Mrs. Renu Yadav, Haryana V. ACIT, Faridabad

ITA 632/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65635 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 06-08-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 06-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S C GOEL; RAJESH GOEL ADVS
• Assessee Lawyers: RENU JOHA RI
• Keywords: Income from undisclosed sources; Documents seized
• Section: 143(3); 142(1); 153A; 263; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI G.D. AGRAWAL, HONBLE VICE-PRESIDENT AND SHRI RAJPAL YADAV, HONBLE JUDICIAL MEMBER ITA NO. 632/DEL/2012 ASSESSMENT YEAR: 2008-09 DR. (MRS.) RENU YADAV W/O VS. ASSISTANT CIT, DR. (MRS.) SURAT SINGH YADAV, CENTRAL CIR. II, GAUSHALA ROAD, MAHENDERGARH. FARIDABAD. (PAN: AABPY300IG) (APPELLANT) (RESPONDENT) ASSESSEE BY: S/SHRI S.C. GOEL & RAJESH GOEL, ADVS. ASSESSEE BY: SMT. RENU JOHA RI, CIT(DR) ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE PRESENT APPEAL IS DIRECTED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF LEARNED CIT DATED 12.01.2012 PASSED UN DER SECTION 263 OF THE INCOME-TAX ACT, 1961 FOR ASSESSMENT YEAR 2008-09. T HE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT LEARNED COMMISSIONER HAS ER RED IN TAKING COGNIZANCE UNDER SEC. 263 OF THE ACT AND CANCELLING THE ASSESS MENT ORDER BY DIRECTING THE ASSESSING OFFICER TO REFRAME THE ASSESSMENT ORD ER IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A GYNECOLOGIST BY PROFESSION. SHE IS THE PROPRIETOR OF SARBHATI SURGI CAL & MATERNITY HOME, GOWSAULA ROAD, MAHANDERGARH (HARYANA). A SEARCH AN D SEIZURE OPERATION 2 WAS CARRIED OUT UNDER SEC. 132(1) OF THE ACT ON 04 TH OCTOBER 2007 AT HER RESIDENTIAL PREMISES AS WELL AS THE MATERNITY HOME. HER HUSBAND IS ALSO A DOCTOR AND HIS STATEMENT WAS RECORDED DURING THE CO URSE OF SEARCH. THE ASSESSEE HAS FILED HER RETURN OF INCOME ON 30 TH SEPTEMBER 2008, DECLARING A TOTAL INCOME OF RS.75,69,540. LEARNED ASSESSING OF FICER HAD ISSUED NOTICE UNDER SEC. 143(2) AND THEREAFTER ISSUED A QUESTIONN AIRE UNDER SEC. 142(1) OF THE ACT. AFTER HEARING THE ASSESSEE, HE FRAMED THE ASSESSMENT ORDER ON 14 TH SEPTEMBER 2009. HE ACCEPTED THE RETURN OF INCOME. I T IS A VERY BRIEF ASSESSMENT ORDER RUNNING INTO TWO PAGES AND EIGHT P ARAGRAPHS. LEARNED ASSESSING OFFICER, UP TO PARAGRAPH 4 OF THE ASSESSM ENT ORDER, HAS JUST MENTIONED THE BRIEF BACKGROUND OF THE SEARCH, HOW H E ASSUMED JURISDICTION AND WHEN HE HAS ISSUED NOTICES TO THE ASSESSEE. FRO M PARAGRAPHS 5 TO 8, HE HAS DISCUSSED THE ISSUE ON MERIT. HIS BRIEF FINDING READS AS UNDER: 5. THE REGULAR BOOKS OF ACCOUNT, VIZ THE CASH BOOK , THE LEDGER, THE JOURNAL, THE BILLS AND VOUCHERS AND THE BANK ACCOUN T STATEMENTS, WERE PRODUCED BY THE ASSESSEE WHICH WERE VERIFIED AND EX AMINED VIS-A-VIS THE FINDINGS OF THE SEARCH (CASH FOUND, JEWELRY FOU ND, IMMOVEABLE PROPERTY FOUND, THE DIARY/LOOSE SHEETS FOUND FACTS EMERGING OUT OF THE STATEMENTS RECORDED UNDER SEC. 132(4) OF THE ACT, A ND THE FINAL FINANCIAL STATEMENTS AND PERSONAL BALANCE SHEET FIL ED BY THE ASSESSEE WITH THE RETURN OF INCOME. 