Kiri Dyes & Chemicals Ltd. , Ahmedabad V. The Pr. CIT-2, Ahmedabad

ITA 1232/AHD/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8373 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 11-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P B PARMAR ARS
• Keywords: Opportunity of being heard; Question of law; Initiation of penalty proceedings; Set aside
• Section: 271(1)(c); 263

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO. 1232/AHD/2018 ( ASSESSMENT YEAR : 2003-04) KIRI DYES AND CHEMICALS LTD. 53, MANEKBAUG SOCIETY, LANE NO.7, GATE NO.3, NEHRUNAGAR, AHMEDABAD / VS. PR. COMMISSIONER OF INCOME TAX-2 AHMEDABAD 1 ST FLOOR, NAVJIVAN TRUST BULDING, B/H GUJARAT VIDYAPITH, AHMEDABAD - 380014 ./ ./ PAN/GIR NO. : AAACK9025C ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI TUSHAR HEMANI & SHRI P. B. PARMAR, A.RS. / RESPONDENT BY : SHRI ALOK SINGH, CIT.D.R. DATE OF HEARING 09/10/2019 !'# / DATE OF PRONOUNCEMENT 10/10/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE REVISIONAL ORDER PASSED BY THE PRINCIPA L COMMISSIONER OF INCOME TAX-2, AHMEDABAD (PR.CIT IN SHORT) DATED 2 8.03.2018 UNDER S. 263 OF THE INCOME TAX ACT, 1961 (THE ACT) ARISING A S A CONSEQUENCE OF ASSESSMENT ORDER DATED 07.10.2015 PASSED BY THE ASS ESSING OFFICER (AO) UNDER S.143(3) R.W.S. 254 OF THE ACT RELEVANT TO AY . 2003-04. ITA NO. 1232/AHD/18 [KIRI DYES AND CHEMICALS LTD. VS. PR.CIT] A.Y. 2003-04 - 2 - 2. IN ITS APPEAL, THE ASSESSEE SEEKS TO ASSAIL THE ACTION OF THE PR.CIT IN INVOKING SECTION 263 OF THE ACT AND CONTENDS THAT T HE SUBJECT ASSESSMENT ORDER FRAMED UNDER S.143(3) R.W.S. 254 OF THE ACT P ASSED BY THE AO CANNOT BE TERMED AS ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF THE REVENUE TO PUT SECTION 263 IN MOTION. 3. THE RELEVANT FACTS IN BRIEF ARE THAT THE ASSESSM ENT UNDER S.143(3) OF THE ACT FOR AY 2003-04 WAS FRAMED VIDE ORDER DATED 30.03.2006 WHEREBY THE AO INTER ALIA DISALLOWED THE CLAIM OF RS.3,78,2 8,641/- UNDER S.10B OF THE ACT. THE AFORESAID ACTION OF THE AO WAS SUBJEC TED TO JUDICIAL SCRUTINY AT VARIOUS LEVELS AND EVENTUALLY THE MATTER WAS RES TORED TO THE AO FOR RE- ADJUDICATION. THE ORDER PASSED BY THE AO IN THE SE COND ROUND OF PROCEEDINGS WAS ONCE AGAIN REMITTED BACK BY THE ITA T TO THE AO WITH CERTAIN DIRECTIONS. AN ASSESSMENT ORDER UNDER S.14 3(3) R.W.S. 254 OF THE ACT WAS CONSEQUENTLY PASSED ON 07.10.2015 IN THE TH IRD ROUND OF PROCEEDINGS. THE AO MAINTAINED ITS ORIGINAL STANCE OF DISALLOWANCE OF CLAIM OF DEDUCTION UNDER S.10B OF THE ACT. HOWEVER , WHILE DENYING DEDUCTION CLAIMED UNDER S.10B OF THE ACT, THE AO DI D NOT CHOOSE TO INITIATE PENALTY UNDER S.271(1)(C) OF THE ACT WHILE PASSING THE IMPUGNED ORDER UNDER S.143(3) R.W.S. 254 OF THE ACT. 4. THE FAILURE OF THE AO TO INITIATE PENALTY PROCEE DINGS UNDER S.271(1)(C) OF THE ACT ON DENIAL OF DEDUCTION UNDER S.10B OF THE ACT WHILE PASSING THE ASSESSMENT ORDER PROMPTED THE PR.CIT TO EXERCISE ITS JURISDICTION UNDER S.263 OF THE ACT TO