TaxTMI 
TaxTMI 
2022 (11) TMI 1294
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.....2022 6 4-10 . ITA No. 217 to 223/JP/2022 Shri Ram Kishan Verma 2012-13 to 2018-19 23.03.2022 6 11-13. ITA No. 281 to 283/JP/2022 Shri Manoj Kumar Sharma 2013-14 to 2015-16 25.03.2022 51 2. Since the issue involved in these assessee's appeal for all the years and assessee are almost identical therefore, all these appeals were heard together with the agreement the parties and are being disposed off by this consolidated order. 3. At the outset, the ld. AR has submitted that the matter pertaining to Shri Ram Kishan Verma in ITA no. 217/JPR/2022may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwovenand the facts and circumstances of other cases are exactly identical in other assessment year and even grounds are also identical. The ld. DR did not raise any specific objection against taking that case as a lead case. Therefore, for the purpose of the present discussions, the case of ITA No. 217/JPR/2022 is taken as a lead case of each party. Based on the above arguments we have also seen that for all these appeals are similar on facts and arguments were si....
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....prejudicial to the interest of revenue. The very assumption of jurisdiction is contrary to the provisions of law and facts on record. Hence, the proceedings so initiated u/s 263 of the Act and the impugned order dated 23.03.2022 deserves to be quashed. 3. The appellant prays your honour indulgences to add, amend or alter of or any of the grounds of the appeal on or before the date of hearing." 8. The fact as culled out from the records is that the assessee has filed the return of income on 19.07.2018 declaring total income at Rs. 71,22,29,910/- and agriculture income of Rs. 3,22,500/-. Search and seizure proceeding were carried out by the Investigation Wing of the department at the residential and business premises connected with "Resonance Group, Kota" on 07.08.2017, u/s 132 of the Income Tax Act, 1961. Thereafter, as part of Resonance Group, this case was taken up for block assessment and assessment order u/s 143(3) r.w.s. 153A dated 30.12.2019 was passed determining this income at Rs. 74,74,45,650/- and agriculture Income of Rs. 3,22,500/-. In the assessment order, penalty was initiated by noting that penalty u/s 271(1)(c) of the Income Tax Act is initiated for conce....
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....the error relating to non-initiation/ incorrect initiation of penalty by the Assessing Officer has caused prejudice to the interests of Revenue. Accordingly, in exercise of powers conferred upon me as per provisions of section 263 of the Income Tax Act 1961, I direct the assessing officer to initiate and levy penalty under the requisite sections as detailed in the show cause notice as reproduced earlier, after arriving at due satisfaction independently. Needless to say, that the assessing officer will initiate penalty based upon, his own satisfaction, and will give full opportunity to the taxpayer before proceeding to levy the penalty, which he chooses to levy (or not levy). As such, in my view, the taxpayer will not unduly suffer. Penalty will be levied or not levied, based upon the satisfaction of the assessing officer. For the proposition that the taxpayer will not suffer (as he will be given due opportunity at the time of levy or non-levy of penalty), I rely upon order of Hon'ble Supreme Court in the case of Rampyari Devi Saraogi versus Commissioner of Income Tax, reported in 67 ITR 84 (Supreme Court) (3rd last paragraph thereof maybe seen for this proposition). ....
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....est of the Revenue. The Commissioner has to be satisfied of twin conditions, namely (i) The order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If any one of them is absent i.e. if the assessment order is not erroneous but it is prejudicial to the Revenue, Sec.263 cannot be invoked. This provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous as also prejudicial to revenue's interest, that the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of Revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, if the AO has adopted one of the two or more courses permissible in law andit has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the Commissioner ....
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....3.2Whereas the revisional jurisdiction of the CIT starts only after the conclusion of assessment proceedings, resulting into assessment order, therefore, as a sequel thereto, it is not open to CIT to exercise the revisional powers to create a non-existent proceeding under S. 263 by holding the assessment proceeding as erroneous in so far as prejudicial to the interest of revenue. Since Sec. 263 regulates the revisional powers of the CIT hence, the strict fulfillment of the requirements of a jurisdictional provision cannot be compromised. 3.3 Pertinently, the CBDT in its circular No. 09/DV/2016(Departmental view) dated 26.04.2016 (DPB 26-27) is also of this view that a mere mention in the assessment order is of no value and no initiation even following a Kerala HC decisionGhrahLaxmiV Addl. CIT inthe context of S.271D and 271E. the relevant extract from the circular are as under: "The statement in the assessment order that the proceedings under Section 271D and E are initiated is inconsequential. On the other hand, if the assessment order is taken as the initiation of penalty proceedings, such initiation is by an authority who is incompetent and the proceedings ther....
