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Income Tax Appellate Tribunal, MUMBAI BENCH “A” MUMBAI
Before: SHRI KULDIP SINGH & SHRI OM PRAKASH KANT
This appeal by the assessee is directed against revision order dated 10.03.2022 passed by the Ld. Principal Commissioner of Income-tax-5, Mumbai (in short ‘the Ld. PCIT’) for assessment year 2017-18, raising following grounds :
1. That the Ld. Pr CIT erred in holding that the Assessing Officer was bound by law to initiate proceedings for Anjis Developers Pvt. Ltd. 2 AY 2017-18 imposition of penalty w/s 270A of the Act in every imposition of penalty w/s 270A of the Act in every imposition of penalty w/s 270A of the Act in every assessment proceeding. assessment proceeding.
2. That the Ld. Pr CIT erred in holding that non That the Ld. Pr CIT erred in holding that non-initiation of That the Ld. Pr CIT erred in holding that non proceedings for imposition of penalty w/s proceedings for imposition of penalty w/s 270A of the Act 270A of the Act by itself renders the Assessment Order erroneous and by itself renders the Assessment Order erroneous and by itself renders the Assessment Order erroneous and prejudicial to interest of Revenue. prejudicial to interest of Revenue.
3. That the Ld. Pr CIT erred in holding that non That the Ld. Pr CIT erred in holding that non-initiation of That the Ld. Pr CIT erred in holding that non proceedings for imposition of penalty u/s 270A of the Act proceedings for imposition of penalty u/s 270A of the Act proceedings for imposition of penalty u/s 270A of the Act by itself was prejudicial to the by itself was prejudicial to the interest of the Revenue, interest of the Revenue, without forming an independent prima face belief that the without forming an independent prima face belief that the without forming an independent prima face belief that the initiation of penalty proceeding can result in imposition of initiation of penalty proceeding can result in imposition of initiation of penalty proceeding can result in imposition of penalty w/s 270A of the Act. penalty w/s 270A of the Act.
4. That when there are two views possible on whether the That when there are two views possible on whether the That when there are two views possible on whether the Ld. A.O. is bound to initiate Ld. A.O. is bound to initiate proceedings for imposition of proceedings for imposition of penalty in every case where an addition is made by the penalty in every case where an addition is made by the penalty in every case where an addition is made by the A.O. in the course of assessment, the Pr CIT erred in A.O. in the course of assessment, the Pr CIT erred in A.O. in the course of assessment, the Pr CIT erred in holding the Assessment order to the erroneous. holding the Assessment order to the erroneous. holding the Assessment order to the erroneous.
5. The Ld. Pr CIT erred in directing the A.O. to initiate The Ld. Pr CIT erred in directing the A.O. to initiate The Ld. Pr CIT erred in directing the A.O. to initiate proceedings fo proceedings for imposition of penalty, when the A.O. has r imposition of penalty, when the A.O. has the discretion to initiate penalty proceedings. The the discretion to initiate penalty proceedings. The the discretion to initiate penalty proceedings. The authority to initiate proceedings for imposition of penalty authority to initiate proceedings for imposition of penalty authority to initiate proceedings for imposition of penalty is with the A.O. alone, who has to form a belief that the is with the A.O. alone, who has to form a belief that the is with the A.O. alone, who has to form a belief that the addition made in the course of assessment is a fit case addition made in the course of assessment i addition made in the course of assessment i for examination as to whether penalty is impossible. for examination as to whether penalty is impossible. for examination as to whether penalty is impossible. Where the A.O. has formed a belief that the addition Where the A.O. has formed a belief that the addition Where the A.O. has formed a belief that the addition made in the course of assessment does not even warrant made in the course of assessment does not even warrant made in the course of assessment does not even warrant initiation of proceedings for imposition of penalty, the Pr initiation of proceedings for imposition of penalty, the Pr initiation of proceedings for imposition of penalty, the Pr CIT, though a supervis CIT, though a supervisory authority to the A.O., could not ory authority to the A.O., could not have stepped into the shoes of the A.O. to have directed have stepped into the shoes of the A.O. to have directed have stepped into the shoes of the A.O. to have directed the A.O. to initiate penalty proceedings. the A.O. to initiate penalty proceedings.
6. The Appellant craves leave to, add to, alter, amplify, The Appellant craves leave to, add to, alter, amplify, The Appellant craves leave to, add to, alter, amplify, modify or delete all or any of the aforesaid grounds at or modify or delete all or any of the aforesaid grounds at or modify or delete all or any of the aforesaid grounds at or before before the hearing.
Briefly stated facts of the case are that the assessee e Briefly stated facts of the case are that the assessee e Briefly stated facts of the case are that the assessee e-filed its return of income on 23.10.2017 declaring loss of Rs.9,40,85,832/-. return of income on 23.10.2017 declaring loss of Rs.9 return of income on 23.10.2017 declaring loss of Rs.9 The assessee was engaged in the business of real estate The assessee was engaged in the business of real estate The assessee was engaged in the business of real estate development. The case was selected for scrutiny a . The case was selected for scrutiny a . The case was selected for scrutiny and Assessing Anjis Developers Pvt. Ltd. 3 AY 2017-18 Officer assessed deemed rental income on the stock-in-trade of Officer assessed deemed rental income on the stock Officer assessed deemed rental income on the stock unsold flats and made addition of Rs.75,40,807/ flats and made addition of Rs.75,40,807/- u/s 143(3) of the u/s 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) tax Act, 1961 (in short ‘the Act’). However, in the . However, in the assessment order, the Assessing Officer did not initiate penalty assessment order, the Assessing Officer did not initia assessment order, the Assessing Officer did not initia proceedings u/s 270A of the Act proceedings u/s 270A of the Act.
