Atma Ram Builders Private Limited Vs ITO (ITAT Delhi)
PCIT Cannot Direct Penalty Initiation under Section 271E: ITAT Quashes 263 Order for Want of AO’s Satisfaction
The Delhi ITAT allowed the assessee’s appeal and set aside the revision order passed under Section 263, holding that the PCIT had no jurisdiction to direct initiation of penalty proceedings under Section 271E in the absence of satisfaction recorded by the Assessing Officer in the assessment order. The case arose from an alleged violation of Section 269T based on the tax audit report showing repayment of ₹11 lakh otherwise than through banking channels. While the PCIT treated the omission of penalty initiation as rendering the assessment erroneous and prejudicial to revenue, the Tribunal held that penalty proceedings are independent of assessment proceedings and cannot be directed through revision.
Relying on the Delhi High Court decision in Nihal Chand Rekyan and the Supreme Court ruling in Jai Laxmi Rice Mills, the Tribunal held that without explicit satisfaction recorded by the AO during assessment, no penalty under Section 271E could be initiated or directed. The PCIT’s attempt to distinguish these binding precedents was rejected. Since the AO had only initiated penalty under Section 270A and recorded no satisfaction for Section 271E, the revision directing penalty initiation was held to be beyond jurisdiction and contrary to law. Accordingly, the Section 263 order was quashed and the assessee’s appeal allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
