TMI Blog2008 (10) TMI 588X X X X Extracts X X X X X X X X Extracts X X X X ..... conducted under section 132 of the Act in respect of accounts and deposits held by the assessee in benami names in Indian Bank, Osmangunj Branch, Hyderabad. An amount of Rs.30,94,157 was seized being the proceeds of benami deposits. Subsequent to the search, the assessee had admitted that these fixed deposits belonged to him and represented his income not declared in the returns of income for the assessment years 2002-03, 2003-04 and 2004-05 as under : Particulars of income disclosed in the return Assessment year 2002-03 (original return) (Rs.) Assessment year 2003-04 (original return) (Rs.) Assessment year 2004-05 (original return) (Rs.) Income from house property 2,16,720 2,19,251 3,37,470 Interest and remuneration from firms 3,25,074 3,47,801 5,41,044 1,10,527 Income from other sources 6,52,321 Deduction under section 80L 9,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs ; (iii) every loss of revenue cannot be considered as prejudicial to the interests of the Revenue ; (iv) the Assessing Officer in exercise of his discretionary power has dropped the penalty proceedings and the mere fact that his notings in the order sheet are not speaking and illustrative does not make the discretion of the Assessing Officer as erroneous and prejudicial to the interests of the Revenue. The assessee while placing reliance on the decision in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC), Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) and CIT v. K. Y. Pilliah and Sons [1967] 63 ITR 411 (SC) requested to drop the action initiated under section 263 of the Act. However, the learned Commissioner of Income-tax after considering the assessee s explanation while observing that dropping of proceedings amounts to order and if such order is prejudicial to the interests of the Revenue, then such order is amenable to revisionary powers under section 263 of the Act distinguished all the decisions relied on by learned counsel for the assessee. He after relying on the ratio of the decisions of the following cases (1) New Jagat Textile Mil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income-tax should be quashed for the following reasons : (i) The alleged entry made by the Assessing Officer in the order sheet dropping the penalty under section 271(1)(c), was not communicated to the appellant in spite of specific request made to the Commissioner on February 5, 2007 ; and (ii) The alleged note in the order sheet was not communicated to the appellant, and therefore, it appears that the penalty proceedings were not finalised and barred by limitation. (3) When the Assessing Officer had accepted the reasons stated by the appellant in his detailed explanation and arrived at a decision not to levy penalty, it was not necessary for the Officer to state the reasons in detail, as held by the apex court in the case reported in CIT v. K. Y. Pilliah and Sons [1967] 63 ITR 411 at pages 415, 416. (4) The learned Commissioner of Income-tax is not justified in rejecting a conscious decision taken by the Assessing Officer, after duly considering detailed reply filed by the assessee. The view taken by the Assessing Officer was a possible view, which could not be said to be unsustainable in law, and the Commissioner of Income-tax could not have substituted his opinion i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the hon ble Supreme Court in the case of Trustees of H. E. H. the Nizam s Supplemental Family Trust v. CIT reported in [2000] 242 ITR 381 the order passed by the Assessing Officer dropping the penalty proceedings is not an order in the eye of law. Therefore, the decision relied on by the learned Departmental representative is distinguishable and is not applicable to the facts of the present case and therefore, the order passed by the Assessing Officer be upheld. We have carefully heard the rival submissions and perused the material available on record. We find that there is no dispute that the assessee has filed return originally for the assessment year 2002-03 showing income of Rs. 6,43,320. Subsequently after the search the assessee has filed a revised return disclosing income from surrender of FDRs and interest thereon, profit from own business and cash found aggregating to Rs. 30,71,958. In the return for the assessment years 2003-04 and 2004-05 the assessee has disclosed income from surrender of FDRs, interest on FDRs and profit from own business. We further find that the Assessing Officer has accepted the income disclosed by the assessee in the scrutiny assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Had the Income-tax Officer passed any final order, it would have been communicated to the assessee within a reasonable period. In any case, the note dated November 10, 1965 was merely an internal endorsement on the file without there being an indication if the refund application had been finally rejected. By merely recording that in his opinion no credit for tax deducted at source was to be allowed, the Income-tax Officer could not be said to have closed the proceedings finally. During the pendency of the return filed under section 139 of the Act along with the refund application under section 237 of the Act, action could not have been taken under section 147/ 148 of the Act. In CIT v. Badri Prasad Bianwalla [1982] 133 ITR 433 (Cal), relied on by learned counsel for the assessee it has been held at page 434 (headnote) : that the entry made in the order sheet on October 31, 1963, assessing the loss could not be treated as an order of assessment. Therefore, the return filed by the assessee on June 12, 1961 was pending and as such the Income-tax Officer could not ignore the same and reopen the assessment under section 147. The reassessment proceedings were, therefore, not valid . I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concluded and hence the entry made in the order sheet on October 31, 1963 could not be treated as a valid order of assessment and the reassessment proceedings were not valid. Whereas in the case before us it is a case of penalty proceedings under section 271(1)(c) and not assessment proceedings. In CIT v. Kartar Singh and Co. P. Ltd. [2008] 300 ITR 440 ; 169 Taxman 219 (P H) the order was passed under section 143(1)(a). Therefore, it has been held that the same cannot be revised under section 263 of the Act. In the case before us it is a case of penalty proceedings and not intimation under section 143(1). Hence all the decisions relied on by learned counsel for the assessee are distiguishable and are not applicable to the facts of the present case. Since the Assessing Officer has not passed any speaking order while dropping the penalty proceedings under section 271(1)(c), the noting in order sheet in dropping the penalty cannot be said to have been done after proper enquiry. Hence the orders passed by the Assessing Officer are not only erroneous but also prejudicial to the interests of the Revenue. Considering these aspects of the matter, in our view, the impugned orders passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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