Income Tax Appellate Tribunal - Ahmedabad
J.P. Construction, Ahmedabad vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL,A-BENCH, AHMEDABAD.
Before : Shri T.K.Sharma, Judicial Member, and
Shri D.C.Agrawal, Accountant Member.
ITA No. 1304/Ahd/2009
(Assessment Year 2005-06)
M/s.J.P.Construction, 501,
Anand Mangal Complex, B/h Versus Commissioner of Income-tax,
Femina Town, C.G.Road, Central II, Ahmedabad.
Ahmedabad
PAN AABFJ 0754 H
(Appellant) (Respondent)
For the appellant: Shri Umaid Singh Bhati, AR
For the respondent Shri Rajeev Agarwal, DR
ORDER
Shri T.K.Sharma, Judicial Member : This is an appeal filed by the assessee against the order dt.31.3.2009 of the Commissioner of Income Tax (in short CIT) passed u/s.263 of the Income-tax Act,1961 for the Assessment Year 2005-06.
2. The short facts are that the assessment order U/s 143(3) of the I.T. Act in respect of A.Y.2005-2006 was passed on 29.12.2006, determining total income at Rs.2,16,79,998. The learned CIT noticed that the assessee has filed return of income on 31.10.2005 showing income of Rs.34,28,570 and thereafter, a revised return was filed on 14.07.2006 declaring total income of Rs.44,06,570 wherein the assessee have offered additional income of Rs.10,06,141 for tax. The Assessing Officer made an addition of Rs.1,72,73,488 on the revised income considering the same undisclosed income. The Assessing Officer in the assessment order has categorically stated that the accounting method adopted did not reveal the true picture of affairs, no penalty proceedings u/s.271(1)(c) were initiated in respect of addition made to admitted income. The learned CIT considered the assessment order to be erroneous and prejudicial to the interest of revenue. Accordingly, he issued show cause notice u/s.263 on 23.3.2009. After considering the reply of the assessee, the learned CIT was of the view that the Assessing Officer failed to initiate penalty proceedings u/s.271(1)(c) even though there was prima facie 2 ITA No. 1304/Ahd/2009 justification for holding that the assessee was guilty of concealment of income. Accordingly he held the assessment order to be erroneous and prejudicial to the interest of revenue. He, therefore, set aside the whole assessment and directed the Assessing Officer for framing the same de novo.
3. Aggrieved by the order of the learned CIT, the assessee is in appeal before the Tribunal raising the following grounds of appeal.
"1. The Order passed by the Id. Commissioner of Income tax u/s 263 being bad in law and on fact may be set-a-side / cancelled.
2. The Id. Commissioner of income tax erred in law and on fact in initiating the proceedings u/s 263 of the Act on the ground that the Assessing Officer has failed to initiate penalty proceedings u/s 271 (1)(c) of the Act.
3. The Id. Commissioner of Income Tax has erred in law and on fact in setting-a-side the whole assessment order on the alleged ground that the Assessment order passed by the Assessing Officer was erroneous and prejudicial to the interest of the revenue as he has failed to initiate the penalty proceedings u/s 271(1 )(C) of the Act.
4. The Ld. CIT Central-II, Ahmedabad has not referred the decision of Hon'ble Gujarat High Court in the case of CIT vs. Parmanand M. Patel 278 ITR 3. (covered case).
5. Your appellant craves liberty to add, to alter, to modify, to amend or delete / withdraw any of the grounds of appeal at the time of on or before the hearing of appeal."
4. Heard both parties and perused the record. Carefully going through the impugned order of the learned CIT, we find that since the Assessing Officer has not initiated penalty proceedings u/s.271(1)(c) on the addition of Rs.1,72,73,488 which was offered by the assessee in the revised return, the learned CIT by invoking power u/s.263 has set aside the assessment for framing the same afresh. Therefore, the question to be decided in the present case is - Where the Assessing Officer has failed to initiate penalty proceedings u/s.271(1)(c) of the Act in the assessment proceedings, whether the CIT is empowered u/s.263 to set aside the assessment and direct the Assessing Officer to frame the assessment afresh ? Such a question is no more res integra. In the case Addl. CIT v. J.K. D'Costa [1982] 133 ITR 7 (Delhi) followed in ACIT v. Achal Kumar Jain (142 ITR 606) and CIT v. Nihal Chand Rekyan [2000] 242 ITR 45 (Delhi) and in Addl.CIT v. Sudarshan Talkies (1993) 200 ITR 3 ITA No. 1304/Ahd/2009 153(Delhi); also by Hon'ble madras High Cuort in CIT v. C.K.K.Swami (254 ITR 158); Sarda Prasad Singh v.CIT (173 ITR 510 (Gauhati), it has been held that if the Commissioner finds, while examining the records of an assessment order under section 263, that the Assessing Officer has not initiated penalty proceedings, he cannot direct initiation of penalty proceedings because penalty proceedings are not a part of assessment proceedings. The Commissioner cannot pass an order under section 263 pertaining to penalty. Hon'ble Supreme Court has dismissed special leave petition against the Delhi High Court decision in Addl.CIT v. J.K.D'Costa [reported in (1984) 147 ITR (St) 1)]. In the case of CIT v. Dr. Suresh G.Shah (289) ITR 110 (Gij) following its earlier judgement in the case of CIT v. Parmanand M.Patel (2005) 198 CTR (Guj) 641/278 ITR 3 (Guj), Hon'ble Gujarat High Court has held that while exercising powers under Section 263, CIT is not competent to direct initiation of penalty proceedings under s.271(1)(a) or s.273(2)(c) of the Act. In the case of CIT v. Parmanad M.Patel (supra), Hon'ble jurisdictional High Court has held that the CIT is not empowered to record satisfaction by invoking s.271(1)(c) of the Act and if he is not entitled to do so, on his own, he cannot do it by directing the assessing authority. The Court observed that in other words, what the CIT himself cannot do, he cannot get it done though the assessing authority by exercising revisional powers.
5. In view of the above, since the CIT has set aside the assessment for framing assessment afresh in order to initiate levy penalty u/s.271(1)(c) of the Act, the order passed u/s.263 is not in order and therefore, we cancel the same.
6. In the result, the appeal of the assessee is allowed.
THIS ORDER IS PRONOUNCED IN OPEN COURT ON Dt. 24.07.09 Sd/- Sd/-
(D.C.Agrawal) (T.K.Sharma)
Accountant Member. Judicial Member
Date: 24.07.09
(H.K.Padhee)
Senior Private Secretary.
4 ITA No. 1304/Ahd/2009
Copy of the order forwarded to :
1. The Assessee
2. The Assessing Officer
3. The CIT concerned.
4. The CIT(A) concerned.
5. The DR, Ahmedabad
6. Guard File (in duplicate)
True Copy, By order,
Deputy.Registrar.