The Ld. PCIT called for the assessment record The Ld. PCIT called for the assessment record The Ld. PCIT called for the assessment records and after examining the same examining the same, he was of the view that in view of addition he was of the view that in view of addition made of Rs.75,40,807/ made of Rs.75,40,807/- under the head ‘income from under the head ‘income from house property’ in respect of unsold property’ in respect of unsold flats,the Assessing Officer was he Assessing Officer was required to initiate penalty proceedings u/s 270A of the Act and initiate penalty proceedings u/s 270A of the Act and initiate penalty proceedings u/s 270A of the Act and non-initiation of penalty of penalty has rendered the assessment order has rendered the assessment order erroneous in so far as prejudicial to the interest of the Revenue erroneous in so far as prejudicial to the interest of the Revenue erroneous in so far as prejudicial to the interest of the Revenue within the meaning of section 26 within the meaning of section 263 of the Act. The 3 of the Act. The Ld. PCIT after considering submission of the assessee held the assessment order considering submission of the assessee held the assessment order considering submission of the assessee held the assessment order as erroneous and prejudicial to the interest of the Revenue as erroneous and prejudicial to the interest of the Revenue as erroneous and prejudicial to the interest of the Revenue observing as under:
“1. The submission of the assessee has been carefully 1. The submission of the assessee has been carefully 1. The submission of the assessee has been carefully considered. The assessee company, in its submission has considered. The assessee company, in its submission has considered. The assessee company, in its submission has stated that section 263 cannot be initiated for non initiation of stated that section 263 cannot be initiated for non initiation of stated that section 263 cannot be initiated for non initiation of penalty proceedings as levy of penalty proceedings are penalty proceedings as levy of penalty proceedings are penalty proceedings as levy of penalty proceedings are independent of and separat independent of and separate from the assessment proceedings. e from the assessment proceedings. The power of revision by the CIT us.263 of the Act is very wide The power of revision by the CIT us.263 of the Act is very wide The power of revision by the CIT us.263 of the Act is very wide and it is in the nature of supervisory jurisdiction. It is well and it is in the nature of supervisory jurisdiction. It is well and it is in the nature of supervisory jurisdiction. It is well settled that incorrect assumption of facts or application of law settled that incorrect assumption of facts or application of law settled that incorrect assumption of facts or application of law satisfies the requirement of satisfies the requirement of lawi.e. order being erroneous & lawi.e. order being erroneous & prejudicial to the interest of revenue. The order passed by the prejudicial to the interest of revenue. The order passed by the prejudicial to the interest of revenue. The order passed by the A.O. without application of mind or order showing apparent A.O. without application of mind or order showing apparent A.O. without application of mind or order showing apparent error of reasoning the order where the A.O. simply accepts error of reasoning the order where the A.O. simply accepts error of reasoning the order where the A.O. simply accepts Anjis Developers Pvt. Ltd. 4 AY 2017-18 where the assessee stated in his return o where the assessee stated in his return of income and fails to f income and fails to make the enquiries which are called for in the facts and make the enquiries which are called for in the facts and make the enquiries which are called for in the facts and circumstances of the case will also call for intervention us 263 circumstances of the case will also call for intervention us 263 circumstances of the case will also call for intervention us 263 of the Act by the CIT/Pr.CIT. It is a trite law that the disclosure of the Act by the CIT/Pr.CIT. It is a trite law that the disclosure of the Act by the CIT/Pr.CIT. It is a trite law that the disclosure of facts by the assessee in the return of in of facts by the assessee in the return of income and for in the come and for in the course of assessment proceedings cannot give immunity from course of assessment proceedings cannot give immunity from course of assessment proceedings cannot give immunity from revisional Jurisdiction of the CIT/Pr. CIT u/s 263. revisional Jurisdiction of the CIT/Pr. CIT u/s 263.
In this context, it may be mentioned here that in the cases of 1. In this context, it may be mentioned here that in the cases of 1. In this context, it may be mentioned here that in the cases of CIT vs. Smt. Kiran Jaiswal, CIT vs. Ganeshi Lal Ram Krishna CIT vs. Smt. Kiran Jaiswal, CIT vs. Ganeshi Lal Ram Krishna CIT vs. Smt. Kiran Jaiswal, CIT vs. Ganeshi Lal Ram Krishna and CIT Vs. Surendra Prasad Agarwal (2005) 275 IT 113 (All), and CIT Vs. Surendra Prasad Agarwal (2005) 275 IT 113 (All), and CIT Vs. Surendra Prasad Agarwal (2005) 275 IT 113 (All), the Hon'ble Allahabad High Court held that the omission of the the Hon'ble Allahabad High Court held that the omission of the the Hon'ble Allahabad High Court held that the omission of the AO to initiate penalty proceedings during the course of the AO to initiate penalty proceedings during the course of the AO to initiate penalty proceedings during the course of the assessment renders the assessment order erroneous and assessment renders the assessment order erroneous and assessment renders the assessment order erroneous and prejudicial to th prejudicial to the interest of the revenue. In such factual e interest of the revenue. In such factual background, I am of the considered view that the impugned background, I am of the considered view that the impugned background, I am of the considered view that the impugned assessment was made by the AO is erroneous in so far as it is assessment was made by the AO is erroneous in so far as it is assessment was made by the AO is erroneous in so far as it is prejudicial to the interests of the revenue. prejudicial to the interests of the revenue.
