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TMI Blog2019 (6) TMI 732X X X X Extracts X X X X X X X X Extracts X X X X ..... sofar the Explanation 2 of Sec.263 relied upon by the Pr. CIT is concerned, we are unable to comprehend as to how the same could have been put into service for dislodging the plausible view arrived at by the A.O. Admittedly, the dropping of the penalty proceedings u/s 271(1)(c) by the A.O on the basis of an order sheet noting is not found to be happily worded, however, the same cannot lead to an inference that there was no application of mind by the A.O while so concluding. At this stage, it would be relevant to point out that the Pr. CIT while rushing to the view that there was no proper application of mind by the A.O while dropping the penalty proceedings, had however, failed to consider the reply of the assessee that was filed by him in the course of the penalty proceedings. Perusal of the order sheet noting dated 28.04.2016 of the A.O reveals that he had only after being satisfied with the reply dated 01.04.2016 filed by the assessee, therein concluded that the penalty proceedings initiated u/s 271(1)(c) were to be dropped. Our aforesaid view that merely because the A.O had remained silent on a point would not mean that there was no application of mind on his part is for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of the appellant's case, the Hon ble PCIT erred in treating the submission of the assesse e as unsubstantiated without bringing any cogent material on record to prove such allegation and thus the order passed u/s 263 deserves to be annulled. 5. The appellant craves to leave, add, amend, alter or modify the ground or grounds of Appeal on or before the hearing. 2. Briefly stated, the assessee who is engaged in the business of testing, commissioning and designing of electrical power plants and providing training courses had e-filed his return of income for A.Y 2013-14 on 30.09.2013, declaring total income at ₹ 1,87,94,640/-. The return of income was processed as such under Sec. 143(1) of the I-T Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2). Thereafter, assessment was framed by the A.O under Sec.143(3) on 21.03.2016 at a total income of ₹ 2,20,56,640/- after making an aggregate addition of ₹ 32,60,000/- on the basis of un-reconciled AIR information viz. (i) un-reconciled cash deposits of ₹ 24,17,000/-; and (ii) un-reconciled FDRs: ₹ 8,42,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income, therefore, the A.O had after due application of mind dropped the penalty proceedings which were initiated in the assessment order under Sec. 271(1)(c). It was thus, the claim of the assessee, that as the A.O had after necessary deliberations and application of mind to the facts of the case dropped the penalty proceedings, therefore, the Pr. CIT was divested of his jurisdiction under Sec. 263, as the same would tantamount to re-examining the issue which had already been inquired into by the A.O. However, the Pr. CIT was not persuaded to accept the aforesaid reply of the assessee for multiple reasons viz. (i) that, as the assessee after the selection of his case for scrutiny assessment in September, 2014, had much subsequent thereto by his letter dated 01.03.2016 offered cash deposits of ₹ 25 lac to ₹ 30 lac as his income, and that too on the day when the copy of AIR details were given to him, therefore, it was incorrect on his part to claim that he had voluntarily offered the understated income before its detection by the department; (ii) that, if the case of the assessee would not have been selected for scrutiny assessment proceedings, then the aforesaid undis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver not persuaded to accept the same. Insofar, the claim of the assessee that jurisdiction under Sec. 263 would not take within its sweep dropping of the penalty proceedings by the A.O under Sec. 271(1)(c) on the basis of an order sheet noting was concerned, the same was rejected by the Pr. CIT. Further, the Pr. CIT adverting to the facts of the case observed that the claim of the assessee that he had voluntarily made the disclosure of understated income in the course of the assessment proceedings was factually incorrect. In order to drive home his aforesaid conviction, the Pr. CIT referred to the chronological events starting from the receipt of information by the A.O as regards the understated income of the assessee till the framing of the assessment under Sec. 143(3), as under : Sr. No. Date Remarks/Events 1. 29.08.2013 The information was reported to the department on the issue of cash deposits of ₹ 24,17,000/- in M/s. Model Co-operative Bank Ltd. by the assessee for the A.Y. 2013-14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which were initiated by him while framing the assessment under Sec. 271(1)(c). As such, the Pr. CIT drawing support of the provisions of Explanation 2 to Sec. 263, observed, that as the dropping of the penalty proceedings under Sec. 271(1)(c) by the A.O without proper application of mind had resulted to an order which was erroneous and prejudicial to the interest of the revenue, thus, set aside his order wherein he had dropped the penalty proceedings u/s 271(1)(c), and directed him to pass a reasoned order after affording a reasonable opportunity of being heard to the assessee. 