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2021 (7) TMI 299 - AT - Income TaxRevision u/s 263 - AO is not correct in not initiating penalty proceedings u/s 271(1)(c) - case of the assessee was selected for scrutiny as there was a mis-match found in the receipts of the profit and loss account with Form No. 26AS - HELD THAT - CIT issued show cause notice for assuming jurisdiction u/s 263 of the act on 23/3/2021. Therefore, at the time of examination of the record by the learned principal CIT, issue is squarely covered in favour of the assessee by the decision in her own case in previous year, therefore, she was not justified in passing an order on the identical facts by directing the learned assessing officer to initiate the penalty proceedings for concealment of income. Thus on this count also the order of the learned principal CIT is not sustainable. More on going through the order passed by the learned principal Commissioner of income tax u/s 263 of the income tax act it is clear-cut that she relied on the president is dated 14 December 2016 issued by the government of India, central board of direct taxes with respect to the filing of income tax return by the taxpayers post de monetization of currency. Those she relied on the paragraph number two of that pretzel in stating that if there is no omission or wrong statement made in the original return of income the assessee cannot revise the return filed originally. However, in the present case, we find that there is an omission and a wrong statement, which is bona fide, and therefore the assessee was entitled to revise a return of income. It is also a fact that it is not a case of demonetization of currency. Therefore, the assessee is validly entitled to revise a return of income. If the argument of the learned principal CIT is accepted then the sanctity of revising the return of income then in assessee finds an error or omission in the originally filed return, automatically in all such cases initiation of the penalty proceedings would be mandatory. Such is not the mandate of law and therefore on this count also the order passed by the learned principal Commissioner of income tax is not sustainable. We hold that the order passed by the principal Commissioner of income tax u/s 263 is not sustainable in law - Appeal filed by the assessee is allowed.
Issues Involved:
1. Erroneous and prejudicial assessment order. 2. Non-initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961. 3. Validity of the revised return filed by the assessee. 4. Jurisdiction of the Principal Commissioner of Income Tax (Pr. CIT) under Section 263 of the Income Tax Act, 1961. Detailed Analysis: 1. Erroneous and Prejudicial Assessment Order: The appeal concerns the order passed by the Pr. Commissioner of Income Tax (Pr. CIT) under Section 263 of the Income Tax Act, 1961, which held that the assessment order dated 31st August 2017 was erroneous and prejudicial to the interest of Revenue. The Pr. CIT observed that the Assessing Officer (AO) did not initiate penalty proceedings under Section 271(1)(c) of the Act despite the assessee revising her return to include previously omitted professional receipts amounting to ?44,74,100/-. 2. Non-initiation of Penalty Proceedings under Section 271(1)(c): The Pr. CIT argued that the AO should have initiated penalty proceedings under Section 271(1)(c) for deliberate suppression of income. The assessee contended that the revised return was filed within the permissible time frame under Section 139(5) due to a bona fide error, and not due to detection by the AO. The assessee's counsel cited several judicial precedents asserting that penalty proceedings are independent of assessment proceedings and that the Pr. CIT cannot direct the AO to initiate penalty proceedings under Section 263. 3. Validity of the Revised Return Filed by the Assessee: The assessee revised her return on 31st December 2016, before the AO issued the first notice under Section 142(1) on 23rd June 2017. The assessee argued that the revised return was filed to correct a bona fide error identified by her Chartered Accountant, and not due to any detection by the AO. The Tribunal found that the assessee's action of revising the return was in accordance with the law and before any detection of error by the AO. 4. Jurisdiction of the Pr. CIT under Section 263: The Tribunal examined whether the Pr. CIT had the jurisdiction to direct the AO to initiate penalty proceedings under Section 263. It referred to the Delhi High Court's decision in Addl. CIT vs. J.K.D’Costa, which held that penalty proceedings are separate from assessment proceedings and that the CIT cannot direct the AO to initiate penalty proceedings under Section 263. The Tribunal also noted that the Special Leave Petition against this decision was dismissed by the Supreme Court, reinforcing its validity. Conclusion: The Tribunal concluded that the Pr. CIT's order directing the AO to initiate penalty proceedings under Section 271(1)(c) was not sustainable. It emphasized that the assessment proceedings are separate from penalty proceedings and that the Pr. CIT does not have the authority to direct the initiation of penalty proceedings under Section 263. The Tribunal also noted that the assessee had revised her return before any detection of error by the AO, which further invalidated the Pr. CIT's order. Consequently, the Tribunal quashed the order passed by the Pr. CIT under Section 263 and allowed the assessee's appeal.
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