MUJIB SALMANBHAI PATHAN, Nagpur V. THE CIT-IV`, Nagpur

ITA 246/NAG/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1690 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 03-06-2013
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Keywords: Business income; Opportunity of being heard; Question of law; Initiation of penalty proceedings
• Section: 143(3); 2(14); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 246/NAG./2013 ( ASSESSMENT YEAR : 2008-09 ) SHRI MUJIB SALMANBHAI PATHAN H.NO.242, WARD NO.2, JUNI VASTI AT BUTIBORI, DISTRICT NAGPUR PAN AEFPP0269M APPELLANT V/S COMMISSIONER OF INCOME TAX-IV MECL BUILDING, AMBEDKAR BHAWAN SEMINARY HILLS, NAGPUR 440 006 .... RESPONDENT REVENUE BY : SHRI NARENDRA KANE ASSESSEE BY : SHRI SANJAY THAKAR DATE OF HEARING 24.08.2015 DATE OF ORDER 28.08 .2015 O R D E R PER MUKUL K. SHRAWAT, J.M. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING FROM THE IMPUGNED ORDER DATED 25 TH MARCH 2013, PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) BY THE LEARNED COMMISSIONER OF INCOME TAXIV, NAGPUR, FOR THE ASSES SMENT YEAR 2008-09, ON THE FOLLOWING GROUNDS OF APPEAL: SHRI MUJIB SALMANBHAI PATHAN 2 THE LEARNED COMMISSIONERIV, NAGPUR, ERRED IN SETTI NG ASIDE THE ASSESSMENT ORDER PASSED BY THE ACIT7, NAGPUR, UNDE R SECTION 143(3) OF THE ACT, ON 31 ST DECEMBER 2010, WITH A DIRECTION TO THE ASSESSING OFFICER TO PASS A FRESH ORDER INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. 2. THE OBSERVATION OF THE LEARNED COMMISSIONER WAS THA T THE ASSESSEE HAD SHOWN A LONG TERM CAPITAL GAIN OF RS 33,44,000, ON SALE OF TWO AGRICULTURAL LANDS. AS PER THE RECORDS, THE ASSESSE E HAD CLAIMED EXEMPTION UNDER SECTION 2(14) OF THE ACT. THE LEARNED COMMISS IONER HAS FURTHER DISCUSSED CERTAIN FACTS FOR THE REASON THAT THE ASS ESSING OFFICER HAD RIGHTLY ASSESSED THE PROFIT OF RS 13,63,000, EARNED ON SALE OF LAND AS BUSINESS INCOME . THEN THE LEARNED COMMISSIONER HAS OPINED THAT THE ASSESSEE HAD TRIED TO EVADE TAX BY CLAIMING A WRONG EXEMPTION UN DER SECTION 2(14) OF THE ACT BY FURNISHING INACCURATE PARTICULARS. ACCORDING TO THE LEARNED CIT(A), THE ASSESSING OFFICER SHOULD HAVE INITIATED PENALTY PRO CEEDINGS UNDER SECTION 271(1)(C). BECAUSE THE ASSESSING OFFICER HAD NOT IN ITIATED THE PENALTY PROCEEDINGS, THEREFORE, IN THE OPINION OF THE LEARN ED COMMISSIONER, THE ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) DATED 13 TH DECEMBER 2010, WAS AN ERRONEOUS ORDER WHICH WAS PRE JUDICIAL TO THE INTERESTS OF THE REVENUE. TO THAT EFFECT, A SHOW CA USE NOTICE WAS ISSUED. THE ASSESSEE HAS OBJECTED THAT MERELY FOR NON-INITI ATION OF PENALTY PROCEEDINGS, THE POWERS CONFINED UNDER SECTION 263 OF THE ACT, COULD NOT BE INVOKED. THE ASSESSEE HAS CITED A DECISION OF THE H ONBLE DELHI HIGH COURT IN SHRI MUJIB