CIT-Appeals is not Assessing Officer hence can not initiate or levy penalty. The enhancement of penalty u/s 271AAA by CIT-A held not sustainable
ABCAUS Case Law Citation:
ABCAUS 2583 (2018) (10) ITAT
Important Case Laws Cited/relied upon by the parties:
CIT versus Mrs. Ritu Singhal [2018] 403 ITR 97 (Del)
MAK Data (P) Ltd. v. CIT [2013] 358 ITR 593 (SC)
Anirudhsinhji Karansinhji Jadeja v. State of Gujarat [1995] 5 SCC 302
The instant appeal was filed by the appellant assessee against the order of The Commissioner of Income Tax (Appeals) in not only confirming penalty levied u/s 271 AAA of the Income tax Act 1961 (the Act) but also further enhancing the same.
The assessee was deriving income from house property, income from business of profession, capital gain and income from other sources. Besides, she is also in the business of purchase and sale of painting, artworks, sculptures etc.
A Search and seizure operation was carried out at the premises of the assessee. Assessment resulted into an addition on account of unexplained stock of artwork, painting and sculptures.
The Assessing Officer (AO) issued penalty notices u/s 271AAA of the Act to the assessee as she had disclosed a sum of ₹ 3 crores voluntarily during the course of search and offered the same as income in her return of income.
Finally, rejecting the submissions of the assessee, the AO imposed a penalty of ₹ 30 lakhs u/s 271AAA of the act. In the penalty order, the AO stated that since in this case the penalty under section 271(1)(c) was being imposed on substantive basis on the same issue, therefore, he held that penalty under section 271AAA would be on protective basis.
He further held that on the same amount the penalty was believed under section 271 (1) (C ) of the income tax act therefore, he levied penalty under section 271AAA of ₹ 30 lakhs on protective basis.
Assessee, aggrieved with the order of the AO, preferred appeal before the CIT-A who not only confirmed the penalty of Rs 30 Lakhs, but he further enhanced it by Rs 23 lakhs on addition of undisclosed income not considered by Assessing Officer (AO).
On a deeply consideration of the facts and the law laid down by the Hon’ble Courts, the Tribunal, upheld the levy of penalty under section 271AAA of the Act on undisclosed income found during the course on unexplained jewelry. But direct the AO to delete the penalty with respect to the disclosure of ₹ 3 crores on account of undervaluation of the closing stock of artwork/ paintings/ sculptures etc. and cash found during the search, for which the manner of earning was disclosed and substantiated.
The Tribunal opined that there is no provision under the act to levy penalty in the manner AO had envisaged. According to the provisions of section 271AAA (3) of the act provides that no penalty under the provisions of section 271(1)(c) shall be imposed upon the assessee in respect of the undisclosed income referred to in subsection 1 of that section. Therefore, if the penalty had already been levied under section 271AAA of the Act , no further penalty on it can be levied u/s 271 (1) (c) of the act. Penalty u/s 271AAA and 271 (1) (c) are mutually exclusive and even on this ground, too penalty of Rs. 30 lakhs levied by the AO on protective basis was unsustainable.
Coming to the issue of enhancement of the penalty by the CIT-A, the Tribunal observed that the Penalty of ₹ 23 lakhs initiated and levied by the learned CIT–A was otherwise unsustainable in law as only the assessing officer is authorized to levy it.
The Tribunal opined that CIT-A is not an ‘assessing officer‘ as defined u/s 2 (7A) of the act. Therefore, the penalty initiated by the commissioner appeals and levied by him was not sustainable, as he was not authorized to levy the same.
The Tribunal stated that if an authority is given expressly by affirmative words upon a defined condition, the expression of that condition excludes the doing of the Act authorized under other circumstances than those as defined. It is also established principle of law that if a particular authority has been designated to perform an action on any particular issue, then it is that authority alone who should do that action.
Referring to the judgment of the Hon’ble Supreme Court, the Tribunal quoted the Wade and Forsyth in ‘Administrative Law‘, under the heading ‘SURRENDER, ABDICATION, DICTATION‘ and sub- heading “Power in the wrong hands” as below:-
“Closely akin to delegation, and scarcely distingushable from it in some cases, is any arrangement by which a power conferred upon one authority is in substance exercised by another. The proper authority may share its power with some one else, or may allow some one else to dictate to it by declining to act without their consent or by submitting to their wishes or instructions. The effect then is that the discretion conferred by parliament is exercised, at least in part, by the wrong authority, and the resulting decision is ultra vires and void. So strict are the courts in applying this principle that they condemn some administrative arrangements which must seem quite natural and proper to those who make them…..”. “Ministers and their departments have several times fallen foul of the same rule, no doubt equally to their surprise….”
