Vikas Vijay Gupta Vs PCIT (ITAT Ahmedabad)
Procedural error in penalty proceedings can be rectified- ITAT Ahmedabad confirms validity of revision u/s 263 for wrong penalty notice
PCIT in 263 order held that though the AO in the body of the reassessment order concluded the unexplained amount of Rs.66,63,250/= is required to be taxed u/s.69A in line with section 115BBE & also initiated penalty proceeding u/s.271AAC[1] but erroneously issued penalty notice u/s.271[1][c], which is erroneous & prejudicial to the interest of the Revenue & thereby set aside the notice issued u/s.274 rws 271[1][c] & directed the A.O. to issue fresh notice u/s.271AAC[1]
Before the Tribunal, assessee submitted that the penalty proceedings are independent & distinct from the assessment proceedings & that failure to initiate or wrongful initiation of penalty proceedings does not affect the validity of the assessment order. PCIT cannot direct AO to initiate penalty through revision proceedings, when the AO already applied his mind & initiated penalty, even if under the wrong section & thereby quashed the Revision proceeding.
Dept submitted that omission by the AO to initiate penalty proceedings has squarely rendered the assessment order erroneous & prejudicial to the interest of Revenue.
Tribunal distinguished the case laws relied upon by the assessee wherein AO had not recorded the satisfaction for initiation of penalty proceedings. Tribunal observed that in this case it is not in dispute that the AO consciously & correctly invoked section 271AAC(1) in the reassessment order, but wrongly issued penalty notice u/s.271(1)(c) , which is at best, a procedural defect that could have been rectified by the AO himself invoking section 292B.