6. Aggrieved, the assessee has carried the matter in appeal before us. The ld. Authorized Representative (for short A.R ) for the assessee took us through the facts of the case. The ld. A.R in order to buttress his claim that as the A.O after due application of mind had dropped the penalty proceedings which were initiated by him u/s Sec. 271(1)(c), therein took us through the relevant pages of the assesses Paper book (for short ABP ). It was submitted by the ld. A.R that on account of an inadvertent omission certain income in the form of cash deposits/FDRs had remained understated by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Sec. 263 was clearly excluded. As regards the reliance placed by the Pr. CIT on the judgment of the Hon ble Supreme Court in the case of MAK Data Pvt. ltd. Vs. CIT (2013) 358 ITR 593 (SC), it was submitted by the ld. A.R that the facts involved in the case of the assessee were clearly distinguishable as against those involved in the case before the Hon ble Apex Court. Alternatively, it was submitted by the ld. A.R, that as the A.O had dropped the penalty proceedings under Sec.271(1)(c) by way of an order sheet noting and not on the basis of any order , therefore, the Pr. CIT for the said reason also was divested of his jurisdiction to revise the said action of the A.O. On the basis of the aforesaid submissions, it was the claim of the ld. A.R that as the Pr. CIT had wrongly exercised his revisional jurisdiction under Sec.263, therefore, the order passed by him may be set aside and that of the A.O be restored. 7. Per contra, the ld. Departmental Representative (for short D.R ) relied on the order passed by the Pr. CIT. It was submitted by the ld. D.R that the Pr. CIT remaining well within the arena of his jurisdiction had validly revised the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the assessee had all on his own voluntarily offered the understated income in the course of the assessment proceedings is concerned, we have extensively deliberated on the chronology of the events in the backdrop of which the aforesaid understated income was disclosed by the assessee in the course of the assessment proceedings. It is the claim of the assessee, that he had offered the understated income of ₹ 25 lac to ₹ 30 lacs (approx.) for the year under reference, vide his letter dated 01.03.2016. Further, it is submitted by him that though the A.O had made available the AIR information on the very same date i.e 01.03.2016, however, the same was provided to him only after he had already offered the understated income of ₹ 25 lacs to ₹ 30 lacs (approx.) for tax, vide his aforesaid letter filed on the same day. We have deliberated on the aforesaid contention of the ld. A.R and find substantial force in the same. As is discernible from the AIR information that was made available to the assessee in the course of the assessment proceedings, it stands revealed, that the same was given to him only at 5:45 PM on 01.03.2016. The said factual position had not bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,190/- were those corresponding to the duly disclosed FDR s of ₹ 68,28,603/- which were held by him on 31.03.2008; and (v). that, as for the unreconciled balance of FDR s of ₹ 8,42,587/-, the same were those which were held by him on 31.03.2008 at ₹ 68,28,603/- and had over the years culminated to an amount of ₹ 76,71,190/- during the year under consideration. Accordingly, the unreconciled amount of FDR s had boiled down to an amount of ₹ 8,42,587/-. As observed by us hereinabove, the duly disclosed FDR s of ₹ 68,28,603/- held by the assessee on 31.03.2008 alongwith its interest element had culminated to an amount of ₹ 76,71,190/- during the year under consideration. In fact, the assessee had duly submitted before the A.O that the source of the entire FDR s held by him was either from his regular business books/own saving accounts or wifes accounts/jointly with mother or wife etc., though appearing in his name. It was submitted by the assessee that as some of the FDRs were under auto renewal mode, therefore, it was extremely difficult for him to match the same with the exact figure as the AIR information did not contain an ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was made by the assessee after detection by the revenue of its undisclosed income on the basis of incriminating documents that were found during the course of the survey proceedings conducted in the case of its sister concern . Accordingly, we are of the considered view that as the assessee in the case before us had voluntarily came forth with the disclosure of the income that was on account of bonafide reasons understated by him in his return of income, therefore, the judgment of the Hon ble Supreme court in the case of Mak Data P. Ltd. (supra) being distinguishable on facts would not assist the case of the revenue. 11. Accordingly, we are of the considered view that the A.O finding favour with the claim of the assessee that there was a bonafide mistake on his part in understating the aforesaid income of ₹ 32,60,000/-, which thereafter, in the course of the assessment proceedings was voluntarily offered by him for tax, had thus, dropped the penalty proceedings which were initiated by him u/s 271(1)(c) while framing the assessment. We are of the considered view that the A.O in totality of the facts of the case, had in all fairness, by adopting a plausible view ..... X X X X Extracts X X X X X X X X Extracts X X X X
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