Anotra realators Private Limited, Chennai V. PCIT (Central)- 1, Chennai

ITA 1451/CHNY/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 0088 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-08-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 15-05-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law; Initiation of penalty proceedings; Set aside
• Section: 263; 271(1)(c); 143(3); 201; 69A; 192; 13; 153C; 20

Judgement Text

आयकर अपीलȣय अͬधकरण, ‘ए’ Ûयायपीठ, चेÛनई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI Įी महावीर ͧसंह, उपाÚय¢ एवं Įी एस.आर.रघ ु नाथा, लेखा सदèय के सम¢ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI S.R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.:1451/CHNY/2024 Ǔनधा[रण वष[/Assessment Year:2016-17 Anotra Realtors Pvt. Ltd., 19/20, RamLakhan Chamber, General Muthia Street, Sowcarpet, Chennai – 600 079. PAN: AAACA 7416M Vs. The Principal Commissioner of Income Tax (Central), Chennai – 1. (अपीलाथȸ/Appellant) (Ĥ×यथȸ/Respondent) अपीलाथȸ कȧ ओर से/Appellant by : Shri Samdariya Fateh Chand, Advocate Ĥ×यथȸ कȧ ओर से/Respondent by : Shri Nilay Baran Som, CIT स ु नवाई कȧ तारȣख/Date of Hearing : 07.08.2024 घोषणा कȧ तारȣख/Date of Pronouncement : 14.08.2024 आदेश /O R D E R PER MAHAVIR SINGH, VICE PRESIDENT: This appeal by the assessee is arising out of the Revision orders passed by the Principal Commissioner of Income-Tax (Central) Chennai-1, in ITBA/REV/F/REV5/2023-24/1063374365 (1) dated 26.03.2024. The assessment was framed by the Assistant Commissioner of Income Tax, Central Circle 1(1), Chennai for the - 2 - ITA No.1451/Chny/2024 assessment year 2016-17 u/s.153C of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 28.03.2022. 2. The only issue in this appeal of assessee is against the revision order passed by PCIT u/s.263 of the Act holding that the assessment order passed u/s.153C of the Act dated 28.03.2022 is erroneous insofar as prejudicial to the interest of Revenue for the reason that the AO has initiated penalty proceedings u/s.271AAC of the Act instead of initiating penalty u/s.271(1)(c) of the Act. 3. Brief facts are that a search u/s.132 of the Act was conducted on the business premises of the assessee company on 25.02.20220 and consequently, assessment u/s.153C of the Act was framed by the ACIT, Central Circle 1(1), Chennai vide order dated 28.03.2022. While passing the order u/s.153C of the Act, the AO initiated penalty proceedings u/s.271AAC of the Act firstly by para 4.10 as under:- “4.10 It is clear that the assessee was in the possession of the cash to the tune of Rs.5,18,49,128/- that are not recorded in their books of accounts and could not provide any explanation for the Source cash. Hence, the cash receipts during the financial year are treated as the unexplained money u/s 69A of the Income Tax Act, 1961 in the hands of the assessee company and it is liable to be added to their total income. Addition: Rs.5,18,49,128/- Penalty proceedings u/s 271AAC are initiated separately.” - 3 - ITA No.1451/Chny/2024 Subsequently, vide para 6 also he initiated penalty proceedings as under:- “6. Penalty proceedings u/s 271AAC are initiated separately.” The assessment has become final as the assessee has not challenged the same in appeal. 4. Subsequently, on perusal of assessment records for the relevant assessment year 2016-17, the PCIT issued show cause notice and fixed the hearing on 14.02.2024 asking the assessee as to why the assessment order passed u/s.143(3) r.w.s. 153C of the Act dated 28.03.2022 be not considered as erroneous insofar as prejudicial to the interest of Revenue in as much as penalty proceedings was initiated under wrong section of 271AAC of the Act instead of the provision of section 271(1)(c) of the Act. In response to the show-cause notice, the assessee filed reply but the PCIT was not convinced and passed the revision order directing the AO to initiate penalty proceedings u/s.271(1)(c) of the Act by observing in paras 8 to 10 as under:- “8. In this case penalty has been initiated under non-existing provision, which is as good as ‘non-initiation of penalty’. Penalty proceedings has to be initiated correctly under valid