3 6. THE FINDINGS OF THE SEARCH HAVING NOT THROWN UP ANY SUBSTANTIAL MATERIAL TO REPUDIATE THE TOTAL INCOME RETURNED AT RS.76,69,540 IS ACCEPTED. 7. ASSESSED UNDER 143(3) READ WITH 153A AND 153B(1) (B) OF THE ACT ON A TOTAL INCOME OF RS.76,69,540. ISSUE A DEMA ND NOTICE AND A COPY OF THE ASSESSMENT ORDER TO THE ASSESSEE ALONG WITH THE CALCULATION OF THE TAX AND OTHER LIABILITIES. 8. THE ORDER OF ASSESSMENT IS PASSED WITH THE STATU TORY APPROVAL OF THE ADDITIONAL COMMISSIONER OF INCOME-TAX, CENTRAL RANGE, CHANDIGARH, COMMUNICATED VIDE HIS LETTER NO. ADDL.C IT/CHD/2009- 10/709, DATED 09/09/2009, IN ACCORDANCE WITH SECTIO N 153D OF THE ACT. SD/- ASST. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-II, FARIDABAD. COPY TO THE ASSESSEE 3. ON PERUSAL OF THE ASSESSMENT ORDER, LEARNED COMM ISSIONER FORMED AN OPINION THAT ASSESSMENT ORDER IS ERRONEOUS AND PREJ UDICIAL TO THE INTEREST OF THE REVENUE BECAUSE AN INCOME OF RS.1 CRORE WAS SUR RENDERED AT THE TIME OF SEARCH. THE ASSESSEE HAS OFFERED TO TAX THIS AMOUNT OF RS. 1 CRORE IN TWO ASSESSMENT YEARS I.E. RS. 63 LACS IN ASSESSMENT YEA R 2008-09 AND RS.37 LACS IN ASSESSMENT YEAR 2007-08. WHILE FRAMING THE ASSES SMENT ORDER, LEARNED ASSESSING OFFICER FAILED TO INITIATE PENALTY PROCEE DINGS UNDER SEC. 271(1)(C) 4 AND THUS HIS ORDER IS ERRONEOUS AS WELL AS PREJUDIC IAL TO THE INTEREST OF THE REVENUE. THIS SHOW-CAUSE NOTICE WAS ISSUED TO THE A SSESSEE ON 12.12.2011. IN RESPONSE TO THE SHOW-CAUSE NOTICE, IT WAS CONTEN DED THAT HUSBAND OF THE ASSESSEE HAS OFFERED A SUM OF RS. 2 CRORES REPRESEN TING HIS UNDISCLOSED INCOME AS WELL AS HIS WIFES UNDISCLOSED INCOME, FO R TAXATION OVER AND ABOVE NORMAL INCOME DISCLOSED IN THE RETURN. THIS O FFER WAS MADE SUBJECT TO THE CONDITION THAT NO PENALTY OR PROSECUTION UNDER INCOME-TAX ACT, 1961 OR ANY OTHER ACT WOULD BE INITIATED AGAINST THEM. LEAR NED ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORDER ON THE BASIS OF THE OFFER MADE BY THE HUSBAND OF THE ASSESSEE AND THE INCOME RETURNED BY HER. THE ASSESSMENT ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE I NTEREST OF THE REVENUE. IT WAS ALSO CONTENDED THAT FOR NON-INITIATION OF PENAL TY PROCEEDINGS, NO ACTION UNDER SEC. 263 OF THE ACT CAN BE TAKEN BY THE LEARN ED COMMISSIONER. IN ORDER TO BUTTRESS HER CONTENTIONS, ASSESSEE RELIED UPON THE JUDGMENT OF HONBLE JURISDICTIONAL HON'BLE HIGH COURT IN THE CA SE OF CIT VS. SUBHASH KUMAR JAIN REPORTED IN 335 ITR 364 AS WELL AS THE J UDGMENT OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF ACIT VS. J .K. DCOSTA REPORTED