TMI Blog1982 (4) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... 27 in the next year. As the ITO felt that the firm was not genuine and registration had not been granted for earlier years, he refused registration. He, therefore, assessed the assessee as an individual on a total income of Rs. 68,848 for the first year and Rs. 19,717 for the second year. However, he did not charge any interest under s. 139(1) of the I.T. Act, 1961 (in short, " the Act "), for late filing of the return nor under s. 217 for non-filing of the estimate of advance tax; nor did he initiate any penalty proceedings either under s. 271(1)(a) or under s. 73 of the Act. Therefore, the Addl. Commissioner, suo motu, called for the records of the case. He examined them and came to a prima facie conclusion that the orders passed by the ITO were erroneous and prejudicial to the interests of the Revenue. As such he issued a notice dated 28th January, 1971, which was duly served on 29th January, 1971. This required the assessee to show cause by 12th February, 1971, as to why the proceedings should not be continued. The assessee did not comply with the said notice and the matter was decided ex parte. He felt that as the returns of income had been filed beyond the time-limit allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he initiation of penalty proceedings or a levy thereof which are matters relatable to entirely different proceedings. The failure to charge interest, however, was treated on a different footing. The Tribunal held that interest forms part of the sum payable by the assessee determined in the assessment order and the Commissioner can set aside the assessment order if the ITO has failed to exercise his discretion in a judicial manner. In these circumstances, the Tribunal upheld the Order of the Addl. Commissioner on this aspect. In the result, the Tribunal modified the direction given by the Addl. Commissioner to the ITO to the extent that the ITO was directed to consider the levy of interest under ss. 139(1) and 217 in accordance with law, after giving the assessee a hearing. It is thus apparent that the assessee's contentions before the Tribunal were not accepted, except wit regard to the penalty proceeding being distinct and independent from the assessment proceedings, thus resulting in the decision that the Commissioner would not, therefore, be competent to issue directions for the initiation or levy of penalty while reviewing the assessment order. It is this aspect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely culminating in an order of assessment ". It, therefore, held that if the ITO during the pendency of the proceedings omitted to take notice of the facts attracting penalty under s. 271(1)(a), which ultimately ended in an order of assessment, the order would be erroneous and the Commissioner would be entitled to exercise the jurisdiction conferred on him under s. 263 of the Act. In Kantilal Jain [1980] 125 ITR 373 (MP), the court followed the decision in Indian Pharmaceuticals' case [1980] 123 ITR 874 (MP), and held that the Tribunal was not justified in holding that the Commissioner had no jurisdiction to exercise powers vested in him under s. 263 in respect of penalty action under s.273(b). In that case the ITO while completing the assessment omitted to invoke the provisions of s. 273(b) relating to penalty for failure to file an estimate of advance tax under s. 212(3). He also did not charge penal interest under s. 217. The Commissioner, while exercising his jurisdiction under s. 263 found that for the relevant assessment year the assessee was a person who had not been previously assessed by way of regular assessment and he ought to have filed an estimate of advance tax paya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . D'Costa, Income-tax Reference No. 82 of 1974, disposed of by us on 27th April, 1981-reported in [1982] 133 ITR 7, we held on similar facts that the Commissioner could not pass an order pertaining to penalty under s. 263 of the Act. We held that the penalty proceedings do not form part of the assessment proceedings. Further, the failure of the ITO to record his satisfaction or the lack of it in the assessment order, with regard to the leviability of penalty cannot be a factor vitiating the assessment orders. " An assessment cannot be said to be erroneous or prejudicial to the interest of the Revenue because of the failure of the ITO to record his opinion about the leviability of penalty in the case " (p. 12 of 133 ITR). Section 263 enables the Commissioner to call for and examine the record of any proceedings under the Act; and if he finds that any order passed therein is erroneous in so far as it is prejudicial to the Revenue, he can pass such order as the circumstances of the case justify; this he can do only after giving the assessee an Opportunity of being heard and after making or causing to be made such inquiry as he deems necessary. Under s. 263, as above noticed, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner's jurisdiction in the present case is confined to the assessment order/proceedings and he can revise an order, should he find any error which results in a prejudice to the Revenue. Under s. 263 he can set aside the order of the ITO and direct him to make a fresh assessment in accordance with law. The meaning attributed to the expression "assessment" is different in various contexts of the Act. But in the context of s. 263, it is a particular " proceeding " that is to be considered. If he is dealing with the assessment proceedings and assessment order, he cannot extend his powers to deal with penalty proceedings when they are not before him. As observed by us in J. K. D'Costa's case [1982] 133 ITR 7, 11: "There is no identity between the assessment proceedings and the penalty proceedings; the latter are separate proceedings, that may, in some cases, follow as a consequence of the assessment proceedings. As the Tribunal has pointed out, though it is usual for the ITO to record in the assessment order that penalty proceedings are being initiated, this is more a matter of convenience than of legal requirement. All that the law requires, so far as the penalty proceedings a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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