provisions. The penalty order, if it were to be passed subsequently under such wrong sections of the Act, is liable to be deleted by the appellate authorities. Thus, the assessment order in which penalty has been initiated under incorrect provisions of the Act is erroneous and prejudicial to the interest of Revenue. The facts that the AO - 4 - ITA No.1451/Chny/2024 has failed to initiate penalty under the correct provisions of the Act which amounts to non-initiation of penalty proceedings. As held by the Hon'ble Allahabad High Court in the case of CIT vs. Surendra Prasad Agarwal reported in275 ITR 113, non-initiation of penalty in the assessment order, such assessment order is amenable for invoking provisions of section 263 by the CIT. Thus, the submissions of the AR are not acceptable in this respect. 9. Further submission of the AR that the assessee has filed appeal before the CIT(A) against the assessment order which is pending and the powers of the appellate authority are co-terminus and co-extensive with that of the AO and hence., the CIT cannot revise the assessment order which is pending in appeal before the CIT(A) is not acceptable in the facts of this case since the issue of non-initiation of penalty under correct provision of the Act is not a ground before the CIT(A) and CIT(A) will not adjudicate on the ground which has not been raised before him. Besides, this issue is not pending in appeal before the CIT(A) and hence it cannot be said that the undersigned is seeking to revise an assessment order with respect to an issue which is pending in appeal before the CIT(A). Thus, the undersigned has assumed jurisdiction validly under section 263 of the Act and the submissions of the AR in this respect is also rejected. 10. In view of the above, I am satisfied that the order passed u/s 143(3) r.w.s.153C of the Act dated 28.03.2022 for assessment year 2016-17 is erroneous and prejudicial to the interest of Revenue, as penalty has not been initiated u/s 271(1 ) (c)of the Act. Therefore, I consider it appropriate to direct the AO to modify the assessment order dated 28.03.2022 with a direction to invoke provisions of section271(1)(c) of the I.T. Act in regard to the addition made of Rs.5,18,49,128/- u/s.69A of the I.T. Act. Aggrieved, assessee is in appeal before the Tribunal. 5. Before us, the ld.counsel for the assessee argued that the issue now stands covered by the decision of Jaipur Bench of this Tribunal in the case of Harish Jain & others in ITA Nos.214 to 223/JP/2022 & - 5 - ITA No.1451/Chny/2024 281 to 283/JP/2022, order dated 25.11.2022 and argued that on exactly similar facts and circumstances wherein the AO initiated penalty provisions u/s.271AAB(1A) of the Act instead penalty u/s.271(1)(c) of the Act. The ld.counsel for the assessee drew our attention to the relevant order of the ITAT, Jaipur Bench in the case of Harish Jain & Others supra. 6. On the other hand, the ld.CIT-DR relied on the decision of Hon’ble Madhya Pradesh High Court in the case of Addl.CIT vs. Indian Pharmaceuticals reported in [1980] 123 ITR 874 (MP) and also the order of Mumbai Bench of this Tribunal in the case of Anjis Developers Pvt. Ltd., in ITA No.959/Mum/2022, dated 20.02.2023. 7. We have heard rival contentions and gone through facts and circumstances of the case. We have gone through the assessment order passed by the AO u/s.153C of the Act dated 28.03.2022 and noted that the addition was made on account of possession of cash not recorded in the books of accounts and could not provide any explanation for the source of cash to the extent of Rs.5,18,49,128/-. This addition was made u/s.69A of the Act. Therefore the AO while making this addition initiated penalty proceedings at two places and the relevant paras 4.10, 5 to 8 read as under:- - 6 - ITA No.1451/Chny/2024 “4.10 It is clear that the assessee was in the possession of the cash to the tune of Rs.5,18,49,128/- that are not recorded in their books of accounts and could not provide any explanation for the Source cash. Hence, the cash receipts during the financial year are treated as the unexplained money u/s 69A of the Income Tax Act, 1961 in the hands of the assessee company and it is liable to be added to their total income. Addition: Rs.5,18,49,128/- Penalty proceedings u/s 271AAC are initiated separately. 