Appeal details
Counselvise Citation
[2017] 130 COUNSELVISE.COM (IT) 9586 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 10 month(s) 27 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
10-01-2017
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
D
Next Hearing Date
26-10-2016
Assessment Year
2008-2009
Appeal Filed On
13-02-2015
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD .., , !' BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER 1. ./ I.T.A. NO.327/AHD/2015 2. ./ I.T.A. NO.759/AHD/2015 ( / ASSESSMENT YEARS : 2008-09 & 2010-11 RESPECTIVELY) EASY TRANSCRIPTION & SOFTWARE PVT. LTD. B-605, WALL STREET-II OPP. ORIENT CLUB, NR.RLY.CROSSING ELLIS BRIDGE,AHEDABAD-380 006 / VS. THE CIT/PR.CIT AHMEDABAD-II AHMEDABAD % ./ ./ PAN/GIR NO. : AABCE 3408 Q ( %( / APPELLANT ) .. ( )%( / RESPONDENT ) %(* / APPELLANT BY : SHRI S.N. DIVATIA, AR )%(+* / RESPONDENT BY : SHRI SANJAY AGRAWALA, CIT-DR ,+ / DATE OF HEARING 26/10/2016 -./+ / DATE OF PRONOUNCEMENT 10/01/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: BOTH THESE APPEALS BY THE ASSESSEE, IN ITA NOS.32 7/AHD/2015 & 759/AHD/2015, ARE DIRECTED AGAINST THE SEPARATE ORD ERS OF THE COMMISSIONER OF INCOME TAX-II, AHMEDABAD (CIT IN S HORT) DATED 20/01/2015 & 06/02/2015 PASSED FOR ASSESSMENT YEARS (AY) 2008-09 & ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 2 - 2010-11 RESPECTIVELY. THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER FOR T HE SAKE OF CONVENIENCE. ITA NO.759/AHD/2015 FOR AY 2010-11 2. FIRST WE SHALL TAKE UP THE ASSESSEES APPEAL IN ITA NO.759/AHD/2015 FOR AY 2010-11, WHEREIN FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE:- 1.1. THE ORDER PASSED U/S.263 ON 6-2-2015 FOR AY. 2010-11 BY CIT-II, ABAD IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINS T THE PRINCIPLES OF NATURAL JUSTICE. THE IMPUGNED ORDER OF REVISION IS WHOLLY ILLEGAL AND WITHOUT JURISDICTION. 1.2 THE LD.CIT HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN HOLDING THAT THE ORDER OF ASSESSMENT DT 30-5-2012 W AS ERRONEOUS AND PREJUDICIAL TO THE REVENUE IN AS MUCH AS IT FAI LED TO CARRY OUT INQUIRY IN RESPECT OF (I) OFFICE BUILDING REPAIRS C APITALIZED WITHOUT ANY LAND SHOWN IN THE ASSETS (II) HIGH PITCHED CLAI M OF SALARY EXPENSE (III) GENUINENESS OF CONSULTANCY EXPENSES P AID TO MALA GHIYA AND SONA PARIKH (IV) ALLOWABILITY OF DONATION EXP. (V) INITIATE AND LEVY PENALTY U/S.271(1)(C) IN RESPECT OF CLAIM OF EXEMPTION U/S.10B WHICH WAS WITHDRAWN SUO MOTU IN T HE REVISED RETURN. 2.1. THE LD.CIT HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ORDER OF ASSESSMENT DT 30-5-2012 W AS ERRONEOUS ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 3 - AND PREJUDICIAL TO THE REVENUE IN AS MUCH AS IT FAI LED TO CARRY OUT INQUIRY. 2.2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E AS WELL AS IN LAW, THE LD.CIT OUGHT NOT TO HAVE HELD THAT THE ORD ER OF ASSESSMENT DT 30-5-2012 WAS ERRONEOUS AND PREJUDICIAL TO THE R EVENUE IN AS MUCH AS IT FAILED TO CARRY OUT INQUIRY. 3.1. THE LD.CIT HAS ERRED IN LAW AND ON FACTS IN SE TTING ASIDE THE ENTIRE ASSESSMENT AND DIRECTING AO TO MAKE FRESH AS SESSMENT. 3. BRIEFLY STATED, RELEVANT FACTS ARE THAT THE ASSE SSEE IS ENGAGED IN THE BUSINESS OF MEDICAL TRANSCRIPTION DATA IN FOREIGN C OUNTRIES. THE RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 10/07/2010 DECL ARING NIL INCOME AFTER CLAIMING A DEDUCTION OF RS.74,13,632/- UNDER S.10B OF THE ACT. THE CASE WAS SELECTED UNDER SCRUTINY AND NOTICE UNDER S .143(2) OF THE ACT WAS ISSUED ON 26/08/2011. SUBSEQUENT THERETO, A NO TICE UNDER S.142(1) OF THE ACT DATED 07/02/2012 WAS ISSUED WHEREIN COPY OF AUDITORS REPORT FOR CLAIM UNDER S.10B OF THE ACT WAS CALLED FOR BY THE ASSESSING OFFICER (AO). THEREAFTER, ANOTHER NOTICE DATED 01/ 03/2012 WAS ISSUED WHERE A SPECIFIC QUESTION TOWARDS DEDUCTION UNDER S .10B OF THE ACT WAS RAISED TO DEMONSTRATE AS TO HOW THE CONDITIONS PRES CRIBED FOR DEDUCTION ARE FULFILLED IN THE CASE OF THE ASSESSEE. THEREAFT ER, IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED A REVISE D RETURN OF INCOME ON 30/03/2012 DECLARING TOTAL INCOME OF RS.74,13,630/- AND WITHDREW DEDUCTION CLAIMED UNDER S.10B OF THE ACT. THE ASSE SSMENT WAS ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 4 - COMPLETED UNDER S.143(3) OF THE ACT VIDE ORDER DATE D 30/05/2012 WHERE THE INCOME OF RS.74,13,630/- AS PER REVISED RETURN WAS ACCEPTED BY THE AO. 4. ON COMPLETION OF THE ASSESSMENT AS PER REVISED F IGURE EXCLUDING DEDUCTION UNDER S.10B ORIGINALLY CLAIMED, THE COMM ISSIONER ISSUED NOTICE UNDER S.263 OF THE ACT DATED 25/09/2014 IN E XERCISE HIS REVISIONARY POWER REQUIRING THE ASSESSEE TO SHOW-CA USE AS TO WHY THE ASSESSMENT FRAMED UNDER S.143(3) DATED 30/05/2012 S HOULD NOT BE SET ASIDE OR MODIFIED. THE RELEVANT EXTRACT OF THE NOT ICE ISSUED NOTICE UNDER S.263 OF THE ACT DATED 26/09/2014 WHICH READS AS UN DER:- SUB : NOTICE U/S.263 OF THE I.T.ACT 1961 A.Y. 201 0-11 KINDLY REFER TO THE ABOVE 1. THE ASSESSMENT U/S.143(3) OF THE ACT WAS FINALIZED ON 30/05/2012 BY THE ITO, WD.4(1), AHMEDABAD AND THE I NCOME ASSESSED AT RS.74,13,630/-. 2. ON VERIFICATION OF THE RECORDS IT HAS BEEN FOUND TH AT THE ASSESSEE FILED ORIGINAL RETURN ON 10.07.2010 SHOWIN G NIL INCOME, AFTER CLAIMING DEDUCTION OF RS.74,13,632/- U/S.10B OF THE I.T.ACT, 1961. THE CASE WAS SELECTED FOR SCRUT INY UNDER CASS TO VERIFY THE CLAIM OF EXEMPTIONS U/S.10B. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER RAISED SPECIFIC QUERY TO JUSTIFY THE CLAIM MADE U/S.10B OF THE ACT. SUBSEQUENT TO ISSUE OF THE NOTICE, ASSESSEE FILED A REVISED RETURN ON 30.03.2012 DECLARING INCOME OF RS.74,13,630/- AN D THEREBY WITHDRAWING ITS CLAIM OF DEDUCTION U/S.10B MADE IN THE ORIGINAL RETURN OF INCOME. THE A.O. COMPLETED THE ASSESSMEN T ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 5 - U/S.143(3) ON 30.05.2012. HOWEVER, THE AO DID NOT INITIATE PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT, RESUL TING IN THE ASSESSMENT ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE (IN THIS REGARD, RELIANCE IS PL ACED ON THE DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. SURENDRA PRASAD AGARWAL 42 TAXMAN 653). 