2023 (11) TMI 239 - HC - Income Tax

Revision u/s 263 - Unexplained jewellery found in assessee residence - petitioner has declared 101442.5 gms under the same VDI Scheme - HELD THAT - It is noticed that prior to the consequential order the petitioner had made statement on to the effect that 1194.60 gms of gold out of 2034.1 gms of gold formed part of 101442.5 gms of gold declared under VDI Scheme, 1997. The consequential order that was passed pursuant to judgment 2019 (7) TMI 705 - MADRAS HIGH COURT has not made any proper enquiry. There is no merger. The order of the Tribunal allows the Revenue's appeal. The High Court had merely remitted the case back to the respondent. Therefore, the decisions cited by petitioner are not relevant for allowing this Writ Petition. In the facts of the case, it cannot be said there is no merger as has been argued. Prima facie, the consequential order indicates that the said order is erroneous and is prejudicial to the interest with the Revenue warranting invocation of Section 263 of the Income Tax Act, 1961 as there is no proper reasoning and proper application of mind. Thus, there is no comparison between the case of the petitioner and petitioner's co-sister Shanmugapriya's case, who succeeded before the Tribunal 2016 (7) TMI 1529 - ITAT CHENNAI for the same assessment year. There, the Tribunal vide its final order was of the view that when the assessee's mother-in-law late Smt.Prema had declared 3650 grams of gold jewellery under VDI Scheme, the Assessing Officer was expected to give credit to the extent of 3605 grams of gold in the hands of the petitioner's co-sister out of 6136.90 gms of unaccounted gold found in the hands of petitioner's co-sister. There, during the search operation 6136.90 gms of unaccounted gold was found in the hands of petitioner's co-sister. Out of 6136.90 gms of gold, 3650 gms was set off as that of the gold of her mother-in-law late Smt.Prema, who had declared the aforesaid grams of gold under VDI Scheme, 1997. In the present case, 2034.1 gms of gold was found at the residence of petitioner's son R.Sabapathy on 18.08.2011. Whereas, in the present case, the petitioner has declared 101442.5 gms under the same VDI Scheme, 1997. During the search operation in the petitioner's son's residence viz., R.Sabapathy's residence, where 2034.1 gms of gold was found is claimed to be 101442.5 gms declared by the petitioner in VDI Scheme, 1997. The High Court by its order 2019 (7) TMI 705 - MADRAS HIGH COURT merely gave a fresh opportunity to the petitioner to explain the case afresh. AO has passed a consequential order on 29.10.2019 by stating that the case does not attract penalty since the additional income towards investment in jewellery was offered only to purchase peace with the Department. No case is made out for interfering with the Impugned Order,.

Summary

Issues Involved:

1. Legality of invoking Section 263 of the Income Tax Act, 1961.
2. Merger of previous orders with the order dated 29.10.2019.
3. Validity of the penalty imposed and later dropped by the 1st respondent.

Summary:

1. Legality of invoking Section 263 of the Income Tax Act, 1961:

The petitioner challenged the Impugned Order dated 23.03.2021, which directed the 1st respondent to initiate proceedings to impose a penalty. The 2nd respondent invoked Section 263 of the Income Tax Act, 1961, on the grounds that the order dated 29.10.2019 was erroneous and prejudicial to the interests of the Revenue. The court cited the Supreme Court's decision in Malabar Industrial Co. Ltd. Vs. CIT, which clarified that an order causing loss of revenue due to an erroneous assessment is prejudicial to the Revenue's interests. The court concluded that the 2nd respondent was justified in invoking Section 263, as the order dated 29.10.2019 lacked proper reasoning and application of mind.

2. Merger of previous orders with the order dated 29.10.2019:

The petitioner argued that the previous orders, including the High Court's judgment dated 03.07.2019, had merged with the order dated 29.10.2019, thus precluding the invocation of Section 263. However, the court found no merger, as the High Court had merely remitted the case back to the respondent for a fresh decision. The court referred to the explanation (1)(c) to Section 263, which allows revising orders that have not been considered and decided in appeal. The court held that the decisions cited by the petitioner were not relevant and that there was no merger in this case.

3. Validity of the penalty imposed and later dropped by the 1st respondent:

The petitioner had initially suffered an adverse assessment order and a penalty was imposed under Section 271(1)(c) of the Income Tax Act, 1961. The Appellate Commissioner dropped the penalty, stating that the gold jewellery could have been received as streedhan during marriage, and no concealment was established beyond doubt. The Tribunal later allowed the Revenue's appeal, reinstating the penalty. The High Court remitted the case back to the Assessing Officer for fresh consideration. The 1st respondent, in the consequential order dated 29.10.2019, dropped the penalty again, citing the petitioner's declaration under the VDIS Scheme. The 2nd respondent issued a show-cause notice and subsequently passed the Impugned Order to revise the assessment. The court found that the 1st respondent's order lacked proper enquiry and reasoning, thus justifying the 2nd respondent's invocation of Section 263.

Conclusion:

The court dismissed the writ petition, upholding the Impugned Order dated 23.03.2021, and concluded that the 2nd respondent acted within jurisdiction in directing the revision of the assessment. The connected miscellaneous petitions were also closed.