5. Therefore, the assessee’s total income is computed as under: Returned Income Rs.4,49,130 Add: Addition u/s 69A of the Act – U/s.115BBE Rs.5,18,49,128 Total Assessed Income Rs.5,22,98,258 6. Penalty proceedings u/s 271AAC are initiated separately. 7. The Tax Computation Sheet and Demand Notice are enclosed. 8. This order is passed with the prior approval of the Additional Commissioner of Income Tax, Central Range-1, Chennai as per section 153D of the Income Tax Act.” From the above, it is clear that this order is passed with the prior approval of Additional Commissioner of Income Tax u/s.153D of the Act. Admittedly there is an application of mind. Firstly by the AO while initiating penalty proceedings u/s.271AAC of the Act and thereafter while granting approval and it has held by various courts that there should be application of mind while granting approval to the order of assessment passed u/s.153A / 153C of the Act. It means that two authorities i.e, ACIT, Central Circle 1(1), Chennai while framing assessment has initiated penalty proceedings - 7 - ITA No.1451/Chny/2024 u/s.271AAC of the Act and also approval was granted by the Add.CIT, Central Range-1, Chennai as per the provisions of section 153D of the Act. The approval granted by Addl.CIT, Central Range-1, Chennai u/s.153D of the Act is not mere formality. It requires application of mind. Admittedly, as noted by PCIT while revising assessment order directing the AO to initiate penalty proceedings u/s.271(1)(c) of the Act, has noted that the AO while framing assessment u/s.153C of the Act has initiated penalty proceedings u/s.271AAC of the Act, which is non-existent provision for the relevant assessment year. We agree with the noting done by PCIT that the provision of section 271AAC of the Act was brought on statute book by the Taxation Law (Second Amendment) Act, 2016, w.e.f. 01.04.2017 and will apply for and from assessment year 2017-18 onwards. Be it so, can the AO initiate penalty proceedings u/s.271AAC of the Act so casually and without going into the provisions and facts of the case instead of initiating penalty u/s.271(1)(c) of the Act. For the purpose of initiation of penalty proceedings u/s.271(1)(c) of the Act, the AO has to carry out exercise and the AO should even satisfy in the course of assessment proceedings regarding concealment of income and also the charge whether the assessee has concealed the particulars of its income or has furnished inaccurate particulars of its income. This issue has - 8 - ITA No.1451/Chny/2024 been deliberated by the Hon’ble Supreme Court in the case of D.M. Manasvi vs. CIT reported in [19720 86 ITR 557 (SC) and there, it has been laid down that what is contemplated by section 271(1) of the Act is that the AO should have been satisfied in the course of assessment proceedings regarding matters mentioned in clause (a), (b) and/or (c) of section 271(1) of the Act. Thus, it is amply clear that the satisfaction should precede the issue of notice and therefore, no legal satisfaction shall be inferred from the mere issuance of notice. A notice can be issued only after satisfaction has been recorded. This is what minimum is expected from the AO. In the present case before us, the AO seems to have not carried out any exercise, what to talk of initiation of penalty u/s.271(1)(c) of the Act or initiation of penalty u/s.271AAC of the Act. It means that the AO has not carried out basic exercise while initiating penalty proceedings during the assessment years under either of the sections i.e., section 271AAC or section 271(1)(c) of the Act. Admittedly, the provision of section 271AAC of the Act brought on statute book from 01.04.2017 by the Taxation Laws (Second Amendment) Act, 2016. 