NUSRAT MUSTAFA RASIWALA,MUMBAI vs. PR CIT 25, MUMBAI

The only issue in this appeal of the assessee is against the revision order of the CIT u/s. 263 of the Act holding the assessment order framed by the AO u/s. 143(3) of the Act is erroneous and prejudicial to the interest of the Revenue for not referring the property to the DVO u/s. 50C(2) of the Act and Nusrat Mustafa Rasiwala.(AY 11-12) also for not initiating penalty proceedings u/s. 271(1)(c) of the Act. For this the assessee has raised following ground “-

Briefly stated facts are that the assessee, during the year under consideration, sold one Long term capital asset in the form of gala at Laxmi Industrial Estate and another Gala at Bhiwandi. The assessee invested the capital gains arising out of the sale of these galas and claimed exemption u/s. 54EC of the Act. The Assessing Officer, from the agreement for sale of gala at Bhiwandi, noted that the sale consideration received was at ` 11,15,100/- as against the value estimated by the Stamp Duty Authorities for the purpose of calculation of stamp duty at ` 32,27,381/- . The Assessing Officer took the sale consideration of sale of gala at Bhiwandi at ` 32,27,381/- without referring it to the DVO as has been objected by the assessee u/s. 50C(2) of the Act. The CIT, after going through the case records, issued show cause notice for revision of assessment u/s. 263 of the Act that the assessment is erroneous and prejudicial to the interest of the Revenue. The CIT issued show case notice as under:

The CIT after discussing the facts and legal position, finally noted that the matter should have been referred to the DVO u/s. 50C(2) and that the Assessing Officer also failed to initiate penalty proceedings u/s. 271(1)(c) of the Act against the assessee for furnishing inaccurate particulars of income. Aggrieved with the revision order, the assessee is in appeal before the Tribunal.

We have heard the rival contentions and gone through the facts and circumstances of the case. We find that first of all the CIT cannot be agitated by the assessment order, wherein no reference was made to the DVO u/s. 50C(2) of the Act because the Assessing Officer has adopted the value/sale consideration of the sale of gala at Bhiwandi as determined by the Stamp Duty Valuation Authorities at ` 32,27,381/-. The CIT cannot ask for revision in the price for the reason that in any eventuality the AO has to adopt either Stamp Duty Valuation or the value estimated by the DVO u/s 50C(2) of the Act, which is lower price. It means that the assessment order is neither prejudicial or nor erroneous. Secondly, whether the CIT u/s. 263 of the Act can direct the Assessing Officer to initiate penalty proceedings u/s. 271(1)(c) of the Act, this issue

As noticed earlier, the Assessing Officer or the appellate authority is required to be satisfied in the course of any proceedings before the authority as to whether penalty is imposable or not. What is the meaning of the terms 'satisfied' and 'satisfaction'. One may usefully refer to the legal meaning given to the aforesaid expression :

The provision does not empower any other authority under the Act to record satisfaction : the only authorities empowered are the Assessing Officer, the Appellate Assistant Commissioner or the Commissioner (Appeals). Even if the Commissioner is superior to the aforesaid authorities in the administrative hierarchy, when it comes to discharging the functions in a quasi-judicial capacity, one has to proceed strictly in accordance with the requirement of the provision. The Commissioner is not empowered to record satisfaction by section 271(1) of the Act, and if he is not entitled to do so on his own he cannot do it by directing the assessing authority. In other words, what the Commissioner himself cannot do cannot be got done through the assessing authority by exercising revisional powers. The Commissioner cannot substitute his satisfaction. The Commissioner cannot make up mind or arrive at the required affirmative conclusion for the Assessing Officer, it is only that authority who is permitted by the statute to do so-to be satisfied, i.e., reach a clear conclusion on the evidence before it.

There is one more reason why the Commissioner should not be permitted to invoke revisional powers for initiation of penalty proceedings. Section 271(1) of the Act specifically empowers the Assessing Officer or the appellate authority to record satisfaction. It is well-settled that Nusrat Mustafa Rasiwala.(AY 11-12) once an appeal has been preferred against an order of assessment the entire assessment is open before the appellate authority. The appellate authority is entitled to do all that the Assessing Officer could have done. The powers of the appellate authority are co-extensive and co-terminus with the powers of the assessing authority. It is equally well-settled that the Commissioner cannot exercise revisional jurisdiction qua proceedings before an appellate authority. The order of assessment does not have any independent existence and stands merged with the order of the appellate authority. Hence, to read section 263 as being applicable only in the case of an Assessing Officer for the purposes of initiation and levy of penalty and not being applicable to the appellate authority cannot be the legislative intent. To the contrary, the inherent indication under section 271(1) of the Act makes it clear that the Commissioner does not have any powers to direct either of the authorities, the Assessing Officer or the appellate authority, to initiate and levy penalty. The section requires the Assessing Officer or the appellate authority to be satisfied in the course of 'any proceedings'. This means, any proceedings before either of the specified authorities. The Commissioner cannot create proceedings. If he is not permitted to direct the appellate authority (and this is an accepted position) he cannot be permitted to substitute jurisdiction/powers of only the Assessing Officer by his satisfaction by creating proceedings where none exist—assessment having already been completed.