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TMI Blog2022 (1) TMI 1204X X X X Extracts X X X X X X X X Extracts X X X X ..... delay as being the lapse on the part of the accountant, Shri Dhiraj Patel, who had misplaced the order passed u/s. 263. The said application points out that while the order u/s. 263 dated 10-03-2015 was received on 16-03-2015 and the appeal ought to have been filed by 15-05-2015, but on account of misplacement of the order by the accountant ,it came to notice only on 6-07-2015 and immediately thereafter on 8-07-2015, the appeal was filed, thereby resulting in a delay in filing of 54 days. An affidavit of the accountant, Shri Dhiraj Patel, admitting on oath to his lapse as aforestated, was filed before us. Accordingly, it was prayed that there being a reasonable cause for the delay and no negligence on the part of the assessee, the delay be condoned. 2.2 We have noted the contention of the assessee. Considering that the delay is only of 54 days, that too not attributable to the assessee but his accountant who has admitted on oath to the lapse on his part, we find that the assessee has adduced sufficient and reasonable cause for the same. The delay is accordingly condoned. 3. Proceeding to adjudicate the issue before us ,it transpires from the order of the ld. PCIT, that the revisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same. (ii) Making proper verification with respect to the claim- of opening cash balance of Rs. 6,10,756/- as per the copy of cash book. (iii) Making proper verification of computation of interest accrued/earned during the year, and whether requisite amount has been disclosed in the return of income. (iv) Considering initiation of penalty proceedings u/s 271(l)(c) of the Act as the assessee filed his return of income and paid the taxes only after issue of and in response to notice u/s 148 of the Act." 4. Aggrieved by the same, the assessee has come up in appeal raising the following ground before us:- "1.The learned CIT has erred in holding that the Order dated 27-12-2013 under Section 147 read with Section 143(3) is erroneous and prejudicial to the interest of revenue under Section 263 since the AO did not initiate the penalty proceeding under Section 271(l)(c) and that the AO did not make sufficient inquiry about the deposits made in the bank account in as much as AO had access to all records of assessee, and after perusing said records, he framed assessment, said assessment could not be re-opened in exercise of revision power under section 263 for making further inq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s stated above, the order passed by the Assessing Officer u/s 147 of the Act has been found by the Ld. PCIT to be erroneous so as to cause prejudice to the revenue on the following counts:- (i)Non-verification of the cash deposits in the bank of the assessee (ii) Non-verification of the interest income returned by the assessee (iii) For not initiating penalty proceedings u/s 271(1)(c) of the Act despite being in the know that the assessee had returned income only when subjected to re-assessment proceedings. 6.1 Vis-à-vis the first two aspects, the ld. counsel for the assessee had nothing to state before us except pointing out that in the consequential order passed by the Assessing Officer, no addition had been made on account of the same.In this regard we are in agreement with the Ld.CIT DR that the fact of no addition made in consequential proceedings is of no relevance for determining whether the power of revision u/s 263 of the Act was validly exercised.What is relevant for the exercise of revisionary power is the existence of twin conditions of there being an error in the order of the AO and the error causing prejudice to the Revenue. The CIT/PCIT has to prima fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 271(1)(c) which did not empower the commissioner to initiate penalty proceedings. Going forward, the ITAT thereafter proceeded to hold that despite the said fact, the judgment of the Jurisdictional High Court still applied post amendment to section 271(1)(c) since the decision was rendered taking into consideration various aspects of the issue besides the fact that the commissioner was not empowered u/s. 271(1)(c) to initiate penalty proceedings at that point of time. The ITAT has noted in the said judgment that the Jurisdictional High Court held the CIT lacked jurisdiction u/s. 263 to cancel assessment for failure of the Assessing Officer to initiate penalty proceedings , for the following reasons:- (i) Section 271(1)(c) did not empower the CIT to initiate penalty and in the absence of the said power, the CIT could not direct the Assessing Officer to do so in exercise of his powers u/s. 263. (ii)The satisfaction for the default committed attracting the levy of penalty has to be arrived in the course of any proceedings as per the provision of section 271(1)(c) of the act and proceedings having concluded the direction for initiation of the same could not be given u/s. 263 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs' which means any proceedings before any of the authority. The CIT cannot create proceedings. (D) The assessment and penalty proceedings are separate and distinct proceedings. Therefore, the CIT cannot set aside the assessment order for the sole purpose of initiation of penalty proceedings in exercise of revisional jurisdiction. As a corollary, assessment order can not be set aside to initiate and impose penalty notwithstanding the fact the imposition of penalty is lawful. 14. A reading of later judgment of Gujarat High Court in J P Construction(supra) would show that the Hon'ble Court has remanded the matter only in respect of proposition (A) enumerated above. As a necessary implication, other propositions continue to apply and have not faded into insignificance. Under S. 263, the CIT concerned can examine the record of any proceedings and order passed consequent thereto can be set aside on fulfillment of conditions as stipulated therein. In the instant case, the proceeding and consequent order is assessment order. As noted by jurisdictional High Court, penalty proceedings are separate and distinct. There is no identity between the two. Penalty proceedings can be initiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir roles under the Act. The Commissioner is not a substitute of the other statutorily prescribed fora with codified functions dischargeable in terms of the prescribed procedure in the situations comprehended thereby. When read in conjunction with the decision of Parmanand Patel (supra), the language of Section 263 is not capable of and does not admit of a construction to empower the CIT to set aside an assessment order to initiate a distinct penalty proceeding. The legislature, in our view, has allowed this position to be sustained so far except expanding the scope of authority under S. 271(1)(c) to include administrative CIT within its ambit. 16. Before we proceed to conclude the issue, we also take note the decision in the case of CIT vs. Surendra Prasad Agrawal 275 ITR 113(All.); Indian Pharmaceuticals (1980) 123 ITR 874(MP); RA Himmatsingka & Co. 340 ITR 253(Pat.); Sara Enterprises (Mad.) 224 ITR 169 etc. referred to and relied upon on behalf of the revenue. In all these cases, it was held that the CIT administration is entitled to invoke S. 263 to cancel the assessment where the penalty was either dropped or the AO omitted to initiate the penalty proceedings. However, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re concerned. The proceedings in respect of assessment and penalty are different and distinct notwithstanding the precondition that later has to be initiated in the course of former proceedings. Though expression 'assessment' is used in the Act with different meanings in different context, in so far as Section 263 is concerned, it refers to that particular proceeding which is being considered by the Commissioner. It is not possible to expand the scope of assessment proceeding and assessment, which is subject matter of revision, for the purposes of initiating a new and distinct penalty proceedings of onerous nature. Failure of AO to initiate or impose penalty cannot be a factor capable of vitiating the assessment order in any respect. An assessment, in our considered view, cannot be said to be erroneous or prejudicial to the interest of revenue owing to such failure with respect to initiate a distinct proceedings with a view to evaluate imposition of penalty therein. In view of the forgoing discussion, the Pr. CIT/ CIT is not competent to direct the AO to redo the assessment with a view to initiate and levy penalty in respect of erroneous claim of deduction under S. 10B." 6.6 In vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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