8. In view of the above discussion, now we want to discuss how the PCIT has directed the AO setting aside the assessment order - 9 - ITA No.1451/Chny/2024 passed u/s.153C of the Act dated 28.03.2022 and directed the AO to initiate penalty proceedings u/s.271(1)(c) of the Act instead of 271AAC of the Act. The PCIT has noted the decision of Hon’ble Allahabad High Court in the case of CIT vs. Surendra Prasad Agarwal reported in 275 ITR 113(All) wherein, the PCIT noted that, the Hon’ble High Court held that the assessment order in which penalty has been initiated under incorrect provisions of the Act is erroneous and prejudicial to the interest of revenue. 9. In these facts, now we have to discuss the case law cited by ld.counsel for the assessee of the Hon’ble Delhi High Court in the case of Addl.CIT vs. J.K.D’Costa reported in [1982] 133 ITR 7 (Delhi), wherein it is held that where penalty proceedings were initiated before or at the time of making assessment, the CIT cannot invoke power u/s.263(1) of the Act, so as to set aside the assessment order and direct the initiation of penalty proceedings u/s.271(1)(c) of the Act. The Hon’ble Delhi High Court in the case of J.K.D’Costa, supra held as under:- 6. We have heard Mr. Wazir Singh, learned counsel for the department, but we are of opinion that the conclusion reached by the Tribunal is the only possible conclusion that can be arrived at in the circumstances of the case. Section 263 enables the Commissioner to call for and examine the record of any proceedings under the Act and if he considers that any order passed therein by the ITO is erroneous, in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being - 10 - ITA No.1451/Chny/2024 heard and after making or causing to be made such enquiries as he deemed necessary, pass such orders thereon as the circumstances of the case justify. In the present case, the Addl. Commissioner called for the record of the assessment proceedings and it is also clear from this order that in his view the assessment orders passed by the ITO on 28th March, 1969, were erroneous and prejudicial to the interest of the revenue. As the Tribunal has rightly pointed out, his jurisdiction was confined to the proceedings of assessment and the assessment orders, and he had full powers to revise the assessment order in regard to any error he may discover therein which is prejudicial to the interest of the revenue. In the present case, the complaint of the Addl. Commissioner is that while completing the assessment and passing the assessment orders, the ITO had failed to take steps to charge interest and that he had also failed to initiate penalty proceedings against the assessed. The question, therefore, is whether these two aspects of the matter formed part of the proceedings which were being examined by the Commissioner and also whether these are two aspects which form an integral part of the assessment orders which the Commissioner is seeking to revise. The Tribunal has held, so far as the question of interest is concerned, that it is a part of the proceedings of assessment and that the direction to charge interest can also be said to be an integral part of the assessment order. So far as this part of the Commissioner's order is concerned, it has not been challenged by the assessee in the reference and we are not concerned with this part of the Commissioner's order. The only question before us us whether the Tribunal was right in revoking the order of the Addl. Commissioner in so far as it pertains to the question of penalties under ss. 271(1)(a) and 273(b). Here, we find ourselves in complete agreement with the view taken by the Tribunal. It is well established that proceedings for the levy of a penalty whether under s. 271(1)(a) or under s. 273(b) are proceedings independent of and separate from the assessment proceedings. Though the expression "assessment" is used in the Act with different meanings in different contexts, so far as s. 263 is concerned, it refers to a particular proceeding that is being considered by the Commissioner and it is not possible when the Commissioner is dealing with the assessment proceedings and the assessment order to expand the scope of these proceedings and to view the penalty proceedings also as part of the proceedings which are being sought to be revised by the Commissioner. There is no identity between the assessment proceedings and the penalty proceedings; the latter are separate