IN 133 ITR 7. IT WAS ALSO CONTENDED THAT SLP AGAINST THE JUDGMENT OF HON'BLE DELHI HIGH COURT WAS REJECTED. LEARNED CIT DID NOT MAKE REFERENCE TO THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT, RATH ER HE SUPPORTED HIS ORDER 5 WITH THE DECISION OF HON'BLE ALLAHABAD HIGH COURT R ENDERED IN THE CASE OF CIT VS. SURRENDER PRASAD AGGARWAL REPORTED IN 94 CT R 161. ACCORDING TO THE LEARNED CIT, IF THE ASSESSING OFFICER FAILED TO INITIATE PENALTY PROCEEDINGS THEN HIS ORDER CAN BE TERMED AS ERRONEO US AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE ALSO EMPHASIZED THAT DISMISSAL OF SLP BY THE HON'BLE SUPREME COURT IN THE CASE OF J.K. DCOS TA WITHOUT SPEAKING ORDER WOULD ONLY MEAN THAT COURT WAS NOT INCLINED T O EXERCISE ITS DISCRETION IN GRANTING LEAVE TO FILE THE APPEAL. IT DOES NOT A TTRACT THE DOCTRINE OF MERGER AND THE VIEW EXPRESSED IN THE IMPUGNED ORDER DOES N OT BECOME THE VIEW OF THE HON'BLE SUPREME COURT. ON THE BASIS OF THIS REA SONING, HE DID NOT GIVE PREFERENCE TO THE DECISION OF HON'BLE DELHI HIGH CO URT IN THE CASE OF J.K. DCOSTA AS WELL AS OF HONBLE JURISDICTIONAL HIGH C OURT. LEARNED COMMISSIONER SET ASIDE THE ASSESSMENT ORDER AND DIR ECTED THE ASSESSING OFFICER TO REFRAME THE ASSESSMENT IN ACCORDANCE WIT H THE PROVISIONS OF THE INCOME-TAX ACT, 1961. 4. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE IMPUG NING THE ORDER OF THE LEARNED CIT CONTENDED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE J URISDICTIONAL HIGH COURT IN THE CASE OF SUBHASH KUMAR JAIN. ON THE OTHER HAN D, LEARNED DR RELIED 6 UPON THE ORDER OF THE LEARNED CIT. SHE POINTED OUT THAT THE ASSESSING OFFICER HAS ACTED ERRONEOUSLY WHILE NOT INITIATING PENALTY PROCEEDINGS. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE RECORD CAREFULLY. THE ITAT IN THE CASE OF MRS. KHATIZA S. OOMERBHOY VS. ITO, MUMBAI, 101 TTJ 1095, ANALYZED IN DETAIL VARIOUS AU THORITATIVE PRONOUNCEMENTS INCLUDING THE DECISION OF HON'BLE SU PREME COURT IN THE CASE OF MALABRA INDUSTRIES 243 ITR 83 AND HAS PROPO UNDED THE FOLLOWING BROADER PRINCIPLE TO JUDGE THE ACTION OF CIT TAKEN UNDER SEC. 263 OF THE ACT. THE FUNDAMENTAL PRINCIPLE WHICH EMERGE FROM THE A BOVE CASES MAY BE SUMMARIZED BELOW (I) THE CIT MUST RECORD SATISFACTION THAT THE ORDE R OF THE A.O IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. BO TH THE CONDITIONS MUST BE FULFILLED. (II) SEC. 263 CANNOT BE INVOKED TO CORRECT EACH AN D EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE A,O AND IT WAS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. (III) AN INCORRECT ASSUMPTION OF FACTS OR AN INCOR RECT APPLICATION OF LAW WILL SUFFICE THE REQUIREMENT OF ORDER BEING ERRONEOUS. (IV) IF THE ORDER IS PASSED WITHOUT APPLICATION O F MIND, SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOUS ORDER. (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PRE JUDICIAL TO THE INTERESTS OF THE REVENUE AND IF THE A.O HAS ADOPTED ONE OF TH E COURSES PERMISSIBLE UNDER LAW OR WHERE TWO VIEWS ARE POSSIBLE AND THE A.O HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT B E TREATED AS AN ERRONEOUS ORDER, UNLESS THE VIEW TAKEN BY THE A.O I S UNSUSTAINABLE UNDER LAW. (VI) IF WHILE MAKING THE ASSESSMENT, THE A.O EXAMI NES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINE THE INCOME, THE CIT, WHILE EXERC ISING HIS POWER UNDER S. 263 IS NOT PERMITTED TO SUBSTITUTE HIS ESTIMATE OF INCOME IN PLACE OF THE INCOME ESTIMATED BY THE A.O. (VII) THE A.O EXERCISES QUASI-JUDICIAL POWER VEST ED IN HIS AND IF HE EXERCISES SUCH POWER IN ACCORDANCE WITH LAW AND ARR IVES AT A CONCLUSION, 7 SUCH CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SI MPLY BECAUSE THE CIT DOES NOT FEEL SATISFIED WITH THE CONCLUSION. (VIII) THE CIT, BEFORE EXERCISING HIS JURISDICTION UNDER S. 263 MUST HAVE MATERIAL ON RECORD TO ARRIVE AT A SATISFACTION. (IX) IF THE A.O HAS MADE ENQUIRIES DURING THE COU RSE OF ASSESSMENT PROCEEDINGS ON THE RELEVANT ISSUES AND THE ASSESSEE HAS GIVEN DETAILED EXPLANATION BY A LETTER IN WRITING AND THE A.O ALLO WS THE CLAIM ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, THE DECISION OF THE A.O CANNOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HI S ORDER HE DOES NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. 6. IN THE LIGHT OF ABOVE PROPOSITION, LET US EXAMIN E THE FACTS OF THE PRESENT CASE. LEARNED ASSESSING OFFICER HAS ISSUED NOTICE UNDER SEC. 153A OF THE ACT. ASSESSEE HAS FILED HER RETURN OF INCOME DECLARING TOTAL INCOME OF RS.76,69,540. IN THIS INCOME, A SUM OF RS.63 LACS I S THE INCOME OFFERED BY HER HUSBAND IN HIS STATEMENT. LEARNED COMMISSIONER TOOK INTO CONSIDERATION THE BREAK UP OF THIS INCOME ON PAGES 1 AND 2 OF THE IMPUGNED ORDER. HOWEVER, IN THE ASSESSMENT ORDER, LEARNED ASSESSIN G OFFICER HAS NOT SUBSTANTIATED THE ADDITION WITH ANY MATERIAL. HE SI MPLY ACCEPTED THE INCOME OF THE ASSESSEE. AS FAR AS ASSESSMENT OF THE INCOME IS CONCERNED, LEARNED COMMISSIONER HAS NO GRIEVANCE. HIS AREA OF DISPUTE IS THAT WHY ASSESSING OFFICER HAS NOT INITIATED THE PENALTY. IN THIS CONN ECTION, IT IS WORTH TO TAKE NOTE OF QUESTION NO. 13 AND ITS REPLY OF THE STATEM ENT OF ASSESSEES HUSBAND. IT READS AS UNDER: 8 I AM SHOWING ON DOCUMENTS SEIZED AS PER ANNEXURE-I TO A-27. PLEASE GO THROUGH THE SAME AND EXPLAIN ABOUT THE SA ME? I HAVE GONE THROUGH ALL THESE DOCUMENTS. THESE CONT AIN DETAILS OF MY INCOME AND THAT OF MY WIFES INCOME AND INVESTMENTS MADE OUT OF MY INCOME EARNED. ON THE BASIS OF THESE DOCUMENTS AND ANY OTHER INCOME EARNED BY ME AND BY MY WIFE. I OFFER AN ADDITIONAL INCOME OF RS.2 CRORES (TWO CRORES) REPRESENTING MY UNDISCLOSED INC OME AS WELL AS MY WIFES