SHRI DIGPAL JAISWAL,KATNI vs. INCOME TAX OFFICER, WARD -1, KATNI

The present appeals have been filed by assessee against the different orders of ld.PCIT-2, Jabalpur & ld. NFAC/CIT(A),New Delhi dated 27.02.2019 & 19.08.2021

The assesse has raised the following grounds of appeal in are as under:-

The assesse has raised the following grounds of appeal in

The order u/s 263 has been passed on 27/02/2019 wherein assessment framed u/s 143 r.w.s. 147 of I.T. Act 1961 on 20/06/2016 has been set-aside to make fresh assessment by holding that the order passed by A.O. is erroneous and prejudicial to the interest of Revenue in respect to following two matters.

The ld. PCIT has observed that non-application of mind for proper examination of case has rendered the order erroneous in so far as it is prejudicial to the interest of the Revenue.

In the case of assessee, regular assessment has been made u/s 143(3) of I.T. Act 1961 on 26/02/2014 by ITO, Ward - 1, Katni after due examination of audited financial statements and books of account. A.O. has made addition of Rs. 1,00,000/ - out of various expenses claimed in profit and loss account.

Notice u/s 148 of I.T. Act 1961 was issued on 07/01/2016. The reasons recorded indicate that - Notice u/s 148 was issued for escapement of income for no disallowance made u/s 4 Digpal Jaiswal 40(a)(ia) of I.T. Act 1961 for interest paid without deduction of tax at source at Rs.3,23,670/- to Shriram Finance Ltd. Query letter dated 06/05/2016 was issued to enquire details of interest paid at Rs.3,23,670/- and TDS thereupon. In the case of assessee detailed explanation was submitted in reassessment proceedings to explain that there was no claim for deduction on account of interest. Thus there is no scope for any disallowance to be made u/s 40(a)(ia) of I.T. Act 1961 for interest paid. Thus there is no escapement of income. Reassessment was framed after examining the submission of assessee. Finding is recorded at para 3 of reassessment order that there is no claim for interest payment in Profit & Loss Account. Thus there remain no escapement of income in terms of reasons recorded. Reassessment was framed on income determined in original assessment on 26/02/2014.

Considering the above factual position in this regard and their being no claim of interest in Profit & Loss Accoun t for any interest paid and no deduction having been allowed for any interest paid in reassessment framed there remains no scope for any enquiry about deduction of tax at source on any interest paid for the purpose of determination of assessable income. Assessment order, thus in no manner of consideration can be considered as erroneous and prejudicial to the interest of Revenue.

Hence, we hold that unequivocally hold that the Jurisdiction exercised by PCIT u/s 263 of I.T. Act 1961 to hold that order passed in reassessment is erroneous is unsustainable and bad in law.

In the result appeal of the assessee is allowed.

The order imposing penalty u/s 271(1)(b) of I.T. Act 1961 has been passed imposing penalty at Rs. 10,000/- for no complying to notice u/s 142(1) of I.T. act 1961 dated 05/09/2019.

Notice u/s 142(1) was in the set aside assessment proceedings pursuance to order passed u/s 263 of I.T. Act 1961. We find that the information required in the notice u/s 142(1) dated 05/09/2019 (P 38 - 39) was already matter of record and available on file of the Assessing Officer. The same is the matter record in the office note of the Assessing Officer.

Bare perusal of provisions of section 271(1)(b) indicates A.O. is required to be satisfied in the course of any proceedings under the Act for default before levying penalty. Assessment order passed on 16/10/2019 (P 14 - 18) does not indicate any satisfaction recorded for levy of penalty u/s 271(1)(b) hence, we hold that penalty levied is unjustified.

In the result, the appeal of the assesse is allowed. Order Pronounced in the Open Court on 30/11/2023.