3. FURTHER, IT WAS SEEN THAT THE ASSESSEE HAS CLAIMED TO HAVE MADE ADDITION TO FIXED ASSETS BLOCK AMOUNTING TO RS.1,11 ,50,763, INCLUDING EXPENDITURE OF RS.61,81,270/- ON OFFICE B UILDING. HOWEVER, IN THE SCHEDULE OF FIXED ASSETS, THE ASSES SEE HAS NOT SHOWN ANY LAND ON WHICH THE BUILDING IS CONSTRUCTED . THE AO HAD NOT CALLED FOR ANY DETAILS REGARDING ADDITION T O FIXED ASSETS AMOUNTING TO RS.1,11,50,760/- AND HAS NOT CONDUCTED ANY ENQUIRIES IN THIS REGARD. HENCE, THE CLAIM OF DEPR ECIATION WAS ALLOWED WITHOUT VERIFICATION OF ITS ELIGIBILITY. 4. THE ASSESSING OFFICER HAS ALSO NOT CARRIED OUT ANY INQUIRY TO VERIFY GENUINENESS OF ASSESSEES HIGH PITCHED CLAIM OF DEDUCTION UNDER THE HEAD SALARY EXPENSES AGAINST RECEIPT OF RS.4,82,60,964/- FROM EXPORT OF MEDICAL TRANSCRIPTI ON SERVICE, BARRING OBTAINING COPY OF THE SALARY ACCOUNT AND PL ACING IT ON FILE. NO VERIFICATION WAS MADE REGARDING THE PROJE CTS TO WHICH SUCH EMPLOYEES WERE ASSIGNED AND RECEIPTS THERE FRO M RECOGNIZED DURING THE YEAR UNDER CONSIDERATION. 5. SIMILARLY, ASSESSING OFFICER ALLOWED ASSESSEES CLA IM OF CONSULTANCY EXPENSES OF RS.43,67,981/- WHICH INCLUD ES PAYMENT OF RS.18 LAKHS EACH TO (I) MALA GHIYA, A-12, AVERBELA FLATS, NAVRANGPURA, AHMEDABAD (II) SONA PARIKH, 17, SATYAM SOCIETY, 809, ROAD, SATELLI TE, AHMEDABAD. THE ABOVE TWO PERSONS, VIZ MALA GHIYA AND SONA PARI KH, HAVE BEEN PAID CONSULTANCY CHARGES OF RS.1 LAC PER MONTH EACH FROM APRIL 2009 TO JULY 2009 AND RS.2 LAC PER MONTH EACH FOR AUG, 2009 TO FEB, 2010. IT IS SEEN THAT THESE PERSONS H AD THE ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 6 - COMMON ADDRESSES WITH THAT OF THE DIRECTORS SHRI CH ETANBHAI JAYANTILAL PARIKH AND DIPTIBEN DINESHBHAI PARIKH. THE ASSESSING OFFICER WAS DUTY BOUND TO VERIFY GENUINEN ESS OF THE SAID PAYMENTS AND ITS ALLOWABILITY AS AN EXPENSE ES PECIALLY WHEN EVEN THE TAX AUDIT REPORT WAS SILENT AS TO WHE THER THESE PAYMENTS WERE COVERED U/S.40A(2)(B) OF THE ACT. TH E ASSESSING OFFICER HAS NOT CALLED FOR ANY DETAILS OR CARRIED O UT ANY ENQUIRIES AT ALL REGARDING HE GENUINENESS OF CONSUL TANCY CHARGES OF RS.36 LACS I.E. RS.18 LACS EACH TO MALA GHIYA AND SONA PARIKH, AND ALLOWED THE CLAIM. 6. IT IS ALSO OBSERVED THAT THE ASSESSING OFFICER HAS FAILED TO EXAMINE ALLOWABILITY OF THE ASSESSEES CLAIM OF DON ATION EXPENSES OF RS.25200/- UNDER THE HEAD INDIRECT EXP ENSES. 7. IN LIGHT OF THE ABOVE, THE ASSESSMENT ORDER FINALIZ ED ON 30.05.2012 IS CONSIDERED TO BE ERRONEOUS TO THE EXT ENT IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. HENCE THE SAID ASSESSMENT ORDER IS PROPOSED TO BE AMENDED ACCORDIN GLY. 8. YOU ARE, THEREFORE, HEREBY GIVEN AN OPPORTUNITY TO REPRESENT YOUR CASE AND SHOW CAUSE AS TO WHY THE ASSESSMENT O RDER U/S.143(3) DTD 30.5.2012 SHOULD NOT BE SET ASIDE AN D THE AMOUNT OF PENALTY BE LEVIED AS PER THE PROVISIONS O F SEC 271(1)(C). THE HEARING IS FIXED ON 08.10.2014 AT 11 AM, IN THE OFFICE OF THE UNDERSIGNED EITHER PERSONALLY OR THRO UGH AN AUTHORISED REPRESENTATIVE AND MAY ALSO FILE WRITTEN SUBMISSIONS, IF ANY, ON THE SAID DATE. 5. AS CAN BE SEEN FROM THE PERUSAL OF IMPUGNED NOTI CE, IT WAS ALLEGED BY THE COMMISSIONER THAT EXAMINATION OF RECORDS REV EALED THAT ASSESSMENT ORDER SO PASSED IS ERRONEOUS IN SO FAR A S ITS PREJUDICIAL TO THE INTERESTS OF THE REVENUE FOR THE REASONS THAT THE A O HAS FAILED TO MAKE ENQUIRIES/ VERIFICATIONS/EXAMINATIONS IN RESPECT OF CERTAIN ITEMS OF ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 7 - EXPENDITURE AND DEDUCTIONS AS NOTED ABOVE AS WARRA NTED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. SECONDLY, THE COMMISSIO NER OBSERVED THAT AO DID NOT INITIATE PENALTY PROCEEDINGS UNDER S.271 (1)(C) OF THE ACT FOR WRONGFUL CLAIM OF DEDUCTION UNDER S.10B OF THE ACT RESULTING IN ASSESSMENT ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN RESPONSE, THE ASSESSEE SUBMITTED BEFOR E THE CIT THAT VARIOUS DETAILS WERE CALLED FOR AT THE TIME OF ASSESSMENT A S PER NOTICE ISSUED IN THIS REGARD DATED 07/02/2012 AND 01/03/2012 AND THE ASSESSEE HAS REPLIED THERETO. THE AO WAS SATISFIED WITH THE REPLY AND TH E REVISED FIGURES OF INCOME WERE ACCEPTED IN THE ASSESSMENT ORDER. IN R ESPONSE TO NON- INITIATION OF PENALTY PROCEEDINGS, IT WAS THE CASE OF THE ASSESSEE BEFORE THE CIT THAT PENALTY U/S.271(1)(C) OF THE ACT CAN B E INITIATED ONLY WHEN THE ASSESSEE HAS CONCEALED THE PARTICULARS OF ITS I NCOME OR FURNISHED IN ITS PARTICULARS OF INCOME. FOR THIS PURPOSE, THE AO HA S TAKEN A DECISION BASED ON RECORD AND COME TO A DECISION ABOUT IMPOSI NG PENALTY. NON- INITIATION OF PENALTY PROCEEDINGS SHOULD ORDINARIL Y MEAN THAT THE AO IS OF THE VIEW THAT THE RECORD DOES NOT WARRANT SUCH I NITIATION OF PENALTY. THUS, NON-INITIATION PENALTY PROCEEDINGS IPSO FACTO WOULD NOT LEAD TO A CONCLUSION THAT THE ORDER OF THE AO IS ERRONEOUS IN ANY MANNER. THE ASSESSEE ACCORDINGLY CONTENDED BEFORE THE ADMINISTR ATIVE CIT THAT PENALTY PROCEEDINGS UNDER S.271(1)(C) OF THE ACT HA S NOT BEEN INITIATED IN EXERCISE OF DISCRETION VESTED WITH IT. THUS, THE C IT HAS NO JURISDICTION ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 8 - UNDER S.263 OF THE ACT TO DIRECT THE AO TO INITIATE AND IMPOSE PENALTY UNDER S.271(1)(C) OF THE ACT. 5.1. HOWEVER, THE COMMISSIONER DID NOT ACCEPT THE P LEAS RAISED BY THE ASSESSEE. IN ESSENCE, THE COMMISSIONER OBSERVED TH AT THE ASSESSMENT WAS COMPLETED BY THE AO WITHOUT CONDUCTING APPROPRI ATE ENQUIRIES ON VARIOUS ITEMS OF EXPENDITURE AND DEDUCTIONS AS NOTE D IN SHOW-CAUSE NOTICE AND WITHOUT VERIFYING THE GENUINENESS OF EXP ENDITURE INCURRED TOWARDS CONSULTANCY CHARGES. 