TaxTMI 
TaxTMI 
2014 (4) TMI 1170
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....ds that the AO had not initiated penalty proceedings, he cannot direct the AO to initiate penalty proceedings. 2. That on the facts and in the circumstances of the case and in law, learned CIT erred in assuming jurisdiction u/s 263 of the Act for non-initiation of penalty proceedings despite fact assessment u/s 153 A has been made after obtaining mandatory statutory approval u/s 153 D from Addl. CIT; surrender was made subject to no penal action; the word used in section 271AAA(1) is 'may', giving complete discretion to AO to take or not to take action under this section and even complied with the provisions of section 271AAA(2), which debars AO from taking action u/s 271AAA(1) and in interpreting that power exercised by JCIT u/s 144 A is same u/s 153 D of the Act. 3. That Ld. CIT has grossly erred in cancelling the assessment order with the directions to reframe the order in accordance with the provisions of the I.T. Act. Non-issuance of specific directions for assessment to be framed clearly proves that it is a case of only change of opinion and assessment framed is neither erroneous nor prejudicial to the interests of revenue." ITA No. 357/Chd/2013 2. Brief f....
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.... taken one of the possible view. In any case penalty proceedings are independent from assessment proceedings and therefore assessment order cannot be held to be erroneous and prejudicial to the interest of the Revenue for not initiating penalty. In this regard reliance was placed on the following case laws: "CIT v. Sudershan Talkies [1993] 201 ITR 289 (Del); Addl. CIT v. J.K. D'sCosta [1982] 133 ITR 7 (Delhi), CIT v. Keshrimal Parasmal [1986] 157 ITR 484 (Raj); Surendra Prasad Singh v. CIT [1988] 173 ITR 510 (Gau); CIT v. Linotype & Machinery Ltd. [1994] 192 ITR 337 (Cal); CIT v. R.K. Swamy [2002] 254 ITR 158 (Mad.)CIT v. Subhash Kumar Jain [2011] 355 ITR 364 (Punj. & Har.)." 4. The Ld. Commissioner examined the submissions and observed that the definition of the order passed given in Explanation (a) to S 263 is of inclusive nature and therefore reference to the assessment order in Exp (a)(i) and (a)(ii) does not place any restriction on the power of Commissioner to any order which can be revised u/s 263. He further examined the matter and distinguished the decision of Hon'ble Punjab and Haryana High Court in case of CIT v. Subhash Kumar Jain [2011] 355 ITR 364 becaus....
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....concluding has clearly observed that they have preferred the view taken by Hon'ble Madhya Pradesh High Court in case of Indian Pharmaceuticals (supra). He submitted that if the decision by Hon'ble Punjab and Haryana High Court in the case of Subhash Kumar Jain (supra) is clearly perused then para 11 of the decision would show that Hon'ble Punjab and Haryana High Court preferred to follow the decision of Hon'ble Delhi High Court, Hon'ble Rajasthan High Court and Hon'ble Calcutta High Court and specifically pointed out that they were unable to agree with the view of Hon'ble Madhya Pradesh High Court. Therefore this Tribunal was fully bound to follow the decision of Hon'ble Punjab and Haryana High Court. 6. On the other hand, the Ld. D.R. for the Revenue pointed out that the decision of Hon'ble Punjab and Haryana High Court in case of Subhash Kumar Jain (supra) was totally distinguishable. In that case the assessee could not explain that agricultural income and therefore enquiries were got conducted by the Inspector who in his report pointed out various defects in the documents furnished by the assessee. Thereafter the assessee offered to surrend....
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....nbsp;so far as the Assessment year 1965-66 is concerned, he did not mention anything in the assessment order about the initiation of penalty proceedings u/s 273(b) for non-payment of advance tax for the above year." In view of not taking any action by the Assessing officer in respect of above issues the Addl CIT was of the opinion that the order passed by the ITO was erroneous and prejudicial to the interest of the Revenue.. He set aside the order and directed the Assessing officer to charge interest u/s 139 and 217 and also to initiate penalty proceedings u/s 271(1)(a), 273(b). The assessee took the matter to the Tribunal. The Tribunal pointed out that powers u/s 263 contains certain conditions and limitations and under that section, the Commissioner has power only to examine the assessment order and he could not travel beyond the assessment proceedings. Therefore the Tribunal upheld the portion of the order with respect to levy of interest but quashed the order in respect of initiation of penalty proceedings. Hon'ble High Court adjudicated this issue as under: "We have heard Mr. Wazir Singh, learned counsel for the department, but we are of opinion that the conclusion r....
