CIT is empowered to invoke revisionry powers u/s 263 to direct AO to initiate penalty proceedings u/s 271(1)(c) – ITAT
ABCAUS Case Law Citation:
ABCAUS 2687 (2018) (12) ITAT
Important Case Laws Cited/relied upon:
CIT Vs. Ashok Constructions
CIT Vs. Surendra Prasad Agarwal
V. Ramanamurthy Raju
Star Diamond Tools Vs. ITO
CIT Vs. Paramanand M Patel 278 17R 0003 (2005)
Commissioner of Income Tax Vs. Rakesh Nain Trivedi [128 DTR 0309 (P&H)].
The assessee had filed an appeal against the order of the Principal Commissioner of Income Tax (Pr.CIT) against the revisionary order passed u/s 263 of Income Tax Act, 1961 (The Act) giving direction to Assessing Officer (AO) to initiate penalty proceedings u/s 271(1)(c) of the Act.
The assessee had not filed returns of income. The Pr.CIT had received the information from service tax authorities indicating the taxable income earned by the assessee for the impugned assessment years.
The Pr.CIT issued a letter to ascertain status of filing the return of income. In response, the assessee filed the return of income for all the three impugned assessment years with the concerned AO.
Subsequently, the AO issued notice u/s 148 in response to which the assessee requested to treat the return of income already filed as a return in response to the notice u/s 148.
Subsequently, the cases were converted into scrutiny and the notice u/s 143(2) and 142(1) were issued, to the assessee and the assessment was completed by making additions to the total income as declared for all the assessment years u/s 143(3).
The Pr.CIT observed that the AO had completed the assessment without initiating the penalty proceedings. Pr. CIT was of the view that since there was no voluntary return of income and the return was filed in response to notice u/s 148, the AO ought to had initiated the penalty proceedings u/s 271(1)(c) of the Act.
Accordingly, the Pr.CIT was of the view that the order passed by the AO u/s 143(3) was erroneous and prejudicial to the interest of the revenue, hence, he issued the notice u/s 263 invoking the revisional jurisdiction and called for the explanation of the assessee.
The assessee filed explanation stating that the penalty proceedings are not part of assessment proceedings, therefore, giving directions to initiate penalty proceedings u/s 271(1)(c) in revision is beyond the scope of the proceedings u/s 263.
It was contended that recording satisfaction for initiation of penalty proceedings is the opinion of the AO and non-initiation of penalty does not give jurisdiction for revision u/s 263.
It was submitted that the action of the Pr.CIT to initiate the penalty would amount to reviewing of the assessment proceedings, but not the revision within the meaning of section 263 of the Act.
The Pr.CIT held that in view of the amended provisions u/s 271(1)(c) of the Act w.e.f. 01.06.2002, the Pr.CIT is empowered to initiate the penalty and to set aside the order passed by the AO for initiating the penalty proceedings u/s 271(1)(c) of the Act.
The Pr.CIT further observed that the assessee had not filed the return of income for the assessment years under consideration, though the assessee had taxable income. The assessee filed the return of income only after issue of letter of enquiry and notice u/s 148, thus, there was no voluntary return and the case needs to be examined for concealment of income. Since, there is prima facie case for considering the concealment of income and the assessment was completed without initiating the penalty proceedings which ought to have been initiated.
Thus, the Pr.CIT held that the order passed by the AO was erroneous and prejudicial to the interest of the revenue and accordingly set aside the assessment and directed the AO to redo the assessment duly initiating penalty proceedings u/s 271(1)(c) of the Act.
Aggrieved by the order of the Pr.CIT, the assessee was in the appeal before the Tribunal.
The Tribunal observed that though the assessee had taxable income and time allowed u/s 139(1) and 139(4) had expired, the assessee did not file the return of income before the specified dates. The assessee had filed the returns of income manually before the AO after the receipt of the letter issued by the Pr.CIT, though it was required to be filed electronically.
The Tribunal opined that the chain of events clearly showed that the assessee was in the habit of not filing the return of income and non-payment of the taxes due to the government.
The Tribunal noted that the issue with regard to initiation of penalty proceedings by the CIT and directions to AO to initiate the penalty proceedings was considered by the Bench where it was held that and held that the Pr.CIT is empowered to initiate the penalty proceedings and also empowered to direct the AO to initiate the penalty proceedings u/s 271(1)(c) r.w.s 263 of the Act in revision proceedings u/s 263.
The Bench had held that subsequent to the amendment of section 271, the CIT can initiate himself or by exercising power u/s 263 of the Act, direct the assessing officer to initiate the penalty proceedings u/s 271 of the Act,. In other words, CIT has the powers vested under section 271(1)(c) to initiate penalty and consequently the CIT is empowered to get it done through the AO by virtue of powers vested in section 263 of Income tax Act.
Accordingly the Tribunal upheld the order of the Pr.CIT.