CORRECT THE AFORESAID FAILURE OF THE AO. 5. THE CONTROVERSY THUS ARISES ON MAINTAINABILITY O F THE REVISIONAL ACTION OF THE PR.CIT FOR LAPSE/FAILURE ON THE PART OF THE AO TO INITIATE PENALTY PROCEEDINGS IN THE COURSE OF ASSESSMENT PRO CEEDINGS. WE FIND THAT THE ISSUE IS NO LONGER RES INTEGRA AND IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CO-ORDINATE BENCH O F TRIBUNAL IN EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS. CIT (2017) 88 TAXMANN.COM 772 (AHMEDABAD-TRIB.) . IT WAS HELD BY THE TRIBUNAL THEREIN THAT THE DES IGNATED ITA NO. 1232/AHD/18 [KIRI DYES AND CHEMICALS LTD. VS. PR.CIT] A.Y. 2003-04 - 3 - AUTHORITY UNDER S.263 OF THE ACT IS NOT ENTITLED TO CORRECT THE ALLEGED LAPSE OF THE AO IN FAILURE TO INITIATE THE PENALTY PROCEE DINGS UNDER S.271(1)(C) OF THE ACT. 6. THE RELEVANT PARA OF THE ORDER OF THE ITAT IN T HE SAID CASE IS EXTRACTED HEREUNDER FOR EASY REFERENCE:- 10. SECTION 263 ENABLES THE CONCERNED PR.CIT / CIT TO REVIEW THE RECORDS OF ANY PROCEEDINGS AND ORDER PASSED THEREON BY THE ASSESSI NG OFFICER. IT EMPOWERS THE COMMISSIONER CONCERNED TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THE ACT AND IF HE CONSIDERS THAT ANY ORDER PASSED THERE IN BY THE AO 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 CAUS ING TO BE MADE SUCH ENQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIR CUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSES SMENT, OR CANCELING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. THUS, THE REVISIO NAL POWERS CONFERRED ON THE CIT UNDER S. 263 ARE OF WIDE AMPLITUDE WITH A VIEW TO ADDRESS THE REVENUE RISKS WHICH ARE OBJECTIVELY JUSTIFIABLE. 11. AS PER THE ARGUMENTS, THE LEGAL ISSUE THAT EMER GES FOR ADJUDICATION IS WHETHER THE COMMISSIONER UNDER THE UMBRELLA OF REVISIONARY POWE RS IS ENTITLED TO UPSET THE FINALITY OF ASSESSMENT PROCEEDINGS BEFORE THE AO WHO HAS OMITTE D TO INITIATE PENALTY PROCEEDINGS IN RESPECT OF DEFAULTS STIPULATED UNDER SECTION 271(1) (C) WHEN THE CIRCUMSTANCES FOR DOING SO EXISTS. THE OTHER INTEGRAL ISSUE THAT ARISES IS WHE THER SCOPE OF ASSESSMENT INCLUDES INITIATION OF PENALTY PROCEEDINGS UNDER S. 271(1)(C ) OR NOT. THERE ARE LONG LINE OF JUDICIAL PRECEDENTS ON THE ISSUE BOTH FOR AND CONTRA. THE HO NBLE GUJARAT HIGH ALSO HAD OCCASION TO DEAL WITH THE ISSUE RELEVANT TO ASSESSMENT YEAR 1982-83 IN CIT VS. PARMANAD M. PATEL 278 ITR 3 (2005) WHEREIN THE DECISION WAS RENDERED IN FAVOUR OF THE ASSESSEE. RIDING ON THE DECISION OF THE HONBLE GURARAT HIGH COURT, THE CO-ORDINATE BENCH OF TRIBUNAL IN J. P. CONSTRUCTION VS. CIT ITA NO. 1304/ AHD./ 2009 ORDER DATED 24.07.2009 [ AY 2005-06] CANCELLED THE ACTION OF THE CIT UNDER SECTION 263 W HEREIN THE ASSESSMENT ORDER WAS SET ASIDE FOR FRAMING ASSESSMENT AFRESH IN ORDER TO INI TIATE PENALTY UNDER S. 271(1)(C) OF THE ACT. THE ASSESSEE HEREIN SEEKS TO PLACE RELIANCE ON THE DECISION OF GUJARAT HIGH COURT IN PARMANAND PATEL ( SUPRA) FOLLOWED BY TRIBUNAL IN JP CONSTRUCTION. THE