TaxTMI 
TaxTMI 
2019 (1) TMI 1908
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....initiated with the assessment order passed u/s 143(3) dated 22.03.2016. The same is initiated by notice dated 16.09.2016 much after the completion of the assessment proceedings. As such, initiation of penalty proceedings itself is bad in law and need to be quashed. Also in consequence to that the order passed u/s 271 (1 )(c) of the Act need to be quashed. 1b. That the Ld. CIT(A) erred in not appreciating the fact that in the assessment order passed u/s 143(3) dt. 22.03.2016, the Ld. AO initiated the penalty proceedings u/s 271 AAB of the I. T. Act, as evident from the assessment order & penalty initiation notice u/s 271AAB dt. 22.03.2016. As per assessment order, the Ld. AO initiated penalty proceedings u/s 271AAB but later on he issued notice u/s 271 (1)(c) dt. 16.09.2016 and imposed penalty u/s 271 (1)(c) of the Act. As no penalty u/s 271 (1 )(c) was initiated in the assessment order u/s 143(3), the order imposing penalty u/s 271(1)(c) is bad in law & needs to be quashed." 3. Briefly stated facts are that a search & seizure operation u/s 132 of the Act was carried out in the Rupa Group of cases on 07.11.2013 and on subsequent dates. The assessee an individual belonged to this ....
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....t the assessee. In this regard it is pertinent here to note that there was no search against the assessee though the search & Seizure operation was conducted against M/s. Rupa group. Also we note that no statement of the assessee an individual was recorded u/s. 132(4) of the Act or of any of his sons and/or any of the family members. And we note from a perusal of the assessment order dated 22.03.2016 the AO after para 9, clearly initiated penalty u/s. 271AAB of the Act after assessing the income as returned by the assessee. Further we note that in the assessment order at para 8, the AO specifically expressed his opinion that assessee is liable to penalty u/s 271AAB of the Act, which is as under: "The assessee was supposed to file return of income 31-07-2014. Now in this return filed on 12.01.2016 the assessee has shown miscellaneous income of Rs. 38,05,50,000/- in accordance with the disclosure made during the course of search in Rupa group of cases. Thus, I am of the opinion that the assessee is liable to penalty u/s. 271AAB of the I. T. Act, 1961." Thereafter on 22.03.2016 in the penalty notice issued, the AO has stricken down the ingredients of the charges in sec. 271(1)(c) o....
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....e again before the Calcutta High Court in the case of Becker Gray & Co. (1930) Ltd. v. ITO Central Circle-I Calcutta and Others (112 1TR 503; 1977). Relying on the Supreme Court decision in the above case, the Calcutta High Court held that "It is true that the Income-tax Officer should be prima facie satisfied before the penalty notice is issued, but it does not mean that he is required to record such satisfaction in writing in every case." Following these decisions, wherever additions are made, Assessing Officers have, without separately recording any satisfaction, been issuing directions for initiating penalty proceedings. 40.3 However, interpreting the aforesaid Supreme Court decision, the Delhi High Court has, in the case of CIT v. Ram Commercial Enterprises Ltd. (246 ITR 568; 2000) held that "It is the assessing authority which has to form its own opinion and record its satisfaction before initiating penalty proceedings." 40.4 Subsequently, the Allahabad High Court went into this issue in the case of Shyam Biri Works (P.) Ltd. v. CIT (259 ITR 625; 2002). After considering the above Calcutta High Court decision and the Delhi High Court decision, it has held that "With profo....
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....the AO for initiating penalty proceedings u/s. 271(1)(c) of the Act. We note that in the case in hand, the AO has not initiated penalty u/s. 271(1)(c) of the Act while framing the assessment order whereas we note that he was satisfied while framing assessment order that assessee is liable to penalty u/s. 271 AAB of the Act and thereafter he has initiated penalty u/s. 271AAB of the Act. And when pointed out by the assessee that penalty u/s. 271AAB cannot be legally leviable against the assessee, the AO dropped the sec. 271AAB proceedings and initiated sec. 271(1)(c) proceeding which is legally not tenable because for assumption of jurisdiction to levy penalty u/s. 271(1)(c) of the Act, the condition precedent for exercising this jurisdiction is the satisfaction of AO before conclusion of proceedings under the Act that penalty u/s. 271(1)(c) need to be levied against the assessee as held by the Hon'ble Supreme Court in S.V. Angidi Chettiar (supra). However, there was conflicting order of the Hon'ble High Courts, the Parliament in its wisdom has inserted sub sec. 1B of the Act vide Finance Act 2008 (wr.e.f. 01.04.1989), however, even as per section. (1B) to sec. 271, and by virtue of ....