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TMI Blog2016 (7) TMI 457X X X X Extracts X X X X X X X X Extracts X X X X ..... hri S. K. Tulsiyan, Advocate For the Respondent : Shri S. Srivastava, CIT-DR ORDER Per Waseem Ahmed, Accountant Member :- This appeal by the assessee is against the order passed by Ld. Commissioner of Income Tax (CIT for short) under the provision of Sec. 263 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide M.No. CIT(C-I)/263/Enfield Gems Jewellery/Tech/12-13/Kol dated 21.11.2014. Assessment was framed by DCIT CC-VII, Kolkata u/s143(3) dated 28.03.2014 for Assessment Year 2012-13. 2. The only inter-connected issue in this appeal of assessee is against the revision order passed u/s 263 of the Act for revising the assessment order framed by Assessing Officer u/s 143(3) of the Act. For this, assessee has raised following grounds of its appeal:- 1. The order passed by the Commissioner of Income Tax u/s 263 of the Income-tax Act, 1961, is arbitrary, erroneous, void, invalid and bad in law. 2. On the facts and in the circumstances of the case, the learned CIT erred in holding that while disclosing the sum of ₹ 18.10 crores being written back liability, as undisclosed income, the appellant had submitted the application of the u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 18.10 crores but AO did not initiate penalty proceedings u/s 271AAA of the Act. Accordingly, L d CIT u/s 263 of the Act initiated proceedings by stating that order passed by AO is erroneous and prejudicial to the interest of Revenue on the ground that penalty proceedings u/s. 271AAA had not been initiated in the assessment order. In compliance to the notice the assessee submitted that the manner of deriving such income was duly verified by the AO at the time of assessment. The conditions for giving the immunity from the penalty under section 271AAA were duly fulfilled. The AO had not initiated the penalty proceedings under section 271AAA because he was of the view that no such penalty was leviable in the hands of the assessee. The issue of initiating the penalty is the subject matter of AO s satisfaction and therefore it cannot be disputed by the CIT under section 263 of the Act. Therefore the allegation of the CIT that the order is erroneous and prejudicial to the interest of Revenue, is not correct. However the ld. CIT disagreed with the submission of the assessee and observed that the assessee has submitted the application of undisclosed income but the manner in which it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act even the entry found in the books of account can amount to undisclosed income of the assessee. L d DR further submitted that by writing off the liability u/s 41(1) of the Act, the assessee has specified the application of income which does not disclose the manner for deriving the undisclosed income as contemplated u/s. 271AAA of the Act. The DR vehemently relied on the order passed by L d CIT. 5. We have heard the rival contentions and perused the materials available on record. From the facts of the case, we find that AO has not initiated the penalty proceedings u/s 271AAA of the Act in his assessment order which completed u/s. 143(3) of the Act. Therefore the L d CIT passed order u/s 263 of the Act by holding that order passed by AO is erroneous and prejudicial to the interest of Revenue. At this juncture Let us understand the provision of Sec. 271AAA of the Act which reads as under:- 271AAA.(1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1std day of June, 2007 [but before the 1std day of July, 2012], the assessee shall p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome in which it derived as contemplated in section 271AAA of the Act. However in the instant case in our view the manner has been duly explained for deriving the undisclosed income. We also find the AO being quasi judicial authority has not initiated the penalty proceedings in the assessment order is his jurisdictional authority. The ld. CIT cannot just substitute the authority of the AO with his opinion. In this connection we are putting our reliance in the judgment of High Court of Bombay CIT vs. Gabrial India Ltd. (1993) 114 CTR 0081 : (1993) 203 ITR 0108 : (1993) 71 TAXMAN 0585 Revision-Scope-Order sought to be revised must be erroneous and also by virtue of its being erroneous prejudice must have been caused to interests of the Revenue-Section 263 does not visualise substitution of judgment of Commissioner for that of ITO, unless the decision is held to be erroneous- Order is erroneous when it is not in accordance with law and is prejudicial when it has caused loss of revenue-There must be material before the Commissioner to satisfy him, prima facie, that the two requisites are present- Power cannot be exercised at the whims and caprice of Commissioner Held : T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. There must be material available on record called for by the Commissioner to satisfy him, prima facie, that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of suo motu revision under such circumstances will amount to arbitrary exercise of power. It is wellsettled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on records to satisfy it in that regard. If the action of the authority is challenged before the Court, it would be open to the Courts to examine whether the relevant objective factors were available from the records called for and examined by such authority. Any other view in the matter will amount to giving unbridled and arbitrary power to revising authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the ITO to re-examine the matter. That is not permissible. Further, inquiry and/or fresh determination can be directed by the Commissioner only after coming to a conclusion that the earlier finding of the ITO was erroneous and prejudicial to the interest of the Revenue. Without doing so, he does not get the power to set aside the assessment. In the instant case, the Commissioner did so and it is for that reason that the Tribunal disapproved his action and set aside his order. There is no infirmity in the above conclusion of the Tribunal. From the above discussion, we find that assessee is very much entitled for impounded from the penalty proceedings as specified u/s. 271AAA of the Act sub clause (2) of the Act. Therefore in our considered view, we find the impugned revision order unsustai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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