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2018 (7) TMI 1992 - AT - Income TaxRevision u/s 263 by CIT - order passed by the AO u/s 271(1)(c) dropping penalty proceedings was erroneous and prejudicial to the interest of Revenue - search and seizure action u/s 132 was carried out at the premises of assessee and assessment u/s 153A r.w.s. 143(3) was completed admiting additional income declared by assessee - as per assessee additional income declared in the statement u/s 132(4) 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 - HELD THAT:- Penalty proceedings were initiated for both the limbs, then satisfaction recorded by the Assessing Officer in such circumstances was not correct and the Assessing Officer having failed to come to a finding as to which limb of section 271(1)(c) of the Act was not fulfilled, then no penalty could be levied under section 271(1)(c) Penalty proceedings initiated lacked from satisfaction and had quashed the penalty proceedings in the said case of search on the assessee. In such circumstances, where the question of law has been decided M/S MANJUNATHA COTTON AND GINNING FACTORY & OTHS., M/S. V.S. LAD & SONS, [2013 (7) TMI 620 - KARNATAKA HIGH COURT] and on similar facts, the issue has been decided KANHAIYALAL D. JAIN VERSUS THE ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE – 3, NASHIK [2016 (12) TMI 1238 - ITAT PUNE] then the order of Assessing Officer in recording satisfaction of violating both the limbs of section 271(1)(c) of the Act suffers from infirmity. The AO on reply of assessee had dropped penalty proceedings and such an order of dropping penalty proceedings cannot be said to be erroneous. Coming to the exercise of jurisdiction by the Commissioner u/s 263 Commissioner in the present case has though exercised his jurisdiction in respect of the order dropping penalty proceedings under section 271(1)(c) of the Act. However, where the Assessing Officer had not initiated the penalty proceedings within framework of law then, the Assessing Officer having dropped penalty proceedings by passing an order, then such an order dropping penalty proceedings cannot be said to be erroneous. In the present set of facts, the order dropping penalty proceedings, which were not validly initiated cannot be said to be erroneous order i.e. passed without application of mind by the Assessing Officer and in the absence of the same, the Commissioner is precluded from exercising his jurisdiction under section 263 - Decided in favour of assessee
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