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TaxTMI 
TaxTMI 
TaxTMI 
2018 (7) TMI 1992
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....ce. On an enquiry, the same was passed on and hence, the delay in filing the appeals late. We find merit in the petition of assessee and condone the delay in filing the appeals late before the Tribunal. 4. The issue raised in all the appeals is against exercise of jurisdiction by the Commissioner under section 263 of the Act, under which he has held that the order passed by the Assessing Officer under section 271(1)(c) of the Act dropping penalty proceedings was erroneous and prejudicial to the interest of Revenue. The facts and issues in all the appeals are identical. However, in order to adjudicate the issues, we make reference to the facts in ITA No.1522/PUN/2017, relating to assessment year 2004-05. 5. The assessee in ITA No.1522/PUN/2017, relating to assessment year 2004-05, has raised the following grounds of appeal:- 1] The learned CIT erred in revising the order passed by the learned A.O. u/s 271(1)(c) dropping the penalty proceedings on the ground that it was erroneous and prejudicial to the interest of the revenue. 2] The learned CIT erred in setting aside the order passed by the learned A.O. u/s 271(1)(c) dated 10.03.2015 and further erred in directing the A.O.....
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....der. He was of the view that the years under consideration were covered by Explanation 5A to section 271(1)(c) of the Act. Since the assessee had declared additional income under section 132(4) of the Act, it was a clear case wherein the provisions of Explanation 5A to section 271(1)(c) of the Act were to be applied. As per show cause notice, the Commissioner observes that the Assessing Officer while dropping penalty proceedings had mentioned certain decisions. The Commissioner after going through the facts and the issues decided by each of the decisions, noted that in all cases except one related to disallowance / rejection of assessee's claim under the normal provisions of the Act, which did not pertain to detection of undisclosed income during search, as in the case of assessee. One case pertains to search but to a period prior to insertion of Explanation 5A to section 271(1)(c) of the Act. The Commissioner was of the view that the order passed by the Assessing Officer dropping penalty proceedings was erroneous and prejudicial to the interest of Revenue. Therefore, show cause notice was issued to the assessee. The assessee filed reply which is incorporated by the Commissioner at....
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....see's case and the action of Assessing Officer in dropping penalty proceedings was not in accordance with mandatory provisions of law and the proceedings were dropped in sheer ignorance or disregard to the provisions of the Act and hence, no contrary view to be taken. The Commissioner also referred to various judicial pronouncements to comment on the powers of revision of Commissioner under section 263 of the Act and observed that the same was not confined to assessments but all proceedings of the Assessing Officer which were prejudicial to the interest of Revenue. Another point which was raised by the assessee was that the additional income declared in the statement under section 132(4) of the Act was duly shown in the revised return filed and since there was no addition to returned income, there was no question of any concealment of income. The said plea of assessee was also rejected by the Commissioner on the ground that only due to search, the additional income was detected and declared finally by the assessee. The Commissioner held that there was non-application of mind by the Assessing Officer, who dropped the penalty proceedings and held the order dropping penalty proceeding....
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....lfilled, then no penalty could be levied under section 271(1)(c) of the Act. He further referred to the decision of the Hon'ble Bombay High Court in CIT Vs. Shri Samson Perinchery in Income Tax Appeal No.1154 of 2014 with other Income Tax Appeals Nos.953 of 2014, 1097 of 2014 and 1226 of 2014, judgment dated 05.01.2017, which has also laid down the said proposition. The learned Authorized Representative for the assessee pointed out that as on date what has to be seen is whether the proceedings initiated were correct or not. In case the proceedings were not correctly initiated and dropped by the Assessing Officer, then such an order cannot be challenged under section 263 of the Act. He stressed that where initiation of proceedings were invalid and the Assessing Officer dropped the same, such an order of Assessing Officer cannot be held to be erroneous and hence, no question of exercise of jurisdiction under section 263 of the Act. He pointed out that in case where the original assessment order was invalid in law, then 263 order holding it to be erroneous is invalid. In this regard, he placed reliance on the decision of the Mumbai Bench of Tribunal in M/s. Westlife Development Ltd. V....
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....in this case were itself bad in law and order dropping penalty in such circumstances, cannot be held to be erroneous. 13. We have heard the rival contentions and perused the record. The issue which arises before us is the exercise of jurisdiction under section 263 of the Act. The Commissioner is empowered to revise the orders passed by the Assessing Officer where the order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue. The Commissioner can exercise his revisionary powers only if both the conditions of section 263 of the Act are fulfilled. The order which is in question should be erroneous and also prejudicial to the interest of Revenue. 14. Coming to the facts of present case, we have to see whether the order passed by the Assessing Officer dropping penalty proceedings under section 271(1)(c) of the Act was erroneous and hence, prejudicial to the interest of Revenue or not. Consequent to search action under section 132 of the Act on the premises of assessee, wherein during recording of statement under section 132(4) of the Act, the assessee had declared additional income on account of various factors in all the years under appeal, which ....
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.... with other Income Tax Appeals Nos.953 of 2014, 1097 of 2014 and 1226 of 2014, judgment dated 05.01.2017 after referring to the decision of the Hon'ble Supreme Court in Ashok Pai Vs. CIT (2007) 292 ITR 11 (SC) and the decision of the Hon'ble High Court of Karnataka in CIT & Anr. Vs. M/s. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Kar) has held that satisfaction of the Assessing Officer has to be with regard to one of two breaches mentioned under section 271(1)(c) of the Act, for initiation of penalty proceedings, would not warrant / permit penalty being imposed for other breaches. Penalty under section 271(1)(c) of the Act can be levied only in respect of either of two limbs i.e. either for concealment of income or furnishing inaccurate particulars of income. The Assessing Officer after making additions in the hands of assessee has to record satisfaction in this regard as to which limb of section 271(1)(c) of the Act has not been satisfied by the assessee and accordingly, give him show cause notice by recording satisfaction of violating either of the limbs. 17. The Pune Bench of Tribunal in Kanhaiyalal D. Jain Vs. ACIT (supra) had also after referring to severa....
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....al is root of start of the proceedings i.e. recording of satisfaction and the issue of notice, which has been challenged by the assessee to be invalid. Applying the ratio laid down by the Hon'ble Karnataka High Court in CIT & Anr. Vs. Manjunath Cotton and Ginning Factory (supra) and CIT Vs. SSA'S Emerald Meadows (supra) and in view of SLP being dismissed, we find merit in the plea of assessee that the satisfaction recorded in the present case to initiate penalty proceedings both for concealment of income and furnishing of particulars of income against additional income offered by the assessee is incorrect. Further, where the assessee is not aware of exact charge against him, the ambiguity in the notice issued under section 274 r.w.s. 271(1)(c) of the Act by not striking of portion which is not applicable, prejudice the right of reasonable opportunity to the assessee, as he was not made aware of exact charge he had to face. It is a clear-cut case of concealment since the assessee had offered additional income pursuant to search carried out at its premises. It is not the case of furnishing of inaccurate particulars of income and hence, the Assessing Officer should have recorded the s....
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.... different connotations, then as per provisions of the Act, the satisfaction has to be recorded by the Assessing Officer before initiating penalty proceedings as to under which limb the case of assessee falls. In the present set of facts, the satisfaction as recorded by the Assessing Officer which is evident from the assessment order itself does not establish the case of Revenue against the assessee that it is liable for levy of penalty for concealment under which limb i.e. for concealment of income or for furnishing of inaccurate particulars of income. The notice issued under section 274 of the Act by the Assessing Officer also does not show cause the assessee as to make him aware of exact charge levied against him. In the absence of same, it causes prejudice to the right of reasonable opportunity to be allowed to the assessee before levy of penalty under section 271(1)(c) of the Act. Consequently, penalty notice issued in the present case suffers from infirmities i.e. lack of satisfaction and lack of notice being issued in making the assessee aware of exact charge against him, hence the same is quashed. The penalty proceedings completed pursuant to such notice are vitiated and th....