CIT (A) cannot initiate & levy penalty u/s 271(1) (c) by penalty order under his adjudication

Brief of the Case

ITAT Pune held In the case of Shri Ajit Ramchandra Jadhav. vs. ACIT that the order initiating the penalty proceedings has to be a different order and has to be passed by the person, who has made the addition / assessment in the hands of the assessee. In case the said person is CIT (A), then he is competent to initiate the penalty proceedings and also competent to levy the penalty by passing a separate order, but the CIT (A) is not competent to initiate and levy the penalty for concealment under section 271(1) (c) by the same order while deciding the appeal against the order levying penalty for concealment passed by the Assessing Officer under section 271(1)(c).The CIT (A) in the present case has exceeded the jurisdiction and we find no merit in the order passed by the CIT (A).

Facts of the Case

The assessee had furnished the return of income on 18.12.2003 declaring total income of Rs.82,842/-. The said return of income was processed under section 143(1). Survey action under section 133A was carried out at the premises of the assessee and declaration of additional income of Rs.1.75 crores was made by the assessee. Pursuant to the issue of notice under section 148, the assessee filed revised return on 05.11.2009 declaring total income of Rs.1,25,39,650/- and agricultural income of Rs.3,26,988/-. The case of the assessee was taken up for scrutiny. The Assessing Officer notes that the assessee had credited a sum of Rs.1.42 crores to its Profit & Loss Account being the declaration account.

The assessee was asked to furnish the basis of declaration of additional income of Rs.1.42 crores as against the declaration made during the survey of Rs.1.75 crores. The assessee explained the said offer of Rs.1.42 crores. The Assessing Officer accepted the explanation of the assessee and the declaration of Rs.1.42 crores of additional income. Thereafter, the Assessing Officer on verification of Balance Sheet noted that the assessee had shown investment in Hotel Varsha at Rs.51,98,433/-. After deliberating upon the various aspects of the said investment, an addition of Rs.23,01,567/- was made as unexplained expenditure from undisclosed sources and penalty proceedings under section 271(1)(c) were initiated against the assessee. Another issue noted by the Assessing Officer was agricultural income declared by the assessee and considering the facts and circumstances of the case, the agricultural income was restricted to the income shown in the original return of income and the difference of Rs.1,51,640/- was considered as income from unexplained sources and added to the income of the assessee. The Assessing Officer also initiated penalty proceedings under section 271(1) (c) in respect of the said addition.

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