2017 (1) TMI 41

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....ppeal) erred in ignoring the fact that the Penalty Order was passed with reference to order u/s 153-C and not order u/s 143(3). b) In order u/s 153-C no penalty was initiated u/s 271 (1) (c)." 2. Before us, the learned Counsel for the assessee, Miss Dinkle Heriya explaining the background of the case submitted that, a search and seizure action was conducted at the premises of Navkar Group of Companies on 13-03-2013 in which assessee was also covered. Post search action and before the issuance of notice u/s 153A of the Act, the assessee had filed its return of income on 31-03-2008 declaring total income at NIL. The said return of income was also selected for scrutiny u/s 143(2) of the Act by service of notice on 24-09-2008 and thereafter, notices u/s 142(1) were issued, which were complied with by the assessee. Accordingly, assessment order u/s 143(3) was passed on 30-12-2008 whereby the assessee's income was determined by the estimating the profit rate of 8% on total sales turnover of Rs. 2.50 Crores and accordingly, assessee's income was assessed at Rs. 19,99,780/-. Against the said assessment order passed u/s 143(3), first appeal has been preferred before the learned CIT (A).....

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....r of assessment that proceedings under section 271(1) (c) would be initiated makes the initiation of such proceedings untenable. [Para 12] The nature of satisfaction of assessee need not be in writing, though the factum of satisfaction must be in writing. [Para 15] (ii) Chennakesava Pharmaceuticals v. C.I.T [2012] 349 ITR 16 (AP)   The Hon'ble High Court held that the Assessing Officer was not justified in directing penalty proceedings to be initiated in the absence of any finding recorded by him in the assessment order that there has been concealment of income by the assessee or that the assessee had furnished inaccurate particulars in his return. Relied on: CIT v. Ram Commercial Enterprises Ltd. [2000 246 ITR 568 (Delhi) (para 29) CIT M.K. Sharma [20081 307] ITR 147 (Delhi) (iii) C.I.T v. Triveni Engineering & Industries Ltd [(2014) 369lTR 660 (All)]   It was held that in order that the deeming fiction in sub-section (113) must apply, two requirements must be fulfilled. The first requirement is that an amount must have been added or disallowed in computing the total income or loss of an assessee in any order of assessment or reassessment. The second is tha....

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....stence of conditions stipulated in section 271(1)(c) is a sine qua non for initiation of penalty proceedings under section 271. The existence of such conditions should be discernible from the assessment order or order of the Appellate Authority or Revisional Authority. Even if there is no specific finding regarding the existence of the conditions mentioned in section 271(1)(c), at least the facts set out in Explanation 1(A) and (B) should be discernible from the said order, which would, by a legal fiction, constitute concealment because of deeming provision. Even if these conditions do not exist in the assessment order passed, at least, a direction to initiate proceedings under section 271(1)(c) is a sine qua non for the Assessing Officer to initiate the proceedings because of the deeming provision contained in section 1(B). The said deeming provisions are not applicable to the orders passed by the Commissioner (Appeals) and the Commissioner. [Para 63] The direction referred to in Explanation 1B to section 271 should be clear and without any ambiguity. If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings in app....

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....ell as the materials placed on record. Before going into the merits of the matter, whether penalty u/s 271 (1) (c) is leviable on the addition of Rs. 19,99,776/- or not, we would like to dwell upon the very substratum of initiation of penalty proceedings u/s 271 (1) (c) on the facts of the present case. Admittedly, in the present case return of income for the assessment year 2006-07 was filed by the assessee on 31-03-2008 which was u/s 139 (4). The said return of income was also selected for scrutiny by issuance of and service of notice u/s 143(2) dated 24-09-2008. However, prior to filing of the return of income and issuance of notice u/s 143(2), a search and seizure action was conducted on 13-03-2008, wherein the assessee was also roped in u/s 153A r. w. s. 153C. Once, the assessee's case was covered under the search provisions, then it was mandatory upon the AO to proceed with the assessment proceedings u/s 153A of the Act. In terms of "second proviso" to Section 153A of the Act, the pending assessment on the date of initiation of search action gets abated. The abatement is by Law here in this case as the assessment was pending. Thus, the original assessment proceedings u/ 143(3....