UNDISCLOSED INCOME FOR TAXATION OVER AND ABO VE OUR NORMAL INCOME DISCLOSED IN THE RETURN. I SHALL PAY ADDITIO NAL TAX ON THIS UNDISCLOSED INCOME BEFORE MARCH, 2008 SUBJECT TO NO PENALTY OR PROSECUTION UNDER INCOME-TAX ACT OR ANY OTHER ACT U /S. 132(4) OF THE INCOME-TAX ACT, 1961. I ALSO REQUEST THAT SEIZED CA SH OF RS. 32 LACS MAY BE ADJUSTED AGAINST TAX OF THIS UNDISCLOSED INC OME ADMITTED BY ME AND FOR THE BALANCE AMOUNT. I WILL BE GIVING POS T-DATED CHEQUES ISSUED BY ME AS WELL AS BY MY WIFE FOR RECURRING PU RPOSES. THIS OFFER OF SURRENDER OF UNACCOUNTED INCOME OF RS. 2 CRORES IN THE NAME OF MYSELF AND MY WIFE IS MADE UNDER THE PROVISION OF S EC. 132(4) OF I.T. ACT AND I MAY BE ALLOWED THE BENEFIT OF THE PROVISI ONS, ACCORDINGLY. SD/- 7. THE CONJOINT READING OF THE FINDINGS RECORDED IN THE ASSESSMENT ORDER, EXTRACTED SUPRA, AS WELL AS THE STATEMENT, THEN IT WOULD SUGGEST THAT ADDITION WAS MADE BASICALLY ON THE BASIS OF THIS STATEMENT. IN THE STATEMENT, OFFER WAS MADE SUBJECT TO THE CONDITION THAT NO PENALTY OR PR OSECUTION UNDER INCOME- TAX ACT, 1961 OR ANY OTHER ACT WAS TO BE INITIATED. ASSESSING OFFICER KEEPING IN MIND WHOLE BACKGROUND OF THE CASE DID NOT INITIA TE THE PENALTY. UNDER THE 9 ACT, IT IS NOT MANDATORY TO INITIATE A PENALTY, IT IS A DISCRETION WHICH VESTS WITH THE ASSESSING OFFICER WHILE FRAMING THE ASSESS MENT ORDER. IN THE IMPUGNED ORDER, LEARNED COMMISSIONER NOWHERE POINTE D OUT HOW THAT DISCRETION HAS NOT BEEN EXERCISED JUDICIOUSLY. HE I S SIMPLY HARPING UPON THE JUDGMENT OF THE HON'BLE ALLAHABAD HIGH COURT AND OB SERVED THAT IF PENALTY NOT INITIATED DURING THE COURSE OF ASSESSMENT PROCE EDINGS THEN ASSESSMENT ORDER CAN BE SAID TO BE ERRONEOUS. LEARNED COMMISSI ONER NOWHERE POINTED OUT AS TO WHY PENALTY OUGHT TO BE INITIATED. SIMUL TANEOUSLY, HE DID NOT DISCUSS THE JUDGMENT OF JURISDICTIONAL HIGH COURT W HICH IS BINDING UPON THE LEARNED COMMISSIONER AND DIRECTLY ON THE POINT. 8. THE QUESTIONS BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SUBHASH KUNAR JAIN WERE AS UNDER: WHETHER THE AGREEMENT MADE BY THE ASSESSING OFFICE R OF INITIATING NO PROCEEDINGS UNDER SECTION 271(1)(C) IS BAD IN LA W ? AND WHETHER THE ASSESSMENT SO FRAMED IS ERRONEOUS AND PREJUDICI AL TO THE INTERESTS OF THE REVENUE? HONBLE COURT ON AN ANALYSIS OF THE PROVISIONS OBSE RVED THAT THERE ARE TWO ISSUES INVOLVED IN THE APPEAL. THE FIRST ISSUE IS W HEN AN ASSESSEE MAKES A SURRENDER SUBJECT TO THE CONDITION THAT NO PENALTY WOULD BE IMPOSEABLE UPON 10 THE ASSESSEE, IN SUCH SITUATION IF THE ORDER IS PAS SED ON SUCH AN UNDERSTANDING THEN, NON-INITIATION OF PENALTY CANNOT GIVE RISE TO GRIEVANCE FOR FURTHER AGITATION. THE DISCUSSION MADE ON THIS ISSUE BY THE HONBLE COURT IS WORTH TO REFER. IT READS AS UNDER: 4. THE ISSUE INVOLVED IN THIS APPEAL HAS TWO FACETS . FIRSTLY, WHEN THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDE R UNDER SECTION 143(3) OF THE ACT HAD GIVEN AN OFFICE NOTE THAT THE SURRENDER OF THE AGRICULTURAL INCOME WHICH WAS MADE BY THE ASSESSEE WAS SUBJECT TO NO PENAL ACTION UNDER SECTION 271(1)(C), COULD THE CIT IN EXERCISE OF POWER UNDER SECTION 263 HOLD THE ORDER OF THE ASSES SING OFFICER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ECONDLY, WHETHER THE CIT COULD EXERCISE JURISDICTION UNDER S ECTION 263 OF THE ACT BY HOLDING THAT THE FAILURE OF THE ASSESSING OF FICER TO INITIATE PENALTY PROCEEDINGS WHILE COMPLETING ASSESSMENT UND ER SECTION 143(3) OF THE ACT WAS AN ORDER WHICH WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 5. ADVERTING TO THE FIRST ASPECT OF THE ISSUE, IT M AY BE NOTICED THAT THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDE R UNDER SECTION 143(3) HAD MADE AN OFFICE NOTE, THE RELEVANT PORTIO N OF WHICH IS AS UNDER:- THE REPORT OF THE INSPECTOR WAS CONFRONTED TO THE ASSESSEE WHO IN TURN ACCEPTED THE UNGENUINENESS OF AGRICULTU RAL INCOME SHOWN BY HIM AND THUS CAME FORWARD WITH A SU RRENDER OF AGRICULTURAL INCOME, SUBJECT TO NO PENAL ACTION U/S 271(1)(C) OF THE I.T. ACT. SINCE THE DEPARTMENT HAD NO DOCUME NTARY 11 EVIDENCE AGAINST THE ASSESSEE BUT ONLY THE REPORT O F THE INSPECTOR, THEREFORE, THE OFFER OF THE ASSESSEE WAS ACCEPTED. 6. A PERUSAL OF THE SAME CLEARLY SHOWS THAT THE ASS ESSEE HAD MADE SURRENDER WITH A CLEAR CONDITION THAT NO PENAL ACTI ON UNDER SECTION 271(1)(C) OF THE ACT WOULD BE INITIATED. THE OFFICE NOTE FURTHER DEPICTS THAT THE OFFER OF THE ASSESSEE WAS ACCEPTED BY THE DEPARTMENT SINCE THE DEPARTMENT HAD NO DOCUMENTARY EVIDENCE AGAINST THE ASSESSEE EXCEPT THE REPORT OF THE INSPECTOR. ONCE THAT WAS S O, THE DEPARTMENT COULD NOT TAKE SOMERSAULT AND SEEK TO LEVY PENALTY. 7. A DIVISION BENCH OF THIS COURT IN BANTA SINGH KARTAR SINGH V. COMMISSIONER OF INCOME-TAX, PATIALA, (1980) 125 ITR 239 (P&H) RELYING UPON BOMBAY HIGH COURT DECISION IN JIVATLAL PURTAPSHI V. CIT (1967) 65 ITR 261 HAD AN OCCASION TO CONSIDER AS TO WHETHER AN AGREEMENT BETWEEN ASSESSEE AND THE INCOME TAX AUTHO RITIES ARRIVED AT REGARDING IMPOSITION OF PENALTY WHILE SURRENDERI NG THE INCOME WAS TO BE ACTED UPON OR NOT. IT WAS OBSERVED THAT AN OR DER BASED ON AN AGREEMENT CANNOT GIVE RISE TO GRIEVANCES AND THE SA ME CANNOT BE AGITATED. 9. SIMILARLY, ON THE SECOND POINT, WHETHER NON-INIT IATION OF PENALTY WOULD MAKE THE ASSESSMENT AS ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF REVENUE, THE HONBLE COURT HAS RELIED UPON THE DECI SION OF HON'BLE DELHI HIGH COURT IN THE CASE OF J.K. DCOSTA AND OBSERVED THAT LEARNED COMMISSIONER CANNOT DIRECT THE INITIATION OF PENALT Y, WHERE THE ASSESSMENT 12 ORDER UNDER SECTION 143(3) IS SILENT. THE DISCUSSIO N MADE BY THE HONBLE COURT ON THIS ASPECT