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....oceedings independently or an separate from the assessment proceedings. Though the expression "assessment" is used in the Act with different meanings in different contexts, so far as sec 263 is concerned, it refers to a particular proceedings that is being considered by the Commissioner and it is not possible when the Commissioner is dealing with the assessment proceedings and the assessment order to expand the scope of these proceedings and to view the penalty proceedings also as part of the proceedings which are being sought to be revised by the Commissioner. There is no identity between the assessment proceedings and the penalty proceedings; the latter are separate proceedings that my in some cases, follow as a consequences of the assessment proceedings. As the Tribunal has pointed out though it is usual for the ITO to record in the assessment order that penalty proceedings are being initiated, this is more a matter of convenience than of legal requirement. All that the law requires, so far as the penalty proceedings are concerned, is that they should be initiated in the course of the proceedings of assessment. It is sufficient if there is some record somewhere even apart from t....
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.... Court in case of CIT v. Linotype & Machinery Ltd. [1991] 192 ITR 337 and by Hon'ble Madras High Court in case of CIT v. R.K. Swamy [2002] 254 ITR 158/[2003] 128 Taxman 104. Still after detailed discussion Hon'ble High Court preferred to follow the decision of Hon'ble Madhya Pradesh High Court in case of Indian Pharmaceuticals (supra) by observing as under: "In this view of the matter, we are in respectful agreement that a view taken by Hon'ble Madhya Pradesh High Court in case of Addl CIT v. Indian Pharmaceuticals 123 ITR 874 and other cases." 9. In case of Subhash Kumar Jain (supra) Hon'ble Punjab and Haryana High Court was concerned with a case where the assessee could not explain the agricultural income properly, therefore enquiries were conducted by the department, therefore an Inspector who in his report pointed out various defects in the documents furnished by the assessee. Because of these defects the assessee made overall surrender of certain amounts subject to no penal action u/s 271(1)(c). The Assessing officer accepted this offer and completed the assessment without initiating any penalty proceedings. This order was revised u/s 263 and the Asse....
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....ceedings also as part of the proceedings which are being sought to be revised by the Ld. Commissioner. There is no identity between the assessment proceedings and the penalty proceedings the latter are separate proceedings that may, in some cases follow as a consequence of the assessment proceedings. As the Tribunal has pointed out though it is usual for the ITO to record in the assessment order that penalty proceedings are being initiated this is roe a matter of convenience than of legal requirement. All that the law requires so far as the penalty proceedings are concerned, is that they should be initiated in the course of the proceedings for assessment. It is sufficient if there is some record somewhere even apart from the assessment order itself that the ITO has recorded his satisfaction that the assessee is guilty of concealment or other default for which penalty action is called for. Indeed in certain cases it is possible for the ITO to issue a penalty notice or initiate penalty proceedings even long before the assessment is completed though the actual penalty order cannot be passed until the assessment finalized. We, therefore agree with the view taken by the Tribunal that th....
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....ings. The matter could be examined from another angle. Both S 271A and 271AAA start with the expression "may". Sec 271A reads as under: "271A Without prejudice to the provisions of section 271, if any person [***] fails to keep and maintain any such books of account and other documents as required by section 44AA or the rules made thereunder, in respect of any previous year or to retain such books of account and other documents for the period specified in the said rules, the Assessing Officer or the [***] Commissioner (Appeals) may direct that such person shall pay, by way of penalty, a sum of twenty-five thousand rupees." Section 271AAA also starts as under: "271AAA. (1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of June, 2007 but before the 1st day of July, 2012, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assessee,- ....