P.RAMESH,SALEM vs. ITO, SALEM

This appeal of the assessee is directed against the order of the Commissioner of Income Tax, Salem, under Section 263 of the Income-tax Act, 1961, dated 30.03.2014 and pertains to assessment year 2009-10.

Sh. T. Vasudevan, the Ld.counsel for the assessee, submitted that the Commissioner found that the Assessing Officer treated the assessee as a trader and not a commission agent. However, while completing the assessment, an addition of much lower amount of `40,50,000/- was added towards peak credit. The Commissioner found that the payment to the extent of `12,79,000/- was made to one Shri Venkatesh. However, the Assessing Officer has not examined the nature of payment while completing the assessment. In the absence of any examination by the Assessing Officer, according to Ld. counsel, the Commissioner came to a conclusion that there was error in the order of the lower authority. The Commissioner found that the assessee is a commission agent and not a trader. However, the addition made towards peak credit was confirmed by the Commissioner.

While coming to the payment of `12,79,000/- made to one Shri Venkatesh, the Commissioner remanded the matter back to the Assessing Officer for re-examination. Referring to the assessment order, the Ld. counsel submitted that the Assessing Officer has examined the issue elaborately. The Assessing Officer further found that on 6th June, 2008, a payment of `4,00,000/- was made. The peak credit assessed was `40,50,000/-. Therefore, according elaborately on the basis of the material available on record. Hence, there is no justification for exercising jurisdiction under Section 263 of the Act.

On the contrary, Sh. Pathlavath Peerya, the Ld. Departmental Representative, submitted that the Assessing Officer found cash credit at Salem Branch of Axis Bank to the tune of `40,50,000/-. The peak credit of `40,50,000/- was assessed to tax in the absence of proper explanation by the assessee. With regard to payment of `12,79,000/- to one Shri Venkatesh, the Assessing Officer has not made any addition even though there was a reference about this payment at page 18 of the assessment order. Therefore, there was an error which is prejudicial to the interests of Revenue.

We have considered the rival submissions on either side and perused the relevant material on record. We have also carefully gone through the orders of the lower authorities. The Commissioner found that the Assessing Officer made an addition of `40,50,000/- towards peak credit in respect of cash credit for the period May, 2008 to October, 2008. Coming to the payment of `12,79,000/- made to one Shri Venkatesh, there was no addition in the assessment order. Therefore, to that extent there was an error which is prejudicial to the interests of Revenue. With regard to peak credit of `40,50,000/-, the assessee has already filed an appeal before the Appellate Commissioner. The matter is pending before him. Therefore, in respect of the mkkkatter, which is pending before Appellate Commissioner, the Administrative Commissioner cannot initiate any proceedings under Section 263 of the Act. The Administrative Commissioner, in exercise of his jurisdiction under Section 263 of the Act, directed the Assessing Officer to examine the payment made by the assessee to one Shri Venkatesh to the extent of `12,79,000/- and also to initiate penalty proceedings under Section 271A of the Act. In respect of penalty proceedings, this Tribunal is of the considered opinion that the Administrative Commissioner cannot issue any direction to initiate penalty proceedings. This view of the Tribunal is fortified by the judgment of Hon'ble Gujarat High Court in CIT v. Dr. Suresh G. Shah (2007) 289 ITR 110 (Guj). A similar view was also taken by the Hon'ble Punjab & Haryana High Court in CIT v. Subhash Kumar Jain 2010(9) TMI

Therefore the order of the Commissioner with regard to direction to initiate proceedings under Section 271A is set aside.

In the result, the appeal of the assessee is partly allowed.