REVENUE ON THE OTHER HAND SEEKS TO DISPUTE THE POSITION OF LAW AS READ BY THE HONBLE JURISDICTIONAL HIGH COURT IN PARMANAND M. PATEL CASE (SUPRA) ON THE GRO UNDS OF AMENDMENT CARRIED OUT IN S. 271(1)(C). THE REVENUE SUBMITS THAT THE IMPUGNED DE CISION IN PARMANAND PATEL CASE WAS RENDERED PRIOR TO AMENDMENT CARRIED OUT IN SECTION 271(1)(C). POST AMENDMENT, THE PR. CIT/ CIT IS ALSO INSERTED AS A DESIGNATED AUTHORITY FOR THE PURPOSES OF EXERCISING POWERS UNDER S. 271(1)(C). THUS THE HANDICAP WHICH FORMED THE BASIS FOR OUTCOME IN PARMANAND PATEL STANDS ADDRESSED BY THE LEGISLATIVE AMENDMEN T. IT IS THEREFORE CONTENDED THAT IN VIEW OF THE LEGISLATIVE CHANGES, THE DECISION I N PARMANAND PATEL HAS LOST ITS PROPOSITION. CONTINUING FURTHER, NEGATING THE RATIO OF DECISION OF TRIBUNAL IN J P CONSTRUCTION (SUPRA), THE REVENUE SUBMITS THAT THE AFORESAID ITAT ORDER H AS BEEN SET ASIDE AND REMANDED BACK TO ITAT FOR FRESH ADJUDICATION IN CIT VS. J P CONST RUCTION IN TAX APPEAL NO. 2581 OF 2009 ORDER DATED 22/10/2013 BY THE HONBLE GUJARAT HIGH COURT TAKING COGNIZANCE OF THIS LEGISLATIVE AMENDMENT. 11.1. HAVING REGARD TO THE CONTROVERSY INVOLVED, IT WOULD BE DESIRABLE TO REPRODUCE HEREUNDER THE RELEVANT PARAS OF THE ORDER OF THE TR IBUNAL IN J P CONSTRUCTION CASE IN ITA NO.1304/AHD/2009 TO BEGIN WITH. ITA NO. 1232/AHD/18 [KIRI DYES AND CHEMICALS LTD. VS. PR.CIT] A.Y. 2003-04 - 4 - 4. HEARD BOTH PARTIES AND PERUSED THE RECORD. CA REFULLY GOING THROUGH THE IMPUGNED ORDER OF THE LEARNED CIT, WE FIND THAT SIN CE THE ASSESSING OFFICER HAS NOT INITIATED PENALTY PROCEEDINGS U/S.27191)9C) ON THE ADDITION OF RS.1,72,73,488 WHICH WAS OFFERED BY THE ASSESSEE IN THE REVISED RE TURN, 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 PRESEN T 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 EMPOWERE D U/S.263 TO SET ASIDE THE ASSESSMENT AND DIRECT THE ASSESSING OFFICER TO FRAM E THE ASSESSMENT AFRESH? SUCH A QUESTION IS NO MORE RES INTEGRA. IN THE CASE ADD L.CIT VS. J.K. DCOSTA [192] 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 VS. SUDARSHAN TALKIES (1993) 200 ITR 153 (DELHI); ALSO BY HONBL E MADRAS HIGH COURT IN CIT VS. C.K.K.SWAMI (254 ITR 158); SARDA PRASAD SINGH V . CIT (173 ITR 510 (GAUHATI), IT HAS BEEN HLED THAT IF THE COMMISSIONE R FINDS, WHILE EXAMINING THE RECORDS OF AN ASSESSMENT ORDER UNDER SECTION 263, T HAT THE ASSESSING OFFICER HAS NOT INITIATED PENALTY PROCEEDINGS, HE CANNOT DIRECT INITIATION OF PENALTY PROCEEDINGS BECAUSE PENALTY PROCEEDINGS ARE NOT A P ART OF ASSESSMENT PROCEEDINGS. THE COMMISSIONER CANNOT PASS AN ORDER UNDER SECTION 263 P0ERTAINING TO PENALTY. HONBLE SUPREME COURT HAS DISMISSED SPECIAL LEAVE PETITION AGAINST THE DELHI HIGH COURT DECISION IN A DDL.CIT VS. J.K. DCOSTA [REPORTED IN (1984) 147 ITR (ST) 1)]. IN THE CASE OF CIT V. DR.SURESH G.SHAH (289) ITR 110 (GUJ) FOLLOWING ITS EARLIER JUDGEMENT IN THE CASE OF CIT V. PARMANAND M.PATEL (2005) 198 CTR (GUJ) 641/278 ITR 3 (GUJ), HONBLE