TaxTMI 
TaxTMI 
2023 (7) TMI 1330
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld. Pr. CIT has erred in holding the assessment order as erroneous and prejudicial to the interests of Revenue merely because the AO has not initiated penalty proceedings and because penalty proceedings though connected are distinct, independent, and separate proceedings. 3. The ld. Pr. CIT could not assume jurisdiction u/s 263 of the Income Tax Act for the sole reason that the AO did not initiate penalty proceedings u/s 271(1) (c) as the prejudice to the interest of the Revenue, if any, has to be proved by reference to the assessment order only. 4. Recording of satisfaction of the Specified Authority u/s 271(1)(c), during the pendency of the assessment proceedings, is a condition precedent for initiation of penalty proceedings and any satisfaction (which is borrowed or supplied, by way of direction or otherwise) coming on record after the assessment would not be valid in law. 5. The id Pr. CIT has failed to appreciate the law that if two reasonable constructions of a taxing provision are possible, that construction which favors the assessee must be adopted and preference needs to be given to the reasoning of the majority of the Hon'ble High Courts." 2.1. Subsequentl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....come of Rs.3,86,91,380/-. Accordingly, notice u/s.143(2) dated 23.07.2019 was issued to the assessee. Subsequently, notices were issued u/s 142(1) calling for information. In response to the notice and subsequent statutory notices, the assessee furnished information. After verification of the information furnished by the assessee and the material available on record, Assessing Officer had completed the assessment interalia making an addition of Rs.50,21,000/- being the difference that had not been accounted for by the assessee as turnover in its books of accounts. Finally, the Assessing Officer had completed the assessment u/s 153A of the Act on 12.07.2021 assessing the total income at Rs.4,37,12,380/-. 6. The ld.AR submitted that the ld.PCIT had issued the show cause notice dt.10.01.2023 u/s 263 of the Act revising the assessment order as the Assessing Officer has not initiated the penalty u/s 271(1) of the Income Tax Act. 7. In the show cause notice dt.10.01.2023, it was mentioned as under : "2. On examination of records, it is observed that the order passed by the Assessing Officer on 12.07.2021 for A.Y. 2017-18 is erroneous in so far as it is prejudicial to the interest of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n preceding paragraphs, it is hereby held that the Assessment Order passed by the A.O. u/s. 143(3), r.w.s. 153A on 12.07.2021 for A.Y. 2016-17 and the Order of approval u/s. 153D of the Act dated 09.07.2021 issued by the Addl. CIT, Central Range-2, Hyderabad are erroneous and prejudicial to the interest of revenue. Accordingly the same are set-aside to the file of the A.O. and the Addl. CIT respectively for the limited purpose of initiating penalty proceedings u/s. 271(1)(c) of the I.T. Act after following due procedure laid down and to take consequential action. Needless to say that the assessee should be afforded proper opportunity of being heard during the assessment proceedings taken up in consequence of this order. The assessee is at liberty to furnish necessary evidence, if any to the Assessing Officer during the proceedings being taken up in consequence to this order." 11. Feeling aggrieved with the order of ld.PCIT, the assessee is now in appeal before us. 12. Before us, ld. AR submitted that the Ld.PCIT cannot direct the initiation of proceedings after the lapse of the statutory period of 6 months from the end of the assessment year, as the penalty proceedings are requi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....IT for initiating penalty proceedings which are barred by limitation. The following are the additional grounds: ADDITIONAL GROUNDS 1. On the facts and in the circumstances of the case, the order passed by the ld. Pr.Commissioner of Income Tax directing the Assessing Officer to initiate penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961 is illegal and unsustainable in law as the time limit for initiating penalty prescribed under section 271(1)(c) of the Act expired much before the ld. Pr. Commissioner of Income Tax assumed jurisdiction on 10.01.2023 under section 263 of the Act. 2. The ld. Pr. Commissioner of Income Tax failed to appreciate that what was not done by the Assessing Officer with in the time limits provided under section 275(l) of the Income Tax Act, 1961 cannot be directed to be done by exercising the revision power under section 263 of the Act as held by various courts. The id. Pr. Commissioner of Income Tax ought to have appreciated that he cannot bring back to live the penalty proceedings under section 271(1)(c) of the Act which got barred by limitation under section 275(l) of the Act. SUBMISSION ON ADDITIONAL GROUNDS 6. The asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l Kumar Jain reported in (1983) 142 ITR 606 (Del) Judgment of MP High Court in ACIT Vs. Indian Pharmaceuticals (1980) 123 ITR 874 (MP) Judgment of Rajasthan High Court in CIT Vs. Keshrimal Parasmal reported in (1986) 157 ITR 484 (Raj) Judgment