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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI PAVAN KUMAR GADALE, JM
O R D E R PER PRASHANT MAHARISHI, AM: 01. These are the 2 appeals filed by the assessee for A.Y. 2010-11 and 2011-12 against Revisionary order passed u/s. 263 of the Act dated 29.03.2022 separately for both the years by the PCIT, Central,Mumbai-2 (the ld. PCIT) wherein the respective orders passed for both the years were held to be erroneous and prejudicial to the interest of the revenue for the simple reason that the ld. AO should have initiated penalty proceedings u/s. 271(1)(c) of the Act in the assessment order passed u/s. 143(3) r.w.s. 254 of the Income Tax Act dated 31.12.2019 for both the years.
“1.On the facts and in the circumstances of the appellant’s case and in law the Ld. Pr. CIT erred in invoking the provisions of section 263 of the Income Tax Act, 1961 (the Act) which is illegal, bad-in-law otherwise void for want of jurisdiction.
On the facts and in the circumstance of the appellant case and in law the Ld. Pr. CIT erred to hold that the assessment order passed by Ld.AO u/s. 143(3) r.w.s. 254 of the Income Tax Act, 1961 dated 31.12.2019 is erroneous and prejudicial to the interest of revenue.
3. On the facts and in the circumstances of the appellant’s case, and in law the Ld. PCIT erred in directing the AO to initiate penalty proceedings u/s. 271(1)(c) of the Income Tax Act, 1961 for furnishing inadequate particulars of income.
On the facts and circumstances of the appellant’s case, and in law the Ld. PCIT erred in directing the AO to issue penalty notice u/s. 271(1)(c) of the Act.”
The fact for A.Y. 2010-11 shows that assessee filed its return of income for A.Y. 2010-11 on 23.10.2009 declaring total income of ₹11,57,690/-. This return
4. Against this assessment order appeal was filed before the CIT-A who passed an appellate order on 17.05.2012 deleting the disallowance. 05. The revenue aggrieved with the appellate order preferred appeal before co-ordinate bench bearing vide order dated 17.04.2018 in for A.Y. 2010-11 and ITA No. 566/MUM/2016 for A.Y. 2011-12 restored back the issue to file of the ld. AO for De novo adjudication. 06. Based on the direction of ITAT, assessment order u/s. 143(3) r.w.s. 254 was made on 31.12.2019 at total income of ₹12,18,84,689/-. The disallowance u/s. 37(1) of the Act of interest was made of ₹12,07,35,739/-.
The ld. PCIT examined the above records and find that the AO has failed to initiate penalty proceedings u/s. 271(1) (c) of the Act and therefore, the orders passed by the AO is erroneous and prejudicial to the interest of revenue and therefore subject to revision u/s. 263 of the Act.
Identically, order u/s. 263 of the Act was also passed for A.Y. 2011-12 on 29.03.2022 holding that the assessment order passed u/s. 143(3) r.w.s. 254 of the Act dt. 03.12.2019 is erroneous.
Contesting the order of the ld. PCIT,LD AR submitted paper book containing 276 pages and relied upon the several judicial precedence holding that the order passed by the ld. PCIT is not sustainable in law. The ld. AR referred to the decision of the Hon’ble Delhi High Court in case of ACIT Vs. J.K. D’costa 9 taxmann 88 and dismissal of Special Leave Petition by the Hon’ble Supreme Court on 02.03.1984. The decision of the Hon’ble Rajasthan High Court in CIT Vs. Keshrimal Parasmal27 taxmann 447, Hon’ble Gujarat High Court in 289 ITR 110 and Hon’ble Punjab & Haryana High Court in 80 taxmann.com 238 was relied upon. The ld. AR further relied upon the co-ordinate bench decision in 80 taxmann.com 772. It was further submitted that the LD PCIT does not have any power to initiate the penalty proceedings himself. In the end, the ld. AR further submitted the copies of the penalty notices u/s. 274 r.w.s. 271 of the Act for A.Y. 2010-11 dt.
The ld. CIT DR vehemently supported the orders of the ld. PCIT. It was submitted that non-initiation of the penalty proceedings u/s. 271(1) (c) of the Act makes assessment orderspassed by ld. AO as erroneous and prejudicial to the interest of the revenue. It was further submitted that when the ITAT has set aside the assessment orders to the file of the ld. AO to pass it and make a De novoassessment, the fresh penalty proceedings are required to the initiated by the ld. AO. Therefore, whether in the original assessment proceedings the penalty proceedings were levied or not or even if not sustainable, it does not have any impactwhen a fresh/De novoassessment is made. De novo assessment is fresh assessment, where the penalty should have been initiated by the ld.AO, but he failed the initiate and reported suchan error to the ld. PCIT there is nothing wrong ifLDPCIT has assumed jurisdiction and directed the ld.AO to initiate penalty proceedings. It was further submitted that initiation of penalty proceedings is directed on the charge of furnishing in accurate particulars of income. Therefore, there is specific charge. Hence, reliance on the earlier notices u/s. 274 r.w.s.271(1) ( C) of the Act in the original proceedings are no more relevant.
Honourable madras High Court in case of CIT vs Chennai Metro rail Ltd 92 taxmann.com 329 has held that In absence of any finding of Assessing Officer with regard to concealment of income or with regard to furnishing of inaccurate particulars of income, Commissioner, in exercise of power under section 263, could not direct Assessing Officer to initiate penalty proceedings under sec 271(1)(c) of the Act.
Similar view has once again been taken by the Honourable madras High Court in CIT vs C. R. K. Swami 254 ITR 258 (madras) has held as Under:- “2. Moreover, as held by a Bench of the Delhi High Court in the case of Addl. CIT v. Sudershan Talkies [1993] 200 ITR 153 , failure on the part of the assessing authority to initiate penalty proceedings would not give jurisdiction to the Commissioner of Income-tax to pass an order under section 263 of the Income-tax Act, 1961 ('the Act') and to direct initiation of
Honourable Rajasthan High Court in case of CIT vs Kesrimal Parasmal by 27 taxman 447 (Rajasthan has held thatIn J.K. D'Costa's case (133 ITR 7 ] (Delhi) it was held that the Commissioner was 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 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.
Decisions relied upon by the learned PCIT are with respect to when the order dropping the penalty proceedings are passed by the learned assessing officer whether they are subject to revision u/s 263 of the act or not. This is not the issue before us, the issue before us is whether when the assessing officer has failed to record any satisfaction about the concealment or furnishing of the particulars of
Accordingly, we have no hesitation in holding that the learned principal Commissioner of income tax is not correct in assuming jurisdiction u/s 263 of the income tax act where the learned assessing officer has failed to initiate penalty proceedings and also does not record any satisfaction of furnishing of inaccurate particulars or concealment of income in the assessment order.
As the facts for the assessment year 2010 – 11 and 2011 – 12 are similar, both the orders passed by the learned principal Commissioner of income tax u/s 263 of the act holding the assessment order passed by the learned assessing officer are erroneous and prejudicial to the interest of the revenue where the learned assessing officer has failed to initiate penalty proceedings u/s 271 (1) © of the act are quashed.
Accordingly appeals of the assessee for both the years are allowed.
Order pronounced in the open court on 29.12.2022.