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TMI Blog2024 (8) TMI 1020X X X X Extracts X X X X X X X X Extracts X X X X ..... oncurred with the decision of Hon ble Allahabad High Court but given a finding that the AO has to record his satisfaction or establish that the assessee has concealed his income by filing inaccurate particulars of income. In the absence of the same, the Hon ble High Court held that the Tribunal has rightly set aside the directions of CIT directing the AO to initiate penalty proceedings although they have not agreed with the reasoning s in its entirety. Even the authorities can levy penalty i.e., AO or CIT(A) or PCIT or CIT in the course of assessment proceedings under section 271(1) - Revenue contended that these authorities have power to initiate penalty proceedings and hence, the PCIT u/s. 263 has jurisdiction in directing the AO to initiate penalty proceedings u/s. 271(1)(c) of the Act - We do not agree with the contentions raised by ld.CIT-DR for the reason that section 271(1)(a), (b) or (c) is for levy of penalty, it gives power for levy of penalty in the proceedings before him and the revisionary power u/s. 263 of the Act is entirely distinct and different power which upset the assessment completed and creates uncertainty. For that, this power cannot be exercised for directin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f accounts and could not provide any explanation for the Source cash. Hence, the cash receipts during the financial year are treated as the unexplained money u/s 69A of the Income Tax Act, 1961 in the hands of the assessee company and it is liable to be added to their total income. Addition: Rs. 5,18,49,128/- Penalty proceedings u/s 271AAC are initiated separately. Subsequently, vide para 6 also he initiated penalty proceedings as under:- 6. Penalty proceedings u/s 271AAC are initiated separately. The assessment has become final as the assessee has not challenged the same in appeal. 4. Subsequently, on perusal of assessment records for the relevant assessment year 2016-17, the PCIT issued show cause notice and fixed the hearing on 14.02.2024 asking the assessee as to why the assessment order passed u/s. 143(3) r.w.s. 153C of the Act dated 28.03.2022 be not considered as erroneous insofar as prejudicial to the interest of Revenue in as much as penalty proceedings was initiated under wrong section of 271AAC of the Act instead of the provision of section 271(1)(c) of the Act. In response to the show-cause notice, the assessee filed reply but the PCIT was not convinced and passed the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 022 with a direction to invoke provisions of section 271(1)(c) of the I.T. Act in regard to the addition made of Rs. 5,18,49,128/- u/s. 69A of the I.T. Act. Aggrieved, assessee is in appeal before the Tribunal. 5. Before us, the ld.counsel for the assessee argued that the issue now stands covered by the decision of Jaipur Bench of this Tribunal in the case of Harish Jain others in ITA Nos.214 to 223/JP/2022 281 to 283/JP/2022, order dated 25.11.2022 and argued that on exactly similar facts and circumstances wherein the AO initiated penalty provisions u/s. 271AAB(1A) of the Act instead penalty u/s. 271(1)(c) of the Act. The ld.counsel for the assessee drew our attention to the relevant order of the ITAT, Jaipur Bench in the case of Harish Jain Others supra. 6. On the other hand, the ld.CIT-DR relied on the decision of Hon ble Madhya Pradesh High Court in the case of Addl.CIT vs. Indian Pharmaceuticals reported in [1980] 123 ITR 874 (MP) and also the order of Mumbai Bench of this Tribunal in the case of Anjis Developers Pvt. Ltd., in ITA No.959/Mum/2022, dated 20.02.2023. 7. We have heard rival contentions and gone through facts and circumstances of the case. We have gone through the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nitiate penalty proceedings u/s. 271(1)(c) of the Act, has noted that the AO while framing assessment u/s. 153C of the Act has initiated penalty proceedings u/s. 271AAC of the Act, which is non-existent provision for the relevant assessment year. We agree with the noting done by PCIT that the provision of section 271AAC of the Act was brought on statute book by the Taxation Law (Second Amendment) Act, 2016, w.e.f. 01.04.2017 and will apply for and from assessment year 2017-18 onwards. Be it so, can the AO initiate penalty proceedings u/s. 271AAC of the Act so casually and without going into the provisions and facts of the case instead of initiating penalty u/s. 271(1)(c) of the Act. For the purpose of initiation of penalty proceedings u/s. 271(1)(c) of the Act, the AO has to carry out exercise and the AO should even satisfy in the course of assessment proceedings regarding concealment of income and also the charge whether the assessee has concealed the particulars of its income or has furnished inaccurate particulars of its income. This issue has been deliberated by the Hon ble Supreme Court in the case of D.M. Manasvi vs. CIT reported in [19720 86 ITR 557 (SC) and there, it has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only possible conclusion that can be arrived at in the circumstances of the case. Section 263 enables the Commissioner to call for and examine the record of any proceedings under the Act and if he considers that any order passed therein by the ITO is erroneous, in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiries as he deemed necessary, pass such orders thereon as the circumstances of the case justify. In the present case, the Addl. Commissioner called for the record of the assessment proceedings and it is also clear from this order that in his view the assessment orders passed by the ITO on 28th March, 1969, were erroneous and prejudicial to the interest of the revenue. As the Tribunal has rightly pointed out, his jurisdiction was confined to the proceedings of assessment and the assessment orders, and he had full powers to revise the assessment order in regard to any error he may discover therein which is prejudicial to the interest of the revenue. In the present case, the complaint of the Addl. Commissioner is that while completing the assessment and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is sufficient