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Before: SMT. BEENA PILLAI & SHRI PRABHASH SHANKAR
आदेश / O R D E R
PER PRABHASH SHANKAR [A.M.] :-
This appeal emanating from the penalty order u/s 270A of the Income Tax Act,1961 dated 25.06.2024 is filed by the assessee against the order passed by the Learned Commissioner of Income-tax (Appeals)[hereinafter referred to as “CIT(A)”] dated 05.04.2021 for the Assessment Year [A.Y.] 2018-19.
In the facts and circumstances of the case and in law, the learned CIT[A] NFAC erred in confirming & the Learned CIT[A] erred in levying penalty of Rs. 29,88,820/ u/s 270A being 200% of tax payable on underreported income in consequence of misreporting and even though the assessed income u/s 143[3] was less than income processed u/s 143[1].
In the facts and circumstances of the case and in law, the CIT[A] erred in levying penalty u/s 270A on the basis of notice wherein no specific charge of either filing of underreporting or misreporting of income was mentioned and thereby passing the order of penalty which is to be quashed as per recent judgement of Bombay High Court and Supreme Court 3. In the facts and circumstances of the case CIT[A] erred in initiating penalty second time even when penalty initiated by the AO was in abeyance and subsisting therefore bad in law because the CIT[A] had no power in this case.
In this case, while adjudicating on the assessment order passed u/s 143(3) by the Assessing Officer, the ld.CIT(A) initiated penalty proceedings u/s 270A of the Act on account of under-reporting of income during the relevant year which was as a consequence to misreporting of income. The penalty was initiated w.r.t. additional income of Rs 47,89,785/- disclosed by the assessee in the revised return of income, consequent to a survey u/s 133A of the Act. He concluded that it was a clear case of under-reporting in the original return. Accordingly, he imposed penalty of Rs 29,88,820/- u/s 270A at the rate 200% holding the assessee as a defaulter.
A.Y. 2018-19 Malcolm Darayes Pestonji 4. Before us, the learned AR has vehemently argued against the penalty referring to pages 1 to 293 of the Paper Book which is placed on record. He has reiterated the submission made before the ld.CIT(A) made in the course of penalty proceedings. More specifically, he has pleaded that the penalty order passed by the ld.CIT(A) is without jurisdiction( Ground no.3 ). We take up the ground no.3 reproduced below for the sake of brevity since it challenges the very jurisdiction of the CIT(A) and consequently, the very basis of validity of the penalty order.
“Ground no.3 In the facts and circumstances of the case CIT[A] erred in initiating penalty second time even when penalty initiated by the AO was in abeyance and subsisting therefore bad in law because the CIT[A] had no power in this case.” 4.1 It is contented that vide separate notices dated 05.04.2021 and 21.02.2022, the Assessing officer had already issued notices under section 274 read with section 270A of the Act, asking the assessee to show cause as to why an order imposing penalty on you should not be made under section 270A of the Act, as it appeared to him in the course of assessment proceedings for AY 2018-19 that there was under reporting/misreporting of income. It is stated that in response, the assessee had requested the AO to keep the proceedings in abeyance on 4.2 However, the ld.CIT(A) despite pending penalty at the level of the AO, initiated penalty proceedings u/s 270A of the Act himself and issued a fresh show cause notice u/s 274/270A dated 10.04.2024 as it appeared to him during appeal proceedings for the AY 2018-19 that the assessee had under reported income which was in consequence to misreporting thereof. The ld. Counsel has drawn attention to the detailed reply dated 10.05.2024 ( page-159-165 of Paper book).He also referred to the Remarks column as appearing in the e-proceedings Response Acknowledgement dated 10.5.2024 (page 166 of PB) in which it was categorically stated that the penalty proceeding was already initiated by the ACIT, Central Circle by issuing notice u/s 274 r.w. 270A and the same was put in abeyance as appeal was pending. Please let me know the reason for re-initialising the penalty proceeding by you………………………….”
