TMI Blog2023 (7) TMI 1330X X X X Extracts X X X X X X X X Extracts X X X X ..... on under section 263, then the limitation for imposition of penalty as provided by section 275(1)(b) is six months from the end of the month in which such order is received. The provision of the Act, is clear and unambiguous, it does not either restrict the power of the ld.PCIT or to the AO to pass an order for imposition of penalty in any way. In the present case, the assessment order was passed on 12.07.2021 and the ld.PCIT had passed the order u/s 263 of the Act on 22.02.2023 and therefore, the order passed by the Assessing Officer, pursuant to the direction of ld.PCIT would not be barred by limitation. Failure to furnish returns, comply with notices, concealment of income, etc.- From the reading of section 271 of the Act, it is abundantly clear that the penalty can be initiated by the AO or Commissioner (Appeals) or the Ld.PCIT on being satisfied that there is a failure on the part of the assessee that he has concealed the particulars of his income or furnished inaccurate particulars of such income. Undoubtedly, the power has been given to the Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner on being satisfied during any proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T records his satisfaction then penalty proceedings should also be completed by him alone and he cannot direct the Assessing Officer after recording his satisfaction to complete the proceedings - we cancel the order of ld.PCIT passed u/s 263 of the Act and thereby confirm the order of Assessing Officer. Thus, the appeal of the assessee is allowed. - SHRI R.K. PANDA, VICE PRESIDENT AND SHRI LALIET KUMAR, JUDICIAL MEMBER For the Assessee : Sri A.V. Raghuram For the Revenue : Sri Jeevan Lal Lavidiya, CIT-DR ORDER PER BENCH : These appeals of the assessee for A.Ys. 2016-17 and 2017- 18 arise from the separate orders of Principal Commissioner of Income Tax (Central), Hyderabad dt.22.02.2023 invoking proceedings under section 263 of the Income Tax Act, 1961 (in short, the Act ). 2. The grounds raised by the assessee in ITA No.230/Hyd/2023 read as under : 1. The id. Pr. CIT (Central), Hyderabad, has erred in law as well as on-facts of the case by passing an order u/s 263 of the Income Tax Act, 1961, setting aside the assessment order passed u/s 153A r.w.s 143(3) to the file of the AO and the Addi. CIT for the limited purpose of initiating penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under section 275(1) of the Act. 3. Similar grounds were raised by the assessee in other appeal also i.e., ITA 231/Hyd/2023 for A.Y. 2017-18 except the amounts involved. 4. Before us, both the parties submitted that the issues raised in both the appeals are identical. In view of the aforesaid submission, we, for the sake of convenience proceed to dispose of both the appeals by a consolidated order but however refer to the facts in ITA No.230/Hyd/2023. 5. The brief facts of the case are that assessee is a company and filed its original return of income for A.Y. 2016-17 on 07.10.2016 admitting income of Rs.3,86,91,380/- under the normal provisions and income of Rs.3,84,47,420/- as per the provisions of Section 115JB of the Act. The case was processed under section 143(1) of the Act on 15.11.2016. Subsequently, the case was selected for scrutiny and assessment was completed u/s 143(3) of the Act on 21.04.2017 wherein the income returned was accepted. A search and seizure operation was conducted in the Red Rose Group of cases on 12/07/2018. As part of the search operations, a warrant was issued in the case of assessee and search was conducted. Thereafter, notice u/s.153A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 961. Your submissions should reach this office on or before 18.01.2023. You may submit your objections / replies to the email id.hyderabad.pcit.cen@incometax.gov.in. 8. The assessee had filed reply to the show cause notice to the ld.PCIT. Thereafter, the ld.PCIT had revised the show cause notice to set aside the approval granted by the ACIT, Range - 2, Hyderabad u/s 153D of the Act. 9. The assessee had filed a reply before the ld.PCIT and it was the submission of the assessee that the ld.PCIT has no jurisdiction to issue the show cause notice for non-issuance of penalty notice to the assessee. Further, the assessee relied upon the judgments to substantiate his case. However, the ld.PCIT was not convinced with the submissions of the assessee and therefore, the ld.PCIT set aside the orders of Assessing Officer for the limited purpose of initiating the penalty proceedings by the Assessing Officer. 10. The assessee had submitted reply to the ld.PCIT, however, the ld.PCIT was not convinced by the submissions made by the assessee and has passed the following directions : 18. In view of all the above, it is held that the objections raised by the assessee vide it's let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 153A of the Act, thereby implying that 'he had chosen not to invoke penalty proceedings. 2. The id. PCIT (Central) issued show cause notice finding the assessment orders for the above asst. years to be erroneous prejudicial to the interest of the Revenue within the meaning of section 263 of the Act. The Id. PCIT also issued supplementary show cause notice finding fault with the approval accorded by the id. Addl. CIT to the assessment orders passed under section 153A of the Act. 3. The Appellant contended before the id. PCIT that jurisdiction under section 263 of the Act cannot be exercised only for the purpose of directing the AO to initiate penalty proceedings as the same are within the domain of the AO. The Appellant also cited various precedents in support of its contention. However, the ld.PCIT did not agree with the submissions of the Appellant nor the precedents cited before him. The ld. PCIT has set aside the assessment orders only for the limited purpose of initiating penalty proceedings by the Assessing Officer. 