Income Tax Appellate Tribunal - Panji
U V Ramana Murthy Raju,, Visakhapatnam vs Tje Cit - 1,, Visakhapatnam on 21 June, 2017
ITA No.27/Vizag/2014
U.V. Ramanamurthy Raju, VSKP
आयकर अपीलीय अिधकरण,
अिधकरण िवशाखापटणम पीठ,
पीठ िवशाखापटणम
IN THE INCOME TAX APPELLATE TRIBUNAL,
VISAKHAPATNAM BENCH, VISAKHAPATNAM
ी वी.
वी दुगा राव,
ाव
याियक सद य एवं
ी िड.एस
िड एस.
एस सु
दर सह,
सह लेखा सद य के सम
BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER &
SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A.No.27/Vizag/2014
(िनधा रण वष / Assessment Year: 2006-07)
U.V. Ramanamurthy Raju, CIT-1,
Visakhapatnam Visakhapatnam
[PAN No.AAFPU6285N]
अपीलाथ / Appellant)
(अपीलाथ याथ / Respondent)
( याथ
अपीलाथ क ओर से / Appellant by : Shri C. Kameswara Rao, AR
याथ क ओर से / Respondent by : Shri R. Govinda Rajan, DR
सुनवाई क तारीख / Date of hearing : 01.06.2017
घोषणा क तारीख / Date of Pronouncement : 21.06.2017
आदेश / O R D E R
PER D.S. SUNDER SINGH, Accountant Member:
This appeal filed by the assessee is directed against order of the CIT-1, Visakhapatnam in F.No.CIT-1/VSP/263/2013-14 dated 29.10.2013 for the A.Y. 2006-07.
2. There was a delay of 28 days in filing this appeal. The assessee has filed an affidavit explaining the reasons for delay in filing the appeal. We have considered the explanations offered by the assessee in the affidavit and heard both the parties and condone the delay. 1 ITA No.27/Vizag/2014
U.V. Ramanamurthy Raju, VSKP
3. All the grounds of appeal are related to the direction of the CIT to initiate penalty u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter called as 'the Act') by exercising the powers u/s 263 of the Act. The assessee filed return of income declaring total income of Rs.11,25,932/- and agricultural income of Rs.5,20,000/- on 27.12.2007. Subsequently, the A.O. conducted the survey u/s 133A of the Act on 25.10.2011 and the assessment was completed u/s 143(3) of the Act on total income of Rs.11,25,932/- excluding the agricultural income. During the course of survey, the A.O. found that a sum of Rs.22,75,000/- was deposited in Union Bank of India, Visakhapatnam branch on 9.12.2005 and 25.5.2006. Consequently, the A.O. issued notice u/s 148 of the Act on 31.3.2012 by reopening the assessment. During the reassessment proceedings, the assessee explained the source of Rs.10,00,000/- but could not explain the source for the remaining deposit of Rs.12,50,000/-, therefore, the assessing officer completed the reassessment on total income of Rs.23,75,932/- by making the addition of Rs.1250000/- but penalty was not initiated u/s 271(1)(c) of the Act. The Ld. CIT-1 called for the record for revision u/s 263 of the Act and noticed that though the assessment was completed by issue of notice u/s 147 r.w.s. 143(3) of the Act but the penalty was not initiated by the A.O. The Ld.CIT held that prima facie there is a case for initiation of 2 ITA No.27/Vizag/2014 U.V. Ramanamurthy Raju, VSKP penalty proceedings but the A.O. did not initiate penalty proceedings hence, the assessment was erroneous and prejudicial to the interest of the revenue and accordingly set aside the assessment order to the limited extent of initiation of penalty proceedings u/s 271(1)(c) of the Act. Aggrieved by the order of the Ld. CIT, the assessee filed appeal before this Tribunal challenging the order made u/s 263 of the Act.
4. Appearing for the assessee, the Ld. A.R. argued that the Ld. CIT has no power u/s 263 of the Act to direct the A.O. to initiate the penalty u/s 271(1)(c) of the Act. Initiation of penalty proceedings is a satisfaction of the assessing officer and the penalty proceedings required to be initiated during the assessment proceedings but not after completion of the assessment proceedings. The A.R. argued that on completion of the assessment proceedings, there were no proceedings pending and no penalty can be initiated u/s 271(1)(c). The Ld. CIT is empowered to revise the orders passed under various sections of the Act and in this case, there is no order which required to be revised. The Ld A.R further argued that the assessment order passed u/s 143(3) of the Act cannot be set aside for initiation of the penalty proceedings. There is no penalty order available to the CIT, which can be taken up for revision u/s 263 of the Act. Therefore, the Ld. A.R. contended that there is no error in the assessment order passed by the A.O. u/s 143(3) 3 ITA No.27/Vizag/2014 U.V. Ramanamurthy Raju, VSKP r.w.s. 147 of the Act, which is prejudicial to the interest of the revenue and the revision made u/s 263 of the Act is erroneous and bad in law, required to be quashed. The Ld. A.R. also relied on the decision of Hon'ble Gujarat High Court judgment in the case of CIT Vs. Parmanand M. Patel and Hon'ble ITAT 'D' bench Ahmedabad in the case of Easy Transportation and Software Private Limited Vs. CIT.