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.... 4.4Rule of Consistency to be maintained: The Rule of Consistency mandatorily requires that in absence of any material change in the facts and circumstances, the earlier decision rendered by the ITAT in the case of the same assessee must be followed. Kindly refer para-38 of Godrej & Boyce Manufacturing Co. Ltd. v/s DCIT &Anr. (2017) (2017) 394 ITR 449/295 CTR 121(SC) wherein held that: "----While it is true that the principle of res judicata would not apply to assessment proceedings under the Act, the need for consistency and certainty and existence of strong and compelling reasons for a departure from a settled position has to be spelt out which conspicuously is absent in the present case. In this regard we may remind ourselves of what has been observed by this Court in RadhasoamiSatsang vs. Commissioner of Income-Tax[6]. "We are aware of the fact that strictly speaking res judicata does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the oth....
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....ound for invoking revisionalpowers.The CIT narrated wrong facts. The AO initiated penalty proceedings u/s 271(1)(a) also. 7. Penalty proceedings already stands barred by limitation: Another indicator provided in S. 275 which has put a bar of limitation for imposing penalty and u/s 275(1)(b), the prescribed period is expiry of two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed. Thus, as and when either the AO/CIT(A), in the course of any proceedings, records satisfaction and initiates penalty proceedings, from the end of the financial year in which such initiation takes place, penalty proceedings are required to be completed within a period of two years. On the expiry of the limitation period, a right is vested in the assessee which, cannot be taken away merely by exercising of revision powers u/s 263 unless there is a clear indication showing a different legislative intent on a plain reading of provision of S.270(1)(c), 271AAB r/w 263. Therefore, the AO cannot be compelled to act beyond the prescribed period of limitation by extending such limitation on exercise of....
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....that there was no mention of initiation of penalty proceedings in the order and that he could not direct the ITO to make fresh assessment to initiate penalty proceedings. The Supreme Court has dismissed the special leave petition in the said case in Special Leave Petition (Civil) Nos. 11391 and 11392 of 1981, dated 2-3-1984 [1984] 147 ITR (St.) 1. As the position was concluded and settled by the Supreme Court, the question which was sought to be referred could not be said to be a substantial question of law arising out of the Tribunal's order. It was only a question of academic nature." 9.1.2 This Hon'ble bench has taken the same view in the context of penalty proceedings not initiated by the AO u/s 271AAC in the order passed u/s 263 in the case of Smt.RekhaShekawat V Pr. CIT (2022) 36 NYPTTJ 987 (Jp) (para 3DPB 4-9), holding as under: "In ground No. 3, the assessee has challenged the assumption of jurisdiction under s. 263 for not initiating penalty proceedings under s. 271AAC of the Act. The learned CIT held that the additional income was also subject to penalty under s. 271AAC of the Act and accordingly set aside the subject assessment order. 3.2 A....
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.... be initiated or not and also the section under which it is to be initiated. The mandate under section 263 of the Act do not give any power to CIT to impose his satisfaction over the satisfaction of AO as to whether the penalty proceedings are to initiated or not and if initiated under which section/clause. In our view, on examination of assessment record, the PCIT cannot direct initiation of penalty proceedings because penalty proceedings are not part of assessment proceedings. Thus, the PCIT's revisionary decision relating to non-initiation/ incorrect initiation of penalty which without holding that assessment order passed by the AO as erroneous and prejudicial to the interest of revenue is vague and bad in law. Notifying both the cases, penalties were initiated by AO under wrong/incorrect provisions of law (as per PCIT), and as against the correct provisions suggested by PCIT. 9.1.5Earlier also, a similar view was taken in the case of Agencies Rajasthan V AO ITA No. 196/JP/2020 AY 2015-16 vide order dated 11.09.2020 9.2The case of Addl. CIT v. J.K. D'Costa [1982] 133 ITR 7 (Delhi)(DPB 18-21) has been followed in ACIT v. Achal Kumar Jain (1983) 142 ....
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....s under s. 271(1)(c)-It is not open to CIT to exercise the revisional powers to create a non-existent proceeding under s. 263by holding the assessment as erroneous in so far as prejudicial to the interest of Revenue- Sec. 263 is a substantive provision and howsoever clear the legislative intent may be, the requirements of a substantive provision cannot be bypassed as the legislative casus omissius cannot be supplied by interpretational fiat-Arriving at 'satisfaction' is the foundation of initiation of proceedings under s. 271(1)(c) which was to be recorded by AO in the course of assessment proceedings-Consequently, once the assessment is concluded, the CIT becomes functus officio as regards initiation of penalty under s. 271(1)(c)-Non-initiation of penalty proceedings under s. 271(1)(c) while framing assessment is not a good ground for invoking revisional powers under s. 263-Sec. 271(1)(c) read in conjunction with s. 263, gives an unmistakable impression that while in the wake of amendment under s. 271(1)(c) w.e.f 1st June, 2002, it may be lawful for the Administrative CIT to impose penalty, that by itself would not be sufficient to hold that the CIT is entitled to exercise....