of MP High Court in ACIT Vs. Kantilal Jain (1980) 125 ITR 373 (MP) Judgment of Madras High Court in CIT Vs. CRK Swamy reported in (2002) 254 ITR 158 (Mad.) Judgment of MP High Court in ACWT Vs. Nathoolal Balaram (1980) 125 ITR 596 (MP) Judgment of P&H High Court in CIT Vs. Rakesh Nain Trivedi reported in (2016) 282 CTR 205 (P&H) Judgment of MP High Court in CIT Vs. Narpat Singh Malkhan Singh (1980) 128 ITR 77 (MP) Order of ITAT Jaipur Bench in Harish Jain Vs. PCIT reported in (2023) 221 TTJ 276 (JP) Judgment of Allahabad High Court in Associated Contractors Corp Vs. CIT (2005) 275 ITR 123 (All) 13. On the other hand, ld. DR submitted that the issue of whether the ld.PCIT can invoke jurisdiction or not, is supported by various High Courts. He relied upon the decisions in the case of CIT Vs. Surendra Prasad Agarwal reported in 142 taxman 653 (Allahabad) and Indian Pharmaceuticals reported in (1980) 123 ITR 874 (Madhya Pradesh Hi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee, therefore no penalty proceedings were initiated against the assessee. The first contention of the ld. AR is that the time period for initiation and completion of penalty proceedings had lapsed after 6 months from the end of the month of passing of the order, therefore, the ld.PCIT is precluded from revising the order u/s 263 of the Act. It was submitted that the ld.PCIT cannot do indirectly what he cannot do directly. To substantiate his contention, ld. AR has relied upon the provisions of section 275, which is to the following effect: "[Bar of limitation for imposing penalties. 275. 15[(1)] No order imposing a penalty under this Chapter shall be passed- 16[(a) in a case where the relevant assessment or other order is the subjectmatter of an appeal to the 17[***] Commissioner (Appeals) under section 246 18[or section 246A] or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed 19, or six months from the end of the month in which the order of the 20[***] Commissioner (Appeals) or, as the case may be, th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion 263 or section 264: Provided that no order of imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty shall be passed- (a) unless the assessee has been heard, or has been given a reasonable opportunity of being heard; (b) after the expiry of six months from the end of the month in which the order of the Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Supreme Court is received by the Chief Commissioner or the Commissioner or the order of revision under section 263 or section 264 is passed: Provided further that the provisions of sub-section (2) of section 274 shall apply in respect of the order imposing or enhancing or reducing penalty under this sub-section.] 23[(2) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any action initiated for the imposition of penalty on or before the 31st day of March, 1989.] 24[Explanation.-In computing the period of limitation for the purposes of this section,- (i) the time taken in giving an opportunity to the assessee t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... concealed the particulars of his income or furnished inaccurate particulars of such income, or (d) has concealed the particulars of the fringe benefits or furnished inaccurate particulars of such fringe benefits, he may direct that such person shall pay by way of penalty,- xxxxxxxxx" 21. From the reading of section 271 of the Act, it is abundantly clear that the penalty can be initiated by the AO or Commissioner (Appeals) or the Ld.PCIT on being satisfied that there is a failure on the part of the assessee that he has concealed the particulars of his income or furnished inaccurate particulars of such income. Undoubtedly, the power has been given to the Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner on being satisfied during any proceedings under the Act to initiate penalty proceedings. 22. However, the above said proceedings are required to be initiated by such officers themselves after due recording of the satisfaction. In our considered opinion, once the ld.PCIT has recorded satisfaction, then the penalty proceedings or penalty notice should have been issued by the office of Ld.PCIT only. Ultimately, the penalty could....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2023) 221 TTJ 276 (Jaipur). 7. CIT Vs. Vegetable Products Limited reported in (1973) 88 ITR 192 (SC). 26. For the time being we are reproducing below the decision in the case of CIT Vs. Rakesh Nain Trivedi (supra) wherein at Paragraphs 5 and 6, it was held as under : "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 Commissioner of Income Tax v. Subhash Kumar Jain (2011) 335 ITR 364 agreeing with the view of High Courts of Delhi in Additional CIT v. J.K.D.'Costa (1982) 133 ITR 7 (Del), Commissioner of Income Tax v. Sudershan Talkies (1993) 201 ITR 289 (Del) and Commissioner of Income Tax v. Nihal Chand Rekyan (2000) 242 ITR 45 (Del), Rajasthan in Commissioner of Income Tax v. Keshrimal Parasmal (1986) 157 ITR 484 (Raj....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent. 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 revenue because of the failure of the ITO to record his opinion about the leviability of penalty in the case. 27. Further, the....