As per amended law, Explanation 2 clause (a) 5. As per amended law, Explanation 2 clause (a) 5. As per amended law, Explanation 2 clause (a) below section 263(1) of the Act, any assessment made without conducting 263(1) of the Act, any assessment made without conducting 263(1) of the Act, any assessment made without conducting requisite enquiry and verification by the AO is erroneous in so requisite enquiry and verification by the AO is erroneous in so requisite enquiry and verification by the AO is erroneous in so far as it is prejudicial to the interests of revenue. Even under far as it is prejudicial to the interests of revenue. Even under far as it is prejudicial to the interests of revenue. Even under pre-amended law, SC in the case of Smt. Tara Devi Agarw amended law, SC in the case of Smt. Tara Devi Agarwal (88 amended law, SC in the case of Smt. Tara Devi Agarw ITR 0323] and also Rampyari Devi Saraogi (67 IT 0084] have ITR 0323] and also Rampyari Devi Saraogi (67 IT 0084] have ITR 0323] and also Rampyari Devi Saraogi (67 IT 0084] have held that any assessment completed without necessary held that any assessment completed without necessary held that any assessment completed without necessary enquirjes as warranted on facts of the case is erroneous in so enquirjes as warranted on facts of the case is erroneous in so enquirjes as warranted on facts of the case is erroneous in so far as it is prejudicial to the interests of revenue. far as it is prejudicial to the interests of revenue. 5.1Hence, considerin 5.1Hence, considering the facts in totality. I am of the g the facts in totality. I am of the considered opinion that the AOin the instant case has failed to considered opinion that the AOin the instant case has failed to considered opinion that the AOin the instant case has failed to conduct all necessary enquiries as warranted on facts of the conduct all necessary enquiries as warranted on facts of the conduct all necessary enquiries as warranted on facts of the case and as discussed in this order supra. Hence, the case and as discussed in this order supra. Hence, the case and as discussed in this order supra. Hence, the assessing officer is directed to initiat assessing officer is directed to initiate penalty us.270A of the e penalty us.270A of the Act and decide the same on merits as per, law. The assessment Act and decide the same on merits as per, law. The assessment Act and decide the same on merits as per, law. The assessment order is erroneous in so far as it is prejudicial to the interests of order is erroneous in so far as it is prejudicial to the interests of order is erroneous in so far as it is prejudicial to the interests of the revenue in respect of non the revenue in respect of non-initiation of penalty proceedings initiation of penalty proceedings as per law as warranted on facts of as per law as warranted on facts of the case. Accordingly, the the case. Accordingly, the same is hereby set aside same is hereby set aside 5.2The AO is hereby directed to initiate penalty proceedings as 5.2The AO is hereby directed to initiate penalty proceedings as 5.2The AO is hereby directed to initiate penalty proceedings as per law and decide thesame on merits after conducting all per law and decide thesame on merits after conducting all per law and decide thesame on merits after conducting all Anjis Developers Pvt. Ltd. 5 AY 2017-18 necessary enquiries and verifications as warranted on facts of necessary enquiries and verifications as warranted on facts of necessary enquiries and verifications as warranted on facts of the case and also the case and also after giving due opportunity of being heard to after giving due opportunity of being heard to the assessee before passing the assessment order. the assessee before passing the assessment order. the assessee before passing the assessment order.”
Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that to initiate or not to to initiate penalty proceedings initiate penalty proceedings iswithin the discretionary authorityand satisf ary authorityand satisfaction of the Assessing Officer and of the Assessing Officer and the Ld. PCIT cannot replace the satisfaction of the Assessing Officer the Ld. PCIT cannot replace the satisfaction of the Assessing Officer the Ld. PCIT cannot replace the satisfaction of the Assessing Officer by his own satisfaction. The Ld. Counsel referred to the submission by his own satisfaction. The Ld. Counsel referred to the submission by his own satisfaction. The Ld. Counsel referred to the submission made before the Ld. PCIT. The Ld. Counsel also relied on the made before the Ld. PCIT. The Ld. Counsel also relied on the made before the Ld. PCIT. The Ld. Counsel also relied on the le Delhi High Court in the case of Addl. CIT v. decision of the Hon’b decision of the Hon’ble Delhi High Court in the case of J.K. D’s Costa [1982] 9 Taxman 88 (Delhi) and Addl. CIT v. J.K. D’s Costa [1982] 9 Taxman 88 (Delhi) and Addl. CIT v. J.K. D’s Costa [1982] 9 Taxman 88 (Delhi) and Addl. CIT v. Achal Kumar Jain [1982] 11 Taxman 228 (Delhi) Achal Kumar Jain [1982] 11 Taxman 228 (Delhi).
5. On the contrary, the Ld. Departmental Representative (DR) On the contrary, the Ld. Departmental Representative (DR) On the contrary, the Ld. Departmental Representative (DR) submitted that omission submitted that omission by the Assessing Officer to initiate penalty Officer to initiate penalty proceedings has squarely rendered the assessment order erroneous squarely rendered the assessment order erroneous squarely rendered the assessment order erroneous and prejudicial to the and prejudicial to the interest of Revenue.In support support, he relied on the Hon’ble Allahabad High Court in the case of CIT v. Surendra CIT v. Surendra the Hon’ble Allahabad High Court in the case of Prasad Agrawal [2005] 142 Taxma Prasad Agrawal [2005] 142 Taxman 653 (Allahabad) n 653 (Allahabad).
We have heard rival submission of the parties on the issue We have heard rival submission of the parties on the issue We have heard rival submission of the parties on the issue-in- dispute and perused the relevant material on record. According to dispute and perused the relevant material on record. According to dispute and perused the relevant material on record. According to the Ld. PCIT, the Assessing Officer failed to make inquiries on the the Ld. PCIT, the Assessing Officer failed to make inquiries on the the Ld. PCIT, the Assessing Officer failed to make inquiries on the issue of initiating penalty proceedin issue of initiating penalty proceedings u/s 270A of the Act and gs u/s 270A of the Act and said action of the Assessing Officer is without application of the action of the Assessing Officer is without application of the action of the Assessing Officer is without application of the mind.Before the Ld. PCIT,i .Before the Ld. PCIT,it was submitted on behalf of the assessee t was submitted on behalf of the assessee Anjis Developers Pvt. Ltd. 6 AY 2017-18 that all material facts were disclosed before the Assessing Officer.It that all material facts were disclosed before the Assessing Officer that all material facts were disclosed before the Assessing Officer was further submitted t submitted that case of the assessee falls within the hat case of the assessee falls within the exclusion mentioned u/s 270A(6) of the Act and therefore addition u/s 270A(6) of the Act and therefore addition made cannot be considered as under reporting of the