TaxTMI 
TaxTMI 
2002 (7) TMI 251
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....P.V.V.P. Krishna Rao, the Managing Partner of the assessee firm and others declared additional income of Rs. 1,26,55,032 under section 132(4). The declarations were made in the hands of the partners and family members. Subsequently the assessees of the group filed the returns admitting additional income of only Rs. 47,50,040 and they also paid taxes on such income. The assessees had also filed reasons for the discrepancy in the income declared originally under section 132(4) and the income admitted later in the returns. Subsequently during the course of assessment proceedings, after discussion with the Revenue authorities Shri P.V.V.P. Krishna Rao, the Managing Partner of the assessees firm agreed to declare the entire additional income originally declared in the hands of the partners and family members since the assessee firm was the main earning organization for the group and the partners and the family members were not having adequate independent source of income. It was also requested by the assessee that the taxes paid in the names of the assessees of the group should be given credit in the hands of the firm and waiver of interest chargeable under sections 234B and 234C should....
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....firm as a part of that agreement. It was further argued that offering of additional income in the hands of the firm was consequent upon the understanding between the assessee and the Department and therefore, non-initiation of penalty proceedings under section 271(1)(c) and giving credit to the taxes by the members in the hands of the firm resulting in short charging of interest under section 234 did not render the assessment erroneous and prejudicial to the interest of the Revenue. In support of such claim the assessee had also relied on certain judicial pronouncements. 4. The CIT was not satisfied with the explanation offered by the assessee. He held that "even non-initiation of penalty proceedings though warranted as also correct charging of interest though not done on account of giving credit wrongly to taxes paid by partners/members of group would make the assessment erroneous and prejudicial to the interest of Revenue." Referring to Explanation 5 of section 271(1)(c) he held that immunity from concealment penalty is available to a person making declaration under section 132(4). In the instant case the declaration under section 132(4) was not made by the assessee but in the....
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.... appended with the revised return filed under section 139(5) wherein it has been stated that since the Department is of the view that all such additional incomes ought to be assessed in the hands of the firm itself, the assessee with a view to purchase peace, agrees with the Department and files the revised return. In the same letter the assessee has also requested that the assessment may be completed amicably and the taxes already paid by the individuals may be given credit in the hands of the firm, and interests, all immunities assured may be given to the firm if any under sections 234A, 234B and 234C and penalty and prosecutions, if any, may be waived/dropped. The learned AR also filed a specimen of letter written by the various assessees while filing revised returns under section 139(5) reducing the additional incomes shown in original returns as per declaration under section 132(4). In the said letter it has also been requested that the taxes already paid may be given credit in the hands of the firm, all immunities assured to the assessee may be in turn given to the firm and interest and penalty and prosecution proceedings may be waived/dropped. 6. It was pointed out by the....
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....sta [1982] 133 ITR 7 (Delhi High Court) (ii) Addl CIT v. Achal Kumar Jain [1983] 142 ITR 606 (Delhi High Court) (iii) P.C. Puri v. CIT [1985] 151 ITR 584 (Delhi High Court) (iv) CIT v. Keshrimal Parasmal [1986] 157 ITR 484 (Rajasthan High Court) (v) Surendra Prasad Singh v. CIT [1988] 173 ITR 510 (Gauhati High Court) (vi) CIT v. Linotype & Machinery Ltd. [1991] 192 ITR 337 (Calcutta High Court) (vii) Addl CIT v. Sudershan Talkies [1993] 200 ITR 153 (Delhi High Court) (viii) CIT v. Sudershan Talkies [1993] 201 ITR 289 (Delhi High Court) (ix) Narendra Associates, Engineers & Contractors v. ITO [1988] 26 ITD 406 (Hyd.) (x) Variety Cloth Centre v. ITO [1996] 59 ITD 377 (Pune) (SMC) (xi) Jain Exports (P.) Ltd. v. Dy. CIT [1999] 68 ITD 126 (Delhi) (i) In the case of JK D'Costa the Hon'ble Delhi High Court held that penalty proceedings and assessment proceedings are independent and separate proceedings and an assessment cannot be said to be erroneous or prejudicial to the interest of Revenue because of the failure of the Assessing Officer to initiate penalty proceedings during the course of assessment proceedings. In this case it was further held that when....
