RAVIKUMAR DHANDHANIA,SALEM vs. ITO WARD 1 (4), SALEM

The ld. AR of the assessee submitted that the Pr.CIT failed to note that the assessee had already disclosed the additional income and filed revised returns, even before the assessment order was passed by the AO, and, therefore, the assessee had no intentions of concealing any income. It was also submitted by ld. AR of the assessee that the Pr.CIT failed to note that when penalty proceedings was initiated against the assessee vide notice dated 30.01.2015, the assessee had represented before the ITO, Ward-1(4), Salem and had clearly proved that there was no intention to conceal income as a result of which the penalty proceedings were dropped. Further the ld. AR of the assessee vehemently argued that the Pr.CIT erred in reopening the penalty proceedings three years after its waiver by the ITO, Ward-1(4), Salem on the basis of change of opinion and not on the basis of any new material facts. Therefore, ld. AR of the assessee submitted that the AO has consciously considered the facts and arrived at a decision to drop the penalty proceedings, which cannot be reopened merely because some other officer takes a different view. Accordingly, he submitted that the order passed u/s.263 of the Act, by the Pr.CIT deserves to be quashed.

Replying to the above, ld. Sr. DR submitted before us that the Pr.CIT rightly set aside the penalty proceedings dropped by the AO on 03.07.2015 because when the department came to know that the shares worth Rs.3,20,00,000/- were transferred to the assessee during the year under consideration, the assessee filed another return. Therefore, it is evident that the assessee had the intention to conceal income and, hence, the penalty proceedings u/s.271(1)(c) dropped by the AO is both erroneous and prejudicial to the interest of revenue. Accordingly, ld. Sr. DR submitted that the order of the Pr.CIT deserves to be upheld and appeal of the assessee deserves to be dismissed.

On careful perusal of the impugned order as well as the assessment order and considering the rival submissions of both the parties, we find that the assessee filed its return of income on 05.03.2009 admitting total income of Rs.1,57,410/- and subsequently filed another 23.06.2014 in response to notice u/s.148 of the Act admitting the total income of Rs.3,21,57,410/-. Thereafter the AO completed the assessment u/s.143(3)/147 of the Act by accepting the income returned as per the return and also levied penalty u/s.271(1)(c) of the Act for concealment of income. However, vide order sheet dated 03.07.2015, the AO dropped the penalty proceedings, against which Pr.CIT called for the record and found that the assessee has filed another return only after the department came to know that shares worth of Rs.3,20,00,000/- were transferred to the assessee during the FY 2006-07. It was also observed by the Pr.CIT that the assessee had the intention to conceal the income and accordingly, set aside the order of AO dropping the penalty proceedings u/s.271(1)(c) of the Act through order sheet entry dated 03.07.2015 holding both erroneous and prejudicial to the interest of revenue. The relevant observations of the Pr.CIT read as under :- “Therefore, it is clear that the assessee has filed another return only after the Department came to know that shares worth of Rs.3,20,00,000/- were transferred to the assessee during the FY 2006-07. Therefore, it is evident that the assessee had the intention to conceal the income, hence, dropping of penalty proceedings u/s.271(1)(c) is both erroneous and prejudicial to the interest of revenue and therefore this issue needs revision u/s.263 of the IT Act.

Further, from the copies of the ordersheets available at assessee’s paper book from pages 47 to 55, specially ordersheet noted at page 54, AO has dropped penalty proceedings u/s.271(1)(c) of the Act with the following observations :- “197 01.7.15 Considering the proceedings initiated u/s.148 at the time of assessee’s declaration, assessee’s positions, facts and circumstances of the case and assessee’s cooperation for assessment proceedings, tax payments are carefully considered. After the due consideration, the proceedings initiated u/s.271(1)(c) is hereby dropped.” Sd/- 03.07.15 6. From the above, it is clear that the AO has dropped penalty proceeding in a casual manner as Note No.197, dated 01.7.15 and after mentioning some irrelevant facts and basis he has dropped the penalty proceedings and signed the same on 03.07.15, which clearly shows a casual approach of the AO and we are hundred per cent satisfied and in agreement with the contention of the ld. CITDR that the penalty proceedings u/s.271(1)(c) of the Act had been dropped by the AO without any cogent reason and plausible cause and without application of mind in a casual manner.

On perusal of the operative part of the revisionary order of the ld. Pr.CIT (reproduced in para 4), it is clear that the assessee has concealed the income, therefore, the Pr.CIT has rightly set aside the penalty proceedings u/s.271(1)(c) dropped by the AO vide order sheet entry dated 03.07.2015, wherein the AO has not considered the income of the assessee properly regarding the shares worth of Rs.3,20,00,000/- transferred to the assessee during the year under consideration. Accordingly, we do not see any good reason to interfere with the findings of the ld. Pr.CIT and we uphold the same and dismiss the appeal of the assessee.

In the result, appeal of the assessee is dismissed. Order pronounced in the open court on 31/03/ 2022.