×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
06-06-2019, Harish C. Mehta, Section 271(1(c), 263, Tribunal Mumbai
The present appeal filed by the assessee is directed against the order passed by the Pr. Commissioner of Income Tax-24, Mumbai (for short „Pr. CIT ) under Sec.263 of the Income Tax Act, 1961, dated 05.12.2018. The assessee has assailed the order of the Pr. CIT before us on the following grounds of appeal:
“1. In law and on the facts and in circumstances of the appellant's case, the Hon'ble PCIT erred in concluding that while dropping penalty u/s 271(1(c), the ld. A O. has not applied his mind by observing that the no ting in the proceeding sheet in this regard was a single statement. Further, that the penalty was dropped by not passing a detailed speaking order. Thus, the action of the PCIT in drawing such conclusion/observation is erroneous and thus the order passed u/s 263 deserves to be cancelled.
2. In law and on the facts and in circumstances of the appellant's case, the Hon’ble PCIT erred in law in having assumed jurisdiction u/s 263 of the Act in order to substitute her subjective view in place of judicious view taken by the AO on the same set of facts and thus such assumption of power is unlawful and unjust and therefore the order passed u/s 263 shall be quashed.
3. In law and on the facts and in circumstances of the appellant's case, the Hon’ble PCIT erred in ignoring the sequence of the events on consideration of which the ld. AO. had dropped the penalty proceeding and therefore the order passed u/s 263 on such incomplete appreciation of facts shall be quashed.
4. In law and on the facts and in circumstances of the appellant's case, the H o n ’ b l e PCIT erred in treating the submission of the assessee 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 Rs.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 Rs. 2,20,56,640/- after making an aggregate addition of Rs.32,60,000/- on the basis of un reconciled AIR information viz. (i) un-reconciled cash deposits of Rs. 24,17,000/-; and (ii) un-reconciled FDRs: Rs.8,42,587/-. The A.O while framing the assessment also initiated penalty proceedings under Sec. 271(1)(c). However, the penalty proceedings in tiated u/s 271(1)(c) were thereafter dropped by
the A.O on the basis of the following noting in the order sheet: “28.04.2016 Authorized Representative Ms. Choksey attended the hearings, after going through the reply for 271(1)(c) dated 04.04.2016 & in the reply of the assessee is satisfactory and thus penalty is hereby dropped.”
3. The Pr. CIT after perusing the assessment records of the assessee, observed, that the A.O in the course of the penalty proceedings had without application of his mind dropped the penalty proceedings that were initiated u/s 271(1)(c). In fact, the Pr.CIT was of the view that the A.O was in error in accepting the incorrect claim of the assessee that the inadvertent omission on his part to offer certain income in the form of cash deposits/FDRs in the return of income for the year under consideration was thereafter voluntarily rectified by him even before the same was pointed out by the A.O. In sum and substance, he was of the view that the A.O had erred in accepting the aforesaid assertion of the assessee, which in fact was factually incorrect. As is discernible from the records, the Pr. CIT held a conviction that the assessee had came forth with the disclosure of the understated income in the course of the assessment proceedings after it was gathered by him that the understated income was well within the notice of the department. Accordingly, the Pr. CIT was of the view that it was absolutely incorrect on the part of the assessee to claim that the disclosure of the additional income was voluntarily made by him. Apart there from, the unsubstantiated claim of the assessee that it was the lapse on the part of the earlier chartered accountant which had led to the understatement of income, also did not find favour with the A.O. On the basis of his aforesaid observations the Pr. CIT issued a „Show Cause‟ notice, dated 12.06 2018 to the assessee and called upon him to explain as to why the order passed by the A.O dropping the penalty proceedings may not be revised under Sec. 263 of the I-T Act. In reply, it was submitted by the assessee that as he had came up with a voluntarily disclosure of the understated income which was inadvertently omitted to be offered in the return of 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)