proceedings, that may, in some cases, follow as a consequence of the assessment proceedings. As the Tribunal has pointed out, though it is usual for the ITO to record in the - 11 - ITA No.1451/Chny/2024 assessment order that penalty proceedings are being initiated, this is more a matter of convenience than of legal requirement. All that the law requires, so far as the penalty proceedings are concerned, is that they should be initiated in the court of the proceedings for assessment. It is sufficient if there is some record somewhere, even apart from the assessment order itself, that the ITO has recorded his satisfaction that the assessed is guilty of concealment or other default for which penalty action is called for. Indeed, in certain cases it is possible for the ITO to issue a penalty notice or initiate penalty proceedings even long before the assessment is completed though the actual penalty order cannot be passed until the assessment finalised. We, therefore, agree with the view taken by the Tribunal that the penalty proceedings do not form part of the assessment proceedings and that the failure of the ITO to record in the assessment order his satisfaction or the lack of it in regard to the leviability of penalty cannot be said to be a factor vitiating the assessment order in any respect. An assessment cannot be said to be erroneous or prejudicial to the interest of the revenue because of the failure of the ITO to record his opinion about the leviability of penalty in the case. We, therefore, answer the first question referred to us in the affirmative and in favor of the assessed. 9.1 Even it was pointed out by ld.counsel for the assessee before us that the Special Leave Petition was dismissed by the Hon’ble Supreme Court in the case of J.K.D’Costa and reported in [1984] 147 ITR (St.) 1 (SC). For the sake of reference, we are reproducing the decision of Hon’ble Supreme Court in the case of J.K.D’Costa, supra, where SLP was dismissed by observing as under:- "Revision : Commissioner in revision in assessment order whether can direct initiation of penalty proceedings. - Their Lordships P.N. Bhagwati and A.N. Sen, JJ. dismissed, as not being a fit case in which the question arising in the special leave petition should be decided, a special leave petition by the department against the judgment dated 27-4-1981 of the Delhi High Court in IT Reference No. 82 of 1974, reported in 133 ITR 7, whereby the High Court, on a reference, held that the Commissioner in a suo motu revision under section 263 of the Income-tax Act, 1961, of an - 12 - ITA No.1451/Chny/2024 assessment proceeding, was not entitled to set aside the assessment order on the ground that there was no mention of initiation of penalty proceedings in the assessment order, and to direct the ITO to make fresh assessment and to initiate penalty proceedings." 9.2 Similar proposition was laid down by various high courts as under:- i) Addl.CIT vs. Achal Kumar Jain, Keshrimal Parasmal, (1986) 157 ITR 484 (Raj) ii) Addl.CIT vs. Precision Metal Works, (1985) 156 ITR 693 (Del) iii) CWT vs. A.N. Sarvaria, (1986) 161 ITR 694 (Del) iv) Surendra Prasad Singh vs. CIT, (1988) 173 ITR 510, 515 (Gauh) v) CIT vs. Linotype and Machinery Ltd., (1991) 192 ITR 337, 341- 42 (Cal) vi) Addl.CIT vs. Sudershan Talkies, (1993) 200 ITR 153, 156(Del) vii) CIT vs. Sudershan Talkies, (1993) 201 ITR 289, 291 (Del) viii) CIT vs. Nihal Chand Rekyan (2000) 242 ITR 45 (Del) ix) CIT vs. C.R.K. Swamy, (2002) 254 ITR 158, 159 (Mad) x) State of Haryana vs. Dasunda Singh Waryam Singh (1996) 103 STC 128, 131 (Punj) following Deputy CCT vs. K.M. Thomas & Co. (1973) 31 STC 529 (Mad) xi) Bhavnagar Chemical Works (1946) Ltd vs. CST, (1991) 83 STC 409 (Guj) 10. Admittedly, there are other views possible as that in such circumstances, CIT can invoke his power u/s.263(1) of the Act, to set aside the assessment and direct the AO to make fresh assessment in accordance with law keeping in view the applicability of penalty provisions as in the case of case law cited by ld.CIT-DR of Hon’ble High Court of Madhya Pradesh in the cases of Addl.CIT vs. Indian Pharmaceuticals, supra and Addl.CIT vs. Kantilal Jain