Income Tax Appellate Tribunal - Chandigarh
Mr. Amarjeet Dhall, Ludhiana vs Assessee on 30 January, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIG ARH BENCH ' A', CHANDIG ARH
BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND
Ms. SUSHMA CHOWLA, JUDICI AL MEMBER
ITA No. 357/Chd/2013
Assessment Year : 2009-10
Amarjeet Dhall Vs. CIT, Central Circle
2550, Dugri Urban Estate Ludhiana
Phase I, Ludhiana
ABMPD 5923 E
ITA No. 358/Chd/2013
Assessment Year : 2009-10
Vimal Dhall Vs. CIT, Central Circle
2551, Dugri Urban Estate Ludhiana
Phase I, Ludhiana
ACMPD 3379 B
(Appellant) (Respondent)
Appellant by Shri Sarabjit Garg
Respondent by: Shri Amarveer Singh
Date of hearing 12.3.2014
Date of Pronouncement 21.4.2014
O R D E R
PER T.R.SOOD, A.M
These appeals of the assessees are directed against the order dated 30.1.2013 of the Ld CIT, Ludhiana. In both these appeals originally detailed grounds were filed and therefore the Ld. Counsel for the assessee had been directed to file concise grounds of appeal. In response the following revised grounds have been filed:
" 1. Th at o n th e f ac ts a n d i n t h e c ir c u ms t anc es of t he c as e a n d i n la w , le ar n ed C IT er r ed in as s u m in g j ur is dic t io n u /s 2 63 o f t he Ac t f or n o n i ni t ia t i on of p e na l ty pr oc e e di n gs d es p it e t he c l ea r c u t r u l i ng of th e H o n 'b l e Pu n ja b & Har y a na H ig h Co ur t i n c as e o f CI T- 1 , L ud h ia n a v . Su b has h Ku m ar J a i n [ 20 1 1] 19 9 Tax m an 3 9 [P & H] t h at a ft er ex a m i n in g t he r ec or ds o f as s es s m e nt in ex er c is e of p o wer s u/s 26 3 , wh er e th e CI T f i nds t h at t h e AO h a d n ot i n i ti a te d p en a lty pr oc e e d in gs , he c an n ot d ir ec t t h e AO t o i n it i at e p en a lty p r oc ee d i ngs .
2. Th at on t h e f ac ts an d i n t he c ir c ums t anc es o f th e c as e4 a nd in l aw , le ar ne d C IT er r ed in as s u m in g j ur is dic t io n u /s 2 63 o f t he Ac t f or n o n i ni t ia t i on of p e na l ty pr oc e e di n gs d es pi t e f ac t as s es s m en t u /s 1 53 A h as be e n m ad e af ter o bt a in i ng ma n da t or y s t at ut or y a ppr ov a l u/s 15 3 D fr o m A d d l. C IT; s ur r en d er w as m ad e s ub j ec t to no p en a l ac ti o n; t h e w or d us ed i n s ec t io n 27 1 A A A( 1) is 'm ay ', g iv in g c om p l et e d is c r et i o n to AO t o t ak e or n ot t o tak e ac t io n u n der th is s ec t io n a n d ev e n c o mp l i ed w it h t h e p r ov is i ons o f s ec t io n 2 7 1 A A A( 2) , w h ic h d eb ar s AO fr om 2 tak i ng ac t io n u /s 27 1 A A A( 1) an d i n i nt er pr et i ng t h at p ow er ex er c is ed by J C IT u/s 1 4 4 A is s am e u /s 15 3 D o f th e Ac t.
3. Th at L d . CIT has gr o s s ly er r e d i n c a nc e l l i ng t h e as s es s me nt o r de r w it h th e d ir ec t io ns to r e fr a m e t he or d er in ac c or da nc e w i th t he pr ov is io ns o f t he I .T. Ac t. No n is s u anc e o f s p ec i fic dir ec ti o ns f or as s e s s me n t to b e fr a me d c l ear ly pr ov es th at i t is a c as e of o n ly c h an g e o f o p i ni o n an d as s es s m en t fr a me d is n e it h er er r on e ous n or pr e j ud ic i al t o t he in t er es ts o f r ev e n ue . " ITA No. 357/Chd/2013
2 Brief facts of the case are that a search was conducted in the premises of the assessee along with other group concerns. During search the assessee surrendered a sum of Rs. 75 lakhs which was stated to have been earned from speculative transactions. In fact in this group a sum of Rs. 7 crores was surrendered. The assessee along with other members of the group honoured the surrender and filed return u/s 153A for a sum of Rs. 8130958/-. This income was accepted by the Assessing officer after making a small addition of Rs. 9000/- on account of non allowability of deduction u/s 24(a).
