TMI Blog2016 (2) TMI 429X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee - ITA No.1150/PN/2014 - - - Dated:- 20-1-2016 - MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM For The Appellant : Shri Ketan Ved For The Respondent : Shri S.K. Rastogi ORDER PER SUSHMA CHOWLA, JM: This appeal filed by the assessee is against the order of CIT-III, Pune, dated 30.03.2014 relating to assessment year 2009-10 passed under section 263 of the Income-tax Act, 1961 (in short the Act ). 2. The assessee has raised the following grounds of appeal:- 1. The order passed by the learned CIT is ultra vires, bad in law and contrary to the provisions of the Act and facts of the case and hence ought to be quashed. 2. The learned CIT erred in invoking the provisions of section 263 of the Act. He erred in not appreciating that the order dropping the penalty passed by the assessing officer is not erroneous and prejudicial to the interest of the revenue. 3. The learned CIT erred in not appreciating that the issue was duly discussed with the assessing officer and that the penalty proceedings were dropped after due application of mind. 4. The learned CIT erred in holding that the issue needs fresh examination at the end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, the Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act. After examining the submissions of the assessee as to why no penalty under section 271(1)(c) of the Act should be levied, the said penalty proceedings were dropped vide order dated 20.06.2012. 5. The Commissioner on examination was of the view that penalty order dated 20.06.2012 suffered from errors and show cause notice was issued to the assessee observing that penalty order passed by the Assessing Officer was both erroneous and prejudicial to the interest of Revenue, since the assessee had not filed any appeal against the working of Assessing Officer, which in turn, means that the working of the assessee was not as per section 14A of the Act read with Rule 8D of the Rules. The Commissioner further observed that if the case had not been selected for scrutiny, it could have escaped the addition, which clearly suggests that the assessee had furnished inaccurate particulars of income in the return of income filed. The Commissioner was of the view that the order dropping penalty for concealment by the Assessing Officer was without discussing the merit and legality of the issue involved. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the issue ignoring the submissions made by the assessee merely stating that where the assessee had not filed any appeal against the addition made in the quantum proceedings, penalty for concealment could not be deleted. Reliance in this regard was placed on the ratio laid down by the Hon ble Bombay High Court in CIT Vs. Gabriel India Ltd. (1993) 203 ITR 108 (Bom) and the decision of Mumbai Bench of Tribunal in Elder IT Solutions Pvt. Ltd. Vs. CIT (2015) 59 taxmann.com 232. 8. The learned Departmental Representative for the Revenue placed reliance on the order of Commissioner. 9. We have heard the rival contentions and perused the record. The issue arising in the present appeal is in exercise of jurisdiction by the Commissioner under section 263 of the Act in holding the penalty order passed by the Assessing Officer to be erroneous and prejudicial to the interest of Revenue. 10. Under section 263 of the Act, the Commissioner can invoke his jurisdiction where the assessment order passed by the Assessing Officer is both erroneous and prejudicial to the interest of Revenue. An erroneous order which has resulted in the order being prejudicial to the interest of Revenue can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in loss of Revenue; or where two views are possible and the Incometax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. 11. Under the provisions of section 263 of the Act, the term erroneous means a wrong / incorrect decision deviating from the law. This expression also postulates an error which makes an order un-sustainable in law. The expression prejudicial to the interest of Revenue is of wide import and is connected to loss of revenue. 12. The Hon ble Delhi High Court in Gee Vee Enterprises Vs. Addl.CIT Others, (1975) 99 ITR 375 (Del) held as under:- The reason is obvious. The position and function of the Income-tax Officer is very different from that of a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejudicial to the interests of the Revenue . It is not an arbitrary or unchartered power, it can be exercised only on fulfillment of the requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. 15. The Hon ble Delhi High Court in ITO Vs. DG Housing Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent's computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is erroneous . The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and if it was done by the CIT himself, then he would have estimated the income at a figure higher than the one determined by the ITO; but such opinion would not vest in the CIT the power to re-examine the accounts and determine the same at a higher figure. Sec. 263 does not visualise a case of substitution of the judgment of the CIT for that of the subordinate authority who passed the order which is sought to be revised. The order passed by a subordinate authority in exercise of its quasi-judicial power vested in him in accordance with law, cannot be termed erroneous merely because the CIT does not feel satisfied with the conclusions reached. 18. The Hon ble Guwahati High Court further held that as under:- Viewed thus, it is clear that every error cannot be an error of jurisdiction and every error of an assessing authority is not open to exercise of suo motu revisional powers under s. 263. If an authority which has the power to assess, makes an assessment and commits a mistake or allows a deduction which ought not to have been allowed, such a mistake, unless it goes t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er enquiries without a finding as to the order being erroneous. It has been held by the Hon ble Bombay High Court in CIT Vs. Gabriel India Ltd. (supra) that exercise of jurisdiction under section 263 of the Act cannot be invoked for making short enquiries or to go into the process of assessment again and again merely on the basis that more enquiries ought to have been conducted to find something. 20. In cases where, two views are possible and the Assessing Officer had taken one view, with which the Commissioner may not agree, the said order cannot be termed as erroneous as held by the Hon ble Supreme Court in Malabar Industrial Co. Ltd. Vs. CIT (supra). Further, the Hon ble Supreme Court had observed that the phrase prejudicial to interest of Revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. However, loss of revenue as a consequence to order of the Assessing Officer cannot be treated as prejudicial to the interest of revenue. The Hon ble Apex Court (supra) further held that where the Assessing Officer had adopted one of the courses permissible and available to him, which in turn, had resulted in loss to the Revenue, cannot make the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ropped, the Commissioner on the premise that no appeal had been filed by the assessee against the additions made in the quantum proceedings, cannot hold that the penalty order was erroneous. 22. It is an established principle of law that the quantum and penalty proceedings are independent of each other and merely because addition has been made in a particular year, does not automatically result in levy of penalty for concealment under section 271(1)(c) of the Act. The assessee is at liberty to explain before the Assessing Officer as to why the said penalty is not leviable against the additions made in the quantum proceedings. In the facts of the present case, the assessee had furnished such an explanation and after accepting the explanation of the assessee, the Assessing Officer came to a view that no penalty was leviable. The decision of the Assessing Officer cannot be disturbed by the Commissioner, especially when no findings have been given against the order of Assessing Officer as to why the view taken by the Assessing Officer is unsustainable in law. Secondly, the Commissioner has not come to any finding and in that respect also, exercise of jurisdiction under section 263 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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