TMI Blog2022 (11) TMI 1294X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwovenand the facts and circumstances of other cases are exactly identical in other assessment year and even grounds are also identical. The ld. DR did not raise any specific objection against taking that case as a lead case. Therefore, for the purpose of the present discussions, the case of ITA No. 217/JPR/2022 is taken as a lead case of each party. Based on the above arguments we have also seen that for all these appeals are similar on facts and arguments were similar and therefore, were heard together and are disposed by taking lead case facts, grounds and arguments from the folder in ITA No. 217/JPR/2022. 4. At the outset of hearing, the Bench observed that there isdelay of 6days in filing the appeal by the assessee for which the ld. AR of the assessee filed an applications dated 12.07.2022for condonation of delay with following prayers. At the outset, there is no delay as such in filing the present appeal in as much as the order of CIT dated 23.03.2022 was in fact, received/served upon the assessee at his residence on 01.04.2022, accordingly, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure proceeding were carried out by the Investigation Wing of the department at the residential and business premises connected with Resonance Group, Kota on 07.08.2017, u/s 132 of the Income Tax Act, 1961. Thereafter, as part of Resonance Group, this case was taken up for block assessment and assessment order u/s 143(3) r.w.s. 153A dated 30.12.2019 was passed determining this income at Rs. 74,74,45,650/- and agriculture Income of Rs. 3,22,500/-. In the assessment order, penalty was initiated by noting that penalty u/s 271(1)(c) of the Income Tax Act is initiated for concealment of income by way of issue of notice u/s 274 r.w.s. 271(1)(c) of the Act issued accordingly. 9. On culmination of the assessment the ld. PCIT on examination of the assessment records observed that the Assessing Officer had failed to correctly initiate penalty. Hence, a show cause notice was issued to the assessee on 03.03.2022 through online portal (having DIN ITBA/REV/REV1/2021-22/1040310385(1). In the said show cause notice the ld. PCIT stated that the penalty in this case needed to have been initiated u/s. 271(1)(c), being a case relating to A. Y. 2012-13 when this was the law. The same has however, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty, which he chooses to levy (or not levy). As such, in my view, the taxpayer will not unduly suffer. Penalty will be levied or not levied, based upon the satisfaction of the assessing officer. For the proposition that the taxpayer will not suffer (as he will be given due opportunity at the time of levy or non-levy of penalty), I rely upon order of Hon'ble Supreme Court in the case of Rampyari Devi Saraogi versus Commissioner of Income Tax, reported in 67 ITR 84 (Supreme Court) (3rd last paragraph thereof maybe seen for this proposition). I wish to make it clear that I am not disturbing the assessment that has already been made. I am only passing an order for initiation / levy of penalty as detailed above, that too based upon independent satisfaction of the assessing officer, who will duly consider the replies of the taxpayer. 11. Aggrieved from the said order of the PCIT the assessee has marched this appeal on the grounds as mentioned here in above and the against the grounds raised the ld. AR of the assessee submitted a paper book containing following documents which reads as under:- S. No. Particulars Page No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only when an order is erroneous as also prejudicial to revenue s interest, that the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of Revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, if the AO has adopted one of the two or more courses permissible in law andit has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. Kindly refer Malabar Industrial Co. Ltd. v/s CIT (2000) 243 ITR 83 (SC). 1.2 Also kindly refer CIT v/s Max India Ltd. (2007) 295 ITR 282 (SC) wherein it is held that The phrase prejudicial to the interests of the Revenue in section 263 of the Income Tax Act, 1961, has to be read in conjunction with the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be compromised. 