5.2. AS REGARDS NON-INITIATION OF PENALTY PROCEEDIN GS, THE COMMISSIONER OBSERVED THAT THE ASSESSEE HAS CLAIMED DEDUCTION UNDER S.10B OF THE ACT WHICH WAS WITHDRAWN BY THE ASSESS EE ONLY SUBSEQUENT TO ISSUE OF SPECIFIC NOTICE UNDER S.143(2) OF THE A CT BY THE AO. HENCE CONCEALMENT PENALTY UNDER S.271(1)(C) WAS REQUIRED TO BE LEVIED ON THE TAX TO BE EVADED. CIT RELIED ON SEVERAL JUDICIAL D ECISION AND OBSERVED THAT IT IS WITHIN THE DOMAIN OF THE CIT TO INTERFER E WITH THE ORDER AO ON HIS FAILURE TO INITIATE PENALTY PROCEEDINGS BY RES ORTING TO SECTION 263 OF THE ACT. THE CIT ACCORDINGLY HELD THAT ASSESSMENT ORDER PASSED SECTION 143(3) OF THE ACT WAS ERRONEOUS IN SO FAR AS PREJUD ICIAL TO THE INTERESTS OF THE REVENUE AND ACCORDINGLY THE SAME IS LIABLE TO B E CANCELLED. THE AO WAS ACCORDINGLY DIRECTED TO REFRAME ASSESSMENT ORD ER AFTER GIVING PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 9 - 6. AGGRIEVED BY THE REVISIONARY ORDER OF THE CIT UN DER S.263 OF THE ACT DATED 06/02/2015, THE ASSESSEE IS IN APPEAL BEF ORE THE TRIBUNAL AS PER GROUNDS NOTED IN PARA 2 ABOVE. 7. THE LD.COUNSEL FOR THE ASSESSEE MR.S.N.DIVATIA R EITERATED ITS SUBMISSIONS MADE BEFORE THE CIT AND SUBMITTED AT TH E OUTSET THAT THE ORDER OF THE AO IS NEITHER ERRONEOUS NOR PREJUDICIA L TO THE INTERESTS OF THE REVENUE AND THEREFORE THE ACTION OF THE CIT UNDER S .263 OF THE ACT IS WITHOUT AUTHORITY OF LAW. 7.1. THE LD.COUNSEL FOR THE ASSESSEE FIRSTLY SUBMIT TED THAT NON- INITIATION OF PENALTY PROCEEDINGS BY THE AO IS NOT A JUSTIFIABLE GROUND FOR INVOKING REVISIONARY POWER UNDER S.263 OF THE ACT. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED ON FACTS THAT ASSESSEE INADV ERTENTLY CLAIMED DEDUCTION UNDER S.10B OF THE ACT BEING UNDER ERRONE OUS IMPRESSION THAT IT IS ELIGIBLE FOR SUCH CLAIM OF DEDUCTION OWING TO IT BEING 100% EOU. THE ASSESSEE WAS ADVISED BY HIS CHARTERED ACCOUNTAN T THAT ONCE THE UNIT IS HAVING IMPORT AND EXPORT CODE, IT TENDS TO FULFI LL ALL THE CONDITIONS OF SECTION 10B OF THE ACT. THE ASSESSEE ACTED ON THE ADVICE AND CLAIMED DEDUCTION UNDER S.10B OF THE ACT AND DID NOT APPLY FOR SEEKING APPROVAL FROM THE BOARD APPOINTED BY THE CENTRAL GO VERNMENT AS CONTEMPLATED UNDER S.10B OF THE ACT. ON REALIZING THE MISTAKE IN THE ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 10 - COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE ITSELF HAS REVISED THE RETURN SUO MOTU AND WITHDREW THE CLAIM. IN THE CIRCUMSTANCES, IT W AS SUBMITTED, WHERE THE CLAIM FOR DEDUCTION WAS BASED ON ADVICE GIVEN BY ASSESSEES CHARTERED ACCOUNTANT, THE ASSESSEE IS NO T SUSCEPTIBLE TO PENALTY PROCEEDINGS UNDER S.271(1)(C) OF THE ACT. THE LD.COUNSEL FURTHER CONTENDED THAT THE IMPUGNED ORDER OF REVISI ON PASSED UNDER S.263 OF THE ACT ON THE GROUNDS OF NON-INITIATION OF PENA LTY PROCEEDINGS IS WHOLLY ILLEGAL AND UNLAWFUL FOR THE REASONS THAT PO WERS OF THE COMMISSIONER WOULD EXTEND TO INITIATE PENALTY PROCE EDINGS UNDER S.271(1)(C) OF THE ACT ONLY ON BEING SATISFIED ABO UT THE DEFAULT ENUMERATED THEREIN. IN OTHER WORDS, THE AUTHORITIE S CONCERNED, I.E. AO, CIT(A), CIT OR THE PR.CIT AS THE CASE MAY BE, SHOUL D RECORD A SATISFACTION ABOUT THE NATURE OF DEFAULT, SUCH AS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PA RTICULARS OF INCOME TO PUT SECTION 271(1)(C) OF THE ACT IN MOTION. THE L D. COUNSEL CONTENDED THAT IN THE PRESENT CASE, THE ULTIMATE ORDER PASSED UNDER S. 263 IS MERE CANCELLATION OF ORDER OF THE ASSESSMENT PASSED ON 2 9/05/2012 BY THE AO. HOWEVER, THERE IS NO CONSEQUENT DIRECTION GIVEN ON THE PART OF THE CIT TO AO WITH REGARD TO IMPOSITION OF IMPOSE PENALTY UNDE R S.271(1)(C) OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PARMANAND M PATEL REPORTED IN 278 ITR 03(GUJ.) WHEREIN IT WAS HELD THAT CIT CANNO T EXERCISE POWERS UNDER S. 263 TO DIRECT THE AO TO INITIATE AND IMPOS E PENALTY UNDER ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 11 - S.271(1)(C) OF THE ACT. THE LD.COUNSEL FOR THE ASSE SSEE FURTHER RELIED UPON THE DECISION OF HONBLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF CIT VS. SUBHASH KUMAR JAIN REPORTED IN (201 1) 335 ITR 0364 (P&H) AND DECISION OF ITAT F BENCH, MUMBAI IN THE CASE OF SMT.VANDANA SHARAD DHAKTODE VS. CIT IN ITA NO.3363/ MUM/2014 FOR AY 2009-10, ORDER DATED 04/11/2015 TO SUPPORT ITS C ONTENTION THAT THE COMMISSIONER HAS NO POWER TO CANCEL THE ASSESSMENT ORDER FOR NON- INITIATION OF PENALTY PROCEEDINGS. 7.2 AS REGARDS THE LACK OF PROPER ENQUIRY ON THE EX PENSES AND DEDUCTIONS CLAIMED, THE LD. AR SUBMITTED THAT THE R ELEVANT DETAILS WERE FILED BEFORE THE AO AND HE WAS SATISFIED WITH THE D ETAILS. THE COMMISSION WAS PAID TO PARTIES IN LIEU OF OBTAINI NG SERVICES AS PER THEIR INVOICES. THE SIMILARITY OF ADDRESS WITH THAT OF DI RECTOR PER SE CANNOT BE SEEN AS FACTOR FOR PAYMENTS BEING COVERED UNDER S. 40A(2). SIMILARLY, QUESTIONS RAISED ON VERIFICATION OF ADDITION TO FI XED ASSET IS BASED ON TENUOUS PREMISE. THE OWNERSHIP OF LAND IS NOT NECES SARY FOR CONSTRUCTION OR OTHER ADDITION OF CAPITAL NATURE UNDER THE HEAD BUILDING. THE ALLEGATION OF HIGH PITCHED CLAIM OF SALARY WILL ALSO NOT A R ELEVANT CONSIDERATION FOR INVOKING POWERS UNDER S. 263 OF THE ACT. THE RE QUISITE DETAILS OF THE SALARY AS CALLED FOR WAS PLACED ON RECORD. THE AO W AS SATISFIED WITH THE DETAILS SO FILED. SIMILARLY, SHOW CAUSE ON ELIGIBIL ITY OF DEDUCTION TOWARDS DONATION WAS ALLEGED TO BE VERY VAGUE. IT WAS THER EAFTER CONTENDED THAT ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 12 - THE INADEQUACY OF ENQUIRY BY THE AO PER SE FROM A PERFECTIONIST POINT OF VIEW OF COMMISSIONER DO NOT PERMIT HIM TO INVOKE RE VISIONARY POWERS. 7.3. THE LD. AR IN CONCLUSION ASSERTED THAT PRE-RE QUISITES OF S.263 ARE NOT FULFILLED AND THUS THE ACTION UNDER S. 263 IS V ITIATED IN LAW. 8. PER CONTRA, THE LD. DR FOR THE REVENUE, MR.SANJA Y AGRAWAL CIT(DR) RELIED ON THE ORDER OF THE COMMISSIONER PAS SED UNDER S.263 OF THE ACT AND CASE-LAWS CITED THEREIN. THE LD. DR SUB MITTED THAT THE REASONS FOR ISSUE OF NOTICE UNDER S.263 OF THE ACT WERE TWOFOLD; 8.1 FIRSTLY, THE ASSESSEE FAILED TO INITIATE PENALT Y PROCEEDINGS UNDER S.271(1)(C) OF THE ACT DURING THE COURSE OF ASSESSM ENT/REASSESSMENT PROCEEDINGS IN RESPECT OF DEDUCTION UNDER S.10B OF THE ACT. ADDRESSING THIS REASON, THE LD.DR SUBMITTED THAT THERE WAS NOT HING ON RECORD BEFORE THE COMMISSIONER TO SHOW THAT NON-INITIATION OF PEN ALTY WAS A CONSCIOUS ACT CONSEQUENT UPON SOME APPLICATION OF MIND. THE L D. DR REFERRED TO PARA-7 OF THE ORDER OF THE CIT AND NOTED THAT THE A SSESSEE HAD CLAIMED DEDUCTION UNDER S.10B OF THE ACT WITHOUT COMPLYING WITH EVEN PRIMARY CONDITIONS FOR