income for the made cannot be considered as under reporting of the income made cannot be considered as under reporting of the income purpose of section 270A of the Act and it was possible that purpose of section 270A of the Act and it was possible purpose of section 270A of the Act and it was possible Assessing Officer had had after considering the fact of the case after considering the fact of the case and exclusion mentioned 270A(6) of the Act,arrived at the decision the decision that the assessee was not liable for initiating the the assessee was not liable for initiating the penalty proceedings. penalty proceedings. But we find that there is no such whisper in the assessment order But we find that there is no such whisper in the assessment order But we find that there is no such whisper in the assessment order or in the assessment record that case falls under exclusion he assessment record that case falls under exclusion he assessment record that case falls under exclusion mentioned in section 270A(6) of the Act mentioned in section 270A(6) of the Act. Further, we find that in the . Further, we find that in the case of Addl. CIT v. J.K. D’s Costa (supra), the Hon’ble High Court case of Addl. CIT v. J.K. D’s Costa (supra), the Hon’ble High Court case of Addl. CIT v. J.K. D’s Costa (supra), the Hon’ble High Court has held penalty proceedings do not from has held penalty proceedings do not from part of part of assessment proceedings and failure of the Assessing Officer edings and failure of the Assessing Officer or ITO or ITO to record in the assessment order the assessment order,his satisfaction or lack of it in regard it in regard to the leviability of the penalty leviability of the penalty,cannot be said to be a factor vitiating the ,cannot be said to be a factor vitiating the assessment order in any in any respect. The Hon’ble Delhi H . The Hon’ble Delhi High Court in the case of Achal Kumar Jain (supra) the case of Achal Kumar Jain (supra) following the following the finding in the case of J.K. D’s Costa (supra). However, we find that the Hon’ble case of J.K. D’s Costa (supra). However, we find that the Hon’ble case of J.K. D’s Costa (supra). However, we find that the Hon’ble Allahabad High Court in the case of High Court in the case of Surendra Prasad Agrawal Surendra Prasad Agrawal (supra) after considering the decision of the Hon’b after considering the decision of the Hon’ble Delhi High after considering the decision of the Hon’b court in the case of J.K. D’s Costa (supra) and Achal Kumar Jain court in the case of J.K. D’s Costa (supra) and Achal Kumar Jain court in the case of J.K. D’s Costa (supra) and Achal Kumar Jain (supra) held that non (supra) held that non-initiation of penalty proceedings u/s 271(1)(c) of penalty proceedings u/s 271(1)(c) of the Act has rendered, t of the Act has rendered, the assessment order erroneous in so far he assessment order erroneous in so far Anjis Developers Pvt. Ltd. 7 AY 2017-18 as prejudicial to the interest of the Rev as prejudicial to the interest of the Revenue. The relevant finding of enue. The relevant finding of the Hon’ble Allahabad High Court is reproduced as under: the Hon’ble Allahabad High Court is reproduced as under: the Hon’ble Allahabad High Court is reproduced as under:
“5. We have heard Shri A.N. Mahajan, the learned Standing 5. We have heard Shri A.N. Mahajan, the learned Standing 5. We have heard Shri A.N. Mahajan, the learned Standing Counsel for the Revenue and Shri Rishi Raj Kapoor, leamed Counsel for the Revenue and Shri Rishi Raj Kapoor, leamed Counsel for the Revenue and Shri Rishi Raj Kapoor, leamed counsel for the respondent.
6. The learned counsel fo counsel for the respondent.
6. The learned counsel fo counsel for the respondent.
6. The learned counsel for the Revenue submitted that the Tribunal was not justified in Revenue submitted that the Tribunal was not justified in Revenue submitted that the Tribunal was not justified in holding that the Commissioner of Income Tax could not have holding that the Commissioner of Income Tax could not have holding that the Commissioner of Income Tax could not have assumed jurisdiction under section 263 of the Act in a case in assumed jurisdiction under section 263 of the Act in a case in assumed jurisdiction under section 263 of the Act in a case in which there was no order passed by the Income Tax Officer which there was no order passed by the Income Tax Officer which there was no order passed by the Income Tax Officer under the Act under the Act in as much as omission to initiate penalty in as much as omission to initiate penalty proceedings proceedings proceedings while while while passing passing passing the the the assessment assessment assessment order order order was was was erroneous as also prejudicial the interest of the Revenue. He erroneous as also prejudicial the interest of the Revenue. He erroneous as also prejudicial the interest of the Revenue. He further submitted that the Commissioner of Income Tax has further submitted that the Commissioner of Income Tax has further submitted that the Commissioner of Income Tax has remanded the matter and if the order was remanded the matter and if the order was erroncous and erroncous and prejudicial on two points, the Commissioner had the power to prejudicial on two points, the Commissioner had the power to prejudicial on two points, the Commissioner had the power to remand the matter and direct for initiation of penalty remand the matter and direct for initiation of penalty remand the matter and direct for initiation of penalty proceedings also. He relied upon the following decisions proceedings also. He relied upon the following decisions proceedings also. He relied upon the following decisions I. Saraiya Distillery 's case (supra) I. Saraiya Distillery 's case (supra) 2. Malabar Industrial Co. Lid.
2. Malabar Industrial Co. Lid. v. CIT (2000) .243 ITR 83 v. CIT (2000) .243 ITR 83-(SC).
7. Shri R.R. Kapoor leamed counsel for the respondent 7. Shri R.R. Kapoor leamed counsel for the respondent 7. Shri R.R. Kapoor leamed counsel for the respondent submitted that omission to initiate penalty proceedings under submitted that omission to initiate penalty proceedings under submitted that omission to initiate penalty proceedings under section 273(1) of the Act by the Income Tax Officer while section 273(1) of the Act by the Income Tax Officer while section 273(1) of the Act by the Income Tax Officer while passing the assessment order did not amount to an passing the assessment order did not amount to an passing the assessment order did not amount to an order which could be revised by the Commissioner of Income Tax which could be revised by the Commissioner of Income Tax which could be revised by the Commissioner of Income Tax under section 263 of the Act. While supporting the decision of under section 263 of the Act. While supporting the decision of under section 263 of the Act. While supporting the decision of the Tribunal he relied upon the following decisions: the Tribunal he relied upon the following decisions: the Tribunal he relied upon the following decisions:
1. 1. Adell. CIT v. J.K. D'Costa (19821 133 ITR 7& (Delhi) 1. Adell. CIT v. J.K. D'Costa (19821 133 ITR 7& (Delhi) 1. Adell. CIT v. J.K. D'Costa (19821 133 ITR 7& (Delhi) 2. Addl. CIT v. Achal Addl. CIT v. Achal Kumar Jain [1983] 142 ITR 606 (Delhi) 142 ITR 606 (Delhi) 3. CIT v. Nihal Chand Rekyan (20001 242 ITTR 45 (Delhi).
