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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 ..... ceedings u/s. 271AAC of the Act instead of initiating penalty u/s. 271(1)(c) of the Act. 3. Brief facts are that a search u/s. 132 of the Act was conducted on the business premises of the assessee company on 25.02.20220 and consequently, assessment u/s. 153C of the Act was framed by the ACIT, Central Circle 1(1), Chennai vide order dated 28.03.2022. While passing the order u/s. 153C of the Act, the AO initiated penalty proceedings u/s. 271AAC of the Act firstly by para 4.10 as under:- "4.10 It is clear that the assessee was in the possession of the cash to the tune of Rs. 5,18,49,128/- that are not recorded in their books of 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be said that the undersigned is seeking to revise an assessment order with respect to an issue which is pending in appeal before the CIT(A). Thus, the undersigned has assumed jurisdiction validly under section 263 of the Act and the submissions of the AR in this respect is also rejected. 10. In view of the above, I am satisfied that the order passed u/s 143(3) r.w.s.153C of the Act dated 28.03.2022 for assessment year 2016-17 is erroneous and prejudicial to the interest of Revenue, as penalty has not been initiated u/s 271(1 ) (c)of the Act. Therefore, I consider it appropriate to direct the AO to modify the assessment order dated 28.03.2022 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 pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d thereafter while granting approval and it has held by various courts that there should be application of mind while granting approval to the order of assessment passed u/s. 153A / 153C of the Act. It means that two authorities i.e, ACIT, Central Circle 1(1), Chennai while framing assessment has initiated penalty proceedings u/s. 271AAC of the Act and also approval was granted by the Add.CIT, Central Range-1, Chennai as per the provisions of section 153D of the Act. The approval granted by Addl.CIT, Central Range-1, Chennai u/s. 153D of the Act is not mere formality. It requires application of mind. Admittedly, as noted by PCIT while revising assessment order directing the AO to initiate 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese facts, now we have to discuss the case law cited by ld.counsel for the assessee of the Hon'ble Delhi High Court in the case of Addl.CIT vs. J.K.D'Costa reported in [1982] 133 ITR 7 (Delhi), wherein it is held that where penalty proceedings were initiated before or at the time of making assessment, the CIT cannot invoke power u/s. 263(1) of the Act, so as to set aside the assessment order and direct the initiation of penalty proceedings u/s. 271(1)(c) of the Act. The Hon'ble Delhi High Court in the case of J.K.D'Costa, supra held as under:- 6. We have heard Mr. Wazir Singh, learned counsel for the department, but we are of opinion that the conclusion reached by the Tribunal is the 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 circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings and to view the penalty proceedings also as part of the proceedings which are being sought to be revised by the Commissioner. There is no identity between the assessment proceedings and the penalty proceedings; the latter are separate proceedings, that may, in some cases, follow as a consequence of the assessment proceedings. As the Tribunal has pointed out, though it is usual for the ITO to record in the assessment order that penalty proceedings are being initiated, this is more a matter of convenience than of legal requirement. All that the law requires, so far as the penalty proceedings are concerned, is that they should be initiated in the court of the proceedings for assessment. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viii) CIT vs. Nihal Chand Rekyan (2000) 242 ITR 45 (Del) ix) CIT vs. C.R.K. Swamy, (2002) 254 ITR 158, 159 (Mad) x) State of Haryana vs. Dasunda Singh Waryam Singh (1996) 103 STC 128, 131 (Punj) following Deputy CCT vs. K.M. Thomas & Co. (1973) 31 STC 529 (Mad) xi) Bhavnagar Chemical Works (1946) Ltd vs. CST, (1991) 83 STC 409 (Guj) 10. Admittedly, there are other views possible as that in such circumstances, CIT can invoke his power u/s. 263(1) of the Act, to set aside the assessment and direct the AO to make fresh assessment in accordance with law keeping in view the applicability of penalty provisions as in the case of case law cited by ld.CIT-DR of Hon'ble High Court of Madhya Pradesh in the cases of Addl.CIT 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 durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shan Talkies [1993] 200 ITR 153, failure on the part of the assessing authority to initiate penalty proceedings would not give jurisdiction to the Commissioner of Income-tax to pass an order under Section 263 of the Income-tax Act, 1961 and to direct initiation of such proceedings. We are in respectful agreement with that view. 3. The question referred to us for the assessment year 1984-85, as to whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in setting aside the order passed under Section 263 of the Income-tax Act and holding that non-initiation of penalty proceedings under Section 271(1)(c) do not render the assessment made dated January 16, 1989, erroneous or prejudicial 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty proceedings. After this point was decided in favor of the assessed, the Commissioner of Income-tax filed a special leave petition being SLP (Civil) Nos. 11391-11392 of 1981 (see [1984] 147 ITR (St) 1) and the same was dismissed by the Supreme Court on March 2, 1984. It is clear, therefore, that the Division Bench decision of this court in J.K. D'Costa's case [1982] 133 ITR 7 has been confirmed by the Supreme Court and the facts of that case are similar to the facts of the present case. It must follow, therefore, that the Tribunal was right in setting aside the order of the Commissioner of Income-tax passed under section 263 of the Act in so far as it directed the Income-tax Officer to initiate penalty proceedings under 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 pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oneous or prejudicial to the interest of Revenue. The learned Tribunal rightly set aside the direction of the Principal Commissioner directing the Assessing Officer to initiate penalty proceedings although we may not agree with the reasoning in its entirety." 14. Here one more aspect was pointed out by the Department that 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) of the Act. The Revenue contended that these authorities have power to initiate penalty proceedings and hence, the PCIT u/s. 263 of the Act 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 directing the AO to initiate penalty under this provision. In our view, if the proceedings are pending before PCIT o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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