CLAIMING DEDUCTION UNDER S.10B OF TH E ACT. THE CLAIM OF DEDUCTION UNDER SECTION 10B WAS IN GROSS CONTRAVENT ION OF THE PRESCRIBED STATUTORY CONDITIONS AS PROVIDED IN S.10B OF THE AC T. THE CLAIM WAS WITHDRAWN BY THE ASSESSEE AT A LATER STAGE OF ASSES SMENT PROCEEDINGS. IT ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 13 - WAS ASSERTED THAT THE WITHDRAWAL OF DEDUCTION WAS M ADE ONLY AT FAG END OF THE ASSESSMENT PROCEEDINGS AFTER POINTED QUERIES IN THIS REGARD WERE RAISED IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE REASONS QUOTED BY THE ASSESSEE FOR MAKING WRONG CLAIM U/S.10B OF THE ACT PURPORTEDLY BASED ON ADVISE BY ITS CHARTERED ACCOUNTANT IS FLIM SY. THE CLAIM UNDER S.10B OF HIGH MAGNITUDE WAS MADE YEAR-AFTER-YEAR ON THE BASIS OF SOME PURPORTED ADVICE GIVEN BY ASSESSEES CHARTERED ACCO UNTANT WHICH WAS DETECTED ONLY BECAUSE OF THE SCRUTINY PROCEEDINGS U NDER S. 143(2) OF THE ACT. IT WAS CONTENDED THAT THE SCRUTINY PROCEEDINGS AND SPECIFIC QUERY THEREIN COMPELLED THE ASSESSEE TO RELUCTANTLY WITHD RAW THE CLAIM. THE NOTICE UNDER S.143(2) OF THE ACT WAS ISSUED ON 07/0 2/2012 ASKING A SPECIFIC QUERY IN RELATION TO APPROVAL OF THE COMPE TENT AUTHORITY TO SECURE CLAIM OF DEDUCTION UNDER S.10B OF THE ACT. THEREAFT ER, ANOTHER NOTICE DATED 01/03/2012 WAS ISSUED BY THE AO ONCE AGAIN TO DISCHARGE ONUS AS TO WHETHER THE CONDITIONS PRESCRIBED UNDER S.10B OF THE ACT ARE FULFILLED OR NOT. IT IS ONLY AFTER A CONSIDERABLE GAP AND RAT HER A NEXT REMINDER THAT A REVISED RETURN WAS FILED ON 30.03.2012 TO WITHDRAW THE BENEFIT OF S. 10B CLAIMED IN ORIGINAL RETURN. IT WAS THUS ARGUED THAT THE CLAIM OF BONAFIDES ON THE PART OF THE ASSESSEE STANDS DISCREDITED. THE LD. DR RELIED UPON THE DECISION OF HONBLE MADHYA PRADESH HIGH COURT IN TH E CASE OF INDIAN PHARMACEUTICALS REPORTED IN (1980) 123 ITR 874 (MP) , WHEREIN IT WAS HELD THAT THE ASSESSMENT DOES NOT MEAN ONLY COMPUTA TION OF INCOME BUT CONSIDERATION OF ALL FACTS INCLUDING THE LIABILITY FOR PENALTY. THE LD. DR ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 14 - SUBMITTED THAT IF THE AO DURING THE PENDENCY OF THE PROCEEDINGS HAS OMITTED TO TAKE NOTICE OF GROSS FACTS ATTRACTING PE NALTY U/S.271(1)(C) OF THE ACT WHILE FRAMING THE ASSESSMENT ORDER CAUSING GRAV E PREJUDICE TO THE INTEREST OF REVENUE OWING TO SUCH ERROR, THE INACTI ON OF AO VESTS CIT WITH REQUIRED JURISDICTION UNDER THE PROVISIONS OF S.263 OF THE ACT READ WITH AMENDED PROVISIONS OF S.271(1)(C) OF THE ACT. THE LD.DR THEREAFTER HEAVILY RELIED UPON THE DECISION OF HON BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. SURENDRA PRASAD AGRAWA L REPORTED IN (2005) 275 ITR 113 (ALL.), WHEREIN ALLAHABAD HIGH COURT WA S CATEGORICAL IN SAYING THAT IN THE EVENT OF THE OMISSION OF THE AO TO INITIATE PENALTY PROCEEDINGS DURING THE COURSE OF ASSESSMENT PROCEED INGS, SUCH OMISSION RENDERS THE ASSESSMENT ORDER ERRONEOUS AND PREJUDIC IAL TO THE INTERESTS OF REVENUE. THE LD. DR NEXT REFERRED TO THE DECISION OF HONBLE PATNA HIGH COURT IN THE CASE OF R.A. HIMMATSINGKA & CO. V S. CIT REPORTED IN 340 ITR 253 (PAT.) AND SUBMITTED THAT PATNA HIGH CO URT HAS DISCUSSED THE SCOPE OF ASSESSMENT ORDER TO INCLUDE INITIATION OF PENALTY. THE LD. DR THEREAFTER ADVERSED TO THE DECISION OF HONBLE G UJARAT HIGH COURT IN THE CASE OF CIT VS. PARMANAND M. PATEL REPORTED IN 278 ITR 03 (GUJ.) AND SUBMITTED THAT THE AFORESAID DECISION RENDERED IN FAVOUR OF ASSESSEE IS BASED ON PRE-AMENDED LAW WHEN THE CIT WAS NOT VE STED WITH STATUTORY POWER RELATED THE PENALTY UNDER THE CHARG ING SECTION; S.271(1)(C). THE LAW UNDER SECTION 271(1)(C) OF TH E ACT IN THIS REGARD CAME TO BE AMENDED WITH EFFECT FROM 01/06/2002. TH E LD. DR THEREAFTER ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 15 - POINTED OUT THAT THE DECISION OF THE ITAT A BENCH AHMEDABAD IN THE CASE OF M/S.J.P CONSTRUCTION VS. CIT IN ITA NO.1384 /AHD/2009 RELEVANT TO AY 2005-06, ORDER DATED 24/07/2009 RENDERED IN F AVOUR OF ASSESSEE BASED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF PARMANAND M. PATELS CASE AND SUBMITTED THAT THE D ECISION DOES NOT TAKE COGNIZANCE OF AMENDMENT IN SECTION 271(1)(C) AND IS THUS NOT A GOOD LAW. IT WAS POINTED OUT THAT ITAT DECISION HAS B EEN QUASHED AND SET ASIDE BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. J.P.CONSTRUCTION IN TAX APPEAL NO.2581 OF 2009, ORD ER DATED 22/10/2013 (COPY PLACED ON RECORD) AND THUS NO LONGER A BINDIN G PRECEDENT. THE LD.DR NEXT REFERRED TO THE DECISION OF HONBLE GUJA RAT HIGH COURT IN THE CASE OF ADDL.CIT VS. MUKUR CORPORATION REPORTED IN (1978) 111 ITR 0312 (GUJ.) AND SUBMITTED THAT IT WAS WITHIN THE DO MAIN OF THE CIT TO CANCEL THE ASSESSMENT WITHOUT GIVING ANY FINAL DECI SION IN THE MATTER AND REMANDING THE MATTER TO MAKE FRESH ASSESSMENT WHERE PROBING ON THE ISSUE, AS WARRANTED, HAS NOT BEEN CONDUCTED BY THE AO. IT WAS CONTENDED THAT AS A NECESSARY IMPLICATION OF AMENDMENT, THE P OWERS OF THE CIT HAS BEEN STRENGTHENED TO ENABLE HIM TO ACT BOTH DIRECTL Y UNDER THE PROVISIONS OF S. 271(1)(C) AS WELL AS INDIRECTLY THROUGH THE A O BY CANCELING OR MODIFYING THE ASSESSMENT ORDER UNDER S.263 OF THE A CT. THE LD.DR THEREAFTER SUBMITTED THAT MERITS OF LEVIABILITY OF PENALTY OR OTHERWISE SHOULD NOT WEIGH FOR DETERMINING THE SCOPE OF S. 26 3 OF THE ACT. FOR THIS PROPOSITION, HE RELIED UPON THE DECISION OF HONBL E DELHI HIGH COURT IN ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 16 - THE CASE OF CIT VS. EASTERN MEDIKIT LTD. REPORTED I N (2011) 337 ITR 56 (DELHI). THE LD. DR ACCORDINGLY CONCLUDED HIS SUBM ISSION BY SAYING THAT NON-INITIATION OF PENALTY IN A EX-FACIE WRONG CLAIM HAS FORFEITED THE RIGHTS OF THE REVENUE UNDER S.271(1)(C) AND RENDERE D IT REMEDY LESS FOR THE POSSIBLE LOSS OF REVENUE OWING TO LAPSE OR OMIS SION OR ERRONEOUS ACT OF THE AO SAVE AND EXCEPT RECOURSE TO S.263 OF THE ACT.. IT WAS THUS CONTENDED THAT THE ACTION OF THE CIT UNDER S.263 OF THE ACT TO CANCEL THE ASSESSMENT IS FULLY JUSTIFIED TO PROTECT THE INTERE ST OF REVENUE. 