SALMANBHAI PATHAN 3 ACIT V/S J.K. DCOSTA, [1982] 133 ITR 007 (DEL.). F EW OTHER CASE LAWS HAVE ALSO BEEN CITED, WHICH ARE AS UNDER: I) CIT V/S KESHRIMAL PARASHMAL, [1985] 48 CTR 61 (RAJ. ); II) SURENDRA PRASAD SINGH V/S CIT, [1988] 71 CTR 125 (G UJ.); AND III) CIT V/S LINOTYPE & MACHINERY LTD., [1991 192 ITR 33 7 (CAL.) HOWEVER, THE LEARNED COMMISSIONER WAS NOT CONVINCED AND AFTER DISCUSSING FEW DECISIONS, CAME TO THE CONCLUSION AS UNDER:- 5 IN VIEW OF THE AFOREMENTIONED DISCUSSION, IT IS C RYSTAL CLEAR THAT WHILE THE A.O. HAS IDENTIFIED AND ESTABLISHED THE ASSESSEES ACT OF FURNISHING INACCURATE PARTICULARS AND CONCEA LMENT WHICH TANTAMOUNT TO RECORDING HIS SATISFACTION, HE HAS OV ERLOOKED THE REQUIREMENT OF INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C). THE DEPARTMENT HAS DEFINITELY LOST THE R EVENUE BECAUSE OF THIS ACT OF THE A.O. THE ORDER PASSED BY THE A.O. IS, THEREFORE, ERRONEOUS AND PREJUDICIAL TO THE INTERES TS OF REVENUE TO THIS EXTENT. IN THIS VIEW OF THE MATTER, I HEREB Y SET ASIDE THE ORDER PASSED BY THE ACIT, CIRCLE7, NAGPUR UNDER SE CTION 143(3) OF THE I.T. ACT, 1961, ON 31 ST DECEMBER 2010, WITH A DIRECTION TO THE A.O. TO PASS A FRESH ORDER INITIATING PENALTY P ROCEEDINGS UNDER SECTION 271(1)(C) AND PROCEED AS PER LAW, AFT ER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . 3. FROM THE SIDE OF THE APPELLANT, THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY PLEADED THAT THE IMPUGNED ASSESSMENT ORD ER PASSED UNDER SECTION 143(3) WAS A DETAILED ORDER AND IN THAT DEC ISION, IT WAS DISCUSSED THE REASONS FOR NOT GRANTING EXEMPTION UNDER SECTIO N 2(14) OF THE ACT. THE CLAIM OF THE ASSESSEE WAS REJECTED AND THE SAME WAS DISCUSSED AS PROFIT & GAIN OF BUSINESS. THE ASSESSING OFFICER HAS TAKEN A CONSCIOUS DECISION NOT TO INITIATE THE PENALTY PROCEEDINGS. ACCORDING TO HIM, OTHERWISE ALSO, IT WAS NOT SHRI MUJIB SALMANBHAI PATHAN 4 A FIT CASE FOR LEVY OF PENALTY FOR CONCEALMENT BECA USE THE ASSESSEE WAS UNDER A BONA FIDE IMPRESSION THAT THE SALE CONSIDER ATION WAS EXEMPT UNDER SECTION 2(14) OF THE ACT. HOWEVER, THE ASSESSING OF FICER WAS OF THE DIFFERENT OPINION THAT THE ASSESSEE HAS EARNED PROFIT ON LAND TRANSACTION. SINCE ALL THE RELEVANT MATERIAL FACTS AND EVIDENCES WERE ALREADY FILED BY THE ASSESSEE, OR THERE WAS NO CONCEALMENT OF PARTICULARS OF THE CASE , HENCE, THE ASSESSING OFFICER WAS LEGALLY RIGHT NOT TO INITIATE THE PROCE EDINGS FOR CONCEALMENT PENALTY. THE ASSESSING OFFICER HAS INFORMED THAT ON IDENTICAL SITUATION, IN THE FOLLOWING CASES, PROCEEDINGS UNDER SECTION 263 OF T HE ACT WERE NOT APPROVED BY THE HON'BLE COURTS. I) ACIT V/S J.K. DCOSTA, [1982] 133 ITR 7 (DEL.); II) CIT V/S KESHRIMAL PARASMAL, [1986] 157 ITR 484 (RAJ .); III) CIT V/S LINOTYPE & MACHINERY LTD., [1991 192 ITR 33 7 (CAL.); IV) CIT