The Commissioner examined the assessment records and noticed that the assessee had surrendered a sum of Rs. 75 lakhs which was stated to have been earned from speculation transactions in the commodities for which no record was maintained. According to the Commissioner additional income disclosed was not covered u/s 132(4) and therefore penal provision of Sec 271AAA were attracted.
He further noted that the Assessing officer has not initiated penalty proceedings. He also noted that since the income of the assessee exceeded prescribed limit mentioned in S 44AA and therefore the assessee was required to maintain the accounts non-maintenance of such accounts would attract penalty u/s 271A which has also not been initiated. In view of these facts the assessment order was found to be erroneous and prejudicial to the interest of the Revenue.
Show cause notice was issued.
3 In response to show cause notice it was contended that as per the Exp (a) to S 263(1) only those cases were covered under the 3 provisions of section 263 where assessment is made by the Assessing officer himself or on the basis of directions issued by the JCIT u/s 144A or the orders passed by the JCIT in exercise of the powers performing the functions of the Assessing officer. Since the present assessment was made u/s 153A with the prior approval of JCIT/Addl CIT u/s 153D. The same could not have been reviewed and revised u/s 263. It was further submitted that penalty provisions of S 271A and S 271AAA used the expression "may" which means the Assessing officer has been given the discretions to levy or not to levy the penalty and therefore if the Assessing officer does not initiate penalty proceedings such order is perfectly in accordance with law and does not require any interference u/s 263 because the Assessing officer has taken one of the possible view. In any case penalty proceedings are independent from assessment proceedings and therefore assessment order cannot be held to be erroneous and prejudicial to the interest of the Revenue for not initiating penalty.
In this regard reliance was placed on the following case laws:
" Su d er s ha n T alk i es , 20 1 I TR 2 8 9 ( D e l) ; J . K. D 'C os t a, 1 33 I TR 7, K es hr i m al P ar as m a l, 15 7 I TR 4 84 ( R aj) ; Su r e n dr a P r as a d S in g h, 1 73 IT R 6 10 ( G a u) ; L in oty p e & Ma c h i n er y Lt d. , 1 92 ITR 3 37 ( Ca l) ; C. R. K . S w amy , 25 4 I TR 15 8 ( Mad .) C IT , L u dh i a na Vs . Su b has h K um ar J a in as r e por t ed i n [2 0 11 ] 19 9 Tax ma n 3 9/ 3 55 36 4 "
4 The Ld. Commissioner examined the submissions and observed that the definition of the order passed given in Explanation (a) to S 263 is of inclusive nature and therefore reference to the assessment order in Exp (a)(i) and (a)(ii) does not place any restriction on the power of Commissioner to any order which can be revised u/s 263. He further examined the matter and distinguished the decision of Hon'ble Punjab and Haryana High Court in case of CIT V. Subhash Kumar Jain (supra) because the facts were different. He also referred to the decision of Hon'ble Delhi High Court in case of Addl CIT Vs. JK D'Costa, 133 ITR 7 wherein it was observed that the assessment could not be said to be erroneous and prejudicial to the 4 interest of the Revenue because failure of the Assessing officer to initiate levy of penalty, would not be related to the assessment. He opined that initiation of penalty proceedings on such assessment was part of the assessment because initiation is necessary ingradient for levy of penalty. In this regard he referred to the decision of Hon'ble Allahabad High Court in case of CIT Vs. Surinder Prashad Aggarwal, 275 ITR 113. Thereafter he observed that passing of an order for levy of penalty u/s 271AAA was altogether a different act then the mere initiation of penalty proceedings during the assessment proceedings. In this background ultimately following the decision of CIT Vs. Surinder Prashad Aggarwal (supra) he held that the assessment order is erroneous and prejudicial to the interest of the Revenue and observed at para 19 as under:
"In view of the above discussion, there is no dispute regarding applicability of provisions of section 263 of Income -tax Act, 1961 and it is clear that in this case non initiation of penalties stated above by the Assessing officer in the assessment order resulted in an assessment order which is erroneous and prejudicial to the interest of the Revenue. Accordingly th assessment order is cancelled and the Assessing officer is directed to reframe the order in accordance with the provisions of the Act."