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....rable High Court upheld the order of ITAT refusing to state a case under section 256(1) of the Act. (iii) Swarup Vegetable Products Industries Ltd (No. 1) v. CIT [1991] 187 ITR 412 (Allahabad High Court): In this case the assessee had not shown the amount received by him by way of refund of excise duty in P&L Account on the ground that a writ petition was pending wherein a third party had claimed a portion of the amount. Assessing Officer admitted the contention of assessee without making proper enquiries. The CIT set aside the order for fresh Assessment Order of CIT was upheld as valid. (iv) CIT v. Panna Devi Saraogi [1970] 78 ITR 728 (Calcutta High Court): In this case the CIT set aside the assessment order as the Assessing Officer had no jurisdiction over the assessee and he had not made proper enquiries about the initial capital and source of money invested in the name of the assessee. Order of CIT was upheld. 9. We have carefully considered the submissions made by the rival parties, the facts of the case, the case laws relied upon and the materials produced before us. We find that the learned CIT has declared the Assessment Order dated 31-3-1997 as erroneous and....
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.... Rs. 38,37,000 properties named 'Hanuma' and'Raja Complex' (2) Towards unexplained jewellery and Rs. 33,93,000 silver in ornaments (3) FDRs including units purchased Rs. 12,45,000 in the name of AA Rama Ambica (4) Stock-in-trade (difference) Rs. 43,75,000  ....
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....n the hands of the assessee firm since it is the main earning Organisation and the assessee of the group have no adequate independent sources of income and the taxes paid by the assessee of the group will be given credit for the demand payable by the assessee firm since the additions as discussed above will be made in the hands of the assessee firm and not in the hands of the assessee of the group and in case for any technical reason due to audit objection or otherwise, the credit for the taxes paid in the names of the assessee of the group is not given credit in the hands of the assessee firm and refunds have to be issued to the assessee of the group, the interest payable under sections 234B and 234C payable on this count will be recommended for waiver set off of interest under section 244A on the refunds to be issued to the assessee of the group. The assessee's AR and Sri Krishna Rao therefore agreed to admit the entire additions discussed above only in the hands of assessee firm. Accordingly they have filed revised return of income admitting total income at Rs. 1,32,23,630 as against income originally returned at Rs. 3,73,630 by admitting the addl. income of Rs. 1,28,50,000 disc....
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....o been referred to by the Assessing Officer at page 2 of Assessment Order. This can also be established by circumstantial evidences like filing of revised return on the date of assessment itself, acceptance of the same by the Assessing Officer without any further enquiry/investigation, acceptance of individual revised returns withdrawing additional income, giving credit to taxes paid by other assessee in the hands of the firm and non initiation of penalty proceedings under section 271(1)(c). Thus we find that the CIT is not at all correct to deny about the existence of any discussion or agreement. He has mentioned in his order that the Assessing Officer has not initiated penalty proceedings without any whisper but in the 'Note' the Assessing Officer has made his discretion loud and clear. 9.3 The CIT has observed that even if there was any understanding, the same would not have legal sanctity if the same is against provisions of law. According to him, in the case of the assessee, initiation of concealment penalty was warranted and hence non-initiation was against provisions of law. We do not agree with the view of the assessee. Initiation of penalty is not warranted in each and ....
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....ise merely. There is a biblical saying that we do not live by bread alone. Varying this saving, it may be said that the Revenue does not live by tax alone. In this sense, therefore, the interests of the Revenue are not tied up merely with realizing as much Revenue as possible, willy nilly, merely looking to the productivity aspect of taxation. The jurisdiction of the CIT under section 263 is undoubtedly a supervisory jurisdiction. It is intended for interference in special cases to counteract orders which are erroneous as well as prejudicial to the interests of the Revenue. In this context, therefore, the expression 'prejudicial to the interests of the Revenue' must be regarded as involving a conception of acts or orders which are subversive of the administration of Revenue. There must be some grievous error in the order passed by the ITO, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the CIT might think to be prejudicial to the interests of Revenue administration. There might be cases where the CIT might wish to interfere with an order of the ITO in order to safeguard the fair name and reputation of the IT Department without any though....