to the assessment order dated 22-12-2009 passed u/s 153A read with section 143(3), which lacks initiation itself. The penalty which has been levied on the basis of the second assessment order, is not sustainable in law, for the reasons that firstly, there is no initiation of penalty proceedings in the assessment order, and secondly, there is to be prima facie satisfaction in the assessment order. In absence of such initiation and satisfaction, penalty levied itself is unsustainable in law. In support, the learned Counsel for the assessee relied upon the following decisions:- (i) C.I.T. v. Lotus Constructions [2015] 370 ITR 475- The Section 271(1)(c) itself indicates that the satisfaction or decision to initiate proceedings must arise in the course of the proceedings. Added to that, sub- section (1) (b) of Section 271 mandates that the intention or satisfaction to initiate proceedings must be evident from the order of assessment itself, meaning thereby that such satisfaction need not be supported with other reasons. In Chennakesava Pharmaceuticals v. CIT [2012] 349 ITF1 196 (AP), Hon'ble High Court held that absenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be gathered from the said order also. It is held in the aforesaid judgment that (a) phrases like penalty proceedings are being initiated separately (b) penalty proceedings under Section 271(1)(c) are initiated separated do not comply with the meaning of the word direction as contemplated even in the amended provisions of law. The direction should be clear and without any ambiguity. The word 'direction' has been interpreted by the decision of the Apex Court in the case of Rajinder Nath v. CIT [1979] 120 ITR 14, where it has been held that in any event whatever else it may amount to, on its very terms the observation that the ITO is free to take action, to assess the excess in the hand of the co-owners cannot be described as a direction. A direction by a statutory authority is in the nature of an order requiring positive compliance. When it is left to the option and discretion of the ITO whether or not to take action, it cannot be described as a direction. In the absence of such a direction, the deeming provision is not attracted. Therefore the conditions prescribed under Section 271(1)(c) of the Act, is not attracted. (v) C.I.T v. Manjunatha Cotton Grinning Factory[ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income Tax Act 1961 dated 12.03.2012 alongwith a covering letter. In the covering letter, the A.O. has mentioned that the assessment under s. 143(3) of the I. T. Act, for A. Y. 2006-07 in the captioned case was completed on 22.12.2009 wherein, penalty under s. 271 (1) (c) and under s. 271 B of the I. T. Act are initiated and pending against you . Certainly a mistake apparent from record has crept in here in that the A. O. had inadvertently mentioned the date of order as 22.12.2009, whereas he has very clearly mentioned and drawn the attention of the assessee to the assessment under s. 143(3) of the I. T. Act . That being so, the provisions of s. 292B amply saves the said notice since it is in substance and effect in conformity with the intent and purpose of the Act. Though the notice is technically defective, it has not caused any prejudice to the assessee and is protected under s. 292B. It therefore follows that merely because of the said defect, the order of penalty does not become invalid. In this view of the matter, support is drawn from the decision of the jurisdictional High Court in the case of Shiriish Madhukar Dalvi vs ACIT (2006) 287 ITR 242 (Bom). 4. We have h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , dated 30-12-2008. We are unable to appreciate such an observation of the learned CIT (A), firstly, in the notice dated 12-03-2012, the learned AO has specifically mentioned initiation of penalty proceedings in terms of the order dated 22-12-2009 and, not order dated 30-12-2008, and secondly, in the wake of the proceedings u/s 153A/153C the said assessment order automatically stands abated in terms of second proviso to Section 153A. Such an abated assessment cannot be revived for the purpose of levying penalty u/s 271 (1) (c). Thus, such an observation and finding of the learned CIT (A) cannot be upheld. Once, the original assessment stands abated, then consequently, no proceedings u/s 271 (1) (c) Act can be initiated or penalty can be levied in terms of the said assessment order. So far as levy of penalty u/s 271 (1) (c) in respect of the assessment order dated 22-12-2009 is concerned, the same again is unwarranted, because there is no initiation of penalty proceedings u/s 271 (1) (c) in the abetment order and nothing is discernible from the said assessment order that the AO had some kind of satisfaction for initiating proceedings or levying penalty u/s 271 (1) (c). The decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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