5. On the other hand, the Ld. D.R. argued that non-initiation of penalty u/s 271(1)(c) of the Act where the penalty is required to be initiated is erroneous and prejudicial to the interest of the revenue. In the assessee's case, the assessment was completed u/s 143(3) of the Act and subsequently a survey was conducted in the assessee's case. During the course of survey, evidence was found evidencing the escapement of income, which resulted in reopening of the assessment u/s 147 of the Act and the reassessment was completed on the basis of the material found during the course of survey by making addition of Rs.12,50,000/- u/s 69 of the Act. All the facts narrated above leads to the prima facie a case for initiation of penalty proceedings u/s 271(1)(c) of the Act, which the assessing officer failed to do so. Therefore, the Ld. CIT held that the assessment made u/s 143 r.w.s. 147 is erroneous and prejudicial to the interest of the revenue. The Ld. CIT relied on the Hon'ble Allahabad High Court decision in the case of CIT Vs. Surendra 4 ITA No.27/Vizag/2014 U.V. Ramanamurthy Raju, VSKP Prasad, which supports the view that omission to initiate penalty proceedings during the course of assessment proceedings renders the assessment order erroneous and also prejudicial to the interest of the revenue. The Ld. D.R. further relied on the decision of Patna High Court in the case of R.A. Himmat Singhga & Co. Vs. CIT 340 ITR 0253 and invited our attention to the para no.28 of the order which reads as under:
"28. Thus, in essence, the initial words of section 263 "any proceedings"
under the Act are of immense signification. Secondly, section 263 which uses the words "any order passed therein" by the assessing officer also has its importance. It is also seen from section 263 that the said provision uses the words "pass such order thereon as the circumstances of the case justify, including..." The word, "proceedings" hence, we are disposed to think, is a wider term compare to the word "assessment". It is also worth noting that the word "assessment" has been used only after the word "including" towards the end of section 263 and in the earlier part of section 263, the only word used is "proceedings". Hence, in any proceeding in which an order is passed dropping penalty, is very much an order passed in any proceeding and, thus, the same would come under the exercise of revisional jurisdiction of section 263 of the Act."
6. Further, the Ld. D.R. submitted that the Act has been amended w.e.f. 1.6.2002 including the Principal Commissioner or Commissioner for the purpose of penalty u/s 271(1)(c) of the Act, thus the conjoint reading of section 271 & 263 of the Act establishes that the CIT is empowered u/s 263 of the Act to set aside the order passed by the A.O. for initiating penalty proceedings u/s 271(1)(c) of the Act, hence there is no error in the order of the CIT and the same required to be upheld. Rebutting the submissions made by the Ld. D.R., the Ld.A.R placed 5 ITA No.27/Vizag/2014 U.V. Ramanamurthy Raju, VSKP reliance on the Finance Act, 2002 and brought to our notice that the clarificatory amendments in section 271 of the Act relating to penalty for concealment of income etc. was amended to include the reference to the Commissioner as being an authority who can initiate penalty u/s 271 of the Act. Therefore, the Ld. A.R. contended that u/s 263 of the Act, the CIT can initiate the penalty but he cannot direct the A.O. to initiate penalty u/s 271 of the Act. Therefore, the Ld. A.R. affirmed that the order passed u/s 263 of the Act required to be quashed.
7. We have heard the rival submissions and perused the materials placed on record. In this case, the assessment was completed u/s 143(3) r.w.s. 147 of the Act. A survey u/s 133A of the Act was conducted and during the course of survey, evidence was found regarding unexplained investment in the form of deposits made in the bank account. Consequently re-assessment was made by the A.O. The A.O. in the re-assessment order did not initiate penalty proceedings u/s 271(1)(c) of the Act. Therefore, the CIT called for the record u/s 263 of the Act and held that though it is a prima facie case for initiation of penalty proceedings, the A.O. has not initiated the penalty proceedings. Therefore, placing the reliance on Allahabad High Court judgment cited (supra) held that omission to initiate penalty proceedings during the course of assessment proceedings renders the assessment order 6 ITA No.27/Vizag/2014 U.V. Ramanamurthy Raju, VSKP erroneous and prejudicial to the interest of the revenue. Accordingly, the Ld. CIT set aside the order u/s 143 r.w.s. 147 of the Act for the limited purpose of initiating penalty proceedings. We have carefully gone through the provisions of section 263 of the Act which reads as under:
"The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the 2 Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he, may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. "