3.3 Pertinently, the CBDT in its circular No. 09/DV/2016(Departmental view) dated 26.04.2016 (DPB 26-27) is also of this view that a mere mention in the assessment order is of no value and no initiation even following a Kerala HC decisionGhrahLaxmiV Addl. CIT inthe context of S.271D and 271E. the relevant extract from the circular are as under: The statement in the assessment order that the proceedings under Section 271D and E are initiated is inconsequential. On the other hand, if the assessment order is taken as the initiation of penalty proceedings, such initiation is by an authority who is incompetent and the proceedings thereafter would be proceedings without jurisdiction. If that be so, the initiation of the penalty proceedings isonly with the issuance of the notice issued by the Joint Commissioner to the assessment to which he has filed his reply. 4.1 There must be some order: In this case, the only proceeding and consequent order, is the assessment order and not the penalty proceedings because the same were not existing hence no proceedings u/s 263 could be invoked.There must exist some order, which is sought to be revised by the CIT.If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of strong and compelling reasons for a departure from a settled position has to be spelt out which conspicuously is absent in the present case. In this regard we may remind ourselves of what has been observed by this Court in RadhasoamiSatsang vs. Commissioner of Income-Tax[6]. We are aware of the fact that strictly speaking res judicata does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. The earlier decision in the case of CIT V K.J. Business Centre (2009) 24 DTR 99 (Del) and RadhswamiSatsang vs CIT (1992) 193 ITR 321 (SC) at Pg-329 has been relied upon. 5. Assessment Penalty proceedings are separate and distinct: 5.1Moreover, the law is well settled that penalty proceedings are separate and distinct from the assessment proceedings and there is no identity between the two. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings, from the end of the financial year in which such initiation takes place, penalty proceedings are required to be completed within a period of two years. On the expiry of the limitation period, a right is vested in the assessee which, cannot be taken away merely by exercising of revision powers u/s 263 unless there is a clear indication showing a different legislative intent on a plain reading of provision of S.270(1)(c), 271AAB r/w 263. Therefore, the AO cannot be compelled to act beyond the prescribed period of limitation by extending such limitation on exercise of revisional powers. 8. Assessment order already merged: There is one more reason why the CIT should not be permitted to invoke revisional powers for initiation of penalty proceedings. Sec. 271(1) specifically empowers the AO or the appellate authority to record satisfaction. 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 wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w in the context of penalty proceedings not initiated by the AO u/s 271AAC in the order passed u/s 263 in the case of Smt.RekhaShekawat V Pr. CIT (2022) 36 NYPTTJ 987 (Jp) (para 3DPB 4-9), holding as under: In ground No. 3, the assessee has challenged the assumption of jurisdiction under s. 263 for not initiating penalty proceedings under s. 271AAC of the Act. The learned CIT held that the additional income was also subject to penalty under s. 271AAC of the Act and accordingly set aside the subject assessment order. 3.2 After hearing both the parties and perusing the materials available on record as well as judicial pronouncements cited by both the parties, we at the outset have no hesitation to hold that the issue involved is no more res integra in as much as the Hon'ble Rajasthan High Court in the case of CIT vs. KeshrimalParasmal (1985) 48 CTR (Raj) 61 : (1986) 27 Taxman 447 (Raj), held as under : X XXX There are several other decisions cited by the learned Authorised Representative of the assessee for which no contrary decision was brought to our notice. Hence, we are of the considered view that the learned Principal CIT acted beyond jurisdiction in hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest of revenue is vague and bad in law. Notifying both the cases, penalties were initiated by AO under wrong/incorrect provisions of law (as per PCIT), and as against the correct provisions suggested by PCIT. 9.1.5Earlier also, a similar view was taken in the case of Agencies Rajasthan V AO ITA No. 196/JP/2020 AY 2015-16 vide order dated 11.09.2020 9.2The case of Addl. CIT v. J.K. D'Costa [1982] 133 ITR 7 (Delhi)(DPB 18-21) has been followed in ACIT v. Achal Kumar Jain (1983) 142 ITR 606 (Delhi)and CIT v. Nihal Chand Rekyan [2000] 242 ITR 45 (Delhi) and in Addl. CIT v. Sudarshan Talkies (1993) 200 ITR 153 (Delhi); also by Hon'ble Madras High Court in CIT v. C. R. K. Swami (2002) 254 ITR 158(Cal) (DPB II 28-29); Sarda Prasad Singh v. CIT (1998) 173 ITR 510 (Gauhati),wherein it has been consistentlyheld that if the CIT finds, while examining the records of an assessment order under S. 263, that the Assessing Officer has not initiated penalty proceedings, he cannot direct initiation of penalty proceedings because penalty proceedings are not a part of assessment proceedings. The CIT cannot pass an order u/s 263 pertaining to penalty. 