5 Before us, the Ld. Counsel for the assessee reiterated the submissions made before the Ld. Commissioner. Reference was made to various decisions which were relied before him. He specifically pointed out that in case of CIT Vs. Surinder Prashad Aggarwal (supra) Hon'ble Allahabad High Court noted the divergent views expressed by various courts including in the case of Addl CIT Vs. JK D'Costa (supra). It was also noted that SLP was dismissed by the Hon'ble Supreme Court in case of Addl CIT Vs. JK D'Costa (supra). It was also noted that this decision has been followed by various High Courts but still Hon'ble Allahabad High Court preferred to follow the decision of Hon'ble Madhya Pradesh High Court in case of Addl CIT Vs. Indian Pharmaceuticals, 123 ITR 874. In fact 5 High Court while concluding has clearly observed that they have preferred the view taken by Hon'ble Madhya Pradesh High Court in case of Addl CIT Vs. Indian Pharmaceuticals (supra). He submitted that if the decision by Hon'ble Punjab and Haryana High Court in the case of CIT Vs. Subhash Kumar Jain (supra) is clearly perused then para 11 of the decision would show that Hon'ble Punjab and Haryana High Court preferred to follow the decision of Hon'ble Delhi High Court, Hon'ble Rajasthan High Court and Hon'ble Calcutta High Court and specifically pointed out that they were unable to agree with the view of Hon'ble Madhya Pradesh High Court. Therefore this Tribunal was fully bound to follow the decision of Hon'ble Punjab and Haryana High Court .
6 On the other hand, the Ld. D.R. for the Revenue pointed out that the decision of Hon'ble Punjab and Haryana High Court in case of CIT Vs. Subhash Kumar Jain (supra) was totally distinguishable. In that case the assessee could not explain that agricultural income and therefore enquiries were got conducted by the Inspector who in his report pointed out various defects in the documents furnished by the assessee. Thereafter the assessee offered to surrender certain amounts subject to no penal action u/s 271(1)(c). This offer was accepted by the Assessing officer and assessment was framed accordingly without initiating any penalty u/s 2711)(c). Thereafter the Ld. Commissioner in exercise of his powers u/s 263, stated that the assessment order was erroneous and prejudicial to the interest of the Revenue and directed the Assessing officer to reframe the assessment after charging penalty u/s 271(1)(c). Hon'ble High Court quashed the orders u/s 263 by observing that offer was made by the assessee subject to no penal action and since the Revenue did not have specific evidence to show that the income has been concealed and therefore no penalty could have been imposed. However, when 6 the assessee has himself surrendered a sum of Rs. 75 lakhs in the case before us then the assessee has definitely concealed the particulars of his income. In this regard he referred to the provisions of section 271AAA as well as 271A which clearly mandates the levy of penalty and therefore Assessing officer was duty bound to initiate penalty proceedings because initiation is mandatory for levy of penalty. He also submitted that other decisions relied on by the Counsel for the assessee are distinguishable and in this regard he particularly referred to the decision of Hon'ble Supreme Court in case of CIT Vs. Sun Engineering W orks P Ltd, 198 ITR 297 (S.C) wherein it is clearly observed that only the judgment which is identical to the facts of the case, can be relied for particular proposition.
7 W e have gone through the rival submissions carefully and find force in the submissions of the Ld. Counsel for the assessee. In case of Addl CIT Vs. JK D'Costa (supra) Assessing officer completed the assessment but he did not took following action.