if there is some record somewhere, even apart from the assessment order itself, that the ITO has recorded his satisfaction that the assessed is guilty of concealment or other default for which penalty action is called for. Indeed, in certain cases it is possible for the ITO to issue a penalty notice or initiate penalty proceedings even long before the assessment is completed though the actual penalty order cannot be passed until the assessment finalised. We, therefore, agree with the view taken by the Tribunal that the penalty proceedings do not form part of the assessment proceedings and that the failure of the ITO to record in the assessment order his satisfaction or the lack of it in regard to the leviability of penalty cannot be said to be a factor vitiating the assessment order in any respect. An assessment cannot be said to be erroneous or prejudicial to the interest of the revenue because of the failure of the ITO to record his opinion about the leviability of penalty in the case. We, therefore, answer the first question referred to us in the affirmative and in favor of the assessed. 9.1 Even it was pointed out by ld.counsel for the assessee before us that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT vs. Indian Pharmaceuticals, supra and Addl.CIT vs. Kantilal Jain reported in [1980] 125 ITR 373 (MP), Addl.CWT vs. Nathoolal Balaram reported in [1980] 125 ITR 596 (MP) and Hon ble High Court of Allahabad in the case of CIT vs. Braj Bhushan Cold Storage reported in [2005] 275 ITR 360 (All) 11. The opposite view taken by the Hon ble High Court of Madhya Pradesh in the case of Indian Pharmaceuticals, supra wherein the Hon ble Madhya Pradesh High Court held that during the pendency of assessment proceedings, the AO has omitted to take the notice of fact attracting section 271(1)(a) of the Act, which ultimate ended in an order of assessment, the order would be erroneous and hence, the CIT was right in exercising jurisdiction u/s. 263 of the Act. In the present case before us, in our view, this is diametrically opposite view what is taken by Hon ble Madras High Court, Gauhati High Court, Delhi High Court, Rajasthan High Court as noted above. One more aspect considered by Hon ble Allahabad High Court in the case of Surendra Prasad Agarwal, supra that the AO has to initiate proceedings for imposing of penalty during the course of assessment proceedings itself but if he fails to initiat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial to the interests of the Revenue and consequently the Commissioner of Income-tax is not justified in assuming under Section 263, is therefore answered in favour of the assessee and against the Revenue. 12. We have also gone through the judgment of Hon ble Delhi High Court in the case of Sudershan Talkies, supra, and noted that the Hon ble High Court of Delhi has framed the question of law as under:- Whether, on the facts and circumstances of the case, the Tribunal was correct in holding that the question of levying penalty under section 273(b) was totally extraneous to the scope of the assessment order, and, as such, it could not be covered by recourse to section 263 of the Income-tax Act, inasmuch as it was neither prejudicial to the interests of the Revenue nor was erroneous ? Answering this question, the Hon ble High Court of Delhi considering the various case laws including considering the judgment of Hon ble Supreme court in SLP in the case of J.K.D Costa, supra has held that CIT has erred in passing order u/s. 263 of the Act insofar as he directed the AO to initiate penalty proceedings u/s. 273B of the Act. The Hon ble Delhi High Court answered the question in affirmative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 273(b) of the Act. The question of law is, therefore, answered in the affirmative and against the Revenue. 13. In the present case before us, admittedly assessment was framed u/s. 153C of the Act and the AO initiated penalty proceedings u/s. 271AAC of the Act, which is non-existent provision and the same was also approved by the Addl.CIT u/s. 153D of the Act. But there is no recording of any satisfaction that the assessee has concealed the particulars of income or furnished inaccurate particulars of income. Once there is no satisfaction recorded in the order, the order cannot be subject matter of revision u/s. 263 of the Act by the PCIT in view of another decision of Hon ble High Court of Madras in the case of CIT vs. Chennai Metro Rail Ltd., in Tax Case (Appeal) No.745 of 2017, wherein the Hon ble Madras High Court considering the decision of Hon ble Allahabad High Court in the case of Surendra Prasad Agarwal, supra, concurred with the decision of Hon ble Allahabad High Court but given a finding that the AO has to record his satisfaction or establish that the assessee has concealed his income by filing inaccurate particulars of income. In the absence of the same, the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the reason that section 271(1)(a), (b) or (c) is for levy of penalty, it gives power for levy of penalty in the proceedings before him and the revisionary power u/s. 263 of the Act is entirely distinct and different power which upset the assessment completed and creates uncertainty. For that, this power cannot be exercised for directing the AO to initiate penalty under this provision. In our view, if the proceedings are pending before PCIT or CIT(A) or the AO like assessment proceedings, they are well within the power to initiate and levy penalty. But for that, that authority has to initiate and levy the penalty. Hence, in our view, this argument of Revenue fails. 15. In view of the foregoing discussions, in the given facts of the present case we note that there is no finding in the assessment order to the effect that there is concealment of income or furnishing of inaccurate particulars of income. Hence, the impugned action of the PCIT cannot be countenanced. For such a proposition, we rely on the ratio of decisions of Hon ble High Court of Madras in the case of Chennai Metro Rail Ltd., supra and C.R.K.Swamy, supra. Hence, we are inclined to set aside the impugned revision order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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