4. The Appellant has filed the present appeals aggrieved by the order of id. PCIT setting aside the assessment orders only for the limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since the impugned orders of the ld.PCIT have set aside the assessment orders only for the limited purpose of initiating the penalty proceedings, the limitation to levy penalties under section 271(1)(c) and section 270A or section 271AAA of the Act are not saved. The have become barred by time under section 275(1)(c) of the Act. 8. It is submitted that the ld.PCIT cannot give a direction which is barred by limitation given the facts of the present case. It is a settled position of law that what cannot be done by the AO directly cannot be done by the ld.PCIT under section 263 of the Act. It is therefore prayed that the Hon'ble Tribunal may quash the impugned orders passed under section 263 of the Act on these grounds. SUBMISSION ON GROUNDS RAISED IN APPEAL MEMORANDUM 9. Without prejudice to the additional grounds, It is submitted that the ld. PCIT could not have invoked revisional jurisdiction only on the ground that the id. AO has not initiated penalty proceedings. It is submitted that the judicial opinion on the above issue is divided. The following is the legal position: Judgments in favour of assessee Judgments which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g aside the order passed by the Assessing Officer for the limited purposes of initiating the penalty under section 271(1)(c) of the Act. 15. We have heard the rival submissions and perused the material and record. For the initiation of the proceedings under section 263 of the Act, it is essential that the order passed by the AO should be erroneous and prejudicial to the interest of the revenue. In the present case, we are concerned with the non-imposition of penalty by the Assessing Officer. Admittedly, in the present case, the Assessing Officer passed an assessment order on 12.07.2021, making the addition of Rs.50,21,000/- to the turnover of the assessee and thereby computing the total income for Rs.4,37,12,380/-, as against the income declared by the assessee in the original return of income for an amount of Rs.3,86,91,380/-. In the said order, the AO did not record any satisfaction for initiation of penalty against the assessee, as required under law. Further, the Assessing Officer has not initiated any penalty proceedings against the assessee. The assessment order dt.12.07.2021 was passed by the Assessing Officer after taking the approval of the Addl.CIT as per section 153D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by the Chief Commissioner or Commissioner, whichever is later;] (b) in a case where the relevant assessment or other order is the subjectmatter of revision under section 263 21[or section 264], after the expiry of six months from the end of the month in which such order of revision is passed; (c) in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later.] 22[(1A) In a case where the relevant assessment or other order is the subjectmatter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253 or an appeal to the High Court under section 260A or an appeal to the Supreme Court under section 261 or revision under section 263 or section 264 and an order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty is passed before the order of the Commissioner (Appeals) or the Appellate Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the Assessing Officer is the subject matter of revision under section 263, then the limitation for imposition of penalty as provided by section 275(1)(b) is six months from the end of the month in which such order is received. The provision of the Act, is clear and unambiguous, it does not either restrict the power of the ld.PCIT or to the Assessing Officer to pass an order for imposition of penalty in any way. In the present case, the assessment order was passed on 12.07.2021 and the ld.PCIT had passed the order u/s 263 of the Act on 22.02.2023 and therefore, the order passed by the Assessing Officer, pursuant to the direction of ld.PCIT would not be barred by limitation. 20. The second argument raised by the ld.AR for the assessee during the course of oral and written submissions that the ld.PCIT cannot direct for the initiation of penalty to the Assessing Officer. It was the submission of the ld.AR that the satisfaction should be of the officer who is contemplating to initiate the penalty proceedings. The above said contention of the assessee was resisted by the ld.DR and he has drawn our attention to section 271 of the Act. Failure to furnish returns, comply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld.PCIT himself records that PCIT has the power to record the satisfaction and impose the penalty. In the present case, the ld.PCIT has not recorded satisfaction in the impugned order nor he had initiated and imposed the penalty himself. Quite contrary to the above, the ld.PCIT directed the Assessing Officer to impose penalty, in para 18 which was reproduced herein above. 24. We do not agree with the above said direction issued by the ld.PCIT to the Assessing Officer to initiate the penalty proceedings under section 271(1)(c) of the Act. The law does not permit the delegation of authority by the ld.PCIT to Assessing Officer for the purpose of imposition of penalty. Firstly, it is for the ld.PCIT to record satisfaction and then initiate penalty proceedings. Since no satisfaction has been recorded by the ld.PCIT, therefore, it would not be appropriate for him to direct the Assessing Officer to record his satisfaction and initiate the penalty proceedings against the assessee. 25. In our view, if the ld.PCIT records his satisfaction then penalty proceedings should also be completed by him alone and he cannot direct the Assessing Officer after recording his satisfaction to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty proceedings under Section 271(1)(c) of the Act in the assessment order, he cannot direct the Assessing Officer to initiate penalty proceedings under Section 271(1)(c) of the Act in exercise of revisional power under Section 263 of the Act. The relevant observations recorded therein read thus:- 9. Now adverting to the second limb, it may be noticed that the Delhi High Court in judgment reported in Addl. CIT vs. J.K.D.'Costa (1981) 25 CTR (Del) 224 : (1982) 133 ITR 7 (Del) has held that the CIT cannot pass an order under s. 263 of the Act pertaining to imposition of penalty where the assessment order under s. 143(3) is silent in that respect. The relevant observations recorded are: It is well established that proceedings for the levy of a penalty whether under s. 271(1)(a) or under s. 273(b) are proceedings independent of and separate from the assessment proceedings. Though the expression assessment is used in the Act with different meanings in different contexts, so far as s. 263 is concerned, it refers to a particular proceeding that is being considered by the Commissioner and it is not possible when the Commissioner is dealing with the assessment proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X
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