8.2. ADDRESSING THE SECOND GROUND FOR INVOKING SEC TION 263 OF THE ACT, THE LD. AR CONTENDED THAT IT IS A CASE OF LACK OF ELEMENTARY ENQUIRIES ON THE EXPENSES AND DEDUCTIONS CLAIMED AND NON APPLICA TION OF MIND ON CLAIMS MADE. IT IS JUST NOT A CASE OF INADEQUACY O F ENQUIRY OR EXTENDED ENQUIRY MISSING ON THE SUBJECT MATTER OF ASSESSMENT . AS EVIDENT, THE CIT OBSERVED LACK OF BASIC ENQUIRIES ON GENUINENESS OF COMMISSION PAID, SALARY EXPENSES INCURRED OR DEPRECIATION ALLOWANCE, DONATION ETC. OBJECTED BY THE ASSESSEE AS PER ITS GROUNDS OF APPE AL. THE LD.DR THUS SUBMITTED THAT THE ASSESSMENT ORDER HAS BEEN PASSED PERFUNCTORILY EVEN WITHOUT ANY BASIC ENQUIRY INTO THE CORRECTNESS OF T HE CLAIM OF CERTAIN EXPENSES; NAMELY, CONSULTANCY EXPENSES, HIGH-PITCHE D OF SALARY EXPENSES AND OFFICE BUILDING REPAIRS, ETC.. WITH REFERENCE T O CONSULTANCY EXPENSES, THE LD.DR CONTENDED THAT THERE WAS NO ENQUIRY WHATS OEVER, REGARDING THE NATURE OF SERVICES RENDERED BY THE RECIPIENTS O F THE CONSULTANCY FEES. ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 17 - SUCH EXPENSES COULD NOT HAVE BEEN SUMMARILY ACCEPTE D WITHOUT WEIGHING THE FACTUM OF RENDITION OF THE SERVICES. F OR THIS PROPOSITION, HE RELIED UPON THE DECISION OF HONBLE APEX COURT IN T HE CASE OF GANAPATHY & CO. VS. CIT REPORTED IN 381 ITR 363(SC). THE LD. DR SUBMITTED THAT LACK OF PROPER ENQUIRY IN THE MATTER MAKES THE ORDE R ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF REVENUE. THE LD. DR THEREAFTER REFERRED TO THE DECISION OF HONBLE APEX COURT IN THE CASE OF M ALABAR INDUSTRIAL COMPANY LIMITED VS. CIT REPORTED IN (2000) 109 TAXM AN 66 (SC), WHEREIN IT HAS BEEN HELD THAT IF THE AO HAS ACCEPTE D THE ENTRY IN THE STATEMENT OF ACCOUNT FILED BY THE TAXPAYER WITHOUT MAKING ENQUIRY, THE SAID ORDER OF THE AO SHALL BE DEEMED TO BE ERRONEOU S IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE. THE LD. DR IN CONCLUSION SUBMITTED THAT WHERE THE AO HAS FAILED TO MAKE EVEN BASIC ENQUIRY INTO FACTUAL ASPECTS OF CLAIM OF EXPENSES OR DEDUCTIONS ETC. WHICH WERE CLEARLY WARRANTED, THE CIT IS UNDER BOUNDEN DUTY TO SET ASIDE THE ASSESSMENT ORDER BY TREATING IT AS ERRONEOUS AND PR EJUDICIAL TO THE INTERESTS OF THE REVENUE. IN SUCH CIRCUMSTANCES, IT IS NOT FURTHER REQUIRED ON THE PART OF THE CIT TO EXPRESSLY SHOW WHERE THE ASSESSMENT ORDER WENT WRONG. THE VERY FACT, THAT NO ENQUIRY WAS CONDUCTED OR NO PROPER ENQUIRY WAS CONDUCTED AS REQUIRED IN THE CIRCUMSTAN CES IS SUFFICIENT IN ITSELF TO INVOKE THE PROVISIONS OF SECTION 263 OF T HE ACT. HE THUS, URGED THAT THE PRESENT APPEAL OF THE ASSESSEE DOES NOT HO LD ANY MERIT. ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 18 - 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO N, ORDER OF THE AUTHORITIES BELOW AND MATERIAL REFERRED TO AT THE B AR AND CASE LAWS CITED BY THE RESPECTIVE PARTIES. 10. SECTION 263 ENABLES THE CONCERNED PR.CIT / CIT TO REVIEW THE RECORDS OF ANY PROCEEDINGS AND ORDER PASSED THEREON BY THE ASSESSING OFFICER. IT EMPOWERS THE COMMISSIONER CONCERNED TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THE ACT AND IF H E CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE AO IS ERRONEOUS IN SO F AR 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 THER EON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORD ER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELING THE ASSESSME NT AND DIRECTING A FRESH ASSESSMENT. THUS, THE REVISIONAL POWERS CONFE RRED 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 R EVISIONARY POWERS IS ENTITLED TO UPSET THE FINALITY OF ASSESSMENT PROCEE DINGS BEFORE THE AO WHO HAS OMITTED TO INITIATE PENALTY PROCEEDINGS IN RESPECT OF DEFAULTS STIPULATED UNDER SECTION 271(1)(C) WHEN THE CIRCUMS TANCES FOR DOING SO ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 19 - 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 I SSUE BOTH FOR AND CONTRA. THE HONBLE 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 GU RARAT 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 2005-0 6] CANCELLED THE ACTION OF THE CIT UNDER SECTION 263 WHEREIN THE ASS ESSMENT 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 OTH ER 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 TH AT THE IMPUGNED DECISION IN PARMANAND PATEL CASE WAS RENDERED PRIOR TO AMENDMENT CARRIED OUT IN SECTION 271(1)(C). POST AMENDMENT, T HE PR. CIT/ CIT IS ALSO INSERTED AS A DESIGNATED AUTHORITY FOR THE PUR POSES 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 AMENDMENT. IT IS THEREFORE CONTENDED THAT IN VIEW OF THE LEGISLATIVE ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 20 - CHANGES, THE DECISION IN PARMANAND PATEL HAS LOST I TS PROPOSITION. CONTINUING FURTHER, NEGATING THE RATIO OF DECISION OF TRIBUNAL IN J P CONSTRUCTION (SUPRA), THE REVENUE SUBMITS THAT THE AFORESAID ITAT ORDER HAS BEEN SET ASIDE AND REMANDED BACK TO ITAT FOR FR ESH ADJUDICATION IN CIT VS. J P CONSTRUCTION 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 TRIBUNAL IN J P CONSTRUCTION CASE IN ITA NO.1304/AHD/2009 TO BEGIN WITH. 4. HEARD BOTH PARTIES AND PERUSED THE RECORD. CA REFULLY GOING THROUGH THE IMPUGNED ORDER OF THE LEARNED CIT, WE F IND THAT SINCE THE ASSESSING OFFICER HAS NOT INITIATED PENALTY PROCEED INGS U/S.27191)9C) ON THE ADDITION OF RS.1,72,73,488 WHICH WAS OFFERED BY THE ASSESSEE IN THE REVISED RETURN, THE LEARNED CIT BY INVOKING POW ER U/S.263 HAS SET ASIDE THE ASSESSMENT FOR FRAMING THE SAME AFRESH. THEREFORE, THE QUESTION TO BE DECIDED IN THE PRESENT CASE IS WHE RE 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 E MPOWERED U/S.263 TO SET ASIDE THE ASSESSMENT AND DIRECT THE ASSESSIN G OFFICER TO FRAME THE ASSESSMENT AFRESH? SUCH A QUESTION IS NO MORE RES INTEGRA. IN THE CASE ADDL.CIT VS. J.K. DCOSTA [192] 133 ITR 7 (DELHI) F OLLOWED IN ACIT V. ACHAL KUMAR JAIN (142 ITR 606) AND CIT V. NIHAL CHA ND REKYAN [2000] 242 ITR 45 (DELHI) AND IN ADDL.CIT VS. SUDAR SHAN TALKIES (1993) 200 ITR 153 (DELHI); ALSO BY HONBLE MADRA S HIGH COURT IN CIT VS. C.K.K.SWAMI (254 ITR 158); SARDA PRASAD SIN GH V. CIT (173 ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 21 - ITR 510 (GAUHATI), IT HAS BEEN HLED THAT IF THE COM MISSIONER FINDS, WHILE EXAMINING THE RECORDS OF AN ASSESSMENT ORDER UNDER SECTION 263, THAT THE ASSESSING OFFICER HAS NOT INITIATED PENALT Y PROCEEDINGS, HE CANNOT DIRECT INITIATION OF PENALTY PROCEEDINGS BEC AUSE PENALTY PROCEEDINGS ARE NOT A PART OF ASSESSMENT PROCEEDING S. THE COMMISSIONER CANNOT PASS AN ORDER UNDER SECTION 263 P0ERTAINING TO PENALTY. HONBLE SUPREME COURT HAS DISMISSED SPECI AL LEAVE PETITION AGAINST THE DELHI HIGH COURT DECISION IN ADDL.CIT V S. 