3. CIT v. Nihal Chand Rekyan (20001 242 ITTR 45 (Delhi).
3. CIT v. Nihal Chand Rekyan (20001 242 ITTR 45 (Delhi).
8. Having heard the leamed counsel for the parties we find that 8. Having heard the leamed counsel for the parties we find that 8. Having heard the leamed counsel for the parties we find that the Delhi High Court in the case of J.K. D'Costa (supra) has the Delhi High Court in the case of J.K. D'Costa (supra) has the Delhi High Court in the case of J.K. D'Costa (supra) has held that the assessment cannot be held that the assessment cannot be said to be erroneous or said to be erroneous or prejudicial to the interest of the revenue because of the failure prejudicial to the interest of the revenue because of the failure prejudicial to the interest of the revenue because of the failure Anjis Developers Pvt. Ltd. 8 AY 2017-18 of the Income Tax Officer to record his opinion about the of the Income Tax Officer to record his opinion about the of the Income Tax Officer to record his opinion about the leviability of penalty in the case.It has held as follows: leviability of penalty in the case.It has held as follows: leviability of penalty in the case.It has held as follows: "..The only question before us is whether the Tribunal was right "..The only question before us is whether the Tribunal was right "..The only question before us is whether the Tribunal was right in revoking the order of the Addl.Commissioner in so far as it in revoking the order of the Addl.Commissioner in so far as it in revoking the order of the Addl.Commissioner in so far as it pertains to the question of penalties under sections 271(1)(a) pertains to the question of penalties under sections 271(1)(a) pertains to the question of penalties under sections 271(1)(a) and 273(b). Here, we find ourselves in complete agreement with and 273(b). Here, we find ourselves in complete agreement with and 273(b). Here, we find ourselves in complete agreement with the view taken by the Tribunal. It is well established that e view taken by the Tribunal. It is well established that e view taken by the Tribunal. It is well established that procecdings for the levy of a penalty whether under section procecdings for the levy of a penalty whether under section procecdings for the levy of a penalty whether under section 271(1)(a) or under section 273(6 ) are proceedings independent 271(1)(a) or under section 273(6 ) are proceedings independent 271(1)(a) or under section 273(6 ) are proceedings independent of and separate from the assessment proceedings. Though the of and separate from the assessment proceedings. Though the of and separate from the assessment proceedings. Though the expression"asse expression"assessment" is used in the Act with different ssment" is used in the Act with different meanings in different contexts, so far as section 263 is meanings in different contexts, so far as section 263 is meanings in different contexts, so far as section 263 is concerned, it refers to a particular proceeding that is being concerned, it refers to a particular proceeding that is being concerned, it refers to a particular proceeding that is being considered by the Commissioner and it is not possible when the considered by the Commissioner and it is not possible when the considered by the Commissioner and it is not possible when the Commissioner is dealing with the Commissioner is dealing with the assessment proceedings and assessment proceedings and the assessment order to expand the scope of these proceedings the assessment order to expand the scope of these proceedings the assessment order to expand the scope of these proceedings and to view the penalty proceedings also as part of the and to view the penalty proceedings also as part of the and to view the penalty proceedings also as part of the proceedings which are being sought to be revised by the proceedings which are being sought to be revised by the proceedings which are being sought to be revised by the Commissioner. There is no identity between the assessm Commissioner. There is no identity between the assessm Commissioner. There is no identity between the assessment proceedings and the penalty proceedings; the latter are proceedings and the penalty proceedings; the latter are proceedings and the penalty proceedings; the latter are separate proceedings, that may, in some cases, follow as a separate proceedings, that may, in some cases, follow as a separate proceedings, that may, in some cases, follow as a consequence of the assessment proceedings. As the Tribunal consequence of the assessment proceedings. As the Tribunal consequence of the assessment proceedings. As the Tribunal has pointed out, though it is usual for theITO to record in the has pointed out, though it is usual for theITO to record in the has pointed out, though it is usual for theITO to record in the assessment ord assessment order that penalty proceedings are being initiated, er that penalty proceedings are being initiated, this is more a matter of convenience than of legal requirement. this is more a matter of convenience than of legal requirement. this is more a matter of convenience than of legal requirement. All that the law requires, so far as the penalty proceedings are All that the law requires, so far as the penalty proceedings are All that the law requires, so far as the penalty proceedings are concemed, is that they should be initiated in the course of the concemed, is that they should be initiated in the course of the concemed, is that they should be initiated in the course of the proceedings fo proceedings for assessment. It is sufficient if there is some r assessment. It is sufficient if there is some record somewhere, even apart from the assessment order itself, record somewhere, even apart from the assessment order itself, record somewhere, even apart from the assessment order itself, that the ITO has recorded his satisfaction that the assessee is that the ITO has recorded his satisfaction that the assessee is that the ITO has recorded his satisfaction that the assessee is guilty of concealment or other default for which penalty action guilty of concealment or other default for which penalty action guilty of concealment or other default for which penalty action is called for.Ind is called for.Indeed, in certain cases it is possible for the ITO to eed, in certain cases it is possible for the ITO to issue a penalty notice or initiate penalty proceedings even long issue a penalty notice or initiate penalty proceedings even long issue a penalty notice or initiate penalty proceedings even long before the assessment is completed though the actual penalty before the assessment is completed though the actual penalty before the assessment is completed though the actual penalty order cannot be passed until the assessment is finalized. We, order cannot be passed until the assessment is finalized. We, order cannot be passed until the assessment is finalized. We, therefore, agree therefore, agree with the view taken by the Tribunal that the with the view taken by the Tribunal that the penalty proceedings do not form part of the assessment penalty proceedings do not form part of the assessment penalty proceedings do not form part of the assessment proceedings and that the failure of the ITO to record in the proceedings and that the failure of the ITO to record in the proceedings and that the failure of the ITO to record in the assessment order his satisfaction or the lack of it in regard to assessment order his satisfaction or the lack of it in regard to assessment order his satisfaction or the lack of it in regard to the leviability of penalty ca the leviability of penalty cannot be said to be a factor vitiating nnot be said to be a factor vitiating the assessment order in any respect. An assessment cannot be the assessment order in any respect. An assessment cannot be the assessment order in any respect. An assessment cannot be Anjis Developers Pvt. Ltd. 9 AY 2017-18 said to be erroneous or prejudicial to the interest of the revenue said to be erroneous or prejudicial to the interest of the revenue 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 because of the failure of the ITO to record his opinion about the because of the failure of the ITO to record his opinion about the leviability of penalty i leviability of penalty in the case..." (p. 11) 9. The aforesaid decision has been consistently followed by the 9. The aforesaid decision has been consistently followed by the 9. The aforesaid decision has been consistently followed by the Delhi High Court in the cases of Achal Kumar Jain (supra), P.C. Delhi High Court in the cases of Achal Kumar Jain (supra), P.C. Delhi High Court in the cases of Achal Kumar Jain (supra), P.C. Puri v. CIT [1985) 151 ITR 584 (Delhi), Addl. CIT v. Precision Puri v. CIT [1985) 151 ITR 584 (Delhi), Addl. CIT v. Precision Puri v. CIT [1985) 151 ITR 584 (Delhi), Addl. CIT v. Precision Metal Works [1985)_156 MIR 6934, CWT v. A. Metal Works [1985)_156 MIR 6934, CWT v. A. Metal Works [1985)_156 MIR 6934, CWT v. A.N. Sarvaria [1986) 161 ITR 694, Addl. CIT v. Sudershan Talkies [1993).200 [1986) 161 ITR 694, Addl. CIT v. Sudershan Talkies [1993).200 [1986) 161 ITR 694, Addl. CIT v. Sudershan Talkies [1993).200 ITR 153 , CIT v. ITR 153 , CIT v. Sudershan Talkies [19931.201 ITTR 289 and Nihal Chand Sudershan Talkies [19931.201 ITTR 289 and Nihal Chand Sudershan Talkies [19931.201 ITTR 289 and Nihal Chand Rekvan (supra). Rekvan (supra).
