TMI Blog2018 (9) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... this appeal. - ITAT NO. 411 of 2017, GA No. 3791 of 2017 And GA No. 3792 of 2017 - - - Dated:- 18-7-2018 - MR. ANIRUDDHA BOSE AND MRS. MOUSHUMI BHATTACHARYA, JJ. For The Appellant. : Mr. P. K. Bhowmick, Adv. For The Respondent : Mr. Siddharth Das, Adv. Mr. G. S. Gupta, Adv ORDER The Court: -There is delay of 99 days in preferring the appeal. We have gone through the application for condonation of delay, registered as GA No. 3791 of 2017 and we are satisfied that there was sufficient cause for which the appeal could not be filed within the prescribed time. We, accordingly, condone the delay and allow the application being GA No. 3791 of 2017. Certain loan advanced to the assessee from an incorporated company in which he had substantial interest was treated by the assessing officer as deemed dividend and added to his income for taxation purpose. There is no dispute, however, on that count in this appeal. The controversy in this appeal is over correctness or legality of a penalty proceeding following such addition. The assessing officer in the assessment order had noted:- Penalty proceedings u/s 271(1)(c) have been initiated on this issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell settled that for the ld . CIT to invoke jurisdiction u/s 263 of the Act, the condition precedent thereon would be satisfaction of twin conditions i . e . the order of the subordinate authority should be erroneous and also prejudicial to the interest of the revenue . In the instant case, at best the order/proceedings of the ld . AO could be termed as only prejudicial to the interest of the revenue, but it cannot be termed as erroneous as he had appreciated the facts and the related case laws thereon . By this process, he had taken one permissible view on the subject . The ld . CIT in our considered opinion had only sought to substitute his own opinion on the very same set of facts against the opinion already taken by the ld . AO . This is not permitted in view of the decision of the Hon ble Bombay High Court in the case of CIT vs Nirav Modi reported in (2016) 71 taxmann . com 272 (Bombay) dated 16 . 6 . 2016 . 6 . 4 . It is now well settled that the levy of penalty is not mandatory for every addition made in the assessment . That is the reason the element of discretion is provided to the ld . AO to decide whether a partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement with the HGPL, assessee is entitled to commission and in lieu of that assessee received advance of Rs . 80 lacs i . e . commission receivable on the condition that commission payable would be adjusted against this sum . It was explained that when this advance of Rs . 80 lacs was taken it was estimated that the assessee would be entitled to a commission of about Rs . 80 lacs, hence, the company agreed to make advance but with a condition that the said amount would be adjusted with the commission paid . The assessee further explained that as many of the major contracts for which assessee was working on behalf of the company did not materialize and as a result the commission payable was only to the extent of Rs . 23, 93, 830/- in place of the total advance payable against commission at Rs . 80 lacs . The assessee explained that the net amount of Rs . 56, 06, 165/- stood to the credit of the company in the books of the assessee on account of advance commission payment . The assessee during the course of penalty proceedings explained that he was soliciting business for the company against which the company paid commission and in fact commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, may not understand the law in the correct perspective or a particular provision may go unnoticed because of the number of amendments made to the tax enactments from year to year . Under these circumstances, it would be a travesty of truth and justice to hold that an assessee ought to have known the correct law and comply therewith, even though he was not aware of the provisions . In the case of Kaushal Diwan vs . ITO (1983) 3 ITD 432 (Del) (TM), the learned AM observed, on an analogous situation, that the tax provisions are so complex that even he was not aware of the provision in question till the matter was placed before the Bench . Similar view was taken in the case of WTO vs S . P . Jayakumar (1983) 3 ITD 221 (Mad) . The Bench observed that the plea of ignorance of law can be treated as a proper explanation . Such explanation can be said to have been substantiated when it is shown that: (a) he was assisted by a professional chartered accountant who has not brought to his notice the applicability of provisions of s . 2(22) (e) of the Act and (b) by making a statement that this is the first year in which these provisions came to be applied in assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the ld . AR on the levy of penalty on additions made on deeming fiction . The very fact that the penalty on deemed additions had reached the corridors of various judicial forums itself makes the issue highly debatable which in any case, cannot be the subject matter of revision u/s 263 of the Act . Hence the ld . AO taking one permissible view on the subject and dropping the penalty proceedings and reflecting the same in his order sheet cannot be termed as erroneous . Hence the same cannot be revised u/s 263 of the Act by the ld . CIT . Mr. Bhowmik, learned counsel for the Revenue has argued that since the assessing officer himself had proposed penalty proceeding it was incumbent on him to pass a specific order. According to him, merely a noting in the file would not be sufficient for dropping a penalty proceeding, which is proposed by the assessing officer. Mr. Bhowmik wants us to admit the appeal on this proposition, which according to him, involves substantial question of law. There is no dispute on the question that penalty proceeding is an independent proceeding under the Income Tax Act, 1961 and the proposal for initiating such proceeding doe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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