reported - 13 - ITA No.1451/Chny/2024 in [1980] 125 ITR 373 (MP), Addl.CWT vs. Nathoolal Balaram reported in [1980] 125 ITR 596 (MP) and Hon’ble High Court of Allahabad in the case of CIT vs. Braj Bhushan Cold Storage reported in [2005] 275 ITR 360 (All) 11. The opposite view taken by the Hon’ble High Court of Madhya Pradesh in the case of Indian Pharmaceuticals, supra wherein the Hon’ble Madhya Pradesh High Court held that during the pendency of assessment proceedings, the AO has omitted to take the notice of fact attracting section 271(1)(a) of the Act, which ultimate ended in an order of assessment, the order would be erroneous and hence, the CIT was right in exercising jurisdiction u/s.263 of the Act. In the present case before us, in our view, this is diametrically opposite view what is taken by Hon’ble Madras High Court, Gauhati High Court, Delhi High Court, Rajasthan High Court as noted above. One more aspect considered by Hon’ble Allahabad High Court in the case of Surendra Prasad Agarwal, supra that the AO has to initiate proceedings for imposing of penalty during the course of assessment proceedings itself but if he fails to initiate or record his satisfaction for initiation of penalty proceedings during the course of assessment proceedings, it would be a case where the assessment order can be said to be erroneous as he has not decided a point nor recording a - 14 - ITA No.1451/Chny/2024 finding on the issue which ought to have been done or decides it wrongly. Accordingly, the Hon’ble High Court held that omission of the AO to initiate penalty proceedings during the course of assessment renders the assessment order erroneous and prejudicial to the interest of revenue. This is again a diametrically opposite view to the decision of Hon’ble High Court of Madras. The Hon’ble High Court of Madras in the case of CIT vs. C.R.K Swamy, supra, by following the decision of Hon’ble Delhi High Court in the case of Sudershan Talkies, supra, has answered substantial question of law and held that the revision of assessment by CIT on the ground that the penalty proceedings has not been initiated was unsustainable and non-initiation of penalty proceedings u/s.271(1)(c) of the Act do not render the assessment erroneous or prejudicial to the interest of Revenue and consequently, the CIT is not justified in assuming jurisdiction u/s.263 of the Act. The Hon’ble High Court of Madras held as under:- 1. The order of the Tribunal holding that the addition to income was not justified, having become final, the Tribunal's order holding that the revision of assessment by the Commissioner on the ground that penalty proceedings had not been initiated was unsustainable, in the circumstances, is an order which is required to be upheld. 2. Moreover, as held by a Bench of the Delhi High Court in the case of Addl. CIT v. Sudershan Talkies [1993] 200 ITR 153, failure on the part of the assessing authority to initiate penalty proceedings would not give jurisdiction to the Commissioner of Income-tax to pass an order under - 15 - ITA No.1451/Chny/2024 Section 263 of the Income-tax Act, 1961 and to direct initiation of such proceedings. We are in respectful agreement with that view. 3. The question referred to us for the assessment year 1984-85, as to whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in setting aside the order passed under Section 263 of the Income-tax Act and holding that non-initiation of penalty proceedings under Section 271(1)(c) do not render the assessment made dated January 16, 1989, erroneous or prejudicial to the interests of the Revenue and consequently the Commissioner of Income-tax is not justified in assuming under Section 263, is therefore answered in favour of the assessee and against the Revenue. 