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TMI Blog2018 (6) TMI 1743X X X X Extracts X X X X X X X X Extracts X X X X ..... in this case. In absence of a clear cut finding of ld. Pr.CIT on the basis of documents found and seized and statements recorded during the search, the Pr.CIT. was not justified in issuing such direction. The Pr.CIT cannot reach at a conclusion that the provisions of Section 271AAB (1)(c) are applicable in assessee s case without clear and final finding on this issue. We would also like to hold that once the assessee has preferred the appeal against the order of Assessing Officer for levy of penalty u/s 271AAB of the Act, there is no scope for the ld. Pr.CIT to invoke the provisions of Section 263 of the Act to cover any legal lacuna. Moreover, in a situation where the assessee has been granted certificate under the Direct Tax Dispute Resolution Scheme, 2016 which continues to be valid then also provisions of Section 263 could not be invoked. We would also like to mention that once the certificate issued under DRS Scheme is withdrawn in future then the appeal of assessee before CIT(A) shall revive. In such a situation also the Pr.CIT shall not have jurisdiction to invoke provisions of Section 263 of the Act. There is no scope for treating the penalty order passed by the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 263 of the Income Tax Act, 1961 by holding that the order passed by Learned Assessing Officer u/s 271AAB of the Income Tax Act, 1961 dated 20.08.2015 was erroneous and prejudicial to the interest of the revenue. 4. In the facts and circumstances of the case the learned Pr. CIT, Jaipur- 1, Jaipur has erred in holding that the assessee has not substantiate the manner of earning of income in the statement recorded u/s 132(4) of the Income Tax Act, 1961. 5. In the facts and circumstances of the case the learned Pr. CIT, Jaipur- 1, Jaipur has erred in holding that the penalty us/ 271AAB of the Income Tax Act, 1961 is leviable @ 30% instead of 10% imposed by the Learned Assessing Officer in the given circumstances. 4. The main issue involved in the appeal is passing order U/s 263 of the Act by the ld. Pr.CIT and confirming the penalty U/s 271AAB of the Act. The ld. Pr.CIT has passed order U/s 263 of the Act, the main contents of his order is reproduced hereunder: 11. While imposing the penalty u/s 271AAB of the act it is seen that the AO has also arrived at the conclusion that the assessee has not substantiated this income as during assessment proceedings the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of section 263 of the Income Tax Act 1961. 12. Keeping the above discussion in view by the virtue of the powers conferred on the undersigned under the provisions of Section 263 of the IT Act 1961, I hold that the order under Section 271AAB dated 20/8/2015 for assessment year 2013-14 passed by the assessing officer is erroneous insofar as it is prejudicial to the interest of revenue as the order has been passed by the assessing officer in a routine and perfunctory manner by applying the incorrect clause of section 271AAB in the case of the assessee for imposing penalty. It is therefore liable to revision under explanation (2) clause (a), clause (b) of section 263 of the Income Tax Act. Therefore holding that there has been short levy of penalty of ₹ 2,99,56,404/- the penalty order dated 20/8/2015 is set aside on this issue with a direction to the assessing officer to pass the same in the case of the assessee de novo in accordance with law after making the necessary examination and verification regarding the issue under discussion .The AO is directed to finalize the penalty order keeping in view the facts of the case and correct application of law. However an opportunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Assessing Officer has not referred to any clause of section 271AAB(1). As such the Learned Pr. CIT is wrong in observing that the Learned Assessing Officer has imposed penalty by applying wrong clause/incorrect clause. The entire problem in the penalty is that no clause has been quoted. Not only in the penalty order even in the assessment order while initiating penalty proceedings u/s 271AAB the specific clause (a), (b) or (c) of sub-section (1) have not been quoted. In view of this the order u/s 263 is assailed as under: - 2. Initiation of penalty proceedings is unlawful: - The assessment was completed u/s 143(3) r.w.s. 153B(1)(b) of the IT Act, 1961 almost accepted the income disclosed by the assessee. However the Learned Assessing Officer initiated penalty proceedings u/s 271AAB of the Income Tax Act, 1961 as per para 5 of the assessment order scanned below: - The perusal of the aforesaid paras of the assessment order disclosed that the Learned Assessing Officer has initiated the penalty u/s 271AAB without specifying clause (a), (b) or (c) of section 271AAB. Further there is no satisfaction of the Learned Assessing Officer for initiating penalty proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty notice the Learned Assessing Officer has again not specified the clause of section 271AAB(1) for which penalty was initiated. The penalty notice is scanned below: - Thus in view of the aforesaid facts it is clear that initiation of penalty proceedings was wrong on the following counts: - (i) The Learned Assessing Officer did not record any satisfaction with reference to the specific clause of section 271AAB(1). Copy of assessment order is available on paper book page number 10 to 13. (ii) In the assessment order the Learned Assessing Officer also did not initiated penalty proceeding with reference to any specific clause (a) to (c) of section 271AAB(1). (iii) The notice issued u/s 274 read with section 271 on 13.03.2015 along with the assessment order also did not mention any specific clause of section 271AAB such as 271AAB(1)(a), 271AAB(1)(b) or 271AAB(1)(c). In view of the aforesaid facts on record there was no case for levy of any penalty subsequently on such unlawful initiation of the penalty proceedings. As the very initiation of the penalty proceedings is unlawful the subsequent imposition of penalty is automatically void. The Learned PCIT has set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was worked out and penalty was levied u/s 271(1)(c)-CIT(A) upheld penalty u/s 271(1)(c)-Appellant-assessee challenged imposition of penalty u/s 271(1)(c)-Held, section 271(1)(c) empowered AO to impose penalty to extent specified if, in course of any proceedings under the Act, he was satisfied that any person had concealed the particulars of his income or furnished inaccurate particulars of such income-Penalty could be levied on existence of any of two situations, namely, for concealing particulars of income or for furnishing inaccurate particulars of income-Therefore, imposition of penalty was invited only when conditions prescribed u/s 271(1)(c) exist- Concealment of particulars of income' and furnishing of inaccurate particulars of income' referred to in section 271(1)(c) denote different connotations-In notice issued u/s 274 r.w.s. 271(1)(c) of even date, both limbs of section 271(1)(c) were reproduced in proforma notice and irrelevant clause had not been struck-off-Observation of AO in assessment order and non-striking off of irrelevant clause in notice clearly brings out diffidence on part of AO and there was no clear and crystallized charge being conveyed to assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellate Authority, it was mixed question of law and fact and same might also be permissible-Relevant observations of Tribunal were referred in order passed in M.A.No.62/BANG/15 for rectification and Tribunal, had not accepted contention raised therein-It was hardly required to be stated that if question of law was raised which goes to root of matter and for which no undertaking of factual examination was required, same could be permitted by Tribunal-Had it been case where notice for penalty was not on record in proceedings of assessment, matter might stand on different footing-In any case, where notice for imposition of penalty u/s 271(1)(c) was already there on record and when Tribunal was to examine applicability of this Court decision in case of M/s Manjunatha Cotton and Ginning Factory and law laid down, it was case where contention ought to have been considered and examined-As observed herein above, decision in case of M/s Manjunatha Cotton and Ginning Factory would apply and if notice was found to be illegal and was found to be unsustainable in law, consequences would be that there was breach of natural justice-Hence, ultimate order for imposition of penalty couldn t be sustai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k page number 10 to 13. It is only during the course of assessment proceedings that assessee should have been afforded opportunity to substantiate his income. This was not done. Therefore the observation of the Learned Assessing Officer in the penalty order is false that during the course of assessment proceedings the assessee failed to substantiate his income. Not only this even in the prolonged statement recorded u/s 132(4) on 18.07.2012, the assessee was not put any question regarding substantiating the income. He was never put to explain the source of income disclosed by him. Copy of statement is enclosed with the submission. Therefore it is wrong on the part of the Learned Assessing Officer to have observed in the penalty order that the assessee failed to substantiate his income. And even it is far worse that the Learned Pr. CIT was guided and led by this false observation of the Learned Assessing Officer in the penalty order. She could have rather she should have perused the assessment order herself and should have ascertained whether at any stage assessee was required to substantiate his income. In view of these facts the Pr. CIT has erred in passing the order u/s 263 and gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d maintain information and document in respect of international transaction- Deletion of Penalty- Search and seizure action u/s 132 was carried out in case of Company B - Case of assessee was also covered u/s. 132- Assessee had filed return of income for AY 2010-11, electronically, declaring income of ₹ 20,47,14,190- During course of assessment proceedings, it was noticed by AO that assessee had made disclosure of undisclosed income earned during financial year 2009-10 (relevant to assessment year 2010-11) to extent of ₹ 20 Crores during course of search and post search proceedings on basis of seized material found during course of search- It was further noted by AO that provisions of section 271AAA were applicable with respect to undisclosed income found during course of search and declared by assessee in her return of income for assessment year 2010- 11- AO initiated penalty proceedings u/s. 271AAA during assessment proceedings on ground that assessee had not specified manner in which undisclosed income was earned also failed to substantiate, it and accordingly, imposed penalty of ₹ 2 Crore on assessee for such failure- CIT(A) deleted penalty and allowed appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Finance Act, 2016- Order u/s 204(2) r.w.s. 206 of the Finance Act, 2016 dated 09.11.2016 by Pr. CIT (Central), Jaipur - Over and above the submission made in the forgoing paras it is submitted that during the course of proceedings u/s 263 it was brought to the kind notice of the Learned Pr. CIT that the assessee has availed benefit of the direct tax dispute resolution scheme-2016. In this regard copies of order passed by Pr. CIT(Central), Jaipur dated 18.10.2016 and 09.11.2016 were produced before him. Under the dispute resolution scheme the assessee was required to only ₹ 37,44,551/- in place of penalty levied u/s 271AAB of ₹ 1,49,78,202/-. The matter thus got finality after the payment made by the assessee of ₹ 37,44,551/-. During the course of proceedings u/s 263 the assessee furnished reply under letter dated 20.03.2018 copy of which is available on paper book page no. 53 to 61. The relevant portion is quoted below: - 5. Subsequently the Learned Assessing Officer has imposed the penalty u/s 271AAB of the Income Tax Act, 1961 by order dated 20.08.2015 @ 10% of surrendered income by considering that the assessee fulfilled all the condition as mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officers of the department of the level of Pr. CIT (Central). The order passed u/s 204(2) r.w.s. 205 of the Finance Act 2016 dated 09.11.2016 is none other than by Pr. CIT (Central), Jaipur who deals only with search cases. The jurisdiction of Pr. CIT (Central) is exclusively were search and seizure cases. Further the matter of penalty u/s 271AAB which is also directly related with search cases and such penalty is imposed only in such assessments. The facts being so how could it be that the dispute resolution scheme was not applicable to the assessee despite the Learned Pr. CIT (Central) Jaipur granted the certificate. There is no fault of the assessee in availing scheme. Once a certificate u/s 204(2) r.w.s. section 205 has been granted, the Learned Pr. CIT-1 was precluded in passing order u/s 263 of the Income Tax Act, 1961. The order passed u/s 263 deserves to be quashed. 6. On the other hand, the ld CIT DR has relied on the order of the ld. Pr.CIT and prayed to uphold the order. 7. We have heard both the sides on this issue. We have also perused the lace laws relied upon both the sides. We have also gone through the various relevant materials available on the record. The o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the ld. Pr.CIT that during the proceedings U/s 263 of the Act, ld. Pr.CIT has not arrived at a clear and final conclusion that penalty levied by the Assessing Officer @ 10% was not justified in view of the materials collected and statement recorded during the search. Ld. Pr.CIT in his order U/s 263 of the Act has directed that the penalty order dated 20/08/2015 is set aside on this issue with a direction to the A.O. to pass the same in the case of assessee de novo in accordance with law after making the necessary examination and verification regarding issue under discussion. Thus, the ld Pr.CIT had not given clear finding on the issue. The Assessing Officer have levied penalty @ 10% and ld. Pr.CIT wants to levy 30% of penalty U/s 271AAB of the Act. The A.O. has not specified the sub clause in notice. In such a factual situation, in our considered view, the ratio laid down by the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT (supra) that an incorrect assumption of fact or an incorrect application of law will satisfy the requirement of the order being erroneous, shall not be applicable in this case. In absence of a clear cut finding of ld. Pr.CIT on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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