GUJARAT HIGH COURT HAS HELD THAT WHILE EXERCISING POWERS UN DER SECTION 263, CIT IS NOT COMPETENT TO DIRECT INITIATION OF PENALTY PROCEEDIN GS UNDER S.271(1)(A) OR S.273(2)(C) OF THE ACT. IN THE CASE OF CIT V. PARM ANAND M.PATEL (SUPRA), HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT THE CIT IS NOT EMPOWERED TO RECORD SATISFACTION BY INVOKING S.271(10(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 PO WERS. 5. IN VIEW OF THE ABOVE, SINCE THE CIT HAS SET ASI DE 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. 11.2. AS NOTED EARLIER, THE HONBLE GUJARAT HIGH CO URT HAS QUASHED AND SET ASIDE THE IMPUGNED TRIBUNAL ORDER AND REMANDED THE MATTER BAC K TO THE ITAT FOR ITS FRESH CONSIDERATION IN THE LIGHT OF AMENDMENT IN S. 271(1 )(C) OF THE ACT. THE SHORT ORDER THEREON IN TAX APPEAL NO.2581 OF 2009 IS REPRODUCED HEREUND ER TO APPRECIATE THE ISSUE IN PERSPECTIVE. PRESENT TAX APPEAL HAS BEEN PREFERRED BY THE APPE LLANT REVENUE CHALLENGING THE IMPUGNED JUDGMENT AND ORDER DATED 24TH JULY 2009 PA SSED BY THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD {TRIBUNAL FOR SHORT } IN I.T.A NO. 1304/AHD/2009 WITH RESPECT TO A.Y 2005-06 ON THE FO LLOWING QUESTION OF LAW :- WHETHER THE APPELLATE TRIBUNAL IS RIGHT IN LAW AND ON FACTS IN SETTING ASIDE THE ORDER PASSED BY THE COMMISSIONER OF INCOM E TAX U/S. 263 OF THE ACT WHEN THE ASSESSING OFFICER FAILED IN INITIATING PROCEEDINGS U/S. 271 [1](C) OF THE ACT ? HAVING HEARD MS. PAURAMI SHETH, LEARNED ADVOCATE APPEARING FOR THE APPELLANT- REVENUE AND SHRI MANISH J. SHAH, LEARNED ADVOCATE A PPEARING ON BEHALF OF THE RESPONDENT AND CONSIDERING THE IMPUGNED JUDGMENT AN D ORDER DATED 24TH JULY ITA NO. 1232/AHD/18 [KIRI DYES AND CHEMICALS LTD. VS. PR.CIT] A.Y. 2003-04 - 5 - 2009 PASSED BY THE TRIBUNAL, IT APPEARS THAT WHILE ALLOWING THE APPEAL PREFERRED BY THE ASSESSEE, THE TRIBUNAL HAS RELIED UPON THE D ECISION IN CASE OF CIT V. PARMANAND M. PATEL, REPORTED IN 278 ITR 3 (GUJ). IT IS NOT IN DISPUTE THAT THE DECISION IN CASE OF P ARMANAND M. PATEL [SUPRA] WAS RENDERED CONSIDERING PRE-AMENDED SECTIO N 271 [1] OF THE INCOME-TAX ACT, 1961 {ACT FOR SHORT}. IT IS ALSO NOT IN DISP UTE THAT THE TRIBUNAL WAS REQUIRED TO CONSIDER POST-AMENDED PROVISION OF SECTION 271 [ 1] OF THE ACT. UNDER THE CIRCUMSTANCES, THE IMPUGNED JUDGMENT AND ORDER PASS ED BY THE TRIBUNAL CANNOT BE SUSTAINED AND THE SAME DESERVES TO BE QUASHED AND S ET-ASIDE, AND THE MATTER IS REQUIRED TO BE REMANDED TO THE TRIBUNAL FOR DECIDIN G THE APPEAL BY CONSIDERING THE AMENDMENT IN SECTION 271 [1] OF THE ACT. LEARNED AD VOCATES APPEARING ON BEHALF OF RESPECTIVE SIDES ARE NOT IN A POSITION TO DISPUT E THE SAME AND AS SUCH ARE NOT DISPUTING THE ABOVE. IN VIEW OF THE ABOVE AND WITHOUT EXPRESSING ANYTHIN G ON THE MERITS ON BEHALF OF THE EITHER PARTIES AND SOLELY ON THE AFOR ESAID GROUND, THE IMPUGNED JUDGMENT AND ORDER DATED 24TH JUNE 2009 PASSED BY T HE TRIBUNAL IS HEREBY QUASHED AND SET-ASIDE AND THE MATTER IS REMANDED TO THE TRIBUNAL TO DECIDE AND DISPOSE OF THE SAID APPEAL AFRESH IN ACCORDANCE WIT H LAW ON MERITS AND CONSIDERING THE AMENDED SECTION 271 [1] OF THE ACT. PRESENT TAX APPEAL IS ACCORDINGLY ALLOWED TO THE AF ORESAID EXTENT WITH NO ORDER AS TO COSTS. 