9911796707
TMI Blog2010 (5) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... initiated a proceeding under section 271(1)(c) of the Act on the ground that the assessee-petitioner had furnished inaccurate particulars of income which came in the compartment of concealment of income. The assessee-petitioner preferred an appeal, being I. T. A. No. 644/A-II710/2006-07, before the Commissioner of Income-tax (Appeals)-II, Patna, who, by order dated October 3, 2007, repelled the submissions canvassed by the assessee-petitioner and dismissed the appeal. 3. Being grieved and dissatisfied with the aforesaid order, the assessee-petitioner preferred an appeal before the Income-tax Appellate Tribunal (ITAT), Patna Bench, Patna (for short, "the Tribunal") and the Tribunal allowed the appeal in part, vide order dated March 23, 2009. 4. Thereafter, the Assessing Officer passed the following order : "Further, the assessee submitted that the penalty cannot be imposed for mere omission unless there is some evidence to show or some circumstances found from which it can be gathered that the omission is intentional and attributable to intention and desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resh order considering the entire material on record. 8. We have heard Mr. Krishna Nandan Singh, learned senior counsel for the petitioner, and Mr. Harshwardhan Prasad, learned senior standing counsel along with Mrs. Archana Sinha for the Revenue. 9. The two questions that emerge for consideration in this writ petition are whether the Commissioner in exercise of power under section 263 of the Act can direct for reopening of a penal proceeding because of the language employed under section 263 of the Act, and, secondly, whether the conditions precedent to section 263 of the Act are satisfied to justify the action. 10. To appreciate the controversy in proper perspective, it is seemly to reproduce section 263 of the Act which reads as under : "263.(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may refer with profit to the decision of the Allahabad High Court in CIT v. Braj Bhushan Cold Storage [2005] 275 ITR 360 (All) wherein the Division Bench of the Allahabad High Court was dealing with the reference whether the Commissioner of Income-tax under section 263, can revise the order passed by the Income-tax Officer under section 271(1)(c) because he had dropped the penalty proceedings along with other issues. The Division Bench has held thus (page 363) : "Having heard Sri A. N. Mahajan, learned standing counsel for the Revenue, we find that it is not in dispute that the penalty proceeding has been initiated during the course of the assessment proceeding itself. However, it was dropped by the assessing authority on September 28, 1984. We find that clause (a) to Explanation 4 of section 271(1)(c) of the Act provides that the amount of tax sought to be evaded in a case where the amount of income, in respect of which particulars have been concealed, or incomplete particulars have been furnished exceeds the total income assessed means the tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deals with assessment in case of departure from taxable territories, section 24B deals with collection of tax out of the estate of deceased persons, section 25 deals with assessment in case of discontinued business, section 25A with assessment after partition of Hindu undivided families and sections 29, 31, 33 and 35 deal with the issue of demand notices and the filing of appeals and for reviewing assessment and section 34 deals with assessment of incomes which have escaped assessment. The expression "assessment" used in these sections is not used merely in the sense of computation of income and there is in our judgment no ground for holding that when by section 44, it is declared that the partners or members of the association shall be jointly and severally liable to assessment, it is only intended to declare the liability to computation of income under section 23 and not to the application of the procedure for declaration and imposition of tax liability and the machinery for enforcement thereof. Nor has the expression, "all the provisions of Chapter IV shall so far as may be apply to such assessment" a restricted content ; in terms it says that all the provisions of Chapter IV sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction with the regular assessment' is satisfied that the assessee has without reasonable cause failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of subsection (3A) of section 212. The words 'in the course of any proceeding' have been the subject-matter of interpretation by the Supreme Court and it is settled that the necessary satisfaction conferring jurisdiction on the Income-tax Officer to impose penalty has to be reached before the passing of the order of assessment (See CIT v. S. V. Angidi Chettiar [1962] 44 ITR 739 (SC) and D. M. Manasvi v. CIT [1972] 86 ITR 557 (SC)). To put it differently, the Income-tax Officer has no jurisdiction to impose penalty under section 273 if he omits to record his satisfaction before completing the assessment. If an order of assessment is passed without recording the satisfaction that circumstances exist for imposition of penalty when such a satisfaction should have been recorded, the Commissioner can, in the exercise of his power of revision under section 263, set aside the assessment and direct the Income-tax Officer to make a fresh assessment after taking into account the circumstances which make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 263 of the said Act. In the said case, the Income-tax Officer, during the course of the assessment proceeding, initiated penalty proceedings under section 271(1)(c) of the Act. Subsequently, the Income-tax Officer dropped the penalty proceedings. The Commissioner of Income-tax (Administration), on scrutiny of the order passed by the Income-tax Officer, came to the conclusion that the order passed by the concerned Income-tax Officer in dropping the penalty proceedings was erroneous and prejudicial to the interests of the Revenue. 