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 JU DGEMENT IN THE CASE OF CIT V. PARMANAND M.PATEL (2005) 198 CTR (GUJ) 64 1/278 ITR 3 (GUJ), HONBLE GUJARAT HIGH COURT HAS HELD THAT WHI LE EXERCISING POWERS UNDER SECTION 263, CIT IS NOT COMPETENT TO D IRECT INITIATION OF PENALTY PROCEEDINGS UNDER S.271(1)(A) OR S.273(2)(C ) OF THE ACT. IN THE CASE OF CIT V. PARMANAND 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 CI T HIMSELF CANNOT DO, HE CANNOT GET IT DONE THOUGH THE ASSESSING AUTH ORITY BY EXERCISING REVISIONAL POWERS. 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 ORDE R 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 BACK TO THE ITAT FOR ITS FRESH CONSIDERATION IN THE LIGHT O F AMENDMENT IN S. ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 22 - 271(1)(C) OF THE ACT. THE SHORT ORDER THEREON IN TA X APPEAL NO.2581 OF 2009 IS REPRODUCED HEREUNDER TO APPRECIATE THE ISSU E IN PERSPECTIVE. PRESENT TAX APPEAL HAS BEEN PREFERRED BY THE APPE LLANT REVENUE CHALLENGING THE IMPUGNED JUDGMENT AND ORDER DATED 2 4TH JULY 2009 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, AHMEDA BAD {TRIBUNAL FOR SHORT} IN I.T.A NO. 1304/AHD/2009 WITH RESPECT TO A.Y 2005-06 ON THE FOLLOWING QUESTION OF LAW :- WHETHER THE APPELLATE TRIBUNAL IS RIGHT IN LAW AND ON FACTS IN SETTING ASIDE THE ORDER PASSED BY THE COMMISSIONER OF INCOME 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 APPEARING ON BEHALF OF THE RESPONDENT AND CONSIDERI NG THE IMPUGNED JUDGMENT AND ORDER DATED 24TH JULY 2009 PASSED BY T HE TRIBUNAL, IT APPEARS THAT WHILE ALLOWING THE APPEAL PREFERRED BY THE ASSESSEE, THE TRIBUNAL HAS RELIED UPON THE DECISION IN CASE OF CI T 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 SECTION 271 [1] OF THE INCOME-TAX ACT, 1961 {ACT FOR SHORT}. IT I S ALSO NOT IN DISPUTE THAT THE TRIBUNAL WAS REQUIRED TO CONSIDER POST-AME NDED PROVISION OF SECTION 271 [1] OF THE ACT. UNDER THE CIRCUMSTANCES , THE IMPUGNED JUDGMENT AND ORDER PASSED BY THE TRIBUNAL CANNOT BE SUSTAINED AND THE SAME DESERVES TO BE QUASHED AND SET-ASIDE, AND THE MATTER IS REQUIRED TO BE REMANDED TO THE TRIBUNAL FOR DECIDING THE APP EAL BY CONSIDERING THE AMENDMENT IN SECTION 271 [1] OF THE ACT. LEARNE D ADVOCATES APPEARING ON BEHALF OF RESPECTIVE SIDES ARE NOT IN A POSITION TO DISPUTE 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 O N THE AFORESAID GROUND, THE IMPUGNED JUDGMENT AND ORDER DATED 24TH JUNE 2009 PASSED BY THE TRIBUNAL IS HEREBY QUASHED AND SET-ASIDE AND THE MATTER IS ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 23 - REMANDED TO THE TRIBUNAL TO DECIDE AND DISPOSE OF T HE SAID APPEAL AFRESH IN ACCORDANCE WITH LAW ON MERITS AND CONSID ERING 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 DEBAT E HAVING REGARD TO 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 THA T BASIS FOR HOLDING THAT THE CIT LACKS JURISDICTION UNDER S. 263 TO CAN CEL THE ASSESSMENT FOR FAILURE OF THE AO TO INITIATE PENALTY PROCEEDINGS W ERE MULTIFOLD. THE PROPOSITIONS EMERGING THEREIN ARE BROADLY SUMMARIZE D AS UNDER: ( A ) S. 271(1)(C) CONFERS DISCRETIONARY JURISDICTION O N THE AO OR THE CIT(APPEALS) TO INITIATE PENALTY PROCEEDINGS. THE P ROVISION DOES NOT EMPOWER ANY OTHER AUTHORITY TO EXERCISE DISCRETION. EVEN WHILE BEING A SUPERIOR AUTHORITY, 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 SA TISFACTION ARRIVED AT BY AO, IN EXERCISE OF REVISIONAL POWERS. IN THE ABSENC E OF POWERS CONFERRED ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 24 - TO INVOKE THE PENALTY PROVISION, THE CIT COULD NOT DIRECT THE AO TO DO SO IN COLOURABLE 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 CO URSE OF ANY PROCEEDINGS AND NOT SUBSEQUENT THERETO. THUS, THE STAGE OF FORM ING SATISFACTION IS BEFORE CONCLUSION 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 PRO CEEDINGS BEFORE 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 TH E ASSESSMENT ORDER FOR THE SOLE PURPOSE OF INITIATION OF PENALTY PROCEEDIN GS IN EXERCISE OF REVISIONAL JURISDICTION. AS A COROLLARY, ASSESSMENT ORDER CAN NOT BE SET ASIDE TO INITIATE AND IMPOSE PENALTY NOTWITHSTANDIN G 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 COU RT HAS REMANDED THE MATTER ONLY IN RESPECT OF PROPOSITION (A) ENUME RATED ABOVE. AS A NECESSARY IMPLICATION, OTHER PROPOSITIONS CONTINUE TO APPLY AND HAVE NOT ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 25 - FADED INTO INSIGNIFICANCE. UNDER S. 263, THE CIT CO NCERNED CAN EXAMINE THE RECORD OF ANY PROCEEDINGS AND ORDER PASSED CONS EQUENT THERETO CAN BE SET ASIDE ON FULFILLMENT OF CONDITIONS AS STIPULATE D THEREIN. IN THE INSTANT CASE, THE PROCEEDING AND CONSEQUENT ORDER IS ASSESS MENT ORDER. AS NOTED BY JURISDICTIONAL HIGH COURT, PENALTY PROCEEDINGS A RE SEPARATE AND DISTINCT. THERE IS NO IDENTITY BETWEEN THE TWO. PEN ALTY PROCEEDINGS CAN BE INITIATED DURING THE CURRENCY OF ASSESSMENT OF PROC EEDINGS TILL THE CONCLUSION OF ASSESSMENT PROCEEDINGS. EXCEPT FOR A LEGAL BAR THAT PENALTY PROCEEDINGS CANNOT BE INITIATED SUBSEQUENT TO THE C ONCLUSION OF ASSESSMENT PROCEEDINGS, THERE IS NO OTHER PERCEPTIB LE DEPENDENCE QUA THE ASSESSMENT ORDER. AS A SEQUEL THERETO, IN OUR CONSI DERED VIEW, IT IS NOT OPEN TO CIT TO EXERCISE THE REVISIONAL POWERS TO CR EATE A NON EXISTENT PROCEEDINGS UNDER S. 263 BY HOLDING THE ASSESSMENT PROCEEDING AS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. PERTINENT TO SAY, SECTION 263 CREATES, DEFINES AND REGULATES THE REVISIONAL POWERS OF THE CIT CONCERNED AND IS THUS A SUBSTANTIVE PROVISI ON. HENCE, THE STRICT REQUIREMENTS OF A JURISDICTIONAL PROVISION CAN NOT BE COMPROMISED. WE ARE ALIVE TO THE SITUATION THAT IN THE ABSENCE OF T HE 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 L EGISLATIVE