12. IN THE WAKE OF DEVELOPMENTS NARRATED ABOVE, TH E CONTROVERSY HAS RESURFACED AGAIN AND ISSUE HAS BECOME OPEN TO DEBATE HAVING REGARD T O THE AMENDMENT IN S. 271(1)(C), WHICH WE SEEK DWELL UPON. 13. ON PERUSAL OF THE DECISION OF HONBLE GUJARAT H IGH COURT IN PARMANAND PATEL CASE (PRE AMENDED LAW), WE NOTE THAT BASIS FOR HOLD ING THAT THE CIT LACKS JURISDICTION UNDER S. 263 TO CANCEL THE ASSESSMENT FOR FAILURE O F THE AO TO INITIATE PENALTY PROCEEDINGS WERE MULTIFOLD. THE PROPOSITIONS EMERGING THEREIN A RE BROADLY SUMMARIZED AS UNDER: ( A ) S. 271(1)(C) CONFERS DISCRETIONARY JURISDICTION O N THE AO OR THE CIT(APPEALS) TO INITIATE PENALTY PROCEEDINGS. THE PROVISION DOES NO T EMPOWER ANY OTHER AUTHORITY TO EXERCISE DISCRETION. EVEN WHILE BEING A SUPERIOR AU THORITY, THE ADMINISTRATIVE CIT IS NOT A DESIGNATED AUTHORITY TO FORM SATISFACTION PRIOR TO AMENDMENT OF S. 271(1)(C) EFFECTIVE FROM 1-6.2002. THE CIT IS THUS NOT PERMITTED SUBSTITUTE SATISFACTION ARRIVED AT BY AO, IN EXERCISE OF REVISIONAL POWERS. IN THE ABSENCE OF POWERS CONF ERRED TO INVOKE THE PENALTY PROVISION, THE CIT COULD NOT DIRECT THE AO TO DO SO IN COLOURA BLE EXERCISE OF POWERS. ( B ) THE SATISFACTION FOR DEFAULT COMMITTED AS STIPULA TED UNDER CLAUSE (C) TO S. 271(1)(C) HAS TO BE ARRIVED AT IN THE COURSE OF ANY PROCEEDI NGS AND NOT SUBSEQUENT THERETO. THUS, THE STAGE OF FORMING SATISFACTION IS BEFORE CONCLUS ION OF THE PROCEEDINGS UNDER THE ACT. ( C ) SECTION 271(1)(C) REQUIRES THE SPECIFIED AUTHORI TY TO BE SATISFIED IN THE COURSE OF ANY PROCEEDINGS WHICH MEANS ANY PROCEEDINGS BEFOR E ANY OF THE AUTHORITY. THE CIT CANNOT CREATE PROCEEDINGS. ( D ) THE ASSESSMENT AND PENALTY PROCEEDINGS ARE SEPAR ATE AND DISTINCT PROCEEDINGS. THEREFORE, THE CIT CANNOT SET ASIDE THE ASSESSMENT ORDER FOR THE SOLE PURPOSE OF INITIATION OF PENALTY PROCEEDINGS IN EXERCISE OF REVISIONAL JU RISDICTION. AS A COROLLARY, ASSESSMENT ORDER CAN NOT BE SET ASIDE TO INITIATE AND IMPOSE P ENALTY NOTWITHSTANDING THE FACT THE IMPOSITION OF PENALTY IS LAWFUL. 14. A READING OF LATER JUDGMENT OF GUJARAT HIGH COU RT IN J P CONSTRUCTION(SUPRA) WOULD SHOW THAT THE HONBLE COURT HAS REMANDED THE MATTER ONLY IN RESPECT OF PROPOSITION (A) ENUMERATED ABOVE. AS A NECESSARY IMPLICATION, O THER PROPOSITIONS CONTINUE TO APPLY ITA NO. 1232/AHD/18 [KIRI DYES AND CHEMICALS LTD. VS. PR.CIT] A.Y. 2003-04 - 6 - AND HAVE NOT FADED INTO INSIGNIFICANCE. UNDER S. 26 3, THE CIT CONCERNED CAN EXAMINE THE RECORD OF ANY PROCEEDINGS AND ORDER PASSED CONSEQUE NT THERETO CAN BE SET ASIDE ON FULFILLMENT OF CONDITIONS AS STIPULATED THEREIN. IN THE INSTANT CASE, THE PROCEEDING AND CONSEQUENT ORDER IS ASSESSMENT ORDER. AS NOTED BY J URISDICTIONAL HIGH