8. U/s 263 of the Act, the CIT can call for the record of any proceedings. In the present case, he does so. He called for the record pertaining to the assessment proceedings, examined them and which he is empowered to do. He considered the order of assessment passed therein and found that the provisions of section 271(1)(c) & 273 of the Act have not been invoked. As per the amendment made to the Income tax act, the CIT is empowered to initiate penalty u/s 271(1)(c) of the Act. As per section 263 of the Act , the CIT is empowered to pass an order after giving opportunity of being heard to the assessee, such an order as the circumstances of the case justify including an order enhancing or modifying the assessment or cancelling the assessment 7 ITA No.27/Vizag/2014 U.V. Ramanamurthy Raju, VSKP and directing the fresh assessment. From section u/s 263 of the Act it is clear that the CIT is empowered to enhance, modify or direct the A.O. to re-do the assessment and set aside the assessment order. In this case, the assessing officer has not initiated the penalty proceedings which required to be initiated by him. The CIT has the powers vested under section 271(1)(c) to initiate penalty and consequently the CIT is empowered to get it done through the AO by virtue of powers vested in section 263 of Income tax act. Accordingly, the CIT has directed the A.O. to initiate the penalty proceedings u/s 271(1)(c). The Ld. A.R. relied on the judgement of Hon'ble Gujarat High Court in the case of CIT Vs. Paramanand M Patel 278 ITR 0003 (2005) which was rendered before the amendment of section 271 of the Act. Section 271 of the Act is amended to include the Principal Commissioner/Commissioner to initiate the penalty proceedings by finance Act 2002, w.e.f.01/06/2002. Therefore, subsequent to the amendment of section 271 we are of the considered opinion that the CIT can initiate himself or by exercising power u/s 263 of the Act, direct the assessing officer to initiate the penalty proceedings u/s 271 of the Act. The case law relied upon by the assessee was prior to the amendment of section 271 of the Act. Hon'ble High Court held that CIT was not empowered to record the satisfaction and once he is not empowered to do so on his own, he cannot direct the 8 ITA No.27/Vizag/2014 U.V. Ramanamurthy Raju, VSKP assessing authority in revision powers. The case on hand is related to the assessment year 2006-07and subsequent to the amendment. After the amendment, CIT also empowered to initiate the penalty proceedings u/s 271(1)(c) of the Act. Therefore, the case law relied upon by the assessee is not helpful to him. The second case law relied upon by the assessee was the decision of Hon'ble ITAT Ahmedabad 'B' bench in the case of Easy Transportation Software Pvt. Ltd. (supra). The facts of this case were that the assessee has claimed the deduction u/s 10B of the Act, which was withdrawn by the assessee during the assessment proceedings and the AO completed the assessment without initiating penalty u/s 271(1)(c) of the Act. The CIT has interfered by exercising power u/s 263 of the Act and cancelled the assessment order passed u/s 143(3) of the Act and directed the assessing officer to reframe the assessment order after giving opportunity to the assessee. In the said case, the entire assessment was cancelled and set aside the assessment with a direction to the A.O. to reframe the assessment. In the instant case, the CIT has set aside the order u/s 143(3) of the Act only with a limited purpose of initiating penalty proceedings u/s 271(1)(c) of the Act, therefore, the facts of the case relied upon by the assessee are not applicable to the assessee's case. Hon'ble Allahabad High Court in 275 ITR 113 relied upon by the CIT held that non-initiation of penalty 9 ITA No.27/Vizag/2014 U.V. Ramanamurthy Raju, VSKP proceedings renders the assessment as erroneous and prejudicial to the interest of the revenue. Similarly, in the case of CIT Vs. Ashok Construction Limited 280 ITR 368 of Allahabad High Court held that non- initiation of penalty u/s 271B of the Act render the order erroneous and prejudicial to the interest of the revenue and upheld the revision u/s 263 of the Act. Therefore, we hold that the CIT(A) has rightly exercised the power u/s 263 of the Act and directed the A.O. to initiate penalty proceedings and no interference is called for.
7. In the result, the appeal filed by the assessee is dismissed. The above order was pronounced in the open court on 21stJun'17.
Sd/- Sd/-
वी.
वी दुगा राव)
(वी ाव िड.एस
िड एस.
(िड एस सु
दर सह)
सह
(V. DURGA RAO) (D.S. SUNDER SINGH)
याियक सद य/JUDICIAL
सद य MEMBER लेखा सद य/ACCOUNTANT
सद य MEMBER
िवशाखापटणम /Visakhapatnam: 21.06.2017
दनांक /Dated :
VG/SPS
10
ITA No.27/Vizag/2014
U.V. Ramanamurthy Raju, VSKP
आदेश क ितिलिप अ ेिषत/Copy of the order forwarded to:-
1. अपीलाथ / The Appellant - Shri U.V. Ramanamurthy Rajy, Dr.No.50-1-59/2/5, ASR Nagar, Seethammadhara, Visakhapatnam
2. याथ / The Respondent - The CIT-1, Visakhapatnam
3. आयकर आयु (अपील) / The CIT (A), Visakhapatnam
4. िवभागीय ितिनिध, आय कर अपीलीय अिधकरण, िवशाखापटणम / DR, ITAT, Visakhapatnam
5. गाड फ़ाईल / Guard file आदेशानुसार / BY ORDER // True Copy // Sr. Private Secretary ITAT, VISAKHAPATNAM 11