2001 (12) TMI 223 - AT - Income Tax

Summary

Issues Involved:
1. Validity of invoking jurisdiction u/s 263 by CIT.
2. Dropping of penalty proceedings u/s 271(1)(c) by the Assessing Officer.
3. Nature of revised returns filed by the assessee.
4. Application of the Explanation to Section 271(1)(c).

Summary of Judgment:

1. Validity of invoking jurisdiction u/s 263 by CIT:
The CIT, Nasik, invoked jurisdiction u/s 263, considering the orders passed by the Assessing Officer as erroneous and prejudicial to the interest of Revenue. The CIT noted that the penalty proceedings u/s 271(1)(c) were dropped without proper verification of facts and material on record. The Tribunal held that for assuming jurisdiction u/s 263, the CIT must satisfy himself prima facie that the order of the Assessing Officer is erroneous and prejudicial to the interest of Revenue. The Tribunal found that the CIT did not base his satisfaction on material on record and quashed the CIT's orders.

2. Dropping of penalty proceedings u/s 271(1)(c) by the Assessing Officer:
The Assessing Officer dropped the penalty proceedings initiated u/s 271(1)(c) after considering the explanation provided by the assessee, which stated that the revised returns were filed in good faith and before the issuance of notice u/s 148. The Tribunal noted that the Assessing Officer had applied his mind and exercised his discretion judiciously in dropping the penalty proceedings. The Tribunal emphasized that penalty proceedings are quasi-criminal and require conscious concealment, which was not established in this case.

3. Nature of revised returns filed by the assessee:
The assessee filed revised returns disclosing additional income before the issuance of notice u/s 148. The Tribunal observed that the revised returns were filed voluntarily and in good faith, and the Assessing Officer had regularized these returns by issuing notices u/s 148. The Tribunal held that the revised returns could not be considered as non-est and the Assessing Officer rightly accepted them.

4. Application of the Explanation to Section 271(1)(c):
The Judicial Member, in a separate judgment, opined that the concealment of income should be seen with reference to the original return filed by the assessee and invoked the Explanation to Section 271(1)(c). However, the Third Member agreed with the Accountant Member, stating that the conditions precedent for assuming jurisdiction u/s 263 did not exist and the Assessing Officer's view was a possible view. The Tribunal concluded that the Assessing Officer's decision to drop the penalty proceedings was justified and not erroneous.

Final Decision:
The Tribunal quashed the orders of the CIT and allowed the appeals of the assessee. The Third Member's opinion aligned with the Accountant Member, emphasizing that the CIT's invocation of jurisdiction u/s 263 was not justified.