12. We have also gone through the judgment of Hon’ble Delhi High Court in the case of Sudershan Talkies, supra, and noted that the Hon’ble High Court of Delhi has framed the question of law as under:- "Whether, on the facts and circumstances of the case, the Tribunal was correct in holding that the question of levying penalty under section 273(b) was totally extraneous to the scope of the assessment order, and, as such, it could not be covered by recourse to section 263 of the Income-tax Act, inasmuch as it was neither prejudicial to the interests of the Revenue nor was erroneous ?" Answering this question, the Hon’ble High Court of Delhi considering the various case laws including considering the judgment of Hon’ble Supreme court in SLP in the case of J.K.D’Costa, supra has held that CIT has erred in passing order u/s.263 of the Act insofar as he directed the AO to initiate penalty proceedings u/s.273B of the Act. - 16 - ITA No.1451/Chny/2024 The Hon’ble Delhi High Court answered the question in affirmative and against the Revenue by observing as under:- “7. It has been vehemently contended by Shri Gupta that the Tribunal was wrong in arriving at the aforesaid conclusion. It is submitted by learned counsel that when the Income-tax Officer had failed to initiate proceedings under section 273 it had acted in a manner prejudicial to the interests of the Revenue, and, therefore, the Commissioner of Income-tax was fully justified in taking recourse to the provisions of section 263 of the Act. In support of this, learned counsel places reliance upon the decisions reported as Addl. CIT v. Indian Pharmaceuticals [1980] 125 ITR 373 (MP) and Add. CWT v. Nathoolal Balaram [1980] 125 ITR 596 (MP). It is no doubt true that the said decisions help the contention raised by learned counsel for the Revenue but as far as this court is concerned the matter is no longer res integra. A similar question had come up for consideration before this court in the case of Addl. CIT v. J. K. D'Costa [1982] 133 ITR 7. Proceedings for levy of penalty were not initiated by the Income-tax Officer and the Commissioner had, in that case, passed an order under section 263 of the Act and directed the Income-tax Officer to initiate proceedings for the levy of penalty. This court came to the conclusion that the proceedings for the levy of penalty whether under section 271(1)(a) or section 273(b) are proceedings independent of, and separate from, the assessment proceedings. It then came to the conclusion that failure to initiate penalty proceedings would not give jurisdiction to the Commissioner of Income-tax to pass an order under section 263 and direct initiation of penalty proceedings. After this point was decided in favor of the assessed, the Commissioner of Income-tax filed a special leave petition being SLP (Civil) Nos. 11391-11392 of 1981 (see [1984] 147 ITR (St) 1) and the same was dismissed by the Supreme Court on March 2, 1984. It is clear, therefore, that the Division Bench decision of this court in J.K. D'Costa's case [1982] 133 ITR 7 has been confirmed by the Supreme Court and the facts of that case are similar to the facts of the present case. It must follow, therefore, that the Tribunal was right in setting aside the order of the Commissioner of Income-tax passed under section 263 of the Act in so far as it directed the Income-tax Officer to initiate penalty proceedings under section 273(b) of the Act. The question of law is, therefore, answered in the affirmative and against the Revenue.” - 17 - ITA No.1451/Chny/2024 13. In the present case before us, admittedly assessment was framed u/s.153C of the Act and the AO initiated penalty proceedings u/s.271AAC of the Act, which is non-existent provision and the same was also approved by the Addl.CIT u/s.153D of the Act. But there is no recording of any satisfaction that the assessee has concealed the particulars of income or furnished inaccurate particulars of income. Once there is no satisfaction recorded in the order, the order cannot be subject matter of revision u/s.263 of the Act by the PCIT in view of another decision of Hon’ble High Court of Madras in the case of CIT vs. Chennai Metro Rail Ltd., in Tax Case (Appeal) No.745 of 2017, wherein the Hon’ble Madras High Court considering the decision of Hon’ble Allahabad High Court in the case of Surendra Prasad Agarwal, supra, concurred with the decision of Hon’ble Allahabad High Court but given a finding that the AO has to record his satisfaction or establish that the assessee has concealed his income by filing inaccurate particulars