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2016 (7) TMI 457 - ITAT KOLKATA

2016 (7) TMI 457 - ITAT KOLKATA - TMI - Non-levy of Penalty u/s 271AAA - revision u/s 263 - Held that:- In support of claim the assessee has produced the ledger copy of the party where we find that all the transactions were routed through banking channel. After considering the submissions of the both parties and facts of the facts we find that assessee has duly substantiate the manner in which the undisclosed income was derived. We also find the AO being quasi judicial authority has not initiate .....

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29-6-2016 - Shri Waseem Ahmed, Accountant Member And Shri S. S. Viswanethra Ravi, Judicial Member For the Appellant : Shri S. K. Tulsiyan, Advocate For the Respondent : Shri S. Srivastava, CIT-DR ORDER Per Waseem Ahmed, Accountant Member :- This appeal by the assessee is against the order passed by Ld. Commissioner of Income Tax (CIT for short) under the provision of Sec. 263 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide M.No. CIT(C-I)/263/Enfield Gems & Jewellery/Te .....

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ry, erroneous, void, invalid and bad in law. 2. On the facts and in the circumstances of the case, the learned CIT erred in holding that while disclosing the sum of ₹ 18.10 crores being written back liability, as undisclosed income, the appellant had submitted the application of the undisclosed income without specifying the manner in which such undisclosed income has been derived. 3. On the facts and in the circumstances of the case, the learned CIT erred in holding that it was mandatory o .....

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scussed the same, and furthermore, in holding that the AO had not applied his mind on the issue. 6. On the facts and in the circumstances of the case, the learned CIT erred in holding that by not initiating penalty proceedings u/s. 271AAA of the Act, the order passed by the AO had been erroneous as the same did not follow the provisions of the Act and also that by causing potential loss of revenue, it was also prejudicial to the interest of revenue. 7. On the facts and in the circumstances of th .....

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s a Private Limited Company and deriving its income from business and other sources. A search and seizure operation u/s. 132 of the Act was conducted on 20.10.2011 at various places of assessee s residence, office, factories and other business premises. During the course of search and seizure operation, assessee has made a disclosure of undisclosed income of ₹ 18.10 crores by writing off the advance u/s. 41(1) of the Act. The undisclosed income was duly offered to tax in the Income Tax Ret .....

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ce to the notice the assessee submitted that the manner of deriving such income was duly verified by the AO at the time of assessment. The conditions for giving the immunity from the penalty under section 271AAA were duly fulfilled. The AO had not initiated the penalty proceedings under section 271AAA because he was of the view that no such penalty was leviable in the hands of the assessee. The issue of initiating the penalty is the subject matter of AO s satisfaction and therefore it cannot be .....

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271AAA for the levy of the penalty is not discretionary. There was no noting made by the AO that penalty is not leviable. The ld. CIT has made reference and considered the following Judgments to arrive at the conclusion that the order is erroneous and prejudicial to the interest of Revenue, the case laws are reproduced below:- 1) CIT v. Surendra Praszad Agarwal 275 ITR 113 (All) 2) ACIT vs. Saraya Distillery (1978) CTR 382 (All) 3) ACIT vs. Indian Pharmaceuticals (1980) 19 CTR 302 (MP) 4) CIT vs .....

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e us L d AR filed a paper book which is running pages from 1 to 21 and submitted that the assessee has received advances from M/s Enfield Gems & Jewellery Pvt. Ltd. through banking channel for ₹ 18.10 crores. The ld. AR in this regard drew our attention on page 10 of the paper book where the ledger copy of the sundry creditors M/s Enfield Industries Ltd. was placed. Ld. AR further explained that the income which has been offered for tax was duly recorded in its books of account and the .....

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the customers written back u/s 41(1) of the Act and the said undisclosed income was duly reflected in its returned income filed by assessee for the relevant year. He further stated that as per the provision of the Act even the entry found in the books of account can amount to undisclosed income of the assessee. L d DR further submitted that by writing off the liability u/s 41(1) of the Act, the assessee has specified the application of income which does not disclose the manner for deriving the .....

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nterest of Revenue. At this juncture Let us understand the provision of Sec. 271AAA of the Act which reads as under:- 271AAA.(1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1std day of June, 2007 [but before the 1std day of July, 2012], the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten .....

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reading of the Sec. 271AAA, we find that the penalty will not be attracted under the Section in a case where the assessee fulfills the conditions for claiming immunity from penalty as laid down under sub-clause (2) u/s 271AAA of the Act. The first condition has been fulfilled by assessee for making the disclosure of undisclosed income u/s 132(4) of the Act and by specifying the manner of earning the undisclosed income. The second condition has also been fulfilled by substantiating the manner in .....

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ition has been made out by assessee by paying the tax along with interest in respect of undisclosed income. In our considered view the AO for not initiating the penalty proceedings has taken a possible view i.e. the penalty is not leviable in the case in hand. Now coming to the case laws relied by the ld. CIT as stated above, we find that those case laws are not relevant in relation to the case in hand. It is because under section 263 of the Act the CIT has to fulfill two conditions - firstly th .....

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ity has not initiated the penalty proceedings in the assessment order is his jurisdictional authority. The ld. CIT cannot just substitute the authority of the AO with his opinion. In this connection we are putting our reliance in the judgment of High Court of Bombay CIT vs. Gabrial India Ltd. (1993) 114 CTR 0081 : (1993) 203 ITR 0108 : (1993) 71 TAXMAN 0585 Revision-Scope-Order sought to be revised must be erroneous and also by virtue of its being erroneous prejudice must have been caused to int .....

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) of s. 263 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 interest of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. An order cannot be term .....

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ent examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimates himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and, left to the Commissioner, he would have estimated the income at a higher figure than the one determined by the ITO. That would not vest the Commissioner with .....

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f will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, namely, the order is erroneous, is absent. Similarly if an order is erroneous but not prejudicial to the interest of the Revenue, then also the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be subject-matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which .....

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se of power. It is wellsettled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on records to satisfy it in that regard. If the action of the authority is challenged before the Court, it would be open to the Courts to examine whether the relevant objective factors were available from the records called for and examined by such authority. Any other view in the matter will amount to givi .....

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other words, to form an opinion that the particular order is erroneous in so far as it is prejudicial to the interest of the Revenue, is a quasi-judicial act because on this consideration or opinion the whole machinery of reexamination and reconsideration of an order of assessment, which has already been concluded and controversy about which has been set at rest, is again set in motion. It is an important decision and the same cannot be based on the whims or caprice of the revising authority. Th .....

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l to prima facie come to a conclusion that order of ITO is erroneous as also prejudicial to interest of Revenue. Revision-Validity-ITO allowing certain expenditure as revenue expenditure after making enquiries-Commissioner initiating proceedings under s. 263, setting aside assessment and directing ITO to re-examine the matter as to whether the expenditure was revenue or capital-Illegal -Before setting aside assessment Commissioner must have come to a conclusion that assessment was erroneous as a .....

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