Similar view has been taken by the Rajasthan High Court 10. Similar view has been taken by the Rajasthan High Court 10. Similar view has been taken by the Rajasthan High Court in the case of CIT v. KeshrimalPara in the case of CIT v. KeshrimalParasmal [1986)157 ITR 484%, smal [1986)157 ITR 484%, Gauhati High Court in the case of Surendra Prasad Singh v. CIT Gauhati High Court in the case of Surendra Prasad Singh v. CIT Gauhati High Court in the case of Surendra Prasad Singh v. CIT (19881_173 ITR 610°, Calcutta High Court in the case of CIT v. (19881_173 ITR 610°, Calcutta High Court in the case of CIT v. (19881_173 ITR 610°, Calcutta High Court in the case of CIT v. Linotype & Machinery Lid. [19911_192 ITR 337 and Madras Linotype & Machinery Lid. [19911_192 ITR 337 and Madras Linotype & Machinery Lid. [19911_192 ITR 337 and Madras High Court in the case of CIT v. C.R.K. Swami (20 High Court in the case of CIT v. C.R.K. Swami (20 High Court in the case of CIT v. C.R.K. Swami (2002) 254 ITR 1584.
On the other hand the Madhya Pradesh High Court has 11. On the other hand the Madhya Pradesh High Court has 11. On the other hand the Madhya Pradesh High Court has taken a contrary view in the case of Addl. CIT v.Indian taken a contrary view in the case of Addl. CIT v.Indian taken a contrary view in the case of Addl. CIT v.Indian Pharmaceuticals [19801_123 ITR 874 . Addl. CIT v. Kantilal Pharmaceuticals [19801_123 ITR 874 . Addl. CIT v. Kantilal Pharmaceuticals [19801_123 ITR 874 . Addl. CIT v. Kantilal Jain [19801 125 ITR 3735, Addl. CWT v.NathoolalBala Ram Jain [19801 125 ITR 3735, Addl. CWT v.NathoolalBala Ram Jain [19801 125 ITR 3735, Addl. CWT v.NathoolalBala Ram [1980). 125 ITR 596& and CIT v. Narpat Singh Malkhan Singh ITR 596& and CIT v. Narpat Singh Malkhan Singh (19811 128 ITR 777 (19811 128 ITR 777 12. This Court in the case of Saraiva Distillery (supra) has held 12. This Court in the case of Saraiva Distillery (supra) has held 12. This Court in the case of Saraiva Distillery (supra) has held that an order can be said to be erroneous either when it does that an order can be said to be erroneous either when it does that an order can be said to be erroneous either when it does not decide a point or record a finding on an issue which ough not decide a point or record a finding on an issue which ough not decide a point or record a finding on an issue which ought to have been done or decides it wrongly. In the aforesaid case to have been done or decides it wrongly. In the aforesaid case to have been done or decides it wrongly. In the aforesaid case the Assessing Officer had not charged interest while passing the Assessing Officer had not charged interest while passing the Assessing Officer had not charged interest while passing the assessment order.This Court following the decision of the assessment order.This Court following the decision of the assessment order.This Court following the decision of Kerala High Court in the case of CIT v. Cochin Malabar Estates Kerala High Court in the case of CIT v. Cochin Malabar Estates Kerala High Court in the case of CIT v. Cochin Malabar Estates Lid. [1974)27 ITR 466 and Calcutta High Court in the case of 4)27 ITR 466 and Calcutta High Court in the case of 4)27 ITR 466 and Calcutta High Court in the case of Singho Mica Mining Co. Lid. v. CIT [19781_LL ITR 231 has held Singho Mica Mining Co. Lid. v. CIT [19781_LL ITR 231 has held Singho Mica Mining Co. Lid. v. CIT [19781_LL ITR 231 has held that the order passed by the ITO being prejudicial to the that the order passed by the ITO being prejudicial to the that the order passed by the ITO being prejudicial to the interest of the revenue, the Additional Commissioner had interest of the revenue, the Additional Commissioner had interest of the revenue, the Additional Commissioner had jurisdiction under section jurisdiction under section 263 to pass the order. The Madhya 263 to pass the order. The Madhya Pradesh High Court in the case of Indian Pharmaceuticals after Pradesh High Court in the case of Indian Pharmaceuticals after Pradesh High Court in the case of Indian Pharmaceuticals after Anjis Developers Pvt. Ltd. 10 AY 2017-18 referring to the decision of the Apex Court in the case of C.A. referring to the decision of the Apex Court in the case of C.A. referring to the decision of the Apex Court in the case of C.A. Abraham v. ITO[1961] 41 ITR 425 and CIT v. Bheekha Bhai Abraham v. ITO[1961] 41 ITR 425 and CIT v. Bheekha Bhai Abraham v. ITO[1961] 41 ITR 425 and CIT v. Bheekha Bhai Dada Bhai [1961] 42 ITR 123 has held th Dada Bhai [1961] 42 ITR 123 has held that the assessment at the assessment does not mean only computation of income but consideration of does not mean only computation of income but consideration of does not mean only computation of income but consideration of all facts including the liability for penalty that may attract the all facts including the liability for penalty that may attract the all facts including the liability for penalty that may attract the provisions contained in section 271(1)(a) of the Act. It has provisions contained in section 271(1)(a) of the Act. It has provisions contained in section 271(1)(a) of the Act. It has further held that if in any proceeding for asses further held that if in any proceeding for asses further held that if in any proceeding for assessment the Income Tax Officer fails to take notice of the facts attracting the Income Tax Officer fails to take notice of the facts attracting the Income Tax Officer fails to take notice of the facts attracting the provisions contained under section 271(1)(a) of the Act, it could provisions contained under section 271(1)(a) of the Act, it could provisions contained under section 271(1)(a) of the Act, it could not be said that his failure to take notice of the facts which not be said that his failure to take notice of the facts which not be said that his failure to take notice of the facts which were before him attracting the provisions of sect were before him attracting the provisions of section 271(1)(a) of ion 271(1)(a) of the Act does not amount to an error prejudicial to the interest of the Act does not amount to an error prejudicial to the interest of the Act does not amount to an error prejudicial to the interest of the Revenue. It concluded that if therefore the ITO during the the Revenue. It concluded that if therefore the ITO during the the Revenue. It concluded that if therefore the ITO during the pendency of the proceedings has omitted to take notice of facts pendency of the proceedings