Appellate jurisdiction for penalty orders depends on the rank of the authority; appeal lay to the Tribunal, not CIT(A).

An appeal against a penalty order under section 271FA passed by the Director of Income-tax was held maintainable before the ITAT, not the Commissioner (Appeals). The Tribunal compared sections 246A and 253 and found that, although section 246A(1)(q) generally covers penalty orders under Chapter XXI, it was not suitable where the challenged order was made by an authority treated as equivalent in rank to the Commissioner (Appeals). Applying the principle that an appeal ordinarily lies to a forum superior to the authority whose order is challenged, the Tribunal rejected the preliminary objection and held the appeal properly filed before it.

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Issues: Whether an appeal against an order imposing penalty under section 271FA of the Income-tax Act, 1961 passed by the Director of Income-tax lay before the Commissioner (Appeals) under section 246A(1)(q), or before the Income Tax Appellate Tribunal under section 253(1).

Analysis: The order under challenge was passed by the Director of Income-tax, who was treated as being in rank equivalent to the Commissioner (Appeals). The statutory scheme of appeal was examined by comparing sections 246A and 253 of the Income-tax Act, 1961. Although section 246A(1)(q) generally routes penalty orders under Chapter XXI to the Commissioner (Appeals), the provision was found unsuitable for an order passed by an authority of equal rank. The concept of appellate jurisdiction was also relied upon, namely that an appeal ordinarily lies to a forum superior to the authority whose order is challenged. On that reasoning, the Tribunal held that the appropriate appellate forum for an order under section 271FA passed by the Director of Income-tax was the ITAT and not the Commissioner (Appeals).

Conclusion: The preliminary objection to maintainability was rejected and the appeal was held to be properly filed before the Tribunal.

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