ACIT -1(3)(1), MUMBAI vs. M/S. TILAKNAGAR IDUSTRIES LTD., MUMBAI

Per Rahul Chaudhary, Judicial Member:

Assessment Year: 2009-10 “1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) without going into the merits of the case has directed the AO to delete the penalty levied u/s 271(1)(c) of the I.T. Act on the ground that the Hon‟ble ITAT has held that the relevant proceedings to be void ab initio without appreciating the fact that the Hon‟ble ITAT‟s order being perverse hasn‟t reached finality.? 3. The Departmental Representative appearing before us submitted that the issue has not attained finality in the quantum proceedings, and therefore, the CIT(A) erred in deleting the penalty by relying upon the order, dated 28.08.2020, passed by the Tribunal in the quantum appeal [ITA No. 6357/Mum/2017] without examining the merits of the matter. Per Contra, the Ld. Authorised Representative for the Assessee submitted that since the Tribunal has allowed the appeal of the Assessee by holding that the re-assessment proceedings initiated under Section 147/148 of the Act are void void-ab-initio, levy of penalty cannot be sustained.

“7.1 I have considered the arguments of the assessee. The Hon‟ble ITAT vide its order dated 28.08.2020 has set aside the order passed by the Ld. CIT(A), by holding that the notice u/s 148 r.w.s. 147 of the Act and subsequent proceedings were void ab initio and therefore they allowed appeal of the assessee for the A.Y. 2009-10. For clarity the Assessment Year: 2009-10 relevant observations of the Hon‟ble ITAT are reproduced as under:- “1.1 From the facts and circumstances of the case, discussed above, it can be safely concluded that the AO has passed the original assessment order after taking into consideration each and every details furnished by the assessee in response to the notice issued or query raised by him during the course of assessment proceedings. It can further be concluded that the AO had no tangible material for forming the belief that the income of the assessee has escaped assessment. Hence, in our opinion, since the AO has initiated the re-assessment proceedings on the material already placed on record by the assessee during the assessment proceedings, the action of the AO amounts to change of opinion which is not permissible under law. In the case of CIT v Kelvinator of India Ltd. (supra), the Hon‟ble Supreme Court has held that post 01.04.1989 power of AO to reopen u/s 1417 is much wider, however, the AO has not jurisdiction to reopen assessment on the basis of mere change of opinion. Power u/s 147 of the Act can be exercised by the AO provided there is tangible material to come to conclusion that there is escapement of income from assessment. In our considered view, the AO has no tangible material to come to conclusion that income of the assessee had escaped assessment. Similarly, in the case of State Bank of India v ACIT (supra), the Hon‟ble Bombay High Court had granted interim stay to the appellant holding that no notice u/s 148 read with Section 147 can be issued which is based on change of opinion. Hence, respectfully following the ratio laid down by 3

Assessment Year: 2009-10 the Hon‟ble Supreme Court and the Hon‟ble High Court, we hold that since the AO had initiated reassessment proceedings in the present case based on change of opinion, the CIT(A) has wrongly upheld the action of the AO. We therefore allow the legal ground raised by the assessee and set aside the order passed by the Ld. CIT(A) holding that the notice u/s 148 read with section 147 of the Act and the subsequent proceedings as void ab initio……..….. In the result the appeal filed by the assessee for AY 09-10 is allowed. 7.2 Since the assessment order, on the basis of which impugned penalty has been levied is set aside by the Hon‟ble ITAT and the relevant proceedings have been ehld to be void ab initio, the penalty order dated 19.03.2019 becomes unsustainable in law and does not survive. Therefore the penalty levied by the AO is directed to be deleted.”

5. The re-assessment proceedings under Section 147/148 of the Act have been held to be void-ab-initio and the additions made in quantum proceedings stand deleted. Penalty order has no legs to stand. We do not find any infirmity in the order, dated 04.01.2021, passed by the CIT(A) deleting penalty levied under Section 271(1)(c) of the Act.

Order pronounced on 31.03.2022.