9.3 The Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder s. 271(1)(c)-Non-initiation of penalty proceedings under s. 271(1)(c) while framing assessment is not a good ground for invoking revisional powers under s. 263-Sec. 271(1)(c) read in conjunction with s. 263, gives an unmistakable impression that while in the wake of amendment under s. 271(1)(c) w.e.f 1st June, 2002, it may be lawful for the Administrative CIT to impose penalty, that by itself would not be sufficient to hold that the CIT is entitled to exercise revisional powers by treating the assessment order as erroneous and prejudicial to the interest of Revenue-CIT is not competent to direct the AO to redo the assessment with a view to initiate and levy penalty under s. 271(1)(c) in respect of erroneous claim of deduction under s. 10B. 9.7Also refer Shri NandkumarBhalchandraBhondve in ITA No.943/PN/2014 dated 17.08.2016. 10. In any case if the contention of the ld. CIT is accepted that the AO always wanted to initiate under a correct provision of law but he committed an inadvertent error. Even assuming so then it might be legally covered by S.154 rectification of mistake being a mistake than an error and invoking of S.263 was not permissible.The remedial provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at all the subordinate authorities acting under the jurisdictional High Court are abide by its decisions.There apart, the said RHC decision has been considered in number of later decisions of various Hon ble High Courts and decision cited by ld. DR has been dissented with. 11.1 Otherwise also Surendra Prasad Agarwal (supra) was given long back in 2005 and similarly JawaharBhattacharjee is also a comparatively old decision as thereafter, several High Courts ITAT have rendered decisions till the year 2022 in favour of assessee. 11.2 Further the case of JawaharBhattacharjeehas nothing to do with the controversy involved in as much as that was a case relating to the scope of power of CIT u/s 263 in the context of S.54F. Hence not at all applicable. 11.3 The case of CIT V Surendra Prasad Agarwal (2005) 142 Taxman 653 (All) has been considered and dissented with in para 7 of Rakesh Nain Trivedi (supra) dated 29.10.2015 (DPB 22-25). Even the majority of the High Courts being the High Courts of Delhi, Gujarat, Guwahati, M.P., Madras and Rajasthan have taken similar view with or without following Apex Court decision in CIT vs. J.K. D Costa (1984) 147 ITR 1 (St.)whereinSpecial Lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd if he considers that any order passed therein by the Assessing Officer 89 [or the Transfer Pricing Officer, as the case may be,] is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, 90 [including,- (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section]. 14. As it is evident from the order of the PCIT that he himself admitted that he has not disturbed the assessment that has been made and only passing an order for initiation of levy of penalty by the assessing officer. He further submitted that the initiation, non-initiation or incorrect initiation of penalty cannot be subject matter of provision of section 263 of the Act, as the said proceeding are separate proceedings whereas in the case instated of examining th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer had failed to initiate penalty proceedings while completing assessment under Section 153A of the Act. 6. It may be noticed that the said issue is no longer res integra. This Court in Subhash Kumar Jain case (supra) agreeing with the view of High Courts of Delhi in Additional J.K.D.'s Costa case (supra), CIT v. Sudershan Talkies [1993] 201 ITR 289 (Delhi) and CIT v. Nihal Chand Rekyan [2000] 242 ITR 45/[2002] 123 Taxman 353 (Delhi), Rajasthan in CIT v. KeshrimalParasmal [1986] 157 ITR 484/27 Taxman 447 (Raj.), Calcutta in CIT v. Linotype Machinery Ltd. [1991] 192 