Income Tax Appellate Tribunal - Mumbai
Dharmanandan Diamonds P. Ltd, Mumbai vs Cit 5, Mumbai on 23 March, 2017
आयकर अपीलीय अधिकरण "डी" न्यायपीठ मुंबई में।
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH "D", MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, JUDICIAL MEMBER ITA NO. 1624/MUM/2014 : (A.Y : 2009-10) Dharmanandan Diamonds Pvt. Ltd Vs. The Addl. Commissioner of FC7081-7082, Bharat Diamond Bourse Income Tax Range - 5(1) Bandra Kurla Complex Aaykar Bhavan Bandra East MK Road Mumbai - 400 051 Mumbai - 400 020 PAN : AACCD6676J (अपीलार्थी / Appellant) (प्रत्यर्थी / Respondent) अपीलार्थी की ओर से / Appellant by : Shri Reepal Tralghawala प्रत्यर्थी की ओर से Respondent by : Shri Tufail Ahmad Khan सुनवाई की तारीख / Date of Hearing : 30/12/2016 घोषणा की तारीख Date of Pronouncement : 23/03/2017 आदे श / O R D E R PER C.N.PRASAD (J.M.) :
This appeal is filed by the Assessee against the order of the Ld. CIT-5, Mumbai dated 17.12.2013 passed u/s 263 of the Act.
2. The Ld. Counsel for the Assessee at the outset submits that the Ld. CIT passed order u/s 263 cancelling the assessment order passed u/s 143(3) of the Act and directed the Assessing Officer to initiate penalty proceedings u/s 271(1)(c) of the Act which he omitted while passing the assessment order. The 2 M/s. Dharmanandan Diamonds Pvt. Ltd ITA No.1624/Mum/2014, A.Y.2009-10 Ld. Counsel for the Assessee submits that the Assessing Officer while completing the assessment u/s 143(3) on 30.12.2011 disallowed depreciation claimed by the Assessee on revaluation of assets before conversion of partnership firm into company. The Assessing Officer did not initiate penalty proceedings u/s 271(1)(c) on the disallowance of depreciation claimed on such revalued assets by the Assessee. The Ld. Counsel submits that according to the Ld. Commissioner, the Assessing Officer should have initiated penalty proceedings u/s 271(1)(c) and since he has not initiated the penalty proceedings, the omission on the part of the Assessing Officer to initiate penalty proceedings during the course of assessment has rendered assessment order erroneous and prejudicial to the interest of the revenue. Therefore, he submits that the Ld. CIT directed the Assessing Officer to initiate penalty proceedings u/s 271(1)(c) of the Act. The Ld. Counsel for the Assessee submits that the Assessing Officer has discretion to initiate penalty proceedings or not and the Assessing Officer has taken a conscious decision not to initiate penalty proceedings and therefore assessment order cannot be said to be erroneous. Therefore, he submits that the Ld. Commissioner has no power to set aside the assessment order to initiate penalty proceedings. For this proposition he placed reliance on the following decisions :
1) CIT Vs. Paramanand M Patel [278 ITR 3 (Guj)]
2) CIT Vs. Subhash Kumar Jain [335 ITR 364 (P&H)]
3. The Ld. DR vehemently supported the orders of the Ld. Commissioner in setting aside the assessment order passed u/s 143(3) of the Act and directed the Assessing Officer to initiate penalty proceedings u/s 271(1)(c) of the Act.
3M/s. Dharmanandan Diamonds Pvt. Ltd ITA No.1624/Mum/2014, A.Y.2009-10
4. We have heard the rival submissions, perused the orders of the authorities below. The question to be addressed in this appeal is whether the Ld. Commissioner has power u/s 263 of the Act to direct the Assessing Officer to initiate penalty proceedings u/s 271(1)(c) of the Act. The Ld. Commissioner passed order u/s 263 holding that the omission on the part of the Assessing Officer to initiate penalty proceedings during the course of assessment has rendered the assessment order erroneous and prejudicial to the interest of the revenue. He placed reliance on the decision of Allahabad High Court in the case of CIT Vs. Surendra Prasad Agarwal [275 ITR 113]. The Allahabad High Court held that omission of the Assessing Officer to initiate penalty proceedings in the course of assessment, rendered assessment order erroneous and prejudicial to the interest of the revenue and Ld. Commissioner has jurisdiction to revise such an order u/s 263 of the Act. However, we find that this decision of the Allahabad High Court has been considered and dissented by the Gujarat High Court in the case of CIT Vs. Paramanand M Patel (supra) and held that the Ld. Commissioner cannot set aside the assessment and direct the Assessing Officer to initiate penalty proceedings. Similar view has been taken by the Punjab and Haryana High Court in the case of CIT Vs. Subash Kumar Jain (supra). There are divergent views of the High Courts on the subject. Therefore, following the order of the Hon'ble Supreme Court in the case of CIT Vs. Vegetable Products [82 ITR 1], when two views are possible, the view in favour of the Assessee is to be followed. Therefore, respectfully following the decision of the Gujarat High Court in the case of CIT Vs. Paramanand Patel (supra) and the decision of Punjab & Haryana High Court in the case of CIT Vs. Subash Kumar Jain (supra) we set aside the order of the Commissioner passed u/s 263 in directing the Assessing Officer to initiate penalty proceedings u/s 271(1)(c) of the Act.
4M/s. Dharmanandan Diamonds Pvt. Ltd ITA No.1624/Mum/2014, A.Y.2009-10
5. In the result, appeal of the Assessee is allowed.
Order pronounced in the open court on the 23rd day of March 2017.
Sd/- Sd/- R.C.SHARMA C.N.PRASAD ले खा सदस्य / न्याधयक सदस्य / ACCOUNTANT MEMBER JUDICIAL MEMBER मुुंबई / Mumbai; दिनाुं क / Dated 23/03/2017 LR, SPS
आदे श की प्रधिधलधप अग्रे धिि / Copy of the Order forwarded to :
1. अपीलार्थी / The Appellant
2. प्रत्यर्थी / The Respondent.
3. आयकर आयुक्त(अपील) / The CIT(A), Mumbai.
4. आयकर आयुक्त / CIT
5. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुुं बई / DR, ITAT, Mumbai
6. गाडड फाईल / Guard file.
सत्यादपत प्रदत //True Copy// आदे शानसार/ BY ORDER, सहायक पुं जीकार (Asstt. Registrar) आयकर अपीलीय अधिकरण, मुुं बई / ITAT, Mum