" ( i) he di d n o t s ay a ny t h i ng in t h e or d er a bo ut the c har g i ng of i n ter es t u /s 13 9( 1) f or th e d e lay in t he s ub m is s io n o f th e r e tu r ns by t h e as s es s ee ;
( i i) he d id no t d ea l w i th t he qu es ti o n o f th e c h ar g e a bi l i ty of i nt er es t u/s 2 1 7 for th e f a i l ur e of t he as s es s e e t o f i l e a n e s ti m at e of adv a nc e t a x an d pay th e tax t h er e o n i n s o f ar a s t he As s es s m e nt y e ar 19 6 5- 6 6 w as c o nc er n ed ;
( i i i) he d i d no t m en t io n any t hi n g i n t h e as s e s s me n t or d er r e g ar d i ng t he i ni t ia t io n of p e na l ty p r oc e e d in gs u /s 2 7 1( 1 ) ( a) o f t he Inc o me - t ax Ac t, 19 6 1 th o ug h t he r et ur ns ha d b e en f i l ed b ey on d t i m e; a n d ( iv ) s o f ar as t h e As s es s m en t y ear 1 9 65- 6 6 is c onc er n ed , h e d id n ot me n ti o n any t hi n g i n th e as s es s me n t or d er a b ou t th e i n it i at i on o f p en a lty p r o c ee d i ngs u /s 27 3( b) f or n on p ay me n t of a dv anc e t ax for t h e a bov e y e ar . "
In view of not taking any action by the Assessing officer in respect of above issues the Addl CIT was of the opinion that the order passed by the ITO was erroneous and prejudicial to the interest of the Revenue.. He set aside the order and directed the Assessing officer to charge interest u/s 139 and 217 and also to initiate penalty proceedings u/s 271(1)(a), 273(b). The assessee took the matter to 7 the Tribunal. The Tribunal pointed out that powers u/s 263 contains certain conditions and limitations and under that section, the Commissioner has power only to examine the assessment order and he could not travel beyond the assessment proceedings. Therefore the Tribunal upheld the portion of the order with respect to levy of interest but quashed the order in respect of initiation of penalty proceedings. Hon'ble High Court adjudicated this issue as under:
" W e hav e h ea r d Mr . W a zi r S in g h, le ar ne d c o uns e l fo r ht d e par t me n t, b ut w e ar e of op i n i on th a t t he c onc l us io n r e ac h e d by th e Tr i bu n a l is th e on ly p os s i b l e c onc l us io n t h at c an be ar r iv e d a t i n t he c ir c u ms t a nc es of t h e c as e. Sec t io n 2 6 3 en a b les t he Co m m is s i on er to c a l l f or a n ex a m in e th e r ec or d of a ny pr oc e e di n gs un d er t he Ac t an d if h e c o ns id er s t h at a ny or d er pas s e d th er e in by t he I TO is er r on e ous , i n s o f ar a s it is pr ej u d ic ia l t o t h e i nt er es t of t h e r ev e nu e , h e m ay , af ter g iv i n g th e as s es s ee an op p or t u ni ty o f be in g h e ar d an d a ft er m ak in g or c aus i n g to b e m a de s uc h en q ui r i es as he d ee m ed nec es s ar y , pas s s uc h or d er s th er eo n as t h e c ir c um s ta nc es o f t h e c as e j u s ti fy . I n t h e pr es e nt c as e t he A d d l Co m m is s i o ne r c a l l ed for th e r ec or d o f t h e as s es s m e nt pr oc e e di ngs a nd i t is a ls o c l ear fr o m th is or der th a t i n his v i ew th e as s es s me n t or de r s pas s e d by th e th ITO on 2 8 Ma r c h 1 9 69 w er e e r r o n eo us a n d pr e j u dic i a l t o t he i n ter es t o f t h e Rev e nu e. As t he Tr i bu na l h as r ig h tly po i nt e d out h is j ur is d ic ti o n w as c o nf ir me d to t he pr oc ee d i ngs o f as s es s m e nt a n d t h e as s es s m e nt or der a n d h e ha d fu l l po w er s to r ev is e t h e as s es s m e nt or d er i n r eg ar d t o any er r o r he may d is c ov er th er ei n wh ic h is p l ai n t o f t he A dd l Co m m is s i on er is t ha t w h i le c om p l et i ng th e as s es s m e nt a n d p as s i ng th e as s es s m en t o r de r s , t h e ITO h ad f a il e d t o t