ANTONY METALS P LTD.,CHENNAI vs. ITO, TIRUNELVELI

Sh. A.S. Sriraman, the Ld.counsel for the assessees, submitted that the Assessing Officer completed the assessment in both the cases after calling for all the details necessary for completing the assessment. However, the Principal Commissioner found that there was increase in the capital contributed by the shareholders. According to the Ld. counsel, when the Assessing Officer called for details and examined the same, the Principal Commissioner cannot say that there was no enquiry. At the best, it may be an inadequate enquiry and it cannot be said that the Assessing Officer did not make any enquiry. According to the Ld. counsel, inadequate enquiry would not fall within the purview of prejudicial to the interests of Revenue. Moreover, the Assessing Officer initiated penalty under Section 271(1)(c) of the Income-tax Act, 1961 (in short 'the Act') and after necessary enquiry, the Assessing Officer dropped the penalty proceedings. Therefore, according to the Ld. counsel, the Principal Commissioner cannot direct the Assessing Officer to initiate penalty proceedings.

We have heard Smt. Ruby George, the Ld. Departmental Representative, also. It is an admitted fact that there was increase in the share capital of both the assessees. Even though the assessees claim that the Assessing Officer called for necessary details, the assessment orders in respect of both the assessees do not reflect anything about calling for the material and application of mind of the Assessing Officer to those materials. The proceeding before the Assessing Officer is deemed to be a judicial proceeding.

The order passed by the Assessing Officer is subjected to further appeal before higher forums and also subjected to reversion by the Principal Commissioner of Income-tax. Therefore, the decision taken by the Assessing Officer has to be a reasoned one. In other words, the Assessing Officer has to record his own reasoning on application of mind to the material available on record. The Assessing Officer’s application of mind shall be reflected in the assessment order. This Tribunal is of the considered opinion that the application of mind to the material available on record by the decision maker / Assessing Officer has to be reflected in the assessment order. This would avoid arbitrary decision and also repose confidence on the tax payer. Since the Assessing Officer has not recorded any reasoning with regard to increase in share capital and also for dropping the penalty proceeding, this Tribunal is of the considered opinion that the Principal Commissioner has rightly exercised her power under Section 263 of the Act. In those circumstances, this Tribunal do not find any reason to interfere with the orders of the lower authority and accordingly the same are confirmed.