ITR 337 (Cal.) and Gauhati in Surendra Prasad Singh v. CIT [1988] 173 ITR 510/40 Taxman 346 (Gau.) whereas dissenting with the diametrically opposite approach of Madhya Pradesh High Court in Addl. CIT v. Indian Pharmaceuticals [1980] 123 ITR 874 (MP.), Addl. CIT v. Kantilal Jain [1980] 125 ITR 373/[1981] 5 Taxman 92 (MP.) and Addl. CWT v. NathoolalBalaram [1980] 125 ITR 596/3 Taxman 170 (MP.) had concluded that where the CIT finds that the Assessing Officer had not initiated penalty proceedings under Section 271(1)(c) of the Act in the assessment order, he cannot direct the Assessing Officer t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 10. Special leave petition against the said decision was dismissed by the Apex Court ((1984) 147 ITR (St) 1. The same view was reiterated by the Delhi High Court in CIT vs. Sudershan Talkies (1993) 112 CTR (Del) 165 : (1993) 201 ITR 289 (Del) and followed in CIT vs. Nihal Chand Rekyan (1999) 156 CTR (Del) 59 : (2000) 242 ITR 45 (Del). The Rajasthan High Court in CIT vs. KeshrimalParasmal [1985] 48 CTR (Raj) 61 : [1986] 157 ITR 484 (Raj), Gauhati High Court in Surendra Prasad Singh Ors. vs. CIT (1988) 71 CTR (Gau) 125 : (1988) 173 ITR 510 (Gau) and Calcutta High Court in CIT vs. Linotype Machinery Ltd. (1991) 192 ITR 337 (Cal) have followed the judgment of Delhi High Court in J.K.D's Costa's case (supra). 11. Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, s. 154 of the Act empowers such authority to correct a mistake apparent on the face of the record. The power of appeal and revision is contained in Chapter XX of the Act which includes s. 263 that confer suomotupower of revision in the learned CIT. The different shades of power conferred on different authorities under the Act has to be exercised within the areas specifically delineated by the Act and the exercise of power under one provision cannot trench upon the powers available under another provision of the Act. In this regard, it must be specifically noticed that against an order of assessment, so far as the Revenue is concerned, the power conferred under the Act is to reopen the concluded assessment under s. 147 and/or to revise the assessment order under s. 263 of the Act. The scope of the power/jurisdiction under the different provisions of the Act would naturally be different. The power and jurisdiction of the Revenue to deal with a concluded assessment, therefore, must be understood in the context of the provisions of the relevant sections noticed above. While doing so it must also be borne in mind that the legislature had not vested in the Revenue any specific power t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 to 2017-18 and attached the copy of previous reply as furnished in response to notice dated 30/12/2019 (copy enclosed) however the assessee has not filed reply in response to the said notice for the AY 2018- 19. Thus, it can be seen from above facts that notices u/s under section 274 read with section 271AABIA) of the IT Act, 1961 for the AY 2012-13 to 2018-19 have duly been served to the assessee and the assessee has also responded in compliance to the notices u/s 271AAB(IA) of the Act for the AY 2012-13 to 2017-18. The case history / noting of the case extracted from ITBA portal in the AY 2012-13 to 2017-18 is enclosed herewith for your kind ready reference. However despite of delivery of the said notice u/s 271AAB(IA) of the IT Act for the AY 2018- 19. the assessee has not filed reply in response to the said notice. The status of penalty proceedings u/s 271AAB(1A) of the IT Act, 1961 are still pending in the system in the AY 2012-13 to AY 2018-19.Further, in response to order u/s 263 of the IT Act, passed by the Worthy PCIT (Central), Rajasthan. Jaipur, the fresh notices u/s 271(1)(c) of the IT Act for the AY 2012-13 to 2016-17 and notice u/s 270A of the Act for the AY 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the Apex Court in the case of Rampyari Devi Saraogi vs. CIT [ 67 ITR 84 ], the same is reproduced here in below: It is not necessary to further detail the reasons given by the Commissioner because on the face of the record the orders were prejudicial to the interest of the revenue, and even if the facts which the Commissioner introduced regarding the enquiries made by him had been indicated to the assessee, the result would have been the same. The assessee, in our view, has not in any way suffered from the failure of the Commissioner to indicate the results of the enquiries, mentioned above. Moreover, the assessee