READS AS UNDER:- 9. NOW ADVERTING TO THE SECOND LIMB, IT MAY BE NOTI CED THAT THE DELHI HIGH COURT IN JUDGMENT REPORTED IN COMMISSIONER OF INCOME TAX V. J.K. D'COSTA [1981] 133 ITR 7 HAS HELD THAT THE CIT CANNOT PASS AN ORDER UNDER SECTION 263 OF THE ACT PERTAINI NG TO IMPOSITION OF PENALTY WHERE THE ASSESSMENT ORDER UNDER SECTION 143(3) IS SILENT IN THAT RESPECT. THE RELEVANT OBSERVATIONS RECORDED ARE:- IT IS WELL ESTABLISHED THAT PROCEEDINGS FOR THE LE VY OF A PENALTY WHETHER UNDER S. 271(1)(A) OR UNDER S. 273 (B) ARE PROCEEDINGS INDEPENDENT OF AND SEPARATE FROM THE ASSESSMENT PROCEEDINGS. THOUGH THE EXPRESSION ASSESSMENT IS USED IN THE ACT WITH DIFFERENT MEAN INGS IN DIFFERENT CONTEXTS, SO FAR AS S.263 IS CONCERNED, I T REFERS TO A PARTICULAR PROCEEDING THAT IS BEING CONSIDERED BY T HE COMMISSIONER AND IT IS NOT POSSIBLE WHEN THE COMMIS SIONER IS DEALING WITH THE ASSESSMENT PROCEEDINGS AND THE ASSESSMENT ORDER TO EXPAND THE SCOPE OF THESE PROCE EDINGS AND TO VIEW THE PENALTY PROCEEDINGS ALSO AS PART OF THE PROCEEDINGS WHICH ARE BEING SOUGHT TO BE REVISED BY THE COMMISSIONER. THERE IS NO IDENTITY BETWEEN THE ASSE SSMENT PROCEEDINGS AND THE PENALTY PROCEEDINGS; THE LATTER ARE SEPARATE PROCEEDINGS, THAT MAY, IN SOME CASES, FOLL OW AS A CONSEQUENCE OF THE ASSESSMENT PROCEEDINGS. AS THE T RIBUNAL HAS POINTED OUT, THOUGH IT IS USUAL FOR THE ITO TO RECORD IN THE ASSESSMENT ORDER THAT PENALTY PROCEEDINGS ARE BEING INITIATED, THIS IS MORE A MATTER OF CONVENIENCE THAN OF LEGAL REQUIREMENT. ALL THAT THE LAW REQUIRES, SO FAR AS THE PENALTY PR OCEEDINGS ARE CONCERNED, IS THAT THEY SHOULD BE INITIATED IN THE COURSE OF THE PROCEEDINGS FOR ASSESSMENT. IT IS SUFFICIENT IF THE RE IS SOME RECORD SOMEWHERE, EVEN APART FROM THE ASSESSMENT OR DER ITSELF, THAT THE ITO HAS RECORDED HIS SATISFACTION THAT THE ASSESSEE IS GUILTY OF CONCEALMENT OR OTHER DEFAULT FOR WHICH PENALTY ACTION IS CALLED FOR. INDEED, IN CERTAIN CA SES IT IS POSSIBLE FOR THE ITO TO ISSUE A PENALTY NOTICE OR I NITIATE PENALTY PROCEEDINGS EVEN LONG BEFORE THE ASSESSMENT IS COMP LETED 13 THOUGH THE ACTUAL PENALTY ORDER CANNOT BE PASSED UN TIL THE ASSESSMENT IS FINALISED. WE, THEREFORE, AGREE WITH THE VIEW TAKEN BY THE TRIBUNAL THAT THE PENALTY PROCEEDINGS DO NOT FORM PART OF THE ASSESSMENT PROCEEDINGS AND THAT THE FAI LURE OF THE ITO TO RECORD IN THE ASSESSMENT ORDER HIS SATISFACT ION OR THE LACK OF IT IN REGARD TO THE LEVIABILITY OF PENALTY CANNOT BE SAID TO BE A FACTOR VITIATING THE ASSESSMENT ORDER IN ANY R ESPECT. AN ASSESSMENT CANNOT BE SAID TO BE ERRONEOUS OR PREJUD ICIAL TO THE INTEREST OF THE REVENUE BECAUSE OF THE FAILURE OF THE ITO TO RECORD HIS OPINION ABOUT THE LEVIABILITY OF PENALTY IN THE CASE. 10. SPECIAL LEAVE PETITION AGAINST THE SAID DECISIO N WAS DISMISSED BY THE APEX COURT [1984] 147 ITR (ST.) 