INTENT MAY BE, THE REQUIREMENTS OF A SUBSTANTIVE PROVISION CANNOT BE BYPASSED TO GIVE ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 26 - EFFECT TO SUCH INTENT. IT 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 THE FOUNDATION OF ACTION UNDER S. 271(1)(C) OF THE ACT. ADMITTEDLY, THE CIT IS A DESIGNATED AUTHORITY TO FORM SATISFACTION POST AM ENDMENT. NEVERTHELESS, THE IMPUGNED SATISFACTION TOWARDS D EFAULT 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 ASSESSME NT PROCEEDINGS WERE CONCLUDED AND POST FACTO SATISFACTION 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 CO MPLETED ASSESSMENT CANNOT BE SET ASIDE TO ENABLE THE SUBORDINATE AUTHO RITY TO INITIATE A SEPARATE AND DISTINCT PROCEEDING IN CONFLICT THE SC OPE OF AUTHORITY VESTED UNDER S. 263. THE COMMISSIONER IN EXERCISE OF HIS R EVISIONAL POWERS CANNOT ARROGATE TO HIMSELF A STATUS TO SURROGATE TH E OTHER AUTHORITIES AND SUPPLANT THEIR ROLES UNDER THE ACT. THE COMMISSIONE R IS NOT A SUBSTITUTE OF THE OTHER STATUTORILY PRESCRIBED FORA WITH CODIF IED FUNCTIONS DISCHARGEABLE IN TERMS OF THE PRESCRIBED PROCEDURE IN THE SITUATIONS COMPREHENDED THEREBY. WHEN READ IN CONJUNCTION WITH THE DECISION OF ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 27 - 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 ASIDE AN ASSESSMENT ORDER TO INITIATE A DISTINCT PENALTY PRO CEEDING. THE LEGISLATURE, IN OUR VIEW, HAS ALLOWED THIS POSITION TO BE SUSTAINED SO FAR EXCEPT EXPANDING THE SCOPE OF AUTHORITY UNDER S. 27 1(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 AGR AWAL 275 ITR 113(ALL.); INDIAN PHARMACEUTICALS (1980) 123 ITR 87 4(MP); RA HIMMATSINGKA & CO. 340 ITR 253(PAT.); SARA ENTERPRI SES (MAD.) 224 ITR 169 ETC. REFERRED TO AND RELIED UPON ON BEHALF OF THE REVENUE. IN ALL THESE CASES, IT WAS HELD THAT THE CIT ADMINISTRATIO N IS ENTITLED TO INVOKE S. 263 TO CANCEL THE ASSESSMENT WHERE THE PENALTY W AS EITHER DROPPED OR THE AO OMITTED TO INITIATE THE PENALTY PROCEEDINGS. HOWEVER, IN THE SAME VAIN, WE NOTICE THAT THERE ARE MANY DECISION IN FAV OUR OF THE ASSESSEE ON THE SAME SUBJECT NAMELY CIT VS. SARAYA DISTILLERY 1 15 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 OTHER DECISIONS OF HONBLE DELHI HIGH COURT. THE H ONBLE GUJARAT HIGH COURT HAS TAKEN NOTE OF VARIED DECISIONS OF DIFFERE NT HIGH COURTS WHILE DETERMINING THE ISSUE IN FAVOUR OF THE ASSESSEE. TH E PROPOSITIONS LAID DOWN BY THE HONBLE GURARAT HIGH COURT WILL PREVAIL OVER THE CONTRARY ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 28 - PROPOSITIONS. WE SIMULTANEOUSLY TAKE NOTE THE DECIS ION OF HONBLE PATNA HIGH COURT IN THE CASE OF R.A. HIMMATSINGKA & CO. V S. CIT (2010) 340 ITR 253 (AY 2004-05) RELIED UPON BY REVENUE WHEREIN THE IT WAS EXPLAINED THAT EXPRESSION PROCEEDINGS EMPLOYED IN SECTION 263 IS WIDER THAN THE EXPRESSION ASSESSMENT. HOWEVER, IN OUR V IEW, NOTHING TURNS ON THIS. THE DECISION WAS RENDERED IN A CASE WHERE THE PENALTY PROCEEDINGS WERE DULY INITIATED AND LATER DROPPED WHICH WAS SUB JECT MATTER OF S. 263. JUDICIAL 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 ARE DISPOSED TO HOLD THAT NON INITIATION OF PENALTY PROCEEDINGS UNDER S. 271(1)(C) WHILE FRAMING ASSESSMENT IS NOT A GOOD GR OUND FOR INVOKING REVISIONAL POWERS CONFERRED UNDER S. 263 OF THE ACT . TO REITERATE, WHEN PROCEEDED IN STRICT REQUIREMENT OF THE PROVISION, T HE CIT CAN NOT, AFTER THE CONCLUSION OF THE ASSESSMENT PROCEEDINGS, MAKE UP MIND OR ARRIVE AT THE REQUIRED AFFIRMATIVE CONCLUSION TOWARDS INITIAT ION OF PENALTY PROCEEDINGS IN SUBSTITUTION OF THE LAPSE COMMITTED BY THE AO. SECTION 271(1)(C) READ IN CONJUNCTION WITH S. 263 OF THE AC T, 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 TO IMPOSE PENALTY, THAT BY ITSELF WOULD NOT BE SUFFICI ENT TO HOLD THAT THE CIT IS ENTITLED TO EXERCISE REVISIONAL POWERS BY TREATI NG THE ASSESSMENT ORDER ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 29 - AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REV ENUE. 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 A RISE. IN THE INSTANT CASE, THERE IS NO ORDER IN SO FAR AS PENALTY PROCEEDINGS ARE CONCERNED. THE PROCEEDINGS IN RESPECT OF ASSESSMENT AND PENALTY AR E DIFFERENT AND DISTINCT NOTWITHSTANDING THE PRECONDITION THAT LATE R HAS TO BE INITIATED IN THE COURSE OF FORMER PROCEEDINGS. THOUGH EXPRESSION ASSESSMENT IS USED IN THE ACT WITH DIFFERENT MEANINGS IN DIFFEREN T CONTEXT, IN SO FAR AS SECTION 263 IS CONCERNED, IT REFERS TO THAT PARTICU LAR PROCEEDING WHICH IS BEING CONSIDERED BY THE COMMISSIONER. IT IS NOT POS SIBLE TO EXPAND THE SCOPE OF ASSESSMENT PROCEEDING AND ASSESSMENT, WHIC H IS SUBJECT MATTER OF REVISION, FOR THE PURPOSES OF INITIATING A NEW A ND DISTINCT PENALTY PROCEEDINGS OF ONEROUS NATURE. FAILURE OF AO TO INI TIATE OR IMPOSE PENALTY CANNOT BE A FACTOR CAPABLE OF VITIATING THE ASSESSMENT ORDER IN ANY RESPECT. AN ASSESSMENT, IN OUR CONSIDERED VIEW, CANNOT BE SAID TO BE ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE OWING TO SUCH FAILURE WITH RESPECT TO INITIATE A DISTINCT PROCEEDINGS WIT H A VIEW TO EVALUATE IMPOSITION OF PENALTY THEREIN. IN VIEW OF THE FORG OING DISCUSSION, 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 ERR ONEOUS CLAIM OF DEDUCTION UNDER S. 10B. ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 30 - 18. WE SHALL NOW ADVERT TO SECOND LIMB OF ACTION UN DER S. 263 ALLEGING MECHANICAL AND PERFUNCTORY ACCEPTANCE OF V ARIOUS CLAIMS OF EXPENDITURE ETC. REFERRED BY THE REVENUE AS NOTED E ARLIER PARAS WITH ANY PERCEPTIBLE INQUIRY WHICH HAS BEEN AGITATED BY THE ASSESSEE IN THE PRESENT APPEAL. 18.1 IT IS THE CASE OF THE REVENUE THAT UNLIKE THE CIVIL COURT WHICH IS NEUTRAL TO GIVE A DECISION ON THE BASIS OF EVIDENCE PRODUCED BEFORE IT, AN ASSESSING OFFICER IS NOT ONLY AN ADJUDICATOR BUT IS ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE ON THE FACE OF A RETURN WHICH MAY BE APPARENTLY IN ORDER BUT CALLS FOR ENQUIRY THEREON. FAILURE TO MAK E BASIC ENQUIRY INTO CLAIM OF EXPENDITURE AND DEDUCTIONS ETC. WOULD REND ER THE ASSESSMENT ORDER ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTER EST OF REVENUE. THE REVENUE CONTENDS THAT THE ASSESSMENT ORDER IS VITIA TED BY NON APPLICATION OF MIND TO THE VARIOUS CLAIMS OF EXPENDITURE AND DE DUCTIONS AS DEMONSTRATED IN THE REVISIONAL ORDER. 