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TMI Blog2012 (10) TMI 778X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of/or failure to pay advance tax. Both these penalties are not dependent upon the assessment order but relying on decision taken in Additional Commissioner Of Income-Tax, Madhya Pradesh Versus Indian Pharmaceuticals [1978 (10) TMI 12 - MADHYA PRADESH HIGH COURT] AO has exercised his discretion for not visiting the assessee with the penalty. His order cannot be termed as erroneous and, therefore, no action under sec. 263 is justifiable - in favour of assessee. - ITA No. 632/Del/2012 - - - Dated:- 12-10-2012 - SHRI G.D. AGRAWAL, AND SHRI RAJPAL YADAV, JJ. Assessee by: S/Shri S.C. Goel Rajesh Goel, Advs. Assessee by: Smt. Renu Johari, CIT(DR) ORDER PER RAJPAL YADAV: JUDICIAL MEMBER The present appeal is directed at the instance of the assessee against the order of Learned CIT dated 12.01.2012 passed under section 263 of the Income-tax Act, 1961 for assessment year 2008-09. The solitary grievance of the assessee is that Learned Commissioner has erred in taking cognizance under sec. 263 of the Act and cancelling the assessment order by directing the Assessing Officer to reframe the assessment order in accordance with the provisions of the Act. 2. The brief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... py to the assessee 3. On perusal of the assessment order, Learned Commissioner formed an opinion that assessment order is erroneous and prejudicial to the interest of the revenue because an income of Rs.1 crore was surrendered at the time of search. The assessee has offered to tax this amount of Rs. 1 crore in two assessment years i.e. Rs. 63 lacs in assessment year 2008-09 and Rs.37 lacs in assessment year 2007-08. While framing the assessment order, learned Assessing Officer failed to initiate penalty proceedings under sec. 271(1)(c) and thus his order is erroneous as well as prejudicial to the interest of the revenue. This show-cause notice was issued to the assessee on 12.12.2011. In response to the show-cause notice, it was contended that husband of the assessee has offered a sum of Rs. 2 crores representing his undisclosed income as well as his wife s undisclosed income, for taxation over and above normal income disclosed in the return. This offer was made subject to the condition that no penalty or prosecution under Income-tax Act, 1961 or any other Act would be initiated against them. Learned Assessing Officer has passed the assessment order on the basis of the offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAT in the case of Mrs. Khatiza S. Oomerbhoy vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon'ble Supreme Court in the case of Malabra Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT taken under sec. 263 of the Act. The fundamental principle which emerge from the above cases may be summarized below (i) The CIT must record satisfaction that the order of the A.O is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the A,O and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the A.O has adopted one of the courses permissible under law or wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain details of my income and that of my wife s income and investments made out of my income earned. On the basis of these documents and any other income earned by me and by my wife. I offer an additional income of Rs.2 crores (two crores) representing my undisclosed income as well as my wife s undisclosed income for taxation over and above our normal income disclosed in the return. I shall pay additional tax on this undisclosed income before March, 2008 subject to no penalty or prosecution under Income-tax Act or any other Act u/s. 132(4) of the Income-tax Act, 1961. I also request that seized cash of Rs. 32 lacs may be adjusted against tax of this undisclosed income admitted by me and for the balance amount. I will be giving post-dated cheques issued by me as well as by my wife for recurring purposes. This offer of surrender of unaccounted income of Rs. 2 crores in the name of myself and my wife is made under the provision of sec. 132(4) of I.T. Act and I may be allowed the benefit of the provisions, accordingly. Sd/-" 7. The conjoint reading of the findings recorded in the assessment order, extracted supra, as well as the statement, then it would suggest that addition was m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding that the failure of the Assessing Officer to initiate penalty proceedings while completing assessment under Section 143(3) of the Act was an order which was erroneous and prejudicial to the interest of the revenue. 5. Adverting to the first aspect of the issue, it may be noticed that the Assessing Officer while passing the assessment order under Section 143(3) had made an office note, the relevant portion of which is as under:- The report of the Inspector was confronted to the assessee who in turn accepted the ungenuineness of agricultural income shown by him and thus came forward with a surrender of agricultural income, subject to no penal action u/s 271(1)(c) of the I.T. Act. Since the Department had no documentary evidence against the assessee but only the report of the Inspector, therefore, the offer of the assessee was accepted. 6. A perusal of the same clearly shows that the assessee had made surrender with a clear condition that no penal action under Section 271(1)(c) of the Act would be initiated. The office note further depicts that the offer of the assessee was accepted by the department since the department had no documentary evidence against the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings. As the Tribunal has pointed out, though it is usual for the ITO to record in the assessment order that penalty proceedings are being initiated, this is more a matter of convenience than of legal requirement. All that the law requires, so far as the penalty proceedings are concerned, is that they should be initiated in the course of the proceedings for assessment. It is sufficient if there is some record somewhere, even apart from the assessment order itself, that the ITO has recorded his satisfaction that the assessee is guilty of concealment or other default for which penalty action is called for. Indeed, in certain cases it is possible for the ITO to issue a penalty notice or initiate penalty proceedings even long before the assessment is completed though the actual penalty order cannot be passed until the assessment is finalised. We, therefore, agree with the view taken by the Tribunal that the penalty proceedings do not form part of the assessment proceedings and that the failure of the ITO to record in the assessment order his satisfaction or the lack of it in regard to the leviability of penalty cannot be said to be a factor vitiating the assessment order in any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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