ak e s te ps t o c h ar g e i nt e r es t an d th at h e h a d a ls o f a il e d t o in i t i at e p e na l ty pr oc e e di n gs a g a ins t t he as s es s ee . T he q u es t i on , t h er ef or e is w he t her t hes e tw o as p ec ts o f t h e m at ter f or me d pa r t of t he pr oc ee d i ngs w hic h wer e b ei n g ex a m i ne d by th e C om m is s i o n er an d a ls o w he t her t hes e ar e tw o as p ec ts w h ic h for m an i n te gr a l p ar t of th e as s es s m e nt or d er s wh ic h th e Co m mis s i o ner is s eek i n g t o r ev is e. T h e Tr i b un a l h as he l d s o far as t h e qu es t i o n o f in t er es t is c onc er n ed t ha t i t is a pa r t o f t h e pr oc e e d in gs of as s es s m en t a nd t h at t he d ir ec t io n t o c har g e i nt er es t c a n a ls o be s a id t o b e an i n te gr a l par t of t h e as s es s m e nt or d er . S o far as t h is p ar t o f th e C om m is s i on er 's or der is c onc er n ed , i t h as no t be e n c h a l le n ge d by t h e as s es s ee i n t he r ef e r enc e an d w e ar e n o t c onc er ne d w it h t h is p ar t o f t h e Co m m is s i o n er 's o r d er . T he o n ly q u es t i o n be f or e us is w h et he r th e Tr ib u na l w as r ig ht in r ev ok i ng th e or d er of t he Ad d l Co m m is s i o ne r i n s o f a r as it per ta i ns t o t he qu es ti o n o f pe n a lt i es u/s 2 7 1( 1) ( a ) an d 2 7 3( b ) . Her e w e fi n d o ur s e lv es i n c o m p l et e a gr e e m en t w it h t h e v i ew t ak en by t h e Tr ib u na l . I t is we l l es t ab l is h ed th a t p r oc e e d in gs for th e l ev y of a pe n al ty wh et h er u /s 27 1( 1) ( a ) or u/s 2 7 3( b) ar e pr oc ee d i ngs in d ep e nd e nt ly or an s ep ar at e fr om t he as s es s m e nt pr oc ee d in gs . T h ou g h t h e ex pr es s i o n " as s es s m e nt " is us ed i n t h e Ac t w it h d i ff er en t m e an i n gs in d if fe r e nt c on t ex ts , s o far as s ec 2 63 is c on c er n e d, it r e f er s to a par t ic u l ar pr oc ee d i ngs tha t is b e i ng c ons i d er e d by t h e Co m mis s i o ner an d i t is n ot p os s i bl e w h en t h e Co m m is s i o ne r is d ea l i ng w i th t h e as s es s m e nt pr oc ee d i ngs an d t he as s es s me n t or der t o ex p a nd t h e s c o p e of th es e p r oc e ed i n gs a n d t o v i ew t he p e na l ty pr oc e e d in gs a ls o as p ar t of t he pr oc e e d in gs wh ic h ar e be i n g s o u gh t to b e r e v is ed by th e Co m m is s i o ne r . T her e is n o i d en t ity be tw e e n t he as s es s m e nt pr o c ee d i ngs an d th e p en a lty pr oc e ed i n gs ; t he la tt er ar e s e p ar a t e pr oc e e di n gs th a t my i n s o me c as es , fo l l ow as a c ons e qu e nc es o f th e as s es s m e nt pr oc e e d i ngs . As t he Tr i b un a l has p o in te d ou t th o ug h it is us ua l f or t h e IT O t o r ec or d i n t h e as s es s m e nt or d er th a t pe n al ty pr oc e e d in gs ar e b ei n g i n it i at ed , t h is is m or e a ma tt er of c o nv e ni e nc e th an of le g a l r e qu ir e me n t. A l l t h at t h e l a w r e qu ir es , s o far as th e pe n a lty pr oc ee d i ngs ar e c onc er ne d, is th at t hey s h o ul d be i n it i at e d in th e c o ur s e o f t he pr o c ee d i ngs of as s es s m e nt . It is s u ff ic i en t i f t her e is s o m e r ec o r d s o me w her e ev en a par t fr o m t h e as s es s m e nt or der i ts e l f, th at th e ITO has r ec or d e d h is s a t i s fac t io n t h at t h e as s es s e e is g u il ty o f c o nc e a l me n t or ot h er d ef a ul t f or w hic h p en a lty ac t i on is c a l l ed f or . In de e d, i n c e r ta i n c as es i t is p os s ib l e f or t he I TO to is s u e a p e na l ty n o tic e or i ni t ia t e p en a lty pr oc ee d i ngs ev e n l o ng b e for e t he as s es s m e nt is c o