V/S CRK SWAMY, [2002] 254 ITR 158 (MAD.) 4. FROM THE SIDE OF THE REVENUE, THE LEARNED DEPARTMEN TAL REPRESENTATIVE HAS INFORMED THAT THERE WAS NO BASIS FOR THE ASSESSEE TO HAVE AN IMPRESSION THAT THE SALE CONSIDERATION WAS A LONG TERM CAPITAL GAIN BECAUSE THE LAND WAS PURCHASED FOR A CONSIDERATION OF RS 70,,98,880 ON 3 RD JANUARY 2006. WITHIN FEW DAYS, ON 9 TH JANUARY 2006, THE LAND WAS SOLD FOR A CONSIDERATION OF RS 84,82,500. SINCE THE PURCHASE A ND SALE WAS WITHIN FEW DAYS, THEREFORE, IT WAS IMPOSSIBLE TO FORM AN OPINI ON THAT THE PROFIT ON SALE OF LAND WAS A LONG TERM CAPITAL GAIN. IT WAS A FIT CASE FOR LEVY OF CONCEALMENT PENALTY. SINCE THE ASSESSING OFFICER HAD FORGOTTEN AS WELL AS ERRED IN NOT SHRI MUJIB SALMANBHAI PATHAN 5 INITIATING PENALTY PROCEEDINGS, THEREFORE, SUCH AN OMISSION WAS AN ERRONEOUS DECISION ON THE PART OF THE ASSESSING OFFICER WHICH WAS RIGHTLY DETECTED BY THE LEARNED COMMISSIONER. THE ORDER PASSED UNDER SE CTION 263, THUS DESERVES TO BE UPHELD. 5. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. THERE ARE TWO BASIC REASONS ON THE BASIS OF WHICH WE ARE NOT GOING TO A PPROVE THE DIRECTIONS OF THE LEARNED COMMISSIONER MADE UNDER SECTION 263 OF THE ACT. 6. OUR FIRST REASON FOR QUASHING THE REVISIONARY PROCE EDINGS UNDER SECTION 263 IS THAT AS PER THIS SECTION, THE LEARNED COMMIS SIONER CAN CONSIDER THE ORDER PASSED AS AN ERRONEOUS ORDER AND THEREUPON ENHANCE, MODIF Y OR CANCEL SUCH AN ASSESSMENT ORDER. THE LEARNED COMMIS SIONER CAN MODIFY THE ASSESSMENT OR CANCEL THE ASSESSMENT. UNDER THIS SEC TION, THE LEARNED COMMISSIONER HAS ALSO POWERS TO DIRECT FOR A FRESH ASSESSMENT. AT THIS JUNCTURE, IT IS WORTH TO MENTION THAT THE TERM ASSESSMENT IS DEFINED UNDER SECTION 2(8) OF THE ACT, WHICH SAYS THAT ASSESSMENT INCLUDES RE- ASSESSMENT . THE LANGUAGE USED UNDER SECTION 263, BE READ ALON G WITH THE DEFINITION OF THE ASSESSMENT INDICATES THAT THE QUANTIFICATION OF ASSESSED INCOME IS THE SUBJECT MATTER OF REVISION. THE LANGU AGE OF SECTION 263(1) REVOLVES AROUND AN ORDER PASSED BY THE ASSESSING OFFICER. THIS IS NOT THE CASE BEFORE US THAT THE ASSESSING OFFICER HAS PASSE D AN ORDER UNDER SECTION 271(1)(C) OF THE ACT. THE ASSESSING OFFICER HAS PAS SED ORDER UNDER SECTION 143(3) OF THE ACT BUT THAT WAS NOT THE SUBJECT MATT ER OF CONTROVERSY. EVEN EXPLANATION-2 TO SECTION 263 OF THE ACT, IT IS CLAR IFIED THAT AN ORDER PASSED BY SHRI MUJIB SALMANBHAI PATHAN 6 THE ASSESSING OFFICER SHALL BE DEEMED TO BE AN ERRO NEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE IF THE SAID ORDER IS PASSED WITHOUT MAKING ENQUIRIES OR VERIFICATION OR THE ORDER IS PA SSED ALLOWING ANY RELIEF WITHOUT ENQUIRY OR THE ORDER HAS NOT BEEN MADE IN A CCORDANCE WITH CBDT INSTRUCTIONS, ETC. THEREFORE, THE PRE-CONDITION FOR THE INVOCATION OF