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TMI Blog2019 (1) TMI 1908X X X X Extracts X X X X X X X X Extracts X X X X ..... nt or disallowed while computing the total income or loss of an assessee in and the said order does not contains a direction for initiation of penalty proceedings under clause (c) of subsection (1), such an order of assessment or reassessment cannot be deemed to constitute satisfaction of the Assessing Officer for initiation of the penalty proceedings under the said clause (c). We note that in the assessment order the AO has neither recorded satisfaction to levy penalty against the assessee u/s. 271(1)(c) of the Act nor has he initiated the penalty u/s. 271(1)(c) of the Act. Therefore, after recording satisfaction in assessment order to levy penalty u/s. 271AAB and initiation of penalty u/s. 271AAB of the Act, the AO does not have jurisdiction to levy penalty u/s. 271(1)(c) of the Act. We also rely on the Karnataka High Court decision in CIT Vs. MWP Ltd. [ 2013 (12) TMI 1214 - KARNATAKA HIGH COURT] X X X X Extracts X X X X X X X X Extracts X X X X ..... was initiated. Thereafter, the AO issued show cause notice on 22.03.2016 asking the assessee as to why penalty u/s. 271AAB should not be made against him. Pursuant to the notice u/s. 271AAB of the Act, the assessee objected to the penalty notice u/s. 271AAB of the Act on the premise that as no search u/s. 132 of the Act was conducted against him, the penalty u/s 271AAB is not attracted in the instant case and therefore pleaded that the same to be dropped. Realizing his mistake, the AO dropped the sec. 271AAB penalty proceeding against assessee, however he thereafter issued a fresh notice u/s 271(1)(c) of the Act on 16-09-2016. Further, the AO mentioned in the penalty order that he inadvertently issued notice u/s. 271AAB of the Act and then levied penalty on 27.09.2016 u/s. 271(1)(c) at ₹ 12,91,28,908/-. Aggrieved by the said penalty order, assessee preferred an appeal before the Ld. CIT(A), who allowed the assessee's ground of appeal. Aggrieved revenue is before us. The assessee also filed Cross Objection for the omission on the part of Ld. CIT(A) not to adjudicate the ground raised by the assessee that the AO did not initiate penalty u/s. 271(1)(c) while framing assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eads as under: "271(1B) Where any amount is added or disallowed in computing the total income or loss of an assessee in any order of assessment or reassessment and the said order contains a direction for initiation of penalty proceedings under clause (c) of sub-section (1), such an order of assessment or reassessment shall be deemed to constitute satisfaction of the Assessing Officer for initiation of the penalty proceedings under the said clause (c)." The said section inserted by Finance Act, 2008 with retrospective effect from 01.04.1989. The Ld. AR drew our attention to the circular issued to explain the amendment to para 40.5 which is as under: "40. Clarification regarding satisfaction for initiation of penalty under sub-section (1) of section 271 40.1 Sub-section (1) of section 271 of the Income-tax Act empowers the Assessing Officer to levy penalty for certain offences listed in that sub-section. It is a requirement that the Assessing Officer is required to be satisfied before such a penalty is levied. 40.2 In the context of levy of penalty under section 271 of the Income-tax Act, there has been an ongoing dispute between the Income-tax department and taxpayers on wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 271 of the Income-tax Act has been inserted. This sub-section unambiguously provide that where any amount is added or disallowed in computing the total income or loss of an assessee in any order of assessment or reassessment, and such order contains a direction for initiating of penalty proceedings under sub-section (1) of section 271, such an order of assessment or reassessment shall be deemed to constitute satisfaction of the Assessing Officer for initiating penalty proceedings under sub-section (1) of that section. 40.6 The proposed amendment has been given retrospective effect in order to protect the revenue's contention on this issue in pending cases. However, this retrospective effect will not prejudice taxpayers' right to agitate the levy of penalty on merits. Further, while no separate satisfaction is required to be recorded before initiating penalty proceedings, it is still incumbent upon the Assessing Officer to record his satisfaction before levying the penalty. Accordingly, there is neither violation of the principle of natural justice nor any prejudice caused to the taxpayer as a result of the retrospective amendment. 40.7 Similar amendment has also been carri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section (1B) in section 271 of the Act, where any amount is added or disallowed in computing the total income or loss of an assessee in any order of assessment or reassessment, and such order contains a direction for initiating of penalty proceedings under sub-section (1) of section 271, such an order of assessment or reassessment shall be deemed to constitute satisfaction of the Assessing Officer for initiating penalty proceedings under sub-section (1) of that section. So if in the assessment/reassessment order the AO directs initiation of penalty u/s 271(1)(c) then only the deemed satisfaction for initiating penalty proceedings under sub-section (1) of sec. 271 can be deemed to constitute satisfaction as required u/s. 271 of the Act can come into play. Here in this case, we have reproduced the satisfaction of AO in the assessment order which was for levy of penalty u/s. 271 AAB of the Act and in the assessment order, the AO initiated penalty u/s. 271AAB of the Act. So, as per the discussion above, the AO without even initiating penalty u/s. 271(1)(c) of the Act in the assessment order itself, the imposition of penalty u/s. 271(1)(c) of the Act where in the assessment order AO add ..... X X X X Extracts X X X X X X X X Extracts X X X X
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