has omitted to take notice of facts pendency of the proceedings has omitted to take notice of facts attracting section 271(1)(a) of the Act durin attracting section 271(1)(a) of the Act during the pendency of g the pendency of the proceedings which ultimately ended in an order of the proceedings which ultimately ended in an order of the proceedings which ultimately ended in an order of assessment, the order would be erroneous and in this view of assessment, the order would be erroneous and in this view of assessment, the order would be erroneous and in this view of the matter, the Commissioner the matter, the Commissioner was right in exercising the matter, the Commissioner was right in exercising was right in exercising jurisdiction conferred on him under section 263 of the Act. The jurisdiction conferred on him under section 263 of the Act. The jurisdiction conferred on him under section 263 of the Act. The other decision of the M.P.High Court has followed its earlier decision of the M.P.High Court has followed its earlier decision of the M.P.High Court has followed its earlier decision in the case of Indian Pharmaceutical (supra). The Delhi decision in the case of Indian Pharmaceutical (supra). The Delhi decision in the case of Indian Pharmaceutical (supra). The Delhi High Court in the case of Achal Kumar Jain (supra) had High Court in the case of Achal Kumar Jain (supra) had High Court in the case of Achal Kumar Jain (supra) had considered the decision of the Madhya Pradesh High Court in considered the decision of the Madhya Pradesh High Court in considered the decision of the Madhya Pradesh High Court in the case of Indian P the case of Indian Pharmaceuticals (supra), Shri Kanti Lal Jain harmaceuticals (supra), Shri Kanti Lal Jain (supra), NathoolalBalaram (supra) and Narain Singh Malkhan (supra), NathoolalBalaram (supra) and Narain Singh Malkhan (supra), NathoolalBalaram (supra) and Narain Singh Malkhan Singh (supra) and while disagreeing has held as follows: Singh (supra) and while disagreeing has held as follows: Singh (supra) and while disagreeing has held as follows: "On a cursory examination, it appeared to us that the view of "On a cursory examination, it appeared to us that the view of "On a cursory examination, it appeared to us that the view of the Madhya Pradesh High Court as i the Madhya Pradesh High Court as indicated in the ndicated in the abovementioned decisions is correct, but on closer scrutiny we abovementioned decisions is correct, but on closer scrutiny we abovementioned decisions is correct, but on closer scrutiny we respectfully disagree with the same. In any case, the matter is respectfully disagree with the same. In any case, the matter is respectfully disagree with the same. In any case, the matter is not res integra as far as this court is concerned. In Addl. CIT v. not res integra as far as this court is concerned. In Addl. CIT v. not res integra as far as this court is concerned. In Addl. CIT v. J.K.D.' Costa, Income J.K.D.' Costa, Income-tax Reference No. 82 of 1974, disposed of 1974, disposed of by us on 27th April, 1981 by us on 27th April, 1981-reported in [1982) 133 ITR7. we held reported in [1982) 133 ITR7. we held on similar facts that the Commissioner could not pass an order on similar facts that the Commissioner could not pass an order on similar facts that the Commissioner could not pass an order pertaining to penalty under section263 of the Act. We held that pertaining to penalty under section263 of the Act. We held that pertaining to penalty under section263 of the Act. We held that the penalty proceedings do not form part of the the penalty proceedings do not form part of the the penalty proceedings do not form part of the assessment proceedings.Further, the failure of the ITO to record his proceedings.Further, the failure of the ITO to record his proceedings.Further, the failure of the ITO to record his satisfaction or the lack of it in the assessment order, with satisfaction or the lack of it in the assessment order, with satisfaction or the lack of it in the assessment order, with regard to the leviability of penalty cannot be a factor vitiating regard to the leviability of penalty cannot be a factor vitiating regard to the leviability of penalty cannot be a factor vitiating the assessment orders." the assessment orders."
Anjis Developers Pvt. Ltd. 11 AY 2017-18 6.1 Thereafter, Hon’ble High Court i Thereafter, Hon’ble High Court in para 18 held as under: n para 18 held as under:
“18. It is well established that the Assessing Officer has to 18. It is well established that the Assessing Officer has to 18. It is well established that the Assessing Officer has to initiate proceedings for imposition of penalty during the course initiate proceedings for imposition of penalty during the course initiate proceedings for imposition of penalty during the course of the assessment itself. If he fails to initiate or record his of the assessment itself. If he fails to initiate or record his of the assessment itself. If he fails to initiate or record his satisfaction for the initiation of the p satisfaction for the initiation of the penalty proceedings during enalty proceedings during the course of the assessment proceedings it would be a case the course of the assessment proceedings it would be a case the course of the assessment proceedings it would be a case where the assessment order can be said to be erroneous as he where the assessment order can be said to be erroneous as he where the assessment order can be said to be erroneous as he has not decided a point nor recorded a finding on an issue has not decided a point nor recorded a finding on an issue has not decided a point nor recorded a finding on an issue which ought to have been done or decides it wrongl which ought to have been done or decides it wrongl which ought to have been done or decides it wrongly as held by this Court in the case of Saraiya Distillery (supra). Thus the this Court in the case of Saraiya Distillery (supra). Thus the this Court in the case of Saraiya Distillery (supra). Thus the omission omission omission ofthe ofthe ofthe Income Income Income Tax Tax Tax Officer Officer Officer to to to initiate initiate initiate penalty penalty penalty proceedings during the course of the assessment renders the proceedings during the course of the assessment renders the proceedings during the course of the assessment renders the assessment order assessment order erroneous and prejudicial to the interest of and prejudicial to the interest of the Revenue. Revenue.
