2013 (11) TMI 683 - AT - Income Tax

Tribunal allows appeals, quashes orders under Income Tax Act, citing health issues & improper judgment.

Shri Vineet Sharma Versus Commissioner of income Tax (Central)- II, New Delhi

The tribunal allowed the assessee's appeals, quashing the orders under Section 263 of the Income Tax Act. The delay in filing appeals was condoned due to ... Condonation of delay of 118 days – Held that:- Relying upon the judgment of Hon'ble Supreme Court in the case of Collector, Land Acquisition Vs. MST. Katiji and Others [1987 (2) TMI 61 - SUPREME Court], assessee was prevented by sufficient cause in filing the appeals in time. The assessee has filed ample documentary evidence in the form of medical certificates, prescription etc. in support of its claim that he is not keeping good health for the past few years – Delay condoned. Penalty under section 271(1)(c) on the entire amount of addition made by Revenue – Penalty orders passed under Section 271(1)(c), the assessee did not file any appeal but filed revision petition under Section 264 – During pendency, the CIT initiated proceedings under Section 263. In the order under Section 263, he set aside the matter to the file of the Assessing Officer and then he dismissed the assessee's petition filed under Section 264 holding the same to be infructuous - Penalty order under Section 271(1)(c) on entire additional income offered in the return filed in response to notice under Section 153A – Held that:- Order under Section 263 is not liable to be sustained because it is a settled position that penalty under Section 271(1)(c) is not to be levied on every income. The penalty is to be levied only when the conditions prescribed under Section 271(1)(c) are satisfied. Even when we see the language of Section 271(1)(c), even on concealed income, the levy of penalty is not automatic because discretion has been given to the Assessing Officer to levy or not to levy the penalty which would be clear from the use of the words 'may' in Section 271(1)(c). Legality of order passed u/s 263 of the Income tax Act – Penalty u/s 271(1)(c) levied on lower side – Held that:- Reliance has been placed on the judgment of Hon’ble Bombay High Court in the case of Gabriel India Ltd.[ 1993 (4) TMI 55 - BOMBAY High Court] , wherein it was held that it would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. In the present case, the ratio of decision of Bombay High Court would be squarely applicable. The Assessing Officer had levied the penalty on substantial portion of the income assessed. Merely because the Commissioner is of the opinion that the penalty levied by the Assessing Officer is on the lower side and left to the Commissioner he would have levied the penalty on the entire income assessed would not vest the Commissioner with the power of suo motu revision under Section 263 – Decided in favor of Assessee. Restoration of the revisions petition U/s 264 which is dismissed as infructuous in consequence of the order passed U/s 263 of the Income Tax Act – Held that:- In the additional grounds, the assessee is claiming the relief against the dismissal of order passed under Section 264. Though the relief claimed is only consequential in nature but, Tribunal do not have any jurisdiction to give any direction with regard to order passed under Section 264 – Therefore, no any direction given with regard to order passed under Section 264 - Though, all natural consequences of quashing of the order under Section 263 would follow. Issues Involved:1. Condonation of delay in filing appeals.2. Legality of proceedings initiated under Section 263 of the Income Tax Act.3. Utilization of information furnished under Section 264 to infer the penalty order as erroneous.4. Remanding of the matter by CIT due to incorrect quantum amount for levy of penalty.5. Initiation of proceedings under Section 263 during the pendency of proceedings under Section 264.6. Conclusion by CIT that the penalty order is erroneous and prejudicial to the interest of revenue.7. General grounds of appeal without prejudice to each other.Detailed Analysis:1. Condonation of Delay in Filing Appeals:The assessee requested condonation of delay due to health issues, supported by medical certificates. The delay was 118 days. The tribunal, considering the judgment in the case of Collector, Land Acquisition Vs. MST. Katiji and Others, found sufficient cause for the delay and condoned it.2. Legality of Proceedings Initiated Under Section 263:The assessee argued that the CIT can exercise jurisdiction under Section 263 only if the Assessing Officer's order is erroneous and prejudicial to the interests of the Revenue. The tribunal noted that the penalty under Section 271(1)(c) is discretionary and not automatic. The Assessing Officer had levied penalties on substantial portions of the additional income, and merely because the CIT believed the penalty should be on the entire additional income does not make the order erroneous or prejudicial to the Revenue. The tribunal referred to the decisions in CIT Vs. Max India Ltd. and CIT Vs. Gabriel India Ltd., supporting the view that the CIT cannot substitute his judgment for that of the Assessing Officer unless the decision is unsustainable in law.3. Utilization of Information Furnished Under Section 264:The CIT used information from the Section 264 proceedings to infer that the penalty order was erroneous. The tribunal found that the CIT's action was not in line with the spirit of Section 264, which prohibits passing orders prejudicial to the assessee.4. Remanding of the Matter by CIT Due to Incorrect Quantum Amount for Levy of Penalty:The CIT remanded the matter back to the Assessing Officer, stating that the quantum amount for the penalty was incorrectly taken. The tribunal observed that the Assessing Officer had already levied penalties on substantial portions of the additional income. The CIT's opinion that the penalty should be on the entire additional income does not make the Assessing Officer's order erroneous or prejudicial.5. Initiation of Proceedings Under Section 263 During the Pendency of Proceedings Under Section 264:The tribunal noted that Section 264 prohibits the CIT from passing any order prejudicial to the assessee. The CIT initiated proceedings under Section 263 during the pendency of the Section 264 application and passed an order prejudicial to the assessee, which is not permissible under Section 264.6. Conclusion by CIT That the Penalty Order is Erroneous and Prejudicial to the Interest of Revenue:The tribunal held that the penalty under Section 271(1)(c) is not automatic and is subject to the discretion of the Assessing Officer. The CIT's belief that the penalty should be on the entire additional income does not render the Assessing Officer's order erroneous or prejudicial. The tribunal quashed the orders passed under Section 263, following the decisions in Max India Ltd. and Gabriel India Ltd.7. General Grounds of Appeal Without Prejudice to Each Other:The tribunal addressed the general grounds of appeal, noting that the assessee's arguments were consistent with the legal principles established in the cited cases.Additional Grounds:The assessee requested consequential relief for the order under Section 264, which was dismissed as infructuous. The tribunal noted that it does not have jurisdiction to issue directions regarding the order under Section 264 but stated that natural consequences of quashing the order under Section 263 would follow.Conclusion:The appeals of the assessee were allowed to the extent discussed, and the orders under Section 263 were quashed. The decision was pronounced on 8th November 2013.