TaxTMI 
TaxTMI 
TaxTMI 
2019 (6) TMI 732
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.... 263 deserves to be cancelled. 2. In law and on the facts and in circumstances of the appellant's case, the Hon'ble PCIT erred in law in having assumed jurisdiction u/s 263 of the Act in order to substitute her subjective view in place of judicious view taken by the AO on the same set of facts and thus such assumption of power is unlawful and unjust and therefore the order passed u/s 263 shall be quashed. 3. In law and on the facts and in circumstances of the appellant's case, the Hon'ble PCIT erred in ignoring the sequence of the events on consideration of which the ld. AO. had dropped the penalty proceeding and therefore the order passed u/s 263 on such incomplete appreciation of facts shall be quashed. 4. In law and on the facts and in circumstances of the appellant's case, the Hon'ble PCIT erred in treating the submission of the assesse e as unsubstantiated without bringing any cogent material on record to prove such allegation and thus the order passed u/s 263 deserves to be annulled. 5. The appellant craves to leave, add, amend, alter or modify the ground or grounds of Appeal on or before the hearing." 2. Briefly stated, the assessee who is engaged in the b....
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.... Apart there from, the unsubstantiated claim of the assessee that it was the lapse on the part of the earlier chartered accountant which had led to the understatement of income, also did not find favour with the A.O. On the basis of his aforesaid observations the Pr. CIT issued a 'Show Cause' notice, dated 12.06.2018 to the assessee and called upon him to explain as to why the order passed by the A.O dropping the penalty proceedings may not be revised under Sec. 263 of the I-T Act. In reply, it was submitted by the assessee that as he had came up with a voluntarily disclosure of the understated income which was inadvertently omitted to be offered in the return of income, therefore, the A.O had after due application of mind dropped the penalty proceedings which were initiated in the assessment order under Sec. 271(1)(c). It was thus, the claim of the assessee, that as the A.O had after necessary deliberations and application of mind to the facts of the case dropped the penalty proceedings, therefore, the Pr. CIT was divested of his jurisdiction under Sec. 263, as the same would tantamount to re-examining the issue which had already been inquired into by the A.O. However, the Pr. CIT....
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....g to understatement of income by the assessee had thereafter dropped the penalty proceedings; (vi) that, the fact that the A.O had not passed a detailed order while dropping the penalty proceedings could not be put to service for drawing of adverse inferences against the assessee in order to justify initiation of action under Sec. 263; and (vii) that, as the penalty was dropped by the A.O on the basis of an 'order sheet' noting, thus, in the absence of any 'order' passed by him, the same could not have been revised under Sec. 263. 5. The Pr. CIT after deliberating at length on the contentions advanced by the assessee was however not persuaded to accept the same. Insofar, the claim of the assessee that jurisdiction under Sec. 263 would not take within its sweep dropping of the penalty proceedings by the A.O under Sec. 271(1)(c) on the basis of an 'order sheet' noting was concerned, the same was rejected by the Pr. CIT. Further, the Pr. CIT adverting to the facts of the case observed that the claim of the assessee that he had voluntarily made the disclosure of understated income in the course of the assessment proceedings was factually incorrect. In order to drive home his aforesaid....
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....ejudicial to the interest of the revenue, thus, set aside his order wherein he had dropped the penalty proceedings u/s 271(1)(c), and directed him to pass a reasoned order after affording a reasonable opportunity of being heard to the assessee. 6. Aggrieved, the assessee has carried the matter in appeal before us. The ld. Authorized Representative (for short 'A.R') for the assessee took us through the facts of the case. The ld. A.R in order to buttress his claim that as the A.O after due application of mind had dropped the penalty proceedings which were initiated by him u/s Sec. 271(1)(c), therein took us through the relevant pages of the assesses 'Paper book' (for short 'ABP'). It was submitted by the ld. A.R that on account of an inadvertent omission certain income in the form of cash deposits/FDRs had remained understated by the assessee in his return of income for the year under consideration. It was submitted by him that when the new chartered accountant who was engaged by the assessee brought the aforesaid fallacy to his notice, the assessee without any further loss of time filed a letter on 01.03.2016 with the A.O offering the understated income in form of certain cash depo....
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....t. Alternatively, it was submitted by the ld. A.R, that as the A.O had dropped the penalty proceedings under Sec.271(1)(c) by way of an 'order sheet' noting and not on the basis of any 'order', therefore, the Pr. CIT for the said reason also was divested of his jurisdiction to revise the said action of the A.O. On the basis of the aforesaid submissions, it was the claim of the ld. A.R that as the Pr. CIT had wrongly exercised his revisional jurisdiction under Sec.263, therefore, the order passed by him may be set aside and that of the A.O be restored. 7. Per contra, the ld. Departmental Representative (for short 'D.R') relied on the order passed by the Pr. CIT. It was submitted by the ld. D.R that the Pr. CIT remaining well within the arena of his jurisdiction had validly revised the order passed by the A.O, as he had on the basis of a cryptic 'order sheet' noting dropped the penalty proceedings initiated in the case of the assessee u/s. 271(1)(c). In order to support his claim that the dropping of the penalty proceedings u/s. 271(1)(c) by an A.O on the basis of an 'order sheet' entry could validly be revised under Sec.263, reliance was placed by him on the judgement of the Hon'b....
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....o Rs. 30 lacs (approx.) for the year under reference, vide his letter dated 01.03.2016. Further, it is submitted by him that though the A.O had made available the AIR information on the very same date i.e 01.03.2016, however, the same was provided to him only after he had already offered the understated income of Rs. 25 lacs to Rs. 30 lacs (approx.) for tax, vide his aforesaid letter filed on the same day. We have deliberated on the aforesaid contention of the ld. A.R and find substantial force in the same. As is discernible from the AIR information that was made available to the assessee in the course of the assessment proceedings, it stands revealed, that the same was given to him only at 5:45 PM on 01.03.2016. The said factual position had not been controverted by the ld. D.R by placing on record any documentary evidence which would have persuaded us to hold otherwise. Accordingly, it can safely be concluded that the letter dated 01.03.2016 that was filed by the assessee with the A.O (bearing the stamp of the income tax office) during the office hours, was prior to receipt of the AIR information from him. We thus, are of the considered view that the assessee is correct in claimi....
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....e, the duly disclosed FDR's of Rs. 68,28,603/- held by the assessee on 31.03.2008 alongwith its interest element had culminated to an amount of Rs. 76,71,190/- during the year under consideration. In fact, the assessee had duly submitted before the A.O that the source of the entire FDR's held by him was either from his regular business books/own saving accounts or wifes accounts/jointly with mother or wife etc., though appearing in his name. It was submitted by the assessee that as some of the FDRs were under auto renewal mode, therefore, it was extremely difficult for him to match the same with the exact figure as the AIR information did not contain an exhaustive details of the said FDR's. As the assessee due to shortage of time (as the assessment was getting time barred by 31.03.2016) could not reconcile the FDR's with those reported in the AIR information, therefore, in order to buy peace of mind and to avoid protracted litigation, he had offered the unreconciled balance of Rs. 8,42,587/- for tax in the course of the assessment proceedings. Accordingly, the assessee had offered the additional income of Rs. 32,60,000/- [Rs. 24,17,000/- (+) Rs. 8,42,587/-] for tax in the course of....
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....d not assist the case of the revenue. 11. Accordingly, we are of the considered view that the A.O finding favour with the claim of the assessee that there was a bonafide mistake on his part in understating the aforesaid income of Rs. 32,60,000/-, which thereafter, in the course of the assessment proceedings was voluntarily offered by him for tax, had thus, dropped the penalty proceedings which were initiated by him u/s 271(1)(c) while framing the assessment. We are of the considered view that the A.O in totality of the facts of the case, had in all fairness, by adopting a plausible view dropped the penalty proceedings which were initiated by him u/s 271(1)(c). As such, we are of a strong conviction that though the Pr. CIT might not have been persuaded to subscribe to the aforesaid view so taken by the A.O, however, we are afraid that the same at least would not have justified exercise of the revisional jurisdiction by him u/s 263 for the sake of substituting his view as against that of the A.O. Insofar the Explanation 2 of Sec.263 relied upon by the Pr. CIT is concerned, we are unable to comprehend as to how the same could have been put into service for dislodging the plausible vi....