COURT, PENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT. THERE IS NO IDENTITY BETWEEN THE TWO. PENALTY PROCEEDINGS CAN BE INITIATED DURING THE CURRENCY OF ASSESSMENT OF PROCEEDINGS TILL THE CONCLUSION OF ASSESSMENT PROCEEDINGS. EXCEPT FOR A LEGAL BAR THAT PENALTY PROCEEDINGS CANNOT BE INITIATED SUBSEQUENT TO THE CONCLUSION OF ASSESSMENT PROCEEDINGS, THERE IS NO OTHER PERCEPTIBLE DEPENDENCE QUA THE ASSESSMENT ORD ER. AS A SEQUEL THERETO, IN OUR CONSIDERED VIEW, IT IS NOT OPEN TO CIT TO EXERCISE THE REVISIONAL POWERS TO CREATE A NON EXISTENT PROCEEDINGS UNDER S. 263 BY HOLDING THE AS SESSMENT PROCEEDING AS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. PERT INENT TO SAY, SECTION 263 CREATES, DEFINES AND REGULATES THE REVISIONAL POWERS OF THE CIT CONC ERNED AND IS THUS A SUBSTANTIVE PROVISION. HENCE, THE STRICT REQUIREMENTS OF A JUR ISDICTIONAL PROVISION CAN NOT BE COMPROMISED. WE ARE ALIVE TO THE SITUATION THAT IN THE ABSENCE OF THE REVISIONAL POWER, THE REVENUE IS PROBABLY DEPRIVED OF ANY REMEDY TO CURE THE LAPSE COMMITTED BY THE AO IN APPROPRIATE CASES. THIS HOWEVER, WILL NOT ALTER THE POSITION OF LAW SPELT IN THIS REGARD. HOWSOEVER, CLEAR THE LEGISLATIVE INTENT MAY BE, THE REQUIREMENTS OF A SUBSTANTIVE PROVISION CANNOT BE BYPASSED TO GIVE EFFECT TO SUCH INTENT. I T IS TRITE THAT LEGISLATIVE CASUS OMISSUS CANNOT BE SUPPLIED BY JUDICIAL INTERPRETIVE PROCESS . 15. THE ACTION OF CIT UNDER S. 263 IS REQUIRED TO B E STRUCK DOWN FOR OTHER REASON ALSO. AS NOTED ABOVE, ARRIVING AT THE SATISFACTION IS T HE FOUNDATION OF ACTION UNDER S. 271(1)(C) OF THE ACT. ADMITTEDLY, THE CIT IS A DESIGNATED AUT HORITY TO FORM SATISFACTION POST AMENDMENT. NEVERTHELESS, THE IMPUGNED SATISFACTION TOWARDS DEFAULT ENUMERATED IN 271(1)(C ) IS REQUIRED TO BE FORMED NOT LATER THAN THE CONCLUSION OF PROCEEDING BEFORE IT I.E. ASSESSMENT PROCEEDING IN THE INSTANT CASE. THUS THE DESIGNATED AUTHORITIES WOULD BECOME FUNCTUS OFFICIO ONCE THE PROCEEDINGS ARE CONCLUDED. ADMITTEDLY, THE ASSESSMENT PROCEEDINGS WERE CONCLUDED AND POST FACTO SATISFACT ION IS NOT PERMISSIBLE. THE PENALTY PROCEEDINGS BEING DISTINCT AND SEPARATE, THE ASSESS MENT PER SE CAN ALONE BE REVIEWED IN ACCORDANCE WITH LAW. HOWEVER, THE COMPLETED ASSESSM ENT CANNOT BE SET ASIDE TO ENABLE THE SUBORDINATE AUTHORITY TO INITIATE A SEPARATE AND DI STINCT PROCEEDING IN CONFLICT THE SCOPE OF AUTHORITY VESTED UNDER S. 263. THE COMMISSIONER IN EXERCISE OF HIS REVISIONAL POWERS CANNOT ARROGATE TO HIMSELF A STATUS TO SURROGATE TH E OTHER AUTHORITIES AND SUPPLANT THEIR ROLES UNDER THE ACT. THE COMMISSIONER IS NOT A SUBS TITUTE OF THE OTHER STATUTORILY PRESCRIBED FORA WITH CODIFIED FUNCTIONS DISCHARGEAB LE IN TERMS OF THE PRESCRIBED PROCEDURE IN THE SITUATIONS COMPREHENDED THEREBY. WHEN READ I N CONJUNCTION WITH THE DECISION OF PARMANAND PATEL (SUPRA), THE LANGUAGE OF SECTION 26 3 IS NOT CAPABLE OF AND DOES NOT ADMIT OF A CONSTRUCTION TO EMPOWER THE CIT TO SET A SIDE AN ASSESSMENT ORDER TO INITIATE A DISTINCT PENALTY PROCEEDING. THE LEGISLATURE, IN O UR VIEW, HAS ALLOWED THIS POSITION TO BE SUSTAINED SO FAR EXCEPT EXPANDING THE SCOPE OF AUTH ORITY UNDER S. 271(1)(C) TO INCLUDE ADMINISTRATIVE CIT WITHIN ITS AMBIT. 