18.2. ON APPRAISAL OF FACTS, WE ARE INCLINED TO A GREE WITH THE CONTENTION OF THE REVENUE THAT NO ENDEAVOUR WAS MADE TO ENQUI RE THE BONAFIDES OF CLAIMS AGITATED. THE ASSESSEE IS ALSO NOT SHOWN TO HAVE DISCHARGED ONUS ON THE CORRECTNESS OR OTHERWISE OF THE CLAIMS BEFOR E THE AO IN RESPECT OF DISPUTED CLAIMS. NO PERCEPTIBLE ENQUIRY WAS SHOWN T O HAVE BEEN MADE BY AO IN DISCHARGE OF QUASI JUDICIAL FUNCTION WHICH MAY REVEAL ANY ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 31 - APPLICATION OF MIND ON THE SUSTAINABILITY OF CLAIMS MADE ARISING OUT OF ADDITION TO FIXED ASSETS, SALARY EXPENSES, NATURE O F CONSULTANCY EXPENSES AND PROOF OF SERVICES RENDERED, ALLOWABILITY OF DON ATION ETC. THE QUASI- JUDICIAL VIEW OF THE AO ON THE SUBJECT CLAIMS ARE S ORELY MISSING. THE COURSE CHARTED BY THE CIT IS FOUNDED UPON THE PREM ISE THAT BASIC EVIDENCE TO SUPPORT THE CLAIMS ARE NOT DISCERNIBLE IN RECORDS AND THUS CANNOT BE FAULTED. THE ASSESSMENT ORDER HAS BEEN DE MONSTRATED BY THE CIT TO BE MARRED BY FLIPPANCY AND NON APPLICATION O F MIND IN RELATION TO THESE CLAIM UNDER REVISIONAL SCRUTINY. SUFFICE TO SAY, THE CIT HAS ASSIGNED PRIMA FACIE REASONS TO CAUSE ENQUIRY INTO CLAIM OF EACH OF SUCH EXPENSES AND DEDUCTION UNDER DISPUTE. THUS, EXERCIS E OF POWER UNDER S. 263 CANNOT BE DISCREDITED. IT WILL BE EXPEDIENT AT THIS JUNCTURE TO NOTE THAT THE ACTION OF THE CIT IS BASED ON RECORD PRESENT BEFORE IT. THE CIT HAS MERELY SET ASIDE THE DISPUTED CLAIMS FOR DE NOVO ASSESSMENT. THE ASSESSEE IS AT LIBERTY TO ASSIST THE ASSESSING OFFI CER IN TAKING THE MATTER TO LOGICAL CONCLUSION IN ACCORDANCE WITH LAW. MERE SET ASIDE OF THE ASSESSMENT UNDER S. 263 ON DEMONSTRABLE GROUNDS DOE S NOT CAUSE PREJUDICE TO THE ASSESSEE PER SE SO LONG AS THE RETURN OF INCOME FILED IS IN ACCORDANCE WITH LAW. THE ASSESSEE CONTINUES TO ENJO Y FAIR OPPORTUNITY TO SEEK FRESH ASSESSMENT IN ACCORDANCE WITH LAW. 19. IN THE LIGHT OF AFORESAID, WE DO NOT FIND A NY THING REPUGNANT IN THE ACTION OF CIT IN SETTING ASIDE THE ASSESSMENT ON TH E POINTS OF CONCERNS IN ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 32 - RELATION TO VARIOUS ITEMS OF EXPENSES AND DEDUCTION S ETC. AND CONSEQUENTLY FOR CAUSING APPROPRIATE ENQUIRY TO BE MADE IN THIS REGARD. THE ACTION OF THE CIT IS AMENABLE TO S.263 OF THE A CT AND THUS DOES NOT CALL FOR ANY INTERFERENCE. THE PLEA ON BEHALF OF T HE ASSESSEE ON THIS SCORE THUS REQUIRES TO BE DISCARDED. 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO. 759/AHD./2015 RELEVANT TO AY 2010-11 IS PARTLY ALLOWED. ITA NO.327/AHD/2015 FOR AY 2008-09 21. IN THE ASSESSMENT YEAR 2008-09 ALSO, THE ASSESS EE FILED ITS RETURN OF INCOME WHEREIN DEDUCTION UNDER S. 10B OF THE ACT AMOUNTING TO RS. 2,36,164/- WAS WRONGFULLY CLAIMED. THEREAFTER, IN R ESPONSE TO NOTICE UNDER S. 148, THE DEDUCTION CLAIMED IN THE ORIGINAL RETURN WAS WITHDRAWN. THE CIT ISSUED NOTICE UNDER S. 263 ON THE GROUND TH AT THE ORDER OF ASSESSMENT WAS ERRONEOUS IN AS MUCH AS THE AO FAILE D TO INITIATE THE PENALTY PROCEEDINGS UNDER S. 271(1)(C) IN RESPECT O F WRONGFUL CLAIM OF DEDUCTION UNDER 10B OF THE ACT. THE ORDER OF THE A O WAS CANCELLED BY THE CIT VIDE ITS ORDER DATED 21.01.2015 AND THE AO WAS DIRECTED TO MAKE FRESH ASSESSMENT OF THE TOTAL INCOME OF THE ASSESSE E. THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER OF THE CIT. THE GRO UNDS OF APPEAL RAISED BY THE ASSESSEE BEFORE THE TRIBUNAL READS AS UNDER. ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 33 - 1.1. THE ORDER PASSED U/S.263 ON 20/01/2015 FOR A Y 2008-09 BY CIT- II, ABAD IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST TH E PRINCIPLES OF NATURAL JUSTICE. THE IMPUGNED ORDER OF REVISION IS WHOLLY ILLEGAL AND WITHOUT JURISDICTION. 1.1. THE LD. CIT HAS GRIEVOUSLY ERRED IN LAW AND OR ON F ACTS IN HOLDING THAT THE ORDER OF ASSESSMENT DT 29/05/2012 WAS ERRONEOUS AND PREJUDICIAL TO THE REVENUE IN AS MUCH AS IT FAILED TO INITIATE AND LEVY PENALTY U/S.27191)9C) IN RESPE CT OF CLAIM OF EXEMPTION U/S.10B WHICH WAS WITHDRAWN SUO MOTU IN T HE RETURN FILED IN RESPONSE TO NOTICE U/S.148 BY THE APPELLAN T. 2.1. THE LD.CIT HAS GRIE4VOUSLY ERRED IN LAW AND ON FACTS IN HOLDING THAT THERE WAS CONCEALMENT OR FURNISHING INACCURATE PARTICULARS IN RESPECT OF CLAIM OF EXEMPTION MADE U/S.10B. 2.2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E AS WELL AS IN LAW, THE LD.CIT OUGHT NOT TO HAVE HELD THAT THERE WAS CO NCEALMENT OR FURNISHING INACCURATE PARTICULARS IN RESPECT OF CLA IM OF EXEMPTION MADE U/S.10B. 3.1. THE LD.CIT HAS ERRED IN LAW AND ON FACTS IN SE TTING ASIDE THE E NTIRE ASSESSMENT AND DIRECTING AO TO MAKE FRESH ASSESSMENT. 22. THE ISSUE INVOLVED IN THIS APPEAL IS THUS LIMIT ED TO ADJUDICATION ON CORRECTNESS OF THE ACTION OF THE CIT TOWARDS CANCEL LATION OF ASSESSMENT ORDER OWING TO FAILURE OF THE AO TO INITIATE PENALT Y PROCEEDINGS IN RESPECT OF WRONGFUL CLAIM UNDER S. 10B OF THE ACT. 23. THE ISSUE IS ALREADY ADJUDICATED IN FAVOUR OF T HE ASSESSEE CONCERNING AY 2010-11. IN PARITY WITH OUR FINDINGS IN THE OTHER APPEAL ITA NOS.327 & 759/AHD/2015 EASY TRANSCRIPTION & SOFTWARE PVT.LTD. VS.CIT/PR. CIT ASST.YEARS 2008-09 & 2010-11 RESPECTIVELY - 34 - INVOLVED IN THIS CONSOLIDATED ORDER, WE FIND MERIT IN THE APPEAL OF THE ASSESSEE. 24. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.327/AHD/2015 FOR AY 2008-09 IS ALLOWED. 25. IN THE COMBINED RESULT, APPEAL IN ITA NO.759/AH D./ 2015 IS PARTLY ALLOWED WHILE APPEAL IN ITA NO. 327/AHD./2015 IS AL LOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 10/01/2017 SD/- SD/- ( ..) ( ) ( R.P. TOLANI ) ( PR ADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 10/ 01 /2017 3..,.../ T.C. NAIR, SR. PS !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. %( / THE APPELLANT 2. )%( / THE RESPONDENT. 3. 456 7 / CONCERNED CIT 4. 7 ( ) / THE CIT-II, AHMEDABAD 5. 89:56 , 56/ , 4 / DR, ITAT, AHMEDABAD 6. :<, / GUARD FILE. / BY ORDER, )8 //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD
