TMI Blog2017 (1) TMI 1445X X X X Extracts X X X X X X X X Extracts X X X X ..... d be exercised under section 263 of the Act only in the case of where the order passed by the AO is erroneous and prejudicial to the interest of revenue. But in the present case, the order of the AO is neither erroneous nor prejudicial to the interest of revenue and therefore the ratio has wrongly been applied by the CIT. Accordingly, we set aside the proceedings u/s 263 of the Act and the consequent order of the ld.CIT. Appeal of the assessee is allowed. - I.T.A. 2930/Mum/2012 - - - Dated:- 27-1-2017 - Mahavir Singh (Judicial Member) And Rajesh Kumar (Accountant Member) For the Applicant : Harsh Shah For the Respondent : N. P. Singh ORDER Rajesh Kumar (Accountant Member) This is an appeal filed by the assessee ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under the Act on 7.3.2012 to explain why the assessment order passed under section 143(3) of the Act on 31.3.2009 should not be held erroneous and prejudicial to the interest of revenue for the reasons that the penalty proceedings u/s 271(1)(C) of the Act were not initiated in the assessment order. The assessee vide letter dated 21.3.2012 submitted that the expenses were incurred on behalf of the clients/principals on whose behalf it acted as agents. The reply of the assessee is reproduced below: 5 Assessee filed written submission on 21/03/2012. It was stated that these expenses were incurred for and on behalf of clients/principals on whose behalf it acted as Agents. The assessee further submitted that though the assessing officer h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us and prejudicial to the interest of revenue as has been held in the above decision. Finally, the Commissioner set aside the assessment order framed by the AO on the ground of non-initiation of penalty proceedings under section 271(1)(c) of the Act and accordingly directed the AO to examine whether the disallowance of 25% of sundry expenses should be treated as furnishing inaccurate particulars of income and concealment of income and decide the matter afresh. 6. The ld.AR vehemently submitted before us that the initiation of penalty proceedings, under section 271(1)(c) of the Act is a prerogative of and within the domain of the AO who decides the issue of initiation or non initiation of penalty proceedings on the basis of addition made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal, whereas the assessee claimed whole expenses in the return of income filed by it. In our considered view , it is a trite law that initiation of penalty is a sole prerogative and within the jurisdiction of the AO who makes the addition whether to initiate penalty or not to initiate penalty proceedings. It is true that there is no whisper in the assessment order to initiate penalty proceedings u/s 271(1)(c) but that does not mean that the AO has not gone into the mater. The rationale behind the CIT exercising revisionary powers u/s 263 of the Act seems quite absurd and meaningless for the reason that to initiate the penalty proceedings in the assessment order and then drop in the same order when the AO is satisfied. In our opini ..... X X X X Extracts X X X X X X X X Extracts X X X X
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