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....nt by means of an appeal." 11. Decisions cited by the PCIT and DR-Not applicable: The ld. PCIT, Jaipur cited some decisions, however, those were rendered in altogether different legal and factual context and hence were completely distinguishable.With reference the decisions cited by the ld. DR on 22.09.2022, it is submitted that the ld. DR has taken support of some decisions being dealt with hereunder, however, needless to say that once a decision of Hon'ble Jurisdictional High Court (RHC) is available in KeshrimalParasmal (supra), the subordinate authorities including the ITAT has to follow Hon`ble Rajasthan High Court only as per the law of binding precedents. Needless to say that Article 141of the Constitution of India mandates that all the subordinate authorities acting under the jurisdictional High Court are abide by its decisions.There apart, the said RHC decision has been considered in number of later decisions of various Hon'ble High Courts and decision cited by ld. DR has been dissented with. 11.1 Otherwise also Surendra Prasad Agarwal (supra) was given long back in 2005 and similarly JawaharBhattacharjee is also a comparatively old decision as thereafter....
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....rroneous in any manner. Hence, this ground for revision deserves to be dismissed. In view of the above legal and factual position, the impugned order u/s 263 is completely beyond the scope of Sec. 263 and therefore, deserves to be quashed." 13. The ld. AR in addition to the paper book and written submission filed, also vehemently argued that the by invoking the provision of section 263 of the Act, the ld. PCIT has exceeded the jurisdiction. He read the bear provision of section 263 of the Act, the same is extracted here in below for the sake of ease Revision of orders prejudicial to revenue. 263. (1) The ^88[Principal Chief Commissioner or Chief Commissioner or Principal Commissioner] or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer ^89[or the Transfer Pricing Officer, as the case may be,] is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstan....
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.... fact that the limitation commences at the level of the authority competent to impose the penalty who have issued the notice. Thus, this power rest with the assessing officer and the PCIT has no jurisdiction to direct the ld. AO in this matter. Further, the ld. AR of the assessee submitted that this issue in no longer res integra and to drive his contention he relied upon the finding of the Punjab and Haryana high Court in the case of CIT vs. Rakesh Nain Trivedi, the relied upon finding is reproduced here in below: 5. After hearing learned counsel for the parties, we find the issue that arises for consideration of this Court in this appeal is could the CIT in exercise of power under Section 263 of the Act hold the order of the Assessing Officer to be erroneous and prejudicial to the interest of the revenue where the Assessing Officer had failed to initiate penalty proceedings while completing assessment under Section 153A of the Act. 6. It may be noticed that the said issue is no longer res integra. This Court in Subhash Kumar Jain case (supra) agreeing with the view of High Courts of Delhi in Additional J.K.D.'s Costa case (supra), CIT v. Sudershan Talkies [1....
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....n 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 the view taken by the Tribunal that the penalty proceedings do not form part of the assessment proceedings and that the failure of the ITO to record in the assessment order his satisfaction or the lack of it in regard to the leviability of penalty cannot be said to be a factor vitiating the assessment order in any respect. An assessment cannot be said to be erroneous or prejudicial to the interest of the ....
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....to be quashed as legislature has not empowered the ld. PCIT to direct the AO to initiate the penalty. The AO always wanted to initiate under a correct provision of law but he committed an inadvertent error, even assuming so then it might be legally covered by section 154 rectification of mistake being a mistake than an error and invoking of provision of section 263 not permitted. There are other remedial provision u/s. 147, 153, 263 operate into different fields and cannot be used interchangeably. For this contention he relied upon the decision in the case of CIT Vs. Amitabh Bachchan where in it was held as under: "9. Under the Act different shades of power have been conferred on different authorities to deal with orders of assessment passed by the primary authority. While s. 147 confers power on the Assessing Authority itself to proceed against income escaping assessment, s. 154 of the Act empowers such authority to correct a mistake apparent on the face of the record. The power of appeal and revision is contained in Chapter XX of the Act which includes s. 263 that confer suomotupower of revision in the learned CIT. The different shades of power conferred on different aut....
