2022 (12) TMI 35 - AT - Income Tax

Tribunal quashes revisionary order setting aside penalty proceedings, emphasizes need for error in AO's finding

The Tribunal quashed the revisionary order of the Principal Commissioner of Income Tax (Central) under section 263 of the Income-tax Act,1961, which set ... Revision u/s 263 by CIT - revisionary action over dropping-off of penalty proceedings initiated u/s 271(1)(c) - HELD THAT:- AO after carrying out an inquiry with respect to eligibility of appellants claim, basis of claim and compliance relating thereto (if any) has then culminated the penal proceedings taking one of the plausible view in the light of settled legal position in dropping-off the proceedings initiated u/s 271(1)(c) whereas in a revisionary proceedings PCIT yet again conducted an inquiry into the claim of the appellant based on the like material and sitting on the same fence displaced with the views of Ld. AO and directed for de-nova proceeding by pressing into service the applicability of explanation 5A to section 271(1) which ostensibly is impermissible under a law following the ration laid in down in “CIT Vs Gabriel India Ltd.” [1993 (4) TMI 55 - BOMBAY HIGH COURT] As it is a well settled law that, an inquiry and/or fresh determination can be directed by the revisionary authority only after coming to the conclusion that the finding of the AO is erroneous and prejudicial to the interests of the Revenue on the basis of evidential material and without doing so, the authority turns toothless to disturb the completed proceedings, hence for the reason in our considered opinion, the conclusion drawn by the Ld. PCIT is untenable in law, ergo finding no infirmity with the order dropping the penalty, we quash the revisionary order. Appeal of the appellant assessee is allowed. Issues:Challenge against revisionary order of Principal Commissioner of Income Tax (Central) under section 263 of the Income-tax Act,1961 related to dropping penalty proceedings under section 271(1)(c) for the assessment year 2008-09.Analysis:1. The appeal challenged the revisionary order of the Principal Commissioner of Income Tax (Central) under section 263 of the Income-tax Act,1961, regarding the dropping of penalty proceedings under section 271(1)(c) for the assessment year 2008-09. The appellant contended that the Assessing Officer (AO) had the authority to drop the penalty proceedings, and the revisionary action was erroneous. 2. The case involved a search conducted under section 132 of the Act, where the appellant admitted receiving cash from undisclosed sources and offered it for taxation during reassessment proceedings. The penalty proceedings under section 271(1)(c) were initiated, but the AO dropped the penalty after considering the appellant's submissions. This led to the revisionary action by the Principal Commissioner of Income Tax (Central).3. The Principal Commissioner invoked revisionary jurisdiction under section 263, arguing that the order dropping the penalty was erroneous and prejudicial to the revenue due to the non-consideration of Explanation 5A to section 271(1) of the Act. The appellant's submissions during the revisionary proceedings were not deemed satisfactory, leading to the revisionary order setting aside the penalty dropping order.4. The appellant argued that the penalty initiation lacked proper application of mind, and the penalty proceedings were rightly dropped by the AO. The Departmental Representative contended that the non-application of mind was also evident in the order dropping the penalty, justifying the revisionary jurisdiction.5. After hearing both parties, the Tribunal reviewed the case, considered the relevant provisions, and examined the submissions made by the appellant and the Departmental Representative. The Tribunal analyzed the facts in detail, including the appellant's written reply to the show cause notice and the legal positions cited by both parties.6. The Tribunal referred to legal precedents, such as the judgment in 'CIT Vs Gabriel India Ltd,' to emphasize that revisionary action should not be based on new views or versions presented by the tax authority. The Tribunal concluded that the Principal Commissioner's revisionary order was untenable in law as it failed to demonstrate the AO's finding as erroneous and prejudicial to revenue.7. Ultimately, the Tribunal found no infirmity with the order dropping the penalty and quashed the revisionary order, allowing the appeal of the appellant. The decision was based on the principle that revisionary authority can only direct fresh determination if the AO's finding is proven erroneous, which was not the case in this situation.This detailed analysis of the judgment highlights the legal intricacies involved in challenging a revisionary order related to penalty proceedings under the Income-tax Act,1961.