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TMI Blog2012 (10) TMI 778X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007 at her residential premises as well as the maternity home. Her husband is also a doctor and his statement was recorded during the course of search. The assessee has filed her return of income on 30th September 2008, declaring a total income of Rs.75,69,540. Learned Assessing Officer had issued notice under sec. 143(2) and thereafter issued a questionnaire under sec. 142(1) of the Act. After hearing the assessee, he framed the assessment order on 14th September 2009. He accepted the return of income. It is a very brief assessment order running into two pages and eight paragraphs. Learned Assessing Officer, up to paragraph 4 of the assessment order, has just mentioned the brief background of the search, how he assumed jurisdiction and when he has issued notices to the assessee. From paragraphs 5 to 8, he has discussed the issue on merit. His brief finding reads as under: "5. The regular books of account, viz the cash book, the ledger, the journal, the bills and vouchers and the bank account statements, were produced by the assessee which were verified and examined vis-a-vis the findings of the search (cash found, jewelry found, immoveable property found, the Diary/loose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act can be taken by the Learned Commissioner. In order to buttress her contentions, assessee relied upon the judgment of Hon'ble jurisdictional Hon'ble High Court in the case of CIT vs. Subhash Kumar Jain reported in 335 ITR 364 as well as the judgment of Hon'ble Delhi High Court rendered in the case of ACIT vs. J.K. D'costa reported in 133 ITR 7. It was also contended that SLP against the judgment of Hon'ble Delhi High Court was rejected. Learned CIT did not make reference to the decision of Hon'ble jurisdictional High Court, rather he supported his order with the decision of Hon'ble Allahabad High Court rendered in the case of CIT vs. Surrender Prasad Aggarwal reported in 94 CTR 161. According to the Learned CIT, if the Assessing Officer failed to initiate penalty proceedings then his order can be termed as erroneous as well as prejudicial to the interest of the revenue. He also emphasized that dismissal of SLP by the Hon'ble Supreme Court in the case of J.K. D'costa without speaking order would only mean that court was not inclined to exercise its discretion in granting leave to file the appeal. It does not attract the doctrine of merger and the view expressed in the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment, the A.O examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s. 263 is not permitted to substitute his estimate of income in place of the income estimated by the A.O. (vii) The A.O exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrives at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not feel satisfied with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the A.O has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the A.O allows the claim on being satisfied with the explanation of the assessee, the decision of the A.O cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard." 6. In the light of above proposition, let us examine the facts of the present case. Learned Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ping in mind whole background of the case did not initiate the penalty. Under the Act, it is not mandatory to initiate a penalty, it is a discretion which vests with the Assessing Officer while framing the assessment order. In the impugned order, Learned Commissioner nowhere pointed out how that discretion has not been exercised judiciously. He is simply harping upon the judgment of the Hon'ble Allahabad High Court and observed that if penalty not initiated during the course of assessment proceedings then assessment order can be said to be erroneous. Learned Commissioner nowhere pointed out as to why penalty ought to be initiated. Simultaneously, he did not discuss the judgment of jurisdictional High Court which is binding upon the Learned Commissioner and directly on the point. 8. The questions before the Hon'ble jurisdictional High Court in the case of Subhash Kunar Jain were as under: "Whether the agreement made by the Assessing Officer of initiating no proceedings under section 271(1)(c) is bad in law ? and whether the assessment so framed is erroneous and prejudicial to the interests of the Revenue?" Hon'ble Court on an analysis of the provisions observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Income-Tax, Patiala, (1980) 125 ITR 239 (P&H) relying upon Bombay High Court decision in Jivatlal Purtapshi v. CIT (1967) 65 ITR 261 had an occasion to consider as to whether an agreement between assessee and the income tax authorities arrived at regarding imposition of penalty while surrendering the income was to be acted upon or not. It was observed that an order based on an agreement cannot give rise to grievances and the same cannot be agitated". 9. Similarly, on the second point, whether non-initiation of penalty would make the assessment as erroneous and prejudicial to the interest of revenue, the Hon'ble Court has relied upon the decision of Hon'ble Delhi High Court in the case of J.K. D'Costa and observed that Learned Commissioner cannot direct the initiation of penalty, where the assessment order under section 143(3) is silent. The discussion made by the Hon'ble Court on this aspect reads as under:- "9. Now adverting to the second limb, it may be noticed that the Delhi High Court in judgment reported in Commissioner of Income Tax v. J.K. D'costa [1981] 133 ITR 7 has held that the CIT cannot pass an order under Section 263 of the Act pertaining to imposition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " 10. Special leave petition against the said decision was dismissed by the Apex Court [1984] 147 ITR (St.) 1. The same view was reiterated by the Delhi High Court in Commissioner of Income Tax v. Sudarshan Talkies, [1993] 201 ITR 289 (Del) and followed in CIT v. Nihal Chand Rokyan, [2000] 242 ITR 45 (Del). The Rajasthan High Court in Commissioner of Income Tax v. Keshrimal Parasmal (1986) 157 ITR 484 (Raj), Gauhati High Court in Surendera Parshad Singh and others v. CIT, (1988) 173 ITR 510 and Calcutta High Court in Commissioner of Income-Tax v. Linotype and Machinery Ltd.,(1991) 192 ITR 337 (Cal) have followed the judgment of Delhi High Court in J.K. D'costa's case (supra). 11. However, Madhya Pradesh High Court in Addl. Commissioner of Income-Tax, M.P. v. Indian Pharmaceuticals, [1980] 123 ITR 874 (MP) which has been followed by the same High Court in Addl. CIT v. Kanti Lal Jain, [1980] 125 ITR 373 and Addl. CWT v. Nathoo Lal Bela Ram, [1980] 125 ITR 596 has adopted diametrically opposite approach. 12. We are in agreement with the view taken by the High Courts of Delhi, Rajasthan, Calcutta and Gauhati, and express our inability to subscribe to the view of Madhya Prades ..... X X X X Extracts X X X X X X X X Extracts X X X X
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