will have full opportunity of showing to the Income-tax Officer whether he had jurisdiction or not and whether the income assessed in the assessment orders which were originally passed was correct or not. It may be further mentioned that the assessee did not appeal to the Appellate Tribunal against the order passed under section 33B. The reason given by the learned counsel for not filing an appeal was that he could not raise before the Appellate Tribunal the constitutional question which was raised before the High Court and he could not pursue two remedies conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 of the Act. Based on this he noted that the taxpayer will not unduly suffer as penalty will be levied or not levied is to be based on the satisfaction of the assessing officer. He further noted that the he is not disturbing the assessment that has been completed and only passing an order for initiation / levy of penalty. The bench has noted that there is no error on the part of the assessing officer in computing the taxable income of the assessee for the year under consideration the only error as pointed out by the PCIT is that though the ld. AO has recorded his finding in the order for initiation of penalty u/s. 271(1)(c) but has issued the notice u/s. 271AAB(1A). Since that the section came in to statute from 15.12.2016 the levy of penalty should be u/s. 271(1)(c) of the Act. The ld. AR of the assessee submitted that even though this may be the error on the part of the ld. AO or his conscious decision, the provision of section 263 of the Act does not empower the PCIT to correct that mistake and that is error / mistake does not come under the scope of provision of section 263. The bench also noted from the factual report of the ld. AO that the notices were already issued and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erroneous as also prejudicial to revenue s interest, that the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of Revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. The revisional jurisdiction of the PCIT starts only after the conclusion of assessment proceedings, resulting into assessment order, therefore, as a sequel thereto, it is not open to PCIT to exercise the revisional powers to create a non-existent proceeding under S. 263 by holding the assessment proceeding as erroneous in so far as prejudicial to the interest of revenue. The provision of section 263 regulates the revisional powers of the PCIT hence, the strict fulfillment of the requirements of a jurisdictional provision cannot be compromised. On the issue the CBDT in its circular No. 09/DV/2016(Departmental view) dated 26.04.2016 (DPB 26-27) is also of this view that a mere mention of the penalty in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 under 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. The 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 KeshrimalParasmal [1986] 27 Taxmann 447 (Raj) (DPB 1-3), holding that: 5. On the other hand, Mr. R. Balia, the learned counsel appearing for the assessee, has stoutly opposed the submission and urged that no referable question of law arises out of the order of the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner is, therefore, dismissed. 25. Relying on the above jurisdictional high court decision this bench respectfully followed the said findings in the case Smt.RekhaShekawat V Pr. CIT (2022) in ITA NO. 7/JP/2021, Suresh Kumar Dapkara v. PCIT (Central), Jaipur in ITA No. 141/JP/2022 and in the recent decision in the case of DheerajSinghSisodiya v. PCIT (Central),Jaipur in ITA no. 132/JP/2022 dated 10.08.22(Para 7 DPB II 39-50), and the facts of both the cases are almost similar to the facts in present case and the relied upon finding is as under : 7. We have heard the rival contentions, perused the material available on record, assessment order and impugned order and the case laws cited before us. Admittedly, the AO has initiated penalty proceedings u/s 271 AAB(1A) with the observations that the amount of investment made by the assessee for purchase of motorcycle in cash i.e. Rs.1,25,000/- is added to his total income treated as unexplained investment u/s 69 and tax is charged as per provisions of section 115BBE of the I.T. Act. The assessee has offered Rs.1,25,000/- for taxation during search proceedings in statement u/s 132(4), however, the assessee has not included Rs.1,25,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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