m p le te d th o ug h t he ac t ua l pe n a lty or d er c an n ot b e p as s e d u nt i l th e as s es s m e nt is f i na l i ze d . W e t h er e fo r e ag r e e w it h th e v ie w t ak e n by t he Tr i b un a l t ha t t h e p en a lty pr oc e e di n gs d o no t for m p ar t o f 8 th e as s es s m en t pr oc e ed i n gs a n d t h at th e f a il ur e of th e I TO t o r ec or d i n t h e as s es s m e nt o r d er h is s at is fac t io n or th e lac k of it in r e gar d t o t he lev i a bi l i ty of pe n a lty c a n no t b e s a i d to be a f ac tor v it i at i ng t h e as s es s m e nt o r de r i n an y r es p ec t. A n as s es s m e nt c a nn ot b e s ai d to be er r o ne o us or pr e ju d ic i a l t o th e i nt er es t of t he R ev e n u e b ec a us e o f t he f a il u r e of th e ITO to r ec or d h is o p in i o n ab o ut t h e l ev i ab i l ity of pe n a lty in th e c as e. W e, t he r e for e an s wer th e f ir s t qu es ti o n r e fer r e d to u s i n t he af fir m at iv e a n d i n fav o ur of t he as s es s e e . "
Later on similar issue came up before the Hon'ble Delhi High Court in case of Addl CIT Vs. Sudharsan Talkies, 200 ITR 153. In that case the assessee had not complied with the provisions of the payment of advance tax and therefore assessment order was revised by the Commissioner for non initiation of penalty u/s 273(b). Before the Hon'ble High Court decision of Hon'ble Madhya Pradesh High Court in case of Addl CIT V. Indian Pharmaceuticals (supra) was relied. The Court noted that this issue was no longer res- integra because of the decision of Addl CIT Vs. JK D'Costa (supra). It was noted that because the Revenue had filed SLP (SLP No. 11391, 11392 of 1981) which was dismissed by the Hon'ble Supreme Court vide decision reported at 147 ITR (St) 1 and therefore Hon'ble High Court followed the decision of Addl CIT Vs. JK D'Costa (supra).
8 No doubt Hon'ble Allahabad High Court in case of CIT Vs. Sudarshan Prashad Aggarwal (supra) did not follow the decision of Addl CIT Vs. JK D'Costa (supra) the Court noted that this decision was followed by Hon'ble Delhi High Court in other cases as well as by Hon'ble Rajasthan High Court in case of CIT V. Keshrimal Parasmal, 157 ITR 484 by Hon'ble Gauhati High Court in case of Sudarshan Prashad Singh, 173 ITR 510 by Hon'ble Calcutta High Court in case of CIT Vs. Linotype and Machinery Ltd, 192 ITR 337 and by Hon'ble Madras High Court in case of CIT Vs. R.K. Swang, 254 ITR 158. Still after detailed discussion Hon'ble High Court preferred to follow the decision of Hon'ble Madhya Pradesh High 9 Court in case of Addl CIT V. Indian Pharmaceuticals (supra) by observing as under:
"In this view of the matter, we are in respectful agreement that a view taken by Hon'ble Madhya Pradesh High Court in case of Addl CIT V. Indian Pharmaceuticals, 123 ITR 874 and other cases."
9 In case of CIT Vs. Subhash Kumar Jain (supra) Hon'ble Punjab and Haryana High Court was concerned with a case where the assessee could not explain the agricultural income properly, therefore enquiries were conducted by the department, therefore an Inspector who in his report pointed out various defects in the documents furnished by the assessee. Because of these defects the assessee made overall surrender of certain amounts subject to no penal action u/s 271(1)(c). The Assessing officer accepted this offer and completed the assessment without initiating any penalty proceedings. This order was revised u/s 263 and the Assessing officer was directed to reframe the assessment after charging penalty. N o d o u b t i n t h i s c a s e H o n ' b l e H i g h C o u r t d e a l t w i t h t wo facets of the case which becomes clear. Para four which reads as under:
"The issue involved in this appeal has two facets-----------------.
