TaxTMI 
TaxTMI 
2010 (9) TMI 772
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "Whether the agreement made by the Assessing Officer of initiating no proceedings under section 271(1)(c) is bad in law ? and Whether the assessment so framed is erroneous and prejudicial to the interests of the Revenue ?" 2. The facts for adjudication as narrated in the appeal may be noticed. The assessee filed his return on December 14, 1984, declaring an income of Rs.89,123. His assessment was framed under section 143(3) of the Act, vide order dated April 18, 1996, at an income of Rs. 10,80,213 after making an addition of Rs. 9,91,090 on account of agricultural income. As the assessee failed to explain the agricultural income, enquiries were got conducted by the Inspector who submitted his report pointing out various ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e-tax in exercise of power under section 263 hold the order of the Assessing Officer to be erroneous and prejudicial to the interests of the Revenue. Secondly, whether the Commissioner of Income-tax could exercise jurisdiction under section 263 of the Act by holding that the failure of the Assessing Officer to initiate penalty proceedings while completing the assessment under section 143(3) of the Act was an order which was erroneous and prejudicial to the interests of the Revenue. 5. Adverting to the first aspect of the issue, it may be noticed that the Assessing Officer while passing the assessment order under section 143(3) had made an office note, the relevant portion of which is as under : "The report of the Inspect....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dicial to the interests of the Revenue. Once that is so, no order under section 263 could be passed by the Commissioner of Income-tax. 9. Now, adverting to the second limb, it may be noticed that the Delhi High Court in the judgment reported in Addl. CIT v. J. K. D'Costa [1982] 133 ITR 7 (Delhi) has held that the Commissioner of Income-tax cannot pass an order under section 263 of the Act pertaining to imposition of penalty where the assessment order under section 143(3) is silent in that respect. The relevant observations recorded are (page 11) : "It is well established that proceedings for the levy of a penalty whether under section 271(1)(a) or under section 273(b) are proceedings independent of and separate from the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re the assessment is completed though the actual penalty order cannot be passed until the assessment is finalised. We, therefore, agree with the view taken by the Tribunal that the penalty proceedings do not form part of the assessment proceedings and that the failure of the Income-tax Officer to record in the assessment order his satisfaction or the lack of it in regard to the leviability of penalty cannot be said to be a factor vitiating the assessment order in any respect. An assessment cannot be said to be erroneous or prejudicial to the interests of the Revenue because of the failure of the Income-tax Officer to record his opinion about the leviability of penalty in the case." 10. Special leave petition against the said decis....