16. BEFORE WE PROCEED TO CONCLUDE THE ISSUE, WE ALS O TAKE NOTE THE DECISION IN THE CASE OF CIT VS. SURENDRA PRASAD AGRAWAL 275 ITR 113(ALL. ); INDIAN PHARMACEUTICALS (1980) 123 ITR 874(MP); RA HIMMATSINGKA & CO. 340 ITR 253( PAT.); SARA ENTERPRISES (MAD.) 224 ITR 169 ETC. REFERRED TO AND RELIED UPON ON BEH ALF OF THE REVENUE. IN ALL THESE CASES, IT WAS HELD THAT THE CIT ADMINISTRATION IS ENTITLED TO INVOKE S. 263 TO CANCEL THE ASSESSMENT WHERE THE PENALTY WAS EITHER DROPPED OR THE AO OMIT TED TO INITIATE THE PENALTY PROCEEDINGS. HOWEVER, IN THE SAME VAIN, WE NOTICE THAT THERE ARE MANY DECISION IN FAVOUR OF THE ASSESSEE ON THE SAME SUBJECT NAMELY CIT VS. SARAYA DISTILLERY 115 ITR 34 (ALL.); ADDL. CIT VS. J.K, DCOSTA (1981) 133 ITR 7(DEL.) [ SLP DISMISSED AGAINST THE AFORESAID DECISION] WHICH WERE REFERRED TO AND FOLLOWED IN OT HER DECISIONS OF HONBLE DELHI HIGH COURT. THE HONBLE GUJARAT HIGH COURT HAS TAKEN NOT E OF VARIED DECISIONS OF DIFFERENT HIGH COURTS WHILE DETERMINING THE ISSUE IN FAVOUR O F THE ASSESSEE. THE PROPOSITIONS LAID ITA NO. 1232/AHD/18 [KIRI DYES AND CHEMICALS LTD. VS. PR.CIT] A.Y. 2003-04 - 7 - DOWN BY THE HONBLE GURARAT HIGH COURT WILL PREVAIL OVER THE CONTRARY PROPOSITIONS. WE SIMULTANEOUSLY TAKE NOTE THE DECISION OF HONBLE PA TNA HIGH COURT IN THE CASE OF R.A. HIMMATSINGKA & CO. VS. CIT (2010) 340 ITR 253 (AY 2 004-05) RELIED UPON BY REVENUE WHEREIN THE IT WAS EXPLAINED THAT EXPRESSION PROCE EDINGS EMPLOYED IN SECTION 263 IS WIDER THAN THE EXPRESSION ASSESSMENT. HOWEVER, IN OUR VIEW, NOTHING TURNS ON THIS. THE DECISION WAS RENDERED IN A CASE WHERE THE PENALTY P ROCEEDINGS WERE DULY INITIATED AND LATER DROPPED WHICH WAS SUBJECT MATTER OF S. 263. J UDICIAL UTTERANCES WERE MADE IN THE CONTEXT OF THE CASE THEREIN. 17. TO SUM UP, IN THE LIGHT OF VARIOUS PROPOSITIONS CULLED OUT FROM DECISION OF HONBLE GUJARAT HIGH COURT IN PARMANAND PATEL ( SUPRA) WE A RE DISPOSED TO HOLD THAT NON INITIATION OF PENALTY PROCEEDINGS UNDER S. 271(1)(C ) WHILE FRAMING ASSESSMENT IS NOT A GOOD GROUND FOR INVOKING REVISIONAL POWERS CONFERRED UND ER S. 263 OF THE ACT. TO REITERATE, WHEN PROCEEDED IN STRICT REQUIREMENT OF THE PROVISI ON, THE CIT CAN NOT, AFTER THE CONCLUSION OF THE ASSESSMENT PROCEEDINGS, MAKE UP M IND OR ARRIVE AT THE REQUIRED AFFIRMATIVE CONCLUSION TOWARDS INITIATION OF PENALT Y PROCEEDINGS IN SUBSTITUTION OF THE LAPSE COMMITTED BY THE AO. SECTION 271(1)(C) READ IN CONJ UNCTION WITH S. 263 OF THE ACT, GIVES AN UNMISTAKABLE IMPRESSION THAT WHILE IN THE WAKE OF A MENDMENT UNDER S. 271(1)(C) W.E.F 1-6- 2002, IT MAY BE LAWFUL FOR THE ADMINISTRATIVE CIT T O IMPOSE PENALTY, THAT BY ITSELF WOULD NOT BE SUFFICIENT TO HOLD THAT THE CIT IS ENTITLED TO E XERCISE REVISIONAL