CIT cannot direct AO to initiate Penalty while exercising Revisional Jurisdiction: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench has held that the Commissioner of Income Tax (CIT), while exercising his revisional jurisdiction, cannot direct the Assessing Officer to initiate penalty under section 271(1)(c) of the Income Tax Act, 1961.

The revisionary power was exercised on the order passed by the Assessing Officer in the case of the assessee in reassessment proceedings under section of the 147 of the Act.

Relying of the ITAT Ahmedabad bench’s decision in the case of ITAT Ahmedabad Benches in the case of Easy Transcription and Software Pvt. Ltd. vs. CIT, the two-member bench comprising Accountant Member Ms. Annapurna Gupta and Judicial Member Ms. Masdhumita Roy held that the assessment and penalty proceedings are separate and distinct proceedings and the CIT cannot set aside the assessment order for the sole of initiating penalty proceedings.

“Pointing out the above, the ITAT held that as per the decision of the Jurisdictional High Court, the absence of lack of authority to initiate penalty proceedings by the CIT was not the sole reason for the Hon’ble High Court to hold that the CIT lacked jurisdiction u/s. 263 of the Act and the rest of the reasons still applied post amendment. The decisions of the jurisdictional High Court were accordingly held to apply post amendment to section 271(1)(c) of the Act,” the bench said.

“In view of the above, it is clear that post amendment to section 271(1)(c) w.e.f. 1-4-2002 authorizing the commissioner also initiate penalty u/s 271(1)(c), the CIT still cannot direct the Assessing Officer to initiatepenalty proceedings while exercising his revisionary power u/s. 263 of the act. The decision of the Jurisdictional High Court in the case of CIT vs. Parmanand M. Patel(supra) still holds fort. The order of the PCIT exercising revisionary powers for directing initiation of penalty proceedings is therefore held to be not in accordance with law and is accordingly set aside,” the bench concluded.

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