2017 (10) TMI 1098 - AT - Income Tax

Revision u/s 263 - assessment order framed by the AO u/s. 143(3) is erroneous and prejudicial to the interest of the Revenue for not referring the property to the DVO u/s. 50C(2) and also failed to initiate penalty proceedings u/s. 271(1)(c) of the Act against the assessee for furnishing inaccurate particulars of income - Held that - CIT cannot be agitated by the assessment order, wherein no reference was made to the DVO u/s. 50C(2) of the Act because the Assessing Officer has adopted the value/sale consideration of the sale of gala at Bhiwandi as determined by the Stamp Duty Valuation Authorities at ₹ 32,27,381/-. The CIT cannot ask for revision in the price for the reason that in any eventuality the AO has to adopt either Stamp Duty Valuation or the value estimated by the DVO u/s 50C(2) of the Act, which is lower price. It means that the assessment order is neither prejudicial or nor erroneous. Secondly, whether the CIT u/s. 263 of the Act can direct the Assessing Officer to initiate penalty proceedings u/s. 271(1)(c) of the Act, this issue is clearly covered by the decisions of Hon ble Gujarat High Court in the case of CIT vs. Parmanand M Patel (2005 (7) TMI 72 - GUJARAT High Court) and Sterling Construction and Investments vs. ACIT(Inv) (2015 (4) TMI 838 - BOMBAY HIGH COURT) as held the inherent indication under section 271(1) of the Act makes it clear that the Commissioner does not have any powers to direct either of the authorities, the Assessing Officer or the appellate authority, to initiate and levy penalty. The section requires the Assessing Officer or the appellate authority to be satisfied in the course of any proceedings . This means, any proceedings before either of the specified authorities. The Commissioner cannot create proceedings. If he is not permitted to direct the appellate authority (and this is an accepted position) he cannot be permitted to substitute jurisdiction/powers of only the Assessing Officer by his satisfaction by creating proceedings where none exist-assessment having already been completed. - Decided in favour of assessee.

Summary

Issues:
Appeal against revision order under section 263 of the Income Tax Act, 1961 for not referring property to DVO under section 50C(2) and not initiating penalty proceedings under section 271(1)(c).

Analysis:
1. The only issue in the appeal is against the revision order of the CIT under section 263 of the Act, which deemed the assessment order as erroneous and prejudicial to the Revenue's interest for not referring the property to the DVO under section 50C(2) and for not initiating penalty proceedings under section 271(1)(c). The CIT contended that the assessment was flawed as the AO did not refer the property valuation to the DVO as required by law, resulting in the assessment of long-term capital gains at a lower value than estimated by the Stamp Duty Authorities. The CIT also highlighted the failure to initiate penalty proceedings for furnishing inaccurate income particulars.

2. The assessee sold long-term capital assets during the year and claimed exemption under section 54EC of the Act. The AO assessed the sale consideration of a gala at Bhiwandi without referring it to the DVO as objected by the assessee under section 50C(2). The CIT issued a show cause notice for revision, emphasizing the need to refer the matter to the DVO and initiate penalty proceedings. The CIT concluded that the AO's failure to refer to the DVO and initiate penalty proceedings was erroneous and prejudicial to Revenue's interest.

3. The Tribunal analyzed the case and determined that the CIT could not challenge the assessment order for not referring the property to the DVO under section 50C(2) since the AO adopted the value determined by Stamp Duty Valuation Authorities. The Tribunal cited legal precedents to establish that the CIT cannot direct the AO to initiate penalty proceedings under section 271(1)(c) as it falls within the AO's purview. The Tribunal emphasized that the CIT lacks the authority to substitute its satisfaction for that of the AO in penalty proceedings.

4. Consequently, the Tribunal held that the CIT cannot set aside the assessment solely for the purpose of initiating penalty proceedings under section 271(1)(c) through revisional jurisdiction under section 263 of the Act. Therefore, the Tribunal quashed the revision order passed by the CIT and allowed the appeal of the assessee.

In conclusion, the Tribunal ruled in favor of the assessee, emphasizing the limitations of the CIT's powers under section 263 regarding the initiation of penalty proceedings and the referral of property valuations to the DVO.