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2022 (11) TMI 1294 - AT - Income TaxRevision u/s 263 by CIT - mistake of non-initiation or incorrect initiation of penalty - assessment order that Penalty u/s. 271(1)(c) is initiated for concealment of income by way of issue of notice u/s. 274 r.w.s. 271(1)(c) - HELD THAT:- It is well-settled that once an appeal has been preferred against an order of assessment the entire assessment is open before the appellate authority. The appellate authority is entitled to do all that the AO could have done. The powers of the appellate authority are co-extensive and co-terminus with the powers of the AO. It is equally well-settled that PCIT cannot exercise revisional jurisdiction qua proceedings before an appellate authority. The order of assessment does not have any independent existence and stands merged with the order of the appellate authority. Hence, to read s. 263 as being applicable only in case of an AO for the purposes of initiation and levy of penalty and not being applicable to the appellate authority, cannot be the legislative intent. To the contrary, the inherent indication u/s 271(1) makes it clear that the Pr. CIT / CIT does not have any powers to direct either of the authorities, the AO or the appellate authority, to initiate and levy penalty. The section requires the AO or the appellate authority to be satisfied in the course of ‘any proceedings’. This means, any proceedings before either of the specified authority Pr. CIT / CIT cannot create proceedings. If he is not permitted to direct the appellate authority (and this is an accepted position) he cannot be permitted to substitute jurisdiction/powers of only the AO by his satisfaction by creating proceedings where none exist- assessment having already been completed.. The identical issue is directly covered by the binding decision in case of CIT vs Keshrimal Parasmal [1985 (5) TMI 34 - RAJASTHAN HIGH COURT] As decided in Smt.Rekha Shekawat [2022 (8) TMI 791 - ITAT JAIPUR] on examination of assessment record, the PCIT cannot direct initiation of penalty proceedings because penalty proceedings are not part of assessment proceedings. Thus, the PCIT’s revisionary decision relating to non-initiation/ incorrect initiation of penalty which without holding that assessment order passed by the AO as erroneous and prejudicial to the interest of revenue is vague and bad in law. Being consistent, as there is no contrary finding serviced before us by the revenue we are of the considered view that the invocation of provision of 263 to correct the section under which the penalty is leviable or not is beyond the power vested under section 263 of the Act, when there are other options available with the ld. AO. Therefore, the appeal of the assessee is allowed.
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