of income. In the absence of the same, the Hon’ble High Court held that the Tribunal has rightly set aside the directions of CIT directing the AO to initiate penalty proceedings although they have not agreed with the reasoning’s in its entirety. The Hon’ble High Court observed as under:- - 18 - ITA No.1451/Chny/2024 “14. In view of Section 271(1) read with Section 263 of the Act, the Principal Commissioner might pass such order as the circumstances of the case might justify, which could include an order enhancing or modifying the assessment or cancelling the assessment or directing a fresh assessment. Directing fresh assessment would, in our view, include assessment of penalty. It cannot, therefore, be said that the Principal Commissioner had no jurisdiction to pass such order. The issue has been decided by a Division Bench of the High Court of Allahabad in Commissioner of Income-tax v. Surendra Prasad Agrawal, reported in (2005) 142 Taxman 653 (Allahabad). However, the Principal Commissioner, we find, has recorded a finding that “on examination of the records, it is found that the Assessing Officer had in the assessment order established that the Assessee had concealed his income by filing inaccurate particulars”. There is no such finding in the order of assessment. The Principal Commissioner seems to have distorted the order of assessment. The finding of the Principal Commissioner is to that extent perverse. 15. In our view, in the absence of any finding of the Assessing Officer with regard to concealment of income or with regard to furnishing of inaccurate particulars of income, the Commissioner clearly erred in holding that omission to record satisfaction to initiate penalty proceedings was erroneous or prejudicial to the interest of Revenue. The learned Tribunal rightly set aside the direction of the Principal Commissioner directing the Assessing Officer to initiate penalty proceedings although we may not agree with the reasoning in its entirety.” 14. Here one more aspect was pointed out by the Department that even the authorities can levy penalty i.e., AO or CIT(A) or PCIT or CIT in the course of assessment proceedings under section 271(1) of the Act. The Revenue contended that these authorities have power to initiate penalty proceedings and hence, the PCIT u/s.263 of the Act has jurisdiction in directing the AO to initiate penalty proceedings u/s.271(1)(c) of the Act. We do not agree with the contentions - 19 - ITA No.1451/Chny/2024 raised by ld.CIT-DR for the reason that section 271(1)(a), (b) or (c) is for levy of penalty, it gives power for levy of penalty in the proceedings before him and the revisionary power u/s.263 of the Act is entirely distinct and different power which upset the assessment completed and creates uncertainty. For that, this power cannot be exercised for directing the AO to initiate penalty under this provision. In our view, if the proceedings are pending before PCIT or CIT(A) or the AO like assessment proceedings, they are well within the power to initiate and levy penalty. But for that, that authority has to initiate and levy the penalty. Hence, in our view, this argument of Revenue fails. 15. In view of the foregoing discussions, in the given facts of the present case we note that there is no finding in the assessment order to the effect that there is concealment of income or furnishing of inaccurate particulars of income. Hence, the impugned action of the PCIT cannot be countenanced. For such a proposition, we rely on the ratio of decisions of Hon’ble High Court of Madras in the case of Chennai Metro Rail Ltd., supra and C.R.K.Swamy, supra. Hence, we are inclined to set aside the impugned revision order. - 20 - ITA No.1451/Chny/2024 16. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 14 th August, 2024 at Chennai. Sd/- Sd/- (एस.आर. रघ ु नाथा) (S.R. RAGHUNATHA) लेखा सदèय/ACCOUNTANT MEMBER (महावीर ͧसंह ) (MAHAVIR SINGH) उपाÚय¢ /VICE PRESIDENT चेÛनई/Chennai, Ǒदनांक/Dated, the 14 th August, 2024 RSR आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy to: 1. अपीलाथȸ/Appellant 2. Ĥ×यथȸ/Respondent 3. आयकर आय ु Èत /CIT, Chennai 4. ͪवभागीय ĤǓतǓनͬध/DR 5. गाड[ फाईल/GF.