The Court noted vide para 5 as under:
"Adverting to the first aspect of the issue, it may be noticed that the Assessing officer while passing the assessment order u/s 143(3) had made an office note, the relevant portion of which is as under:
The report of the Inspector was confronted to the assessee who in turn accepted the ungenuineness of agricultural income shown by him and thus came forward with a surrender of agricultural income subject to no penal action u/s 271(1)(c) of Income -tax Act, 1961. Since the Department had no documentary evidence against the assessee but only the report of the Inspector, therefore the offer of the assessee was accepted."
10 The Court further observed that perusal of the note show that the assessee had made a clear offer that no penal action u/s 271(1)(c) would be initiated. The office note clearly show that this offer has been accepted by the Revenue. Therefore penalty could 10 not be levied. In this regard the Court referred to the decision in case of Banta Singh Kartar Singh Vs. CIT, 125 ITR 239 (PH). The Court also dealt with the second limb of the issue vide para 9 to 12 which are as under:
"9 Now adverting to the second limb, it may be noticed that the Delhi High Court in judgment in Addl CIT Vs. JK D'Costa, 133 ITR 7 has held that the CIT cannot pass an order u/s 263 of the Act pertaining to imposition of penalty where the assessment order u/s 143(3) is silent in that respect. The relevant observations recorded are:
"It is well established that proceedings for the levy of a penalty whether u/s 271(1)(c)or u/s 273(b) are proceedings independently of and separate from the assessment proceedings. Though the expression "assessment" is used in the Act with different meanings in different contexts, so far as section 263 is concerned it refers to a particularly proceeding that is being considered by the Ld. Commissioner and it is not possible when the Ld. Commissioner is dealing with the assessment proceedings and the assessment order to expand the scope of these proceedings and to view the penalty proceedings also as part of the proceedings which are being sought to be revised by the Ld. Commissioner. 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 roe a matter of convenience than of legal requirement. All that the law requires so far as the penalty proceedings are concerned, is that they should be initiated in the course of the proceedings for assessment. It is sufficient if there is some record somewhere even apart from the assessment order itself that the ITO has recorded his satisfaction that the assessee is guilty of concealment or other default for which penalty action is called for. Indeed in certain cases it is possible for the ITO to issue a penalty notice or initiate penalty proceedings even long before the assessment is completed though the actual penalty order cannot e passed until the assessment finalized. We, therefore agree with the view taken by the Tribunal that the penalty proceedings do not form part of the assessment proceedings and that the failure of the ITO to record in the assessment order his satisfaction or the lack of it in regard to the leviability of penalty cannot be said to be a factor vitiating the assessment order in any respect. An assessment cannot be said to be erroneous and prejudicial to the interest of the Revenue because of the failure of the ITO to record his opinion about the leviablility of penalty in the case."
10 Special leave petition against the said decision was dismissed by the Hon'ble Apex Court, 147 ITR 1 (ST). The same view was reiterated by the Delhi High Court in CIT Vs. Sudershan Talkies, 201 ITR 289 and f ollowed in CIT Vs. Nihal Chand Rek yan, 242 ITR 45. T he Rajasthan High Court in CIT Vs. Keshrimal Parasmal, 157 ITR 484, Gauhati High Court in Surendera Prasad Singh Vs. CIT, 173 ITR 510 and Calcutta High Court in CIT Vs. Linot ype & Machiner y Ltd. 192 ITR 337 have f ollowed the judgment of Delhi High Court in JK D'Costa case (supra). 11 However, Madh ya Pradesh High Court in Addl CIT Vs. Indian Pharmaceuticals, 123 ITR 874 which has been followed by the same High Court in Addl CIT Vs. Kantilal Jain, 125 ITR 373 and Addl CW T Vs. Nathoolal Belaram, 125 ITR 596 has adopted diametrically opposite approach.
12 W e are in agreement with the view taken by the High Courts of Delhi, Rajasthan, Calcutta and Gauhati and express our inability to subscribe the view of Madhya Pradesh High Court."
