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Income Tax Appellate Tribunal, DELHI BENCH ‘F’ : NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRADIP KUMAR KEDIA
The aforesaid appeal has been filed by the assessee against the impugned order dated 11.09.2020 passed by the CIT (Appeals)-16, New Delhi in respect of order passed u/s 154 levying penalty u/s 271AAC of the Income-tax Act, 1961 (for short ‘the Act’) for the assessment year 2017-18.
In the grounds of appeal, the assessee has raised the following grounds:-
“1. That the order of Ld. CIT(A) is unsustainable in law as well as on merits.
2. That under the facts and circumstances, Ld. CIT(A) erred in law in dismissing the appeal as infructuous as being filed before wrong Appellate Forum by wrongly holding that the jurisdiction to decide the case vest with Hon'ble Settlement Commission and CIT(A) is not competent to adjudicate and decide the appeal.
3. That the impugned order u/s.154 Dtd.27.01.20 is unsustainable in law as well as on facts.
4. That in the absence of any mandatory show cause notice as required u/s.154(3), the impugned order uls.154 r.w.s. 143(3) is unsustainable in law.
That in view of allowing the assessee's petition for this year to be proceeded with by Hon'ble ITSC u/s.245D(1) and 245D(2C), which was pending for final disposal u/s.245D(4) as on the date of passing impugned order u/s.154 by A.O., in view of Sec.245F, the exclusive jurisdiction to pass order uls.154 lied only with Hon'ble ITSC, consequently the impugned order uls.154 passed by A.O. is without jurisdiction.
6. That by invoking the provisions of Sec.154, the penalty initiated u/s.270A of the I.T. Act cannot be substituted by the penalty proceedings uls.271AAC and such order and action of A.O. is clearly outside the scope of prov. of Sec.154 of the I.T. Act.
7. That as no penalty proceedings have been initiated u/s.271AAC during the course of asstt. proceedings, the initiation of penalty proceedings u/s.271AAC vide order u/s.154 is absolutely illegal, unsustainable in law and outside the scope of Sec.154.
That under the facts and circumstances penalty initiated u/s.270A cannot be substituted by Sec.271AAC by Sec.292B which has no application and scope to the facts of the case.”
The facts in brief are that return of income for AY 2017-18 was filed on 30.10.2017 declaring income of Rs.82,47,740/- which was duly processed u/s 143(1) of the Act. Thereafter, the assessee’s case was selected for scrutiny and assessment u/s 143(3) was made vide order dated 08.08.2019 on total income of Rs.1,99,13,195/- after making addition ofRs.1,16,65,455/- u/s 68 of the Act. Accordingly, the tax on such addition was charged as per the provisions of section 115BBE of the Act. In the assessment order, the AO initiated the penalty u/s 270A of the Act and also issued a notice levying of penalty u/s 270A.
In response, to the aforesaid notice, the assessee submitted that firstly, the addition in this case has been made u/s 68 of the Act, therefore, the penalty is leviable u/s 271AAC and not u/s 270A. Assessing Officer duly acknowledged the submissions of the assessee and admitted that it is a wrong initiation, however, he held that it is a mistake apparent on record and rectifiable u/s 154 of the Act as well as curable defect u/s 292B and without giving an opportunity of being heard to the assessee, he has levied the penalty u/s 271AAC vide order dated 27.01.2020.
5. One very important fact which was there on record and also culled from the impugned order and submissions of the ld. counsel for the assessee that, the assessee against the assessment order dated 08.08.2019 in quantum proceedings had filed a petition u/s 245C before the Income Tax Settlement Commission (ITSC) on 05.12.2019. Ld. ITSC admitted the petition and order u/s 245D(1) was passed on 18.12.2019. Thus, the entire assessment was sub-judice and was within the domain of ITSC. When the AO passed an order u/s 154 levying penalty u/s 271AAC in respect of additions made u/s 68, the petition of the assessee already stood admitted and was allowed to be proceeded with ITSC vide order dated 18.12.2019 and accordingly, the AO was precluded from passing any order or levying/initiating penalty order under any provision relating to quantum of addition. This issue was specifically raised before the ld. CIT (A) which has been noted by her that at the time of passing of the rectification order u/s 154 levying penalty u/s 271AAC, the AO did not had any jurisdiction. However, ld. CIT (A) instead of quashing the impugned order held that the CIT (A) is not competent to adjudicate on an issue which pertains to challenge of the jurisdiction of the ITSC and she dismissed the appeal as infructuous.
After hearing both the parties and on perusal of the material placed on record, first of all, we find that it is an undisputed fact that after the passing of the assessment order on 08.08.2019, the assessee had filed a petition before the ITSC on 05.12.2019 which stood admitted and allowed to be proceeded with u/s 245D(1) by the ITSC vide order dated 18.12.2019; and once that is so, it is clear from the provisions of section 245F (2) that ITSC alone has the exclusive jurisdiction. Section 245F (2) reads as under :-
“Section 245F(2) in The Income- Tax Act, 1995 (2) Where an application made under section 245C has been allowed to be proceeded with under section 245D, the Settlement Commission shall, until an order is passed under sub- section (4) of section 245D, have, subject to the provisions of sub- section (3) of that section, exclusive jurisdiction to exercise the powers and perform the functions of an income- tax authority under this relation to the case.”
Thus, wherein an application made u/s 245C has been allowed to be proceeded with u/s 245D, then the ITSC shall, until and unless an order is passed under sub-section (4) of section 245D, subject to the provisions of section 245D(3), the exclusive jurisdiction to exercise powers and perform the functions of an income-tax authority under this Act lies with ITSC. This proposition has been reiterated by the Hon’ble Delhi High Court in the case of M/s. Omaxe Limited 364 ITR 423 (Del.). Once that is so, then AO did not had any jurisdiction to initiate or levy penalty u/s 271AAC. Ld. CIT (A) should have held that the penalty order itself is without jurisdiction and infructuous but instead held that the CIT (A) does not have any jurisdiction. Since AO did not have any jurisdiction to pass any order or levy any penalty on the same matter which is sub-judice before the ITSC then impugned order dated 27.01.2020 levying penalty is quashed as infructuous. On this ground alone, the appeal of the assessee is allowed and the penalty is deleted.
Order was pronounced in open court on 14TH day of February, 2022.