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TMI Blog2021 (12) TMI 746X X X X Extracts X X X X X X X X Extracts X X X X ..... ty proceedings is highly debatable issue. We are of the view that the CIT cannot set aside the Assessment Order for the sole purpose of initiating penalty proceedings in exercise of revisional jurisdiction. Hence, we quash the revision order passed by the PCIT and allow the appeal of the assessee. - ITA No.639/Mum/2021 - - - Dated:- 23-11-2021 - Sri Mahavir Singh, VP And Sri Manoj Kumar Aggarwal, AM For the Appellant : Shri Anuj Kisnadwala, AR For the Respondent : Ms. Shailja Rai, DR ORDER PER MAHAVIR SINGH, VP: This appeal of assessee is arising out of the order of PCIT, Mumbai [in short PCIT] vide order dated 05.03.2021. The Assessment was framed by the Dy. Commissioner of Income Tax, Circle-15(1)(1), Mumbai (in short DCIT/ AO ) for the A.Y. 2010-11 vide order dated 28.12.2018 under section 143(3) read with section 254 of the Income Tax Act, 1961 (hereinafter the Act ). 2. This appeal by assessee arising out of the revision order under section 263 of the Income Tax Act passed PCIT Central Mumbai-2 vide order No. ITBA/REV/F/REV5/2020- 21/1031251374(1) dated 05.03.2021. The original assessment was framed by the ITO Ward-10(3)(1), Mumbai for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Counsel for the assessee stated that the original assessment was framed by the ITO, Ward 10(3)(1), Mumbai under section 143(3)(ii) of the Act vide order dated 26.03.2013, wherein penalty under section 271(1)(c) of the Act was initiated for furnishing of inaccurate particulars of income/ concealment of income. This order of the Assessing Officer was challenged before CIT(A) and consequently matter was taken to the ITAT and ITAT in ITA No.2079/Mum/2015 vide order dated 24.04.2017 set aside the assessment to the file of the Assessing Officer. The learned Counsel for the assessee took us through the facts recorded by the PCIT in Para 2,3 4, which read as under:- 2. M/s. Anushakti Chemicals and Drugs Ltd. (PAN AAACA35I7H) has filed the return of income for A.Y. 2010-11 on 30.09.2010 declaring Nil total income. The assessment u/s 143(3) of the Income-tax Act, 1961 was completed on 23.03.2013 assessing total income at ₹ 5,97,05,484/-. 3. In the assessment order, it was held that since assessee s business was discontinued, the lease rental income and manufacturing services income was assessable under the head income from other sources . Further, since the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 of the Act and he read out Para 9, which read as under:- 9. Therefore, the assessment order passed 143(3) rws 254 of the Income-tax Act, 1961 on dated 28.12.2018 by the Assessing Officer in this case for Assessment Year 2010-11 is treated as erroneous in so far as it is prejudicial to the interest of revenue within the meaning of the clause (a) of explanation (2) below Section 263(1) of the Income-tax Act, 1961 and the same is hereby modified within the meaning of section 263(1) of the Income Tax Act 1961 with a following direction: The AO is directed to initiate the penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961 for furnishing inaccurate particulars of income as is clear from the facts discussed in the assessment order. Further, the Assessing Officer is also directed to issue penalty notice under section 271(1)(c) in accordance with the provisions of the Income-tax Act, 1961. 7. The learned Counsel for the assessee before us stated that by way of revision order, the penalty proceedings under section 271(1)(c) of the Act cannot be initiated and for this, he relied on the decisions of Hon ble Punjab and Haryana High court in the case of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the set aside assessment. We noted that the entire jurisprudence on the above subject is against Revenue and in favour of assessee and more particularly Hon ble Punjab and Haryana High Court has considered this issue and finally, after considering the authorities, held that the initiation of proceedings under section 263 of the Act is not permissible because initiation of penalty proceedings is highly debatable issue. Hon ble High court held in Para 4 to 8 as under:- 4. We have heard learned counsel for the parties. 5. After hearing learned counsel for the parties, we find the issue that arises for consideration of this Court in this appeal is could the CIT in exercise of power under Section 263 of the Act hold the order of the Assessing Officer to be erroneous and prejudicial to the interest of the revenue where the Assessing Officer had failed to initiate penalty proceedings while completing assessment under Section 153A of the Act. 6. It may be noticed that the said issue is no longer res integra. This Court in Subhash Kumar Jain case (supra) agreeing with the view of High Courts of Delhi in Additional J.K.D.'s Costa case (supra), CIT v. Sudershan Talkies [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment 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 court 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 assessed 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 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 respect. An assessment cannot be said to be erroneous or prejudicial to the interest of the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt held as under: 34. As there was a dichotomy between the views expressed by the High Court of Delhi on the one hand and the High Court of Madhya Pradesh on the other, in the case of P.C. Puri v. CIT [1985] 151 ITR 584 (Delhi), the learned Judges constituting the Division Bench expressed a difference of opinion and the matter was referred to a third Judge in terms of section 251 of the Act. The majority view has approved and confirmed the earlier view expressed by the High Court of Delhi in the case of Addl. CIT v. J.K. D' Costa [1982] 133 ITR 71. The learned third Judge while recording the majority opinion has distinguished the reasoning of the Madhya Pradesh High Court in the following manner: The fundamental fallacy in the reasoning of the learned Judges of the Madhya Pradesh High Court, with very great respect, is that the wide meaning that they attribute to the word 'assessment' is not borne out by the context. Take a simple illustration. The Income-tax Officer frames the assessment. But he does not initiate penalty proceedings. The Commissioner thinks that the order is erroneous and prejudicial to the revenue. He cancels the assessment and directs a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harsh results [CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC)]. This may well lead to tax laws capable, if unchecked, of great oppression. It will be an 'intolerable inquisition', to use an expressive phrase of H.H Monroe, if penalty proceedings can be continued even after the expiry of the original limit of two years (Intolerable Inquisition? Reflections on the Law of Tax, Hamlyn Lectures, 33 series). The object of the construction of a statute being to ascertain the will of the Legislature, it may be presumed that neither injustice nor absurdity was intended. If, therefore, a literal interpretation would produce such a result, and the language admits of an interpretation which would avoid it, then such an interpretation may be adopted (Owen Thomas Mangin v. IRC [1971] AC 739, 746 (PC) per Lord Donovan). (p. 609) 35. On the one side there is an opinion expressed by the High Courts of Madhya Pradesh, Allahabad and the minority opinion expressed by the learned judge of the Delhi High Court on which the Revenue places reliance, while on the other hand the High Courts of Delhi, Rajasthan, Gauhati, Calcutta and Madras have taken the view canvassed by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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