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...., the assessment order, penalty notice & demand notices were also served manually to the authorized representative of the assessee on 31.12.2019 (copy enclosed) in these A.Ysie AY A.Y. 2012-13 to 2018-19. In response to the notices under section 274 read with section 271AAB(IA) of the IT Act. 1961 dated 30/12/2019 for the AY 2012-13 to 2017-18 the assessee has filed his reply electronically on ITBA Portal on 24/01/2020 in these assessment years which is enclosed herewith for your kind ready reference however the assessee has not filed reply in response to said notice for the A.Y. 2018-18. Further, the notices u/s under section 274 read with section 271AAB(IA) of the IT Act, 1961 for the AY 2012-13 to 2018-19 have also been issued to the assessee on 10/11/2020. In response to the said notices, the assessee has also filed the reply electronically on 23/11/2020 in for the AY 2012-13 to 2017-18 and attached the copy of previous reply as furnished in response to notice dated 30/12/2019 (copy enclosed) however the assessee has not filed reply in response to the said notice for the AY 2018- 19. Thus, it can be seen from above facts that notices u/s under section....
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....ere an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was- (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner: Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment. 21. Based on the above provision of the act he submitted the law has empowered the authority to correct the mistake in issuance of notice. Thus, the direction given by the PCIT is correct and to drive home to this contention the ld. DR has relied upon the finding of the Apex Court in the case of Rampyari Devi Saraogi vs. CIT [ 67 ITR 84 ], the same is reproduced here in below: It is not necessary to further detail the reasons given by th....
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....y notice u/s. 274 r.w.s. 271AAB(1A) of the Act issued accordingly." Against this finding of the ld. AO the PCIT taken a view that the assessing officer had failed to correctly initiate penalty. Hence the ld. PCIT has noted penalty erroneously initiated penalty u/s. 271AAB(1A) of the Act which came into statue w.e.f. 15.12.2016.The ld. PCIT has noted that ld. AO did not take conscious decision relating to non-initiation / incorrect initiation of penalty. The ld. AO wanted to initiate the penalty under the rightly applicable provisions of the Act. It was an inadvertent error on AO's part whereby the penalty which had to be initiated and which he had wanted to initiate was not done. The ld. PCIT, thus viewed that this error has caused prejudice to Revenue. He did not agree with the submission of the assessee and thus in exercise of powers conferred upon him u/s. 263 the ld. PCIT directed the AO to initiate and levy penalty under the requisite sections as detailed in the show cause notice given in the proceedings u/s. 263 of the Act. Based on this he noted that the taxpayer will not unduly suffer as penalty will be levied or not levied is to be based on the satisfaction of the assessin....
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....ssessing officer to be considered before the proceeding before him. Against the submission of applicable judgement placed on record by the ld. AR of the assessee, ld. DR did not pinpointed any controverting judgements against the various direct and binding judgment presented for service in this case. The bench also noted that the pre-requisites to the exercise of jurisdiction by the Commissioner u/s 263, is that the order of the Assessing Officer is established to be erroneous in so far as it is prejudicial to the interest of the Revenue. The Commissioner has to be satisfied of twin conditions, namely (i) The order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If any one of them is absent i.e. if the assessment order is not erroneous but it is prejudicial to the Revenue, Sec.263 cannot be invoked. This provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous as also prejudicial to revenue's interest, that the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will sa....
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....ch emphasized or stressed upon because there is no order at all in those proceedings hence there cannot be any question of finding any error/prejudice therein u/s 263.There is one more reason why the PCIT should not be permitted to invoke revisional powers for initiation of penalty proceedings. Sec. 271(1) specifically empowers the AO or the appellate authority to record satisfaction. It is well-settled that once an appeal has been preferred against an order of assessment the entire assessment is open before the appellate authority. The appellate authority is entitled to do all that the AO could have done. The powers of the appellate authority are co-extensive and co-terminus with the powers of the AO. It is equally well-settled that the PCIT cannot exercise revisional jurisdiction qua proceedings before an appellate authority. The order of assessment does not have any independent existence and stands merged with the order of the appellate authority. Hence, to read s. 263 as being applicable only in case of an AO for the purposes of initiation and levy of penalty and not being applicable to the appellate authority, cannot be the legislative intent. To the contrary, the inherent ind....
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....s been confirmed by the Supreme Court and according to J.K. D'Costa's case ( supra) the Commissioner is not entitled to set aside the assessment order passed by the ITO on the ground that there was no mention of initiation of penalty proceedings in the assessment order and the Commissioner in the proceedings under section 263 cannot direct the ITO to make fresh assessment to initiate penalty proceedings. As the position stands concluded and settled by the Supreme Court, the question which is now sought to be referred by the Commissioner cannot be said to be a substantial question of law arising out of the Tribunal's order. It is only a question of academic nature. 6. In this view of the matter, it cannot be said that the decision of the Tribunal rejecting the reference application by its order dated 12-8-1983 is incorrect. 7. For the reasons aforesaid, no referable question of law arises out of the order dated 26-11-1982 of the Tribunal. 8. The reference application under section 256(2) filed by the Commissioner is, therefore, dismissed. 25. Relying on the above jurisdictional high court decision this bench respectfully followed th....