TMI Blog2003 (5) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... o furnish the proof regarding the ownership of the agricultural land on lease basis and details of income from the agriculture in the form of copies of lease deeds and copies of vouchers evidencing payment of the lease money. The assessee furnished the requisite details of various expenses relating to agricultural operations. The Assessing Officer deputed her Inspector to conduct enquiries regarding the agricultural activities of the assessee. The Inspector after conducting on the spot enquiries at Village Metholi, Distt. Moradabad (UP), concluded that the lease deeds produced by the assessee were not genuine as some of the Lessors who allegedly signed the deeds were illiterate and one of the Lessors had died about 10 years back, that the land owners denied having leased out their land, that the assessee had shown the sale of arhar whereas enquiries showed that the main crops of the area were wheat, sugarcane and inenthol. When this report as confronted to the assessee by the Assessing Officer, the assessee came forward with surrender of Rs. 9,91,090 and the assessment was completed at an income of Rs. 10,80,210 vide order under section 143(3) dated 18-4-1996 subject to no penal ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 7 (Delhi). 2.1 The CIT after considering these submissions and citations of the assessee and placing reliance on Addl. CIT v. Indian Pharmaceuticals [1980] 123 ITR 874 (MP), Addl. CWT v. Nathoolal Balaram [1980] 125 ITR 596 (MP), Addl. CIT v.Kantilal Jain [1980] 125 ITR 373 (MP), CIT v. Narpat Singh Malkhan Singh [1981] 128 ITR 77(MP) exercised his revisional jurisdiction under section 263 of the Act, set aside the order passed by the Assessing Officer under section 143(3) and directed the Assessing Officer to frame afresh assessment keeping in view the facts attracting the penal action under section 271(1)(c) by making the following observations in his order: "I have gone through the assessment records of the assessee and written submissions filed in response to the show cause. The enquiries got made by the Assessing Officer revealed that the assessee had filed false documents to justify his agricultural income and when the assessee was confronted by concrete evidence in possession of the department, the said agricultural income amounting to Rs. 9,91,090 was surrendered. The Assessing Officer by accepting the surrender when income from agricultural was established to be no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon by the CIT as well as before us by both the parties. From the arguments of both the parties, the issue required to be decided by us is whether the CIT can invoke powers under section 263(1) of the Income-tax Act so as to set aside the assessment order and directing the initiation of penalty proceedings in a case where the penalty proceedings were not initiated by the Assessing Officer before or at the time of making the assessment. The CIT relying on the decisions of Madhya Pradesh High Court in Indian Pharmaceutical's case, Nathoolal Balaram's case, Kantilal Jain's case and Narpat Singh Malkhan Singh's case and applying the same to the instant case of the assessee, invoked his powers under section 263(1) to set aside the assessment and directed the Assessing Officer to frame afresh assessment keeping in view the facts attracting the penal action under section 271(1)(c) of the Income-tax Act because in these cases, the M.P. High Court was of the view that Commissioner can invoke his powers under section 263(1) to set aside the assessment order and directing the Assessing Officer to make afresh assessment in accordance with the law keeping the applicability of the penalty provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the ITO of a satisfaction or direction to issue a notice under section 271(1)(a) of the Income-tax Act, 1961 for late filing of return or under scction 273(b) for failure t6 file an estimate of advance tax and pay the tax, is not an integral part of the assessment order so that a failure to do so would render it erroneous or prejudicial to the revenue. In the context of section 263, the expression "assessment" refers to the particular "proceeding" that is to be considered. If the Commissioner is dealing with assessment proceedings and the assessment order, he cannot expand his powers to deal with penalty proceedings when they are not before him." Held: "Accordingly that while examining the records of an assessment order in exercise of his powers of revision under section 263, the Commissioner was not justified in setting aside the assessment order and directing the initiation of penalty proceedings because the Commissioner found that the ITO had not initiated penalty proceedings either under section 271(1)(a) for late filing of return or under section 273 for failure to file an estimate of advance tax in terms of section 212(3) and paying tax accordingly." (ii Lordships o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ): Held... "that the Commissioner was not entitled to set aside the assessment order passed by the ITO on the ground that there was no mention of initiation of penalty proceedings in the assessment order and the Commissioner in the proceedings under section 263 could not direct the ITO to make a fresh assessment for initiating penalty proceedings. Therefore, no question of law arose out of the order of the Tribunal." In this case, their Lordships of Rajasthan High Court followed the decision in J.K. D'Costa's case and dissented from the decision in Indian Pharmaceuticals case. (vii) In the case of A.N. Sarvaria their Lordship held: "The Commissioner of Wealth Tax has no power under section 25(2) of the Wealth-tax Act, 1957 to revise the order of assessment passed by the W.T.O. on the ground that it is erroneous merely because the WTO failed to initiate penalty proceedings under section 18(1)(a) read with section 18(2) of the Wealth-tax Act." In this case, their Lordships of Delhi High Court followed the decision in J.K. D'Costas case Achal Kumar Jain's case and dissented from the decision in Indian Pharmaceuticals case, Nathoolal Balarams case, Kantilal Jain's case and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the penalty proceedings when they are not before him: In this very case, their Lordships of Calcutta High Court also observed that for failure of the ITO to record in the assessment order his satisfaction or the lack of it, the assessment order cannot be said to be erroneous or prejudicial to the interests of the revenue, the ITO must record his opinion about the leviability of the penalty on the facts of the case. On further referring to the decision of the Delhi High Court in the case of Achal Kumar Jain P.C. Puri's case and A.N. Sarvaria's case have reiterated the same view. The Rajasthan High Court in Keshrimal Parqamal's case and Gauhati High Court, in Surendra Parshad Singh's case following the decision of the Delhi High Court in J.K. D'Costa's case also took the same view. It may be mentioned that on March 2, 1984, the special leave petition filed by the department against the judgment of the Delhi High Court in J.K. D'Costa's case was rejected. Their Lordships of Calcutta High Court held:" "that the Commissioner was not entitled to exercise his powers of revision under section 263 for failure of the ITO to initiate penalty proceedings under section 273(a) of the Act." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and detailed by us hereinabove in our order. 2.6 In this view of the matter, the law of judicial precedents demands that the majority view of the High Court cited, wherein it has been held that even if while examining the records of an assessment order in exercise of his powers of revision under section 263, the Commissioner finds that the Assessing Officer has not initiated penalty proceedings, he cannot direct the initiation of penalty proceedings because the penalty proceedings are not a part of the assessment proceedings and thus, the Commissioner cannot pass an order under section 263 of the Act pertaining to the penalty, should be followed by the Tribunal instead of following the decisions of M.P. High Court which after proper discussion have been dissented from by the above-mentioned High Court in the decisions, whereas, there is no other decision of any other High Court brought to our notice, agreeing with the view taken by the M.P. High Court nor there is any subsequent decision of M.P. High Court dissenting from the decision delivered by the High Courts in the case cited. Lastly, the main decision of Delhi High Court J.K. D'Costa's case following which the subsequent d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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