POWERS BY TREATING THE ASSESSMENT ORDER AS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF REVENUE. THERE MUST EXIST AN ORDER, WHICH IS SOUGHT TO BE REVISED BY THE COMM ISSIONER. IF THERE IS NO ORDER, QUESTION OF REVISING THE ORDER DOES NOT ARISE. IN THE INSTAN T CASE, THERE IS NO ORDER IN SO FAR AS PENALTY PROCEEDINGS ARE CONCERNED. THE PROCEEDINGS IN RESPECT OF ASSESSMENT AND PENALTY ARE DIFFERENT AND DISTINCT NOTWITHSTANDING THE PREC ONDITION THAT LATER HAS TO BE INITIATED IN THE COURSE OF FORMER PROCEEDINGS. THOUGH EXPRESSION ASSESSMENT IS USED IN THE ACT WITH DIFFERENT MEANINGS IN DIFFERENT CONTEXT, IN SO FAR AS SECTION 263 IS CONCERNED, IT REFERS TO THAT PARTICULAR PROCEEDING WHICH IS BEING CONSIDER ED BY THE COMMISSIONER. IT IS NOT POSSIBLE TO EXPAND THE SCOPE OF ASSESSMENT PROCEEDI NG AND ASSESSMENT, WHICH IS SUBJECT MATTER OF REVISION, FOR THE PURPOSES OF INITIATING A NEW AND DISTINCT PENALTY PROCEEDINGS OF ONEROUS NATURE. FAILURE OF AO TO INITIATE OR IMPOSE PENALTY CANNOT BE A FACTOR CAPABLE OF VITIATING THE ASSESSMENT ORDER IN ANY RESPECT. AN A SSESSMENT, IN OUR CONSIDERED VIEW, CANNOT BE SAID TO BE ERRONEOUS OR PREJUDICIAL TO TH E INTEREST OF REVENUE OWING TO SUCH FAILURE WITH RESPECT TO INITIATE A DISTINCT PROCEED INGS WITH A VIEW TO EVALUATE IMPOSITION OF PENALTY THEREIN. IN VIEW OF THE FORGOING DISCUSSIO N, THE PR. CIT/ CIT IS NOT COMPETENT TO DIRECT THE AO TO REDO THE ASSESSMENT WITH A VIEW TO INITIATE AND LEVY PENALTY IN RESPECT OF ERRONEOUS CLAIM OF DEDUCTION UNDER S. 10B. 7. IT WAS ESSENTIALLY HELD IN THE AFORESAID CASE T HAT; (I) ASSESSMENT AND PENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT. EXC EPT INITIATION, THEY ARE NOT DEPENDENT ON ASSESSMENT ORDER. (II) IT IS NOT O PEN TO CIT TO EXERCISE THE REVISIONAL POWERS TO CREATE A NONEXISTENT PROCEEDIN GS UNDER S. 263 BY HOLDING THE ASSESSMENT PROCEEDING AS ERRONEOUS IN S O FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. (III) SATISFACTION REQUI RED BY S.271(1)(C) OF THE ACT CANNOT BE FORMED POST CONCLUSION OF ASSESSMENT PROCEEDINGS. (IV) THERE MUST EXIST AN ORDER, WHICH IS SOUGHT TO BE RE VISED BY THE COMMISSIONER. IF THERE IS NO ORDER, QUESTION OF RE VISING THE ORDER DOES NOT ITA NO. 1232/AHD/18 [KIRI DYES AND CHEMICALS LTD. VS. PR.CIT] A.Y. 2003-04 - 8 - ARISE. IN THE INSTANT CASE, THERE IS NO ORDER IN S O FAR AS PENALTY PROCEEDINGS ARE CONCERNED. 8. IN THE LIGHT OF THE RATIO OF THE DECISION EXTRAC TED HEREINABOVE, WE FIND MERIT IN THE PLEA OF THE ASSESSEE TOWARDS INHE RENT LACK OF AUTHORITY OF PR.CIT TO EXERCISE JURISDICTION CONFERRED UNDER S.2 63 OF THE ACT FOR THE PURPOSES OF INITIATION OF PENALTY PROCEEDINGS UNDER S.271(1)(C) OF THE ACT. THE REVISIONAL ORDER IS ACCORDINGLY SET ASIDE AND Q UASHED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. SD/- SD/- (RAJPAL YADAV) (PRADIP K UMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 10/10/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 10/10/2019