In this view of the matter, we are in respectful agreement 19. In this view of the matter, we are in respectful agreement 19. In this view of the matter, we are in respectful agreement with the view taken by the Madhya Pradesh High Court in the with the view taken by the Madhya Pradesh High Court in the with the view taken by the Madhya Pradesh High Court in the case of Indian Pharmaceuticals (supra). case of Indian Pharmaceuticals (supra).
In view of the foregoing discussions we are of the 20. In view of the foregoing discussions we are of the 20. In view of the foregoing discussions we are of the considered opinion that the T considered opinion that the Tribunal was not justified in ribunal was not justified in holding that the failure to initiate penalty proceedings in the holding that the failure to initiate penalty proceedings in the holding that the failure to initiate penalty proceedings in the course of the assessment did not render the assessment order course of the assessment did not render the assessment order course of the assessment did not render the assessment order erroneous and prejudicial to the interest of the revenue. The erroneous and prejudicial to the interest of the revenue. The erroneous and prejudicial to the interest of the revenue. The Commissioner of Income Tax had the juris Commissioner of Income Tax had the jurisdiction to revise such diction to revise such an order.” 6.2 The issue in dispute in the instant case The issue in dispute in the instant case is is in relation to penalty u/s 270A of the Act whi penalty u/s 270A of the Act which is more or less ‘pari materia ari materia’ with section u/s 271(1)(c) of the Act. For ready reference the section section u/s 271(1)(c) of the Act. For ready reference the section section u/s 271(1)(c) of the Act. For ready reference the section 271(1)(c) of the Act an 271(1)(c) of the Act and section 270A are reproduced as under: d section 270A are reproduced as under:
Section 271(1)(c) Section 271(1)(c) [Failure [Failure [Failure to to to furnish furnish furnish returns, returns, returns, comply comply comply with with with notices, notices, notices, concealment of income, etc. concealment of income, etc.
Anjis Developers Pvt. Ltd. 12 AY 2017-18
(1) If the [Assessing] Officer or the [Commissioner 271. (1) If the [Assessing] Officer or the [Commissioner 271. (1) If the [Assessing] Officer or the [Commissioner (Appeals)] any proceedings under this Act, is satisfied that (Appeals)] any proceedings under this Act, is satisfied that (Appeals)] any proceedings under this Act, is satisfied that nay person- (b) ………………………. ……………………….or (c) has concealed the particulars of "his income or so***] (c) has concealed the particulars of "his income or so***] (c) has concealed the particulars of "his income or so***] "furnished inaccurate particulars of 81[such income, or]7° "furnished inaccurate particulars of 81[such income, or]7° "furnished inaccurate particulars of 81[such income, or]7° (d) …………………. …………………. he may direct he may direct that such person shall pay by way of penalty, that such person shall pay by way of penalty,- (1) [****] 84 (ii) in the cases ) in the cases referred to in clause (b), & in addition to tax, referred to in clause (b), & in addition to tax, if any, payable] by him, [a sum of ten thousand rupees] for if any, payable] by him, [a sum of ten thousand rupees] for if any, payable] by him, [a sum of ten thousand rupees] for each such failure ;] sT each such failure ;] sT (iii) in the cases referred to in clause (c) & or clause (d)], in ) in the cases referred to in clause (c) & or clause (d)], in ) in the cases referred to in clause (c) & or clause (d)], in addition to tax, if any, payable] by him, a sum which sha addition to tax, if any, payable] by him, a sum which sha addition to tax, if any, payable] by him, a sum which shall not be less than, but which shall not exceed *[three times], the be less than, but which shall not exceed *[three times], the be less than, but which shall not exceed *[three times], the amount of tax sought to be evaded by reason of the amount of tax sought to be evaded by reason of the amount of tax sought to be evaded by reason of the concealment of particulars of his income 9 or fringe benefits] or concealment of particulars of his income 9 or fringe benefits] or concealment of particulars of his income 9 or fringe benefits] or the furnishing of inaccurate particulars of such income or fringe the furnishing of inaccurate particulars of such income or fringe the furnishing of inaccurate particulars of such income or fringe benefits]. Section 270A Section 270A 270A. (1) The Assessing Officer or the Commissioner (Appeals) 0A. (1) The Assessing Officer or the Commissioner (Appeals) 0A. (1) The Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner or the Principal Commissioner or Commissioner or the Principal Commissioner or Commissioner may, during the course of any proceedings under this Act, direct that any the course of any proceedings under this Act, direct that any the course of any proceedings under this Act, direct that any person who has under person who has under-reported his income shall be liable to reported his income shall be liable to pay a penalty in addition to tax, if any, on the under pay a penalty in addition to tax, if any, on the under pay a penalty in addition to tax, if any, on the under- reportedincome. reportedincome. 6.3 Since, both the penalty u/s 271(1)© of the Act as well as , both the penalty u/s 271(1)© of the Act as well as , both the penalty u/s 271(1)© of the Act as well as penalty u/s 270A of the Act could be initiated if the Assessing penalty u/s 270A of the Act could be initiated if the Assessing penalty u/s 270A of the Act could be initiated if the Assessing Officer or other authority prescribed may consider so under the Officer or other authority prescribed may consider so under the Officer or other authority prescribed may consider so under the proceeding of the Act. proceeding of the Act. Therefore, the issue decided by Hon’ble the issue decided by Hon’ble Anjis Developers Pvt. Ltd. 13 AY 2017-18 Allahabad High Court (supra) being pari materia, respectfully Allahabad High Court (supra) being pari materia, Allahabad High Court (supra) being pari materia, following the finding lowing the finding, the grounds raised by the assessee are the grounds raised by the assessee are dismissed.
In the result, the appeal filed by the assessee is dismissed. In the result, the appeal filed by the assessee is dismissed. In the result, the appeal filed by the assessee is dismissed.