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2022 (4) TMI 100 - AT - Income TaxRevision u/s 263 - Pr. CIT was of the view that AO had wrongly initiated penalty proceedings u/s 271(1)(c) as the same in the case of a search initiated u/s.132 of the Act i.e, on or after 1st day of July, 2012 but before 15.12.2016 was governed by Section 271AAB - Whether or not the Pr. CIT remaining well within the realm of his jurisdiction u/s 263 of the Act has directed the Assessing Officer to initiate penalty proceedings under the correct section and, re-assess the income of the assessee on the basis of a speaking order.? - HELD THAT - We are unable to concur with the direction of the Pr. CIT as regards initiation of penalty proceedings u/s. 271AAB of the Act in the case of the assessee before us i.e, in a case where cash had been requisitioned u/s.132A however, even otherwise, we are of the considered view that such a direction given by him in exercise of his revisionary jurisdiction u/s 263 of the Act is not sustainable in the eyes of law. In our considered view as section 271AAB of the Act makes a specific reference to the term may , thus, it vests a discretion with the Assessing Officer as to whether or not the assessee is to be visited with penalty under the said statutory provision. Backed by the aforesaid position of law, we are of the considered view that the Pr. CIT could not have in exercise of his revisionary jurisdiction u/s 263 of the Act stepped in to control or, in fact steer such discretion of the Assessing Officer. Our aforesaid view that where the CIT finds that the Assessing Officer had not initiated penalty proceedings in the assessment order, then, he cannot in exercise of his revisionary jurisdiction u/s 263. Not only the Pr. CIT had on the basis of a misconceived reading of the position of law directed the Assessing Officer to initiate penalty proceedings in the case of the assessee u/s 271AAB of the Act, but he had also exceeded his jurisdiction while issuing such directions. We, thus,not being able to persuade ourselves to subscribe to the aforesaid view taken by the Pr. CIT set-aside the order passed by him u/s 263 of the Act, dated 10.12.2020 and restore the order passed by the Assessing Officer u/s 153A r.w.s.143(3) - Decided in favour of assessee.
Issues Involved:
1. Legality and validity of the order passed by the Principal Commissioner of Income Tax (Pr. CIT) under Section 263 of the Income-tax Act, 1961. 2. Whether the proceedings initiated under Section 263 are justified when the return was filed before the expiry of the due date. 3. Appropriateness of the Assessing Officer's (AO) acceptance of the income shown by the assessee. 4. Quantum of penalty under Section 271(1)(c) and whether it was erroneous and prejudicial to the interest of the revenue. 5. Consideration of issues discussed and additions made during the original assessment. 6. Merger of the AO's order with the CIT(A)'s order. 7. Time limitation for imposing penalty under Section 275. 8. Double jeopardy concerning penalty under Sections 271(1)(c) and 271AAB. 9. Consideration of the assessee's written submissions by the Pr. CIT. 10. Whether the Pr. CIT's order setting aside the assessment was justified given the merger with the CIT(A)'s order. Detailed Analysis: 1. Legality and Validity of the Pr. CIT's Order under Section 263: The assessee challenged the legality and validity of the order passed by the Pr. CIT under Section 263, arguing that the order was illegal, invalid, and bad in law. The Pr. CIT had revised the assessment order passed by the AO under Section 153A read with Section 143(3), directing the AO to re-assess the income and initiate penalty proceedings under Section 271AAB instead of Section 271(1)(c). 2. Proceedings Initiated under Section 263: The assessee contended that the return was filed before the due date and, therefore, the proceedings initiated under Section 263 were illegal and invalid. The return of income for the assessment year 2016-17 was filed on 06.08.2016, and the assessment was framed on 27.12.2018. 3. AO's Acceptance of Income: The assessee argued that the AO had accepted the income shown by the assessee after verifying the documents submitted, and therefore, the order under Section 263 was unjustified. The AO had added ?20 lakh as undisclosed income under Section 68 read with Section 115BBE, as the assessee failed to substantiate the source of cash. 4. Quantum of Penalty under Section 271(1)(c): The Pr. CIT observed that the AO should have initiated penalty proceedings under Section 271AAB instead of Section 271(1)(c), as the search was initiated after 01.07.2012 but before 15.12.2016. The Pr. CIT held that the AO's failure to initiate penalty proceedings under the correct section rendered the assessment order erroneous and prejudicial to the interest of the revenue. 5. Issues Discussed During Original Assessment: The assessee contended that all issues were discussed and considered during the original assessment, and the addition of ?20 lakh was deleted by the CIT(A). Therefore, revising the assessment order under Section 263 on the same issues was illegal and unjustified. 6. Merger with CIT(A)'s Order: The assessee argued that the AO's order had merged with the CIT(A)'s order, and therefore, the Pr. CIT's order under Section 263 was unjustified. The CIT(A) had allowed the appeal of the assessee, and the assessment order had merged with the CIT(A)'s order. 7. Time Limitation for Imposing Penalty: The assessee contended that the penalty could not be imposed after the expiry of six months from the date of the assessment order under Section 275. The assessment order was passed on 27.12.2018, and the penalty had to be initiated by 31.03.2019. 8. Double Jeopardy: The assessee argued that imposing a penalty under Section 271AAB when a penalty under Section 271(1)(c) had already been initiated amounted to double jeopardy. The Pr. CIT's order was illegal and invalid as it penalized the assessee twice for the same offense. 9. Consideration of Written Submissions: The assessee contended that the Pr. CIT did not consider the entire written submission and passed the order under Section 263 without going into the merits of the case. Therefore, the order was unjustified and excessive. 10. Setting Aside the Assessment Order: The assessee argued that the Pr. CIT's order setting aside the assessment framed under Section 153A read with Section 143(3) was unjustified, as the order had already merged with the CIT(A)'s order dated 03.09.2020. Judgment: The Tribunal held that the Pr. CIT had misconceived the scope and applicability of Section 271AAB, which applies only in cases where a search is initiated under Section 132. In the present case, cash was requisitioned under Section 132A, and therefore, Section 271AAB was not applicable. The Tribunal also held that the Pr. CIT could not direct the AO to initiate penalty proceedings under Section 271AAB in exercise of his revisionary jurisdiction under Section 263, as it was a discretionary power vested with the AO. The Tribunal set aside the order passed by the Pr. CIT under Section 263 and restored the order passed by the AO under Section 153A read with Section 143(3). The appeal of the assessee was allowed.
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