TaxTMI 
TaxTMI 
2017 (9) TMI 1579
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....e, holding that the order u/s. 143(3) r.w.s. 147 is erroneous and prejudicial to the interest of the revenue. 3) Without prejudice to the above, the learned CIT erred on facts and in law in holding that the order u/s. 143(3) r.w.s. 147 is bad in law in as much as the AO failed to initiate penalty proceedings u/s. 271(1)(C). 4) The appellant prays that your honour hold that the order u/s. 143(3) r.w.s. 147 is neither erroneous nor prejudicial to the interest to the revenue and hence no revision u/s. 263 was called for on that account. 3. At the outset the Learned Counsel for the assessee submits that order u/s 263 of the Act was passed by the Learned Commissioner of Income Tax without serving the show cause notice on the assessee, therefore the order passed is bad in law. However, the Ld. DR before us submits that notice was issued to the assessee by speed post and it was served on the assessee and copy of acknowledgment proof of service is furnished by the Ld.DR. In the circumstances we dismiss this ground of appeal of the assessee. 4. Coming to the merits, the Learned Counsel for the assessee submits that order u/s 263 of the Act was passed by the Learned Commissioner of ....
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....e Learned Commissioner of Income Tax the Assessing Officer should have initiated penalty proceedings u/s. 271(1)(c) of the Act and since he has not initiate penalty proceedings he held that the omission on the part of the Assessing Officer to initiate penalty proceedings during the course of assessment has rendered Assessment Orders erroneous and prejudicial to the interest of Revenue. Thus the Learned Commissioner of Income Tax directed the Assessing Officer to pass a fresh Assessment Order. The issue before us now to be decided is whether the Learned Commissioner of Income Tax has power u/s 263 of the Act to direct the Assessing Officer to initiate the penalty proceedings u/s. 271(1)(c) of the Act. We find similar issue has come up in the case of Dharmanandan Diamonds Pvt. Ltd v. ACIT in ITA.No.1624/Mum/2014 dated 23.03.2017 and the Coordinate Bench following decision of the Hon'ble Gujarat High Court in the case of CIT v. Paramanand M Patel [278 ITR 3] and the Hon'ble Punjab and Haryana High Court in the case of CIT v. Subhash Kumar Jain [335 ITR 364] set aside the order of the Learned Commissioner of Income Tax passed u/s 263 of the Act in directing the Assessing Office....
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....cer to initiate penalty proceedings u/s. 271(1)(c) of the Act in exercising of revisional power u/s 263 of the Act. The Hon'ble High Court held as under: - "5. After hearing learned counsel for the parties, we find the issue that arises for consideration of this Court in this appeal is could the CIT in exercise of power under s. 263 of the Act hold the order of the AO to be erroneous and prejudicial to the interest of the Revenue where the AO had failed to initiate penalty proceedings while completing assessment under s.153A of the Act. 6. It may be noticed that the said issue is no longer res integra. This Court in CIT vs. Subhosli Kumar Jam (supra) agreeing with the view of High Courts of Delhi in Addl. CIT vs. J.K. D'Costa (supra), CIT vs. Sudershan Talkies (1993) 112 CTR (Del) 165: (1993) 201 ITR 289 (Del) and CIT vs. Nihal Chartd Rekyan (1999) 156 CTR (Del) 59: (2000) 242 ITR 45 (Del), Rajasthan in CIT vs. Keshrimal Parasmal (1985) 48 CTR (Raj) 61 (1986) 157 ITR 484 (Raj), Calcutta in CIT vs. Linotype & Machinery Ltd. (1991) 192 ITR 337 (Cal) and Gauhati in Sureridra Prasad Singh & Ors. vs. CIT (1988) 71 CTR (Gau) 125: (1988) 173 ITR 510 (Gau) whereas dissenting w....
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....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 the penalty proceedings do not form part of the assessment proceedings and that the failure of the ITO to record in the assessment order his satisfaction or the lack of it in regard to the le-viability 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 interest of the Revenue because of the failure of the ITO to record his opinion about the leviability of penalty in the case." 10. Special leave petition against the said decision was dismissed by the apex Court [(1984) 147 ITR (St) 1]. The same view was reiterated by the Delhi High Court in CIT vs. Sudershan Talkies (1993) 112 CTR (Del) 165: (1993) 201 ITR 289 (Del) and followed in CIT vs. Nthal Chand Rekyan (1999) 156 CTR (Del) 59: (2000) 242 ITR 45 (Del). The Rajasthan High Court in CIT....