11The above clearly show that second aspect was also dealt and the Hon'ble Punjab and Haryana High Court clearly showed its inability to follow the decision of Hon'ble Madhya Pradesh High Court in case of Addl CIT V. Indian Pharmaceuticals (supra) and rather followed the decision of Hon'ble Delhi High Court in case of JK D'Costa (supra) therefore the contention of the D.R. for the Revenue is not correct that the decision of Hon'ble Punjab and Haryana High Court is distinguishable because they have clearly followed the decision of Hon'ble Delhi High Court in case of JK D'Costa (supra) while dealing with the second aspect. Therefore in view of the decision of Hon'ble Punjab and Haryana High Court in case of CIT Vs. Subhash Kumar Jain (supra) power u/s 263 cannot be used for directing the Assessing officer to initiate penalty proceedings. The matter could be examined from another angle. Both S 271A and 271AAA start with the expression "may". Sec 271A reads as under: 35
" 2 7 1 A W ith o ut pr e ju d i c e t o th e pr ov is io ns o f s ec t io n 2 71 , if a ny p er s o n [ ** * ] fa i ls to k ee p a nd ma i nt a in a ny s uc h b ook s of ac c o un t a nd o t her doc u me n ts as r eq u ir ed by s ec ti o n 44 A A o r th e r u l es m ad e t h er e u nd er , i n r es p ec t of any pr ev i o us y ear or t o r e ta i n s uc h b o ok s of ac c ou n t a n d ot h er doc u me n ts f or t he 36 37 per i o d s pec i f ie d i n t he s a i d r u l es , t he [ As s es s i n g] O f f ic er or th e [ ** * ] 38 [ C om m is s i on er ( A pp ea ls ) ] m a y d ir ec t t h at s uc h p er s on s h a l l p a y , by w ay o f 39 pe n a lty , [ a s u m o f tw en ty - f iv e t ho us an d r u p ees ].
Section 271AAA also starts as under:
"271AAA. (1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on 43 or after the 1st day of June, 2007 [but before the 1st day of July, 2012], the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year.
(2) Nothing contained in sub-section (1) shall apply if the assessee,--
(i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived;
(ii) substantiates the manner in which the undisclosed income was derived; and
(iii) pays the tax, together with interest, if any, in respect of the undisclosed income.
(3) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1).
(4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section.
Explanation.--For the purposes of this section,-- 12
(a) "undisclosed income" means--
(i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has-- (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or (B) otherwise not been disclosed to the Chief Commissioner or Commissioner before the date of search; or
(ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted; 11 From above it is clear that it is not always necessary for the Assessing officer to initiate penalty proceedings if he is satisfied that the particular case is not fit for levy of penalty then the Assessing officer has powers not to initiate penalty proceedings because legislature has used the expression may in penal provision which shows that Assessing officer has discretionary power to initiate the penalty proceedings. In other words, in any such situation of not initiating penalty proceedings the Assessing officer has adopted one of the legal possible view. W henever one of the legal possible view is adopted by the Assessing officer then such assessment order cannot be called erroneous and prejudicial to the interest of the Revenue. In this regard reference may be made to the decision of Hon'ble Supreme Court in case of Malalbar Industries, 243 ITR 83. In the case before us, the Assessing officer may be satisfied that since the assessee has surrendered the amount and has offered the surrendered amount by paying tax therefore this is not a fit case for levy of penalty and accordingly he may not have initiated penalty proceedings. Therefore such order cannot be called erroneous and prejudicial to the interest of the Revenue.
12 In view of the above legal position and discussion we are of the opinion that the assessment order passed by the Assessing officer 13 was not erroneous and prejudicial to the interest of the Revenue and accordingly same is quashed.
13 ITA No. 357/Chd/2013 is allowed. ITA No. 358/Chd/2013 - appeal of Vimal Dhall 14 The facts are identical to the facts involved in ITA No. 357/Chd/2013 in case of Amarjeet Dhall which we have adjudicated above and therefore following the above order, we quash the order passed by the Ld. Commissioner.
15 ITA No. 358/Chd/2013 is allowed. 16 In the result, both the appeals of the assesses are allowed.
Order pronounced in the open court on 21.4.2014
Sd/- Sd/-
(SUSHMA CHOWLA) (T.R. SOOD)
JUDICI AL MEMBER ACCOUNTANT MEMBER
Dated : 21.4.2014
SURESH
Copy to: The Appellant/The Respondent/The CIT/The CIT(A)/The DR