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2022 (1) TMI 1204 - AT - Income TaxRevision u/s 263 by CIT - Reopening of assessment u/s 147 - assessment order being held erroneous for non-initiation of penalty proceedings u/s. 271(1)(c) - HELD THAT - It is clear that post amendment to section 271(1)(c) w.e.f. 1-4-2002 authorizing the commissioner also initiate penalty u/s 271(1)(c), the CIT still cannot direct the Assessing Officer to initiate penalty proceedings while exercising his revisionary power u/s. 263 of the act. The decision of the Jurisdictional High Court in the case of CIT vs. Parmanand M. Patel 2005 (7) TMI 72 - GUJARAT HIGH COURT still holds fort. The order of the PCIT exercising revisionary powers for directing initiation of penalty proceedings is therefore held to be not in accordance with law and is accordingly set aside. In view of the above, the exercise of revisionary powers by the Ld. PCIT on account of non-inquiry of the cash deposits in the bank account of the assessee and the interest income earned by the assessee is upheld, while on the aspect of initiation of penalty proceedings is set aside. The exercise of revisionary powers by the Ld. PCIT on account of non-inquiry of the cash deposits in the bank account of the assessee and the interest income earned by the assessee is upheld, while on the aspect of initiation of penalty proceedings is set aside.- Decided in favour of assessee.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Validity of the revisionary jurisdiction exercised by the PCIT u/s 263 of the Income Tax Act. 3. Non-verification of cash deposits and interest income by the Assessing Officer. 4. Non-initiation of penalty proceedings u/s 271(1)(c) by the Assessing Officer. Issue-Wise Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: The appeal was delayed by 54 days due to the accountant misplacing the order. The assessee filed an application for condonation of delay supported by an affidavit from the accountant admitting the lapse. The Tribunal noted the contention and found that the delay was not attributable to the assessee but to the accountant. The delay was accordingly condoned. 2. Validity of the Revisionary Jurisdiction Exercised by the PCIT u/s 263 of the Income Tax Act: The PCIT exercised revisionary jurisdiction on the grounds that the Assessing Officer’s order was erroneous and prejudicial to the interests of the Revenue due to non-verification of cash deposits and interest income, and non-initiation of penalty proceedings. The Tribunal upheld the PCIT’s exercise of revisionary powers regarding the non-verification of cash deposits and interest income but set aside the revisionary powers concerning the initiation of penalty proceedings. 3. Non-Verification of Cash Deposits and Interest Income by the Assessing Officer: The PCIT noted that the Assessing Officer did not make inquiries regarding huge cash deposits and withdrawals in the bank statements and the interest income returned by the assessee. The Tribunal agreed with the PCIT, stating that the lack of inquiry by the AO was sufficient to hold the order erroneous and prejudicial to the Revenue. Therefore, the Tribunal upheld the PCIT’s order on these two issues. 4. Non-Initiation of Penalty Proceedings u/s 271(1)(c) by the Assessing Officer: The Tribunal referred to the consistent orders of the Jurisdictional High Court, which held that the Commissioner, in exercise of revisionary power, cannot direct the initiation of penalty proceedings. The Tribunal also referred to the ITAT Ahmedabad Bench decision in the case of Easy Transcription and Software Pvt. Ltd., which held that despite the amendment to section 271(1)(c), the Commissioner still cannot direct the AO to initiate penalty proceedings while exercising revisionary power u/s 263. The Tribunal concluded that the PCIT’s exercise of revisionary powers for directing initiation of penalty proceedings was not in accordance with the law and set it aside. Conclusion: The Tribunal partly allowed the appeal of the assessee. The exercise of revisionary powers by the PCIT on account of non-inquiry of the cash deposits in the bank account and the interest income earned by the assessee was upheld, while the aspect of initiation of penalty proceedings was set aside.
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