1. THE SAME VIEW WAS REITERATED BY THE DELHI HIGH COURT IN COMMISSIONER OF INCOME TAX V. SUDARSHAN TALKIES, [1993] 201 ITR 289 (DEL) AND FOLLOWED IN CIT V. NIHAL CHAND ROKYAN, [2000] 242 ITR 45 (DEL). THE RAJASTHAN HIGH COURT IN C OMMISSIONER OF INCOME TAX V. KESHRIMAL PARASMAL (1986) 157 ITR 484 (RAJ), GAUHATI HIGH COURT IN SURENDERA PARSHAD SINGH AND OTHERS V. CIT, (1988) 1 73 ITR 510 AND CALCUTTA HIGH COURT IN COMMISSIONER OF INCOME-TAX V. LINOTYPE AND MACHINERY LTD.,(1991) 192 ITR 337 (CAL ) HAVE FOLLOWED THE JUDGMENT OF DELHI HIGH COURT IN J.K. D'COSTA'S CASE (SUPRA) . 11. HOWEVER, MADHYA PRADESH HIGH COURT IN ADDL. COMMISSIONER OF INCOME-TAX, M.P. V. INDIAN PHARMACEUTICALS, [198 0] 123 ITR 874 (MP) WHICH HAS BEEN FOLLOWED BY THE SAME HIGH COURT IN ADDL. CIT V. KANTI LAL JAIN, [1980] 125 ITR 373 AND ADDL. CWT V. NATHOO LAL BELA RAM, [1980] 125 ITR 596 HAS ADOPTED DIAMETRICALLY OPPOSITE APPROACH. 14 12. WE ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE HIGH COURTS OF DELHI, RAJASTHAN, CALCUTTA AND GAUHATI, AND EXPRESS OUR INABILITY TO SUBSCRIBE TO THE VIEW OF MADHYA PRADESH HIGH COURT. 13. ACCORDINGLY, IT IS HELD THAT THE INITIATION OF PROCEEDINGS UNDER SECTION 263 WAS NOT JUSTIFIED. THE TRIBUNAL WAS RIG HT IN HOLDING THAT AFTER EXAMINING THE RECORDS OF THE ASSESSMENT IN EX ERCISE OF POWERS UNDER SECTION 263, WHERE THE CIT FINDS THAT THE ASS ESSING OFFICER HAD NOT INITIATED PENALTY PROCEEDINGS, HE CANNOT DI RECT THE ASSESSING OFFICER TO INITIATE PENALTY PROCEEDINGS U NDER SECTION 271(1)(C) OF THE ACT. 10. THE PENALTY IMPOSEABLE UNDER SEC. 271(1)(C) OF THE ACT OR UNDER SECTION 273(B) OF THE ACT ARE INDEPENDENT PROCEEDIN GS THEN THE ASSESSMENT ORDER. THE PENALTY IMPOSEABLE UNDER SEC. 271(A) HAS BEEN OMITTED W.E.F. 01.04.1989. THE PENALTY IMPOSEABLE UNDER SEC. 273-B IS CONCERNED, IT IS TO BE IMPOSED FOR FALSE STATEMENT OF/OR FAILURE TO PAY ADVANCE TAX. BOTH THESE PENALTIES ARE NOT DEPENDENT UPON THE ASSESSMENT ORD ER BUT THE HON'BLE JURISDICTIONAL HIGH COURT HAS CONSIDERED THE ISSUE WITH REGARD TO IMPOSITION OF PENALTY UNDER SEC. 271(1)(C) OF THE ACT. IN THE PRESENT CASE BEFORE US, THE ISSUE INVOLVED IS ALSO IN CONNECTION WITH PENALTY I MPOSEABLE UNDER SEC. 271(1)(C) OF THE ACT. RESPECTFULLY FOLLOWING THE JU DGMENT OF HON'BLE JURISDICTIONAL HIGH COURT, WE ARE OF THE VIEW THAT ASSESSING OFFICER HAS 15 EXERCISED HIS DISCRETION FOR NOT VISITING THE ASSES SEE WITH THE PENALTY. HIS ORDER CANNOT BE TERMED AS ERRONEOUS AND, THEREFORE, NO ACTION UNDER SEC. 263 IS JUSTIFIABLE. WE ALLOW THE APPEAL OF THE ASSESSEE AND QUASH THE ORDER PASSED BY THE LEARNED COMMISSIONER. DECISION PRONOUNCED IN THE OPEN COURT ON 12.10.201 2 SD/- SD/- ( G.D. AGRAWAL ) ( RAJPAL YADAV ) VICE-PRESIDENT JUDICIAL MEMBER DATED: 12/10/2012 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR