Dinesh Sitaram Patil Vs ITO (ITAT Pune)
We note that, while culminating the reassessment proceeding in the case of the assessee, the Ld. AO vide concluding para placed at page 4 of his order communicated the assessee his action of initiating the penalty proceedings u/s 271(1)(c) of Act for ‘under reporting / mis-reporting’ of income however by the impugned order has ended up levying penalty u/s 271(1)(c) for ‘furnishing inaccurate particulars of income’, which found perfunctory sustained by the Ld. CIT(A).
Undisputedly in the present case before us, the Ld. AO in the course of reassessment proceedings has recorded his satisfaction for ‘under reporting / mis-reporting’ of income and de-facto initiated penalty proceedings u/s 271(1)(c) of Act, this per-se sufficient to demonstrate his non-application of mind while recording satisfaction vis-à-vis initiation of penal proceedings.
In the light of undisputed facts and aforestated deliberation, we are of the considered view that the necessity for prima facie satisfaction triggering initiation of penal proceedings continues to be a jurisdictional fact and same should discernible from the body of assessment order, which in the present case a miss, consequently we have no hesitation in holding the very basis of initiation of penal proceedings u/s 271(1)(c) suffers from infirmity hence bad in law and deserves to be quashed and accordingly quashed by ITAT.
FULL TEXT OF THE ORDER OF ITAT PUNE
By the present appeal the assessee challenges the first appellate order of National Faceless Appeal Centre, Delhi [for short “CIT(A)/NFAC”] dt. 14/11/2022 passed u/s 250 of the Income-tax Act, 1961 [for short “the Act”] upholding the order of penalty dt. 01/01/2022 passed u/s 271(1)(c) of the Act, by National Faceless Assessment Centre [for short “AO”] for the assessment year [for short “AY”] 2016-17.
2. The short issue emanating from the extant appeal is directed against the action of lower tax authorities in imposing a penalty u/s 271(1)(c) whereas the satisfaction in the order of assessment was recorded for under-reporting or mis-reporting of the income by the assessee.
3. We have heard the rival contentions of both the parties and subject to the provisions of rule 18 of ITAT, Rules perused the material placed on record, case laws relied upon and duly considered the facts of the case in the light of settled legal position which are forewarned to learned representatives of both side.
4. We note that, while culminating the reassessment proceeding in the case of the assessee, the Ld. AO vide concluding para placed at page 4 of his order communicated the assessee his action of initiating the penalty proceedings u/s 271(1)(c) of Act for ‘under reporting / mis-reporting’ of income however by the impugned order has ended up levying penalty u/s 271(1)(c) for ‘furnishing inaccurate particulars of income’, which found perfunctory sustained by the Ld. CIT(A).
5. Excusing from reproduction of provision of section 271(1)(c) in verbatim, it shall be purposive to state that, where the Assessing Officer in the course of any proceedings under the Act, is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income he may direct such person to pay such penalty in addition to tax, if any, payable by him. The pre-existence of conditions stipulated in 271(1)(c) are sine qua non for initiation of penal proceedings and this holds good despite the insertion of s/s (1B) to section 271. Thus this authoritatively settles that the jurisdiction to levy penalty u/s 271(1)(c) fails in the absence of satisfaction as regards to either of the two or both the specific limbs prescribed therein.
6. Undisputedly in the present case before us, the Ld. AO in the course of reassessment proceedings has recorded his satisfaction for ‘under reporting / mis-reporting’ of income and de-facto initiated penalty proceedings u/s 271(1)(c) of Act, this per-se sufficient to demonstrate his non-application of mind while recording satisfaction vis-à-vis initiation of penal proceedings.
7. In the light of undisputed facts and aforestated deliberation, we are of the considered view that the necessity for prima facie satisfaction triggering initiation of penal proceedings continues to be a jurisdictional fact and same should discernible from the body of assessment order, which in the present case a miss, consequently we have no hesitation in holding the very basis of initiation of penal proceedings u/s 271(1)(c) suffers from infirmity hence bad in law and deserves to be quashed in the light of law laid by the Hon’ble Apex Court in “Dilip N Shroff Vs JCIT” reported in 291 ITR 519 (SC), and we order accordingly.
8. In result, the appeal of the assessee is ALLOWED.
In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Thursday 30th day of March, 2023.
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