4.3 It is vehemently argued that the ld.CIT(A) has usurped the jurisdiction of the AO in issuing a fresh show cause notice and went on to impose penalty u/s 270A of the Act, without realizing that parallel penalty proceeding was still not concluded by the AO as no penalty order was either passed or dropped by him. Therefore, the ld CIT(A) was not 4.4 It appears that the ld.CIT(A) on para 7.1 page-4 of the order has dealt with the jurisdictional issue and based on a decision of co- ordinate bench in the case of Shri Ajit Ramchandra Jadhav in ITAT No.2104/PUN/2013, has concluded that the authority who is satisfied about the initiation of penalty proceedings, is required to initiate penalty proceedings and only that authority can levy the penalty. He went on to hold that in the present case, the satisfaction for initiation of penalty u/s 270A with regard to the amount of Rs 47,89,785/- was of Commissioner of Appeals. Therefore, penalty u/s 270A corresponding to the income could be levied by him only. Thus, he imposed the penalty.
Per Contra, Ld.DR relied on the penalty order of the Ld. CIT(A).
We have heard the rival contention and perused the material on record. Provisions contained in Section 270A(1) of the Act read as under:
"270A. (1) The Assessing Officer or [the Joint Commissioner (Appeals) or] the Commissioner (Appeals) or the Principal Commissioner or Commissioner may, during the course of any proceedings under this Act, direct that any person who has under-reported his income shall be liable to pay a penalty in addition to tax, if any, on the under-reported income. (2) to (6)
A.Y. 2018-19 Malcolm Darayes Pestonji 6.1 It is evident from the above section that apart from the Assessing officer, Joint Commissioner (Appeals), Commissioner (Appeals), Pr. Commissioner are also empowered to levy penalty u/s 270A of the Act. However, once the Assessing Officer has already initiated penalty proceedings at his end, the other authorities cannot initiate parallel penalty proceedings on the same facts u/s 270A. It is not case where the AO himself is not vested with such powers as in the case of penalty proceedings u/s 271D etc. It is settled legal position that penalty levied under the provisions of the Act are generally in the nature of a civil liability; albeit a strict liability. At the same time, it cannot be disputed that assessee ought to be granted an effective opportunity to defend the allegations against him. There can be no dispute that the opportunity of being heard granted to the assessee must be effective and not merely empty formality. Therefore, the assessee must be given effective opportunity to defend the charge of under-reporting as well as the quantum of penalty proposed to be levied for such charge. Therefore, he should be communicated the charge of under-reporting as well as the reason or quantum of levying penalty. The Assessing officer must direct initiation of penalty under Section 270A of the Act while passing the assessment/reassessment order and thereby, assume jurisdiction. The issue of show-cause notice is the starting point of penalty proceedings A.Y. 2018-19 Malcolm Darayes Pestonji and the initiation in the absence of such notice assumes great importance especially in the context of time-limit prescribed under section 275. Since proper initiation of penalty proceeding is the foundation of jurisdiction in the matters of penalty, strict observance of the same is absolutely necessary. In this case, a valid jurisdiction was already assumed by the Assessing officer, though penalty proceeding was kept pending. The jurisdiction was apparently with regard to the surrendered income of Rs 47,89,785/-which was the consequence of survey u/s 133A and was disclosed as additional income by way of Revised return by the assessee. Therefore, ld.CIT(A) was not justified in assuming dual jurisdiction for levying penalty on the same set of facts and circumstances. The reliance on the case of Shri Ajit Ramchandra Jadhav(supra) is misplaced and does not support the action of the ld.CIT(A). In this order also,there was no reference and justification to any dual jurisdiction adopted by the CIT(A).Rather,it was categorically observed that once the AO initiated penalty proceedings by issuing show cause, only he would pass the penalty order.
In view thereof and without going into the merits of the ground no.1 and 2 above, only on the very legal premise that the penalty notice u/s 274 r.w.s.270A followed by passing of penalty order u/s 270A of the Act by the ld.CIT(A) without assuming a valid jurisdiction, the A.Y. 2018-19 Malcolm Darayes Pestonji levy of penalty therefore, is vitiated and is held bad in law. We therefore, quash the penalty order of the ld. CIT(A).No adjudication of other grounds is required as the penalty order itself has been quashed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 03/01/2025.