16. In this regard, we may fruitfully refer to CIT v. Toyota Motor Corporation [2008] 306 ITR 49 (Delhi) wherein a Division Bench of the Delhi High Court dealing with the exercise of power under section 263 of the Act had directed the Assessing Officer to revise the order dropping the penalty proceedings. At that juncture, in that context, the Bench held that the order of the Assessing Officer was cryptic, but it did not deal with the jurisdiction of the Commissioner to remit the matter under section 263 of the Act. 17. The said order passed by the Delhi High Court in Toyota Motor Corporation [2008] 306 ITR 49 (Delhi) came to be assai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the circumstances of the case, the Tribunal was right in coming to the conclusion that the Additional Commissioner could not pass an order under section 263 relating to penalties and whether, on the facts and in the circumstances of the case, the Tribunal was right in modifying the order of the Additional Commissioner passed under section 263 setting aside the assessments in question and in that context the court has held as follows (page 11) : "The only question before us is whether the Tribunal was right in revoking the order of the Additional Commissioner in so far as it pertains to the question of penalties under sections 271(1)(a) and 273(b). Here, we find ourselves in complete agreement with the view taken by the Tribunal. It is well established that proceedings for the levy of a penalty whether under section 271(1)(a) or under section 273(b) are proceedings independent of and separate from the assessment proceedings. Though the expression 'assessment' is used in the Act with different meanings in different contexts, so far as section 263 is concerned, it refers to a particular proceeding that is being considered by the Commissioner and it is not possible when th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act, 1961. Their Lordships referred to the decisions in Indian Pharmaceuticals [1980] 123 ITR 874 (MP) ; Addl. CIT v. Kantilal Jain [1980] 125 ITR 373 (MP) ; Addl. CWT v. Nathoolal Balaram [1980] 125 ITR 596 (MP) ; C. A. Abraham v. ITO [1961] 41 ITR 425 (SC) ; CIT v. Bhikaji Dadabhai and Co. [1961] 42 ITR 123 (SC) ; CIT v. Narpat Singh Malkhan Singh [1981] 128 ITR 77 (MP) and placing reliance on the decision in Addl. CIT v. J. K. D' Costa [1982] 133 ITR 7 (Delhi) expressed the view as follows (page 612) : "Under section 263, as above noticed, the Commissioner can call for the record of any proceeding under the Act. In the present case, he does so. He calls for the record pertaining to the assessment proceedings. He examines them, which he is empowered to do. He considers the order of assessment passed therein. He finds that the facts pertaining to the late filing of the return and non-filing of estimate of advance tax have not been considered. The provisions of sections 271(1)(a) and 273 of the Act have not been invoked. Does this make the order of assessment erroneous and prejudicial to the interests of Revenue ? The answer will depend on whether the penalty pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is (not ?) entitled to bring within his scope and deal with penalty proceedings and orders (which are admittedly connected but distinct) while calling for and examining the record of the assessment proceedings and orders. 22. In P. C. Puri v. CIT [1985] 151 ITR 584 (Delhi), it has been held that an assessment cannot be said to be prejudicial to the interests of the Revenue because of the failure of the Income-tax Officer to record his opinion about the leviability of the penalty as penalty proceedings do not form a part of the assessment proceedings. 23. In CIT v. Keshrimal Parasmal [1986] 157 ITR 484 (Raj), the High Court of Rajasthan has held thus (page 488) : "Thus, the position boils down to this that the view taken in J.K.D' Costa's case [1982] 133 ITR 7 (Delhi) has been confirmed by the Supreme Court and, according to this case, the Commissioner of Income-tax is not entitled to set aside the assessment order passed by the Income-tax Officer on the ground that there was no mention of initiation of penalty proceedings in the assessment order and the Commissioner of Income-tax in the proceedings under section 263 of the Act cannot direct the Income-tax Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings are filed. In New Jagat Textile Mills P. Ltd. v. CIT [2006] 282 ITR 399 (Guj) ; [2005] 196 CTR 110 (Guj), it has been observed that the settled legal position is that even if the proceedings are dropped and terminated or filed, any such noting would amount to an order and it would be open to the Revenue to initiate reassessment proceedings or revisional proceedings upon the necessary conditions being fulfilled in the exercise of jurisdiction under one or the other provision. 28. Thus, in essence, the initial words of section 263 "any proceedings" under the Act are of immense signification. Secondly, section 263 which uses the words "any order passed therein" by the Assessing Officer also has its importance. It is also seen from section 263 that the said provision uses the words "pass such order thereon as the circumstances of the case justify, including . . . " The word, "proceedings" hence, we are disposed to think, is a wider term compared to the word "assessment". It is also worth noting that the word "assessment" has been used only after the word "including" towards the end of section 263 and in the earlier part of section 263, the only word used is "proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither of the facts disclosed or the weight of the circumstances. If this is permitted, litigation would have no end, 'except when legal ingenuity is exhausted'. To do so, is '. . . to divide one argument into two and to multiply the litigation'. The power of suo motu revision under sub-section (1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision under this sub-section, viz., (i) the order is erroneous ; (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. We find that the expressions 'erroneous', 'erroneous assessment' and 'erroneous judgment' have been defined in Black's Law Dictionary. According to the definition, 'erroneous' means 'involving error ; deviating from the law'. 'Erroneous assessment' refers to an assessment that deviates from the law and is, therefore, invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 138) : 'In this context, it must be regarded as involving a conception of acts or orders which are subversive of the administration of the Revenue. There must be some grievous error in the order passed by the Income-tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of the Revenue administration'. In our view, this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