REVISION IS THAT THERE SHOULD BE IN EXISTENCE OF AN ORDER PASSE D BY THE ASSESSING OFFICER. BECAUSE OF THESE REASONS THAT THERE WAS NO T INEXISTENCE AN ORDER UNDER SECTION 271(1)(C), WE ARE OF THE VIEW THAT TH E LEARNED COMMISSIONER HAS WRONGLY INVOKED THE JURISDICTION UNDER SECTION 263 OF THE ACT. 7. IN THE CASE OF CIT V/S KESHRIMAL PARASMAL, [1986] 1 57 ITR 484 (RAJ.), A QUESTION WAS THAT, WHETHER ON THE FACTS AND IN TH E CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN CANCELING THE O RDER PASSED UNDER SECTION 263, ON ACCOUNT OF FAILURE ON THE PART OF THE ASSES SING OFFICER TO INITIATE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. THE HON'BLE RAJASTHAN HIGH COURT HAS DISCUSSED THE JURISDICTION FOR THE REVISION AND HELD THAT THE LEARNED COMMISSIONER WAS NOT ENTITLED TO S ET ASIDE THE ASSESSMENT ORDER ON THE GROUND OF NON-MENTION OF INITIATION OF PENALTY PROCEEDINGS. IT WAS HELD THAT THE LEARNED COMMISSIONER GAVE DIRECTI ON TO THE ASSESSING OFFICER TO MAKE FRESH ASSESSMENT TO INITIATE PENALT Y PROCEEDINGS. IT WAS HELD THAT THE TRIBUNAL WAS JUSTIFIED IN CANCELING SUCH O RDER OF THE LEARNED COMMISSIONER PASSED UNDER SECTION 263 OF THE ACT. E XTRACTED BELOW IS PARA- 8 OF THE JUDGMENT:- SHRI MUJIB SALMANBHAI PATHAN 7 8. IT WAS CONTENDED BY MR. J.L. DAGA, LEARNED COUN SEL FOR THE REVENUE, THAT THE QUESTION OF LAW WHICH HAS BEEN ST ATED IN PARA. 5 OF THE REFERENCE APPLICATION DOES ARISE OUT OF TH E ORDER OF THE TRIBUNAL DATED NOVEMBER 26, 1982, AS THE TRIBUNAL I TSELF HAS FOLLOWED ITS EARLIER DECISION RENDERED IN PARAS FAB RICS, PALI'S CASE RELATING TO THE ASSESSMENT YEAR 1977-78. THE TRIBUN AL PREFERRED THE VIEW TAKEN IN J.K. D'COSTA'S CASE, [1982] 133 I TR 7 AND DID NOT FOLLOW THE CONTRARY VIEW TAKEN IN INDIAN PHARMA CEUTICALS' CASE, [1980] 123 ITR 875 (MP). 8. WE HAVE ALSO PERUSED THE DECISION OF THE HON'BLE DE LHI HIGH COURT IN ACIT V/S J.K. DCOSTA, [1982] 133 ITR 7 (DEL.) AND FOUND THAT THE HON'BLE COURT HAS OPINED THAT THOUGH THE EXPRESSION ASSESSMENT IS USED IN THE ACT WITH DIFFERENT MEANINGS IN DIFFERENT CONTEXTS, SO FAR AS S. 263 IS CONCERNED, IT REFERS TO A PARTICULAR PROCEEDINGS TH AT BEING CONSIDERED BY THE CIT AND IT IS NOT POSSIBLE, WHEN THE CIT 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 T O BE REVISED BY THE CIT. THERE IS NO IDENTITY BETWEEN THE ASSESSMENT PR OCEEDINGS AND THE PENALTY PROCEEDINGS; THE LATTER ARE SEPARATE PROCEE DINGS, THAT MAY IN SOME CASES, FOLLOW AS A CONSEQUENCE OF THE ASSESSME NT PROCEEDINGS. 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. ACCORDING TO THE HON'BLE COURT, THE PENALTY PROCEEDINGS DO NOT FORM PART OF THE ASSESSMENT PROC EEDINGS. LACK OF INITIATION OF PENALTY PROCEEDINGS CANNOT BE SAID TO BE A VALID REASON TO HOLD SHRI MUJIB SALMANBHAI PATHAN 8 SUCH AN ASSESSMENT ORDER AS ERRONEOUS ORDER. IT WAS CONCLUDED THAT THE SETTING ASIDE THE ENTIRE ASSESSMENT ORDER WAS NOT T HE CORRECT WAY OF INVOCATION OF JURISDICTION UNDER SECTION 263 OF THE ACT. 9. EVEN THE HON'BLE MADRAS HIGH COURT HAS ADOPTED THE SAME VIEW WHILE PASSING A DECISION NAMELY CIT V/S CRK SWAMY [2002] 254 ITR 158 (MAD.). 10. OUR NEXT OBSERVATION IS THAT THE PENALTY PROCEEDING S UNDER SECTION 271(1)(C) ARE GOVERNED BY THE LANGUAGE PRESCRIBED U NDER THE SAID SECTION WHICH SAYS THAT A SATISFACTION IS TO BE RECORDED BY THE ASSESSING OFFICER. AS PER THE PROVISIONS OF SECTION 271(1)(C) IF THE ASSE SSING OFFICER IS SATISFIED THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HI S INCOME OR FURNISH INACCURATE PARTICULARS OF SUCH INCOME, THEN HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY AN AMOUNT AS PRESCRIBED THEREIN. IN THIS SECTION I.E., SECTION 271(1)(C), AT ONE MORE PLACE, I.E., 2 71(1B), IT IS PRESCRIBED THAT WHERE ANY AMOUNT IS ADDED OR DISALLOWED IN COMPUTIN G THE TOTAL INCOME OR LOSS IN ANY OR ALL ASSESSMENT AND THE SAID ORDER CO NTAINS A DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS UNDER CLAUSE-C OF SUB-SECTION (1), SUCH AN ORDER OF ASSESSMENT SHALL BE DEEMED TO CONSTITUTE S ATISFACTION OF THE ASSESSING OFFICER FOR INITIATION OF PENALTY PROCEED INGS. IF WE CAREFULLY READ BOTH THESE PROVISIONS OF SECTION 271, THEN IT IS VE RY MUCH CLEAR THAT A SATISFACTION IS TO BE RECORDED BY THE ASSESSING OFF ICER HIMSELF. THE ASSESSING OFFICER IS NOT TO RECORD A SATISFACTION AT THE BEHE ST OF ANY OTHER AUTHORITY. IT IS ASSESSING OFFICERS OWN SATISFACTION WHICH IS A SINE QUA NON FOR INITIATION OF 271(1)(C) PROCEEDINGS. HOWEVER, BY DIRECTING UNDER SECTION 263, TO PASS A SHRI MUJIB SALMANBHAI PATHAN 9 FRESH ORDER INITIATING PENALTY PROCEEDINGS UNDER SE CTION 271(1)(C), THE LEARNED COMMISSIONER HAS TRIED TO IMPOSE HIS SATISF ACTION ON THE DISCRETIONARY POWER OF RECORDING SATISFACTION TO THE ASSESSING OFFICER UNDER THE STATUTE. WE ARE OF THE VIEW THAT THE LEARNED CO MMISSIONER HAS EXCEEDED HIS JURISDICTION BY ISSUING SUCH DIRECTIONS. WE, TH EREFORE, QUASH SUCH DIRECTIONS. 11. UNDER THE TOTALITY OF THE FACTS AND CIRCUMSTANCES O F THE CASE AND IN THE LIGHT OF THE DISCUSSION MADE HEREIN ABOVE, ESPECIAL LY FOLLOWING THE CASE LAWS CITED SUPRA, WE HEREBY QUASH THE IMPUGNED ORDER PAS SED UNDER SECTION 263 OF THE ACT. THE GROUNDS ARE ALLOWED. 12. IN THE RESULT, ASSE1`SSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.08.2015 SD/ - SHAMIM YAHYA ACCOUNTANT MEMBER SD/ - MUKUL K. SHRAWAT JUDICIAL MEMBER NAGPUR, DATED: 28.08.2015 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, NAGPUR CITY CONCERNED; (5) THE DR, ITAT, NAGPUR; (6) GUARD FILE. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY A SSISTANT REGISTRAR ITAT, NAGPUR