ITA. No.496/Del/2021

IN THE INCOME TAX APPELLATE TRIBUNAL
[DELHI BENCH: ‘G’ NEW DELHI]

BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER
A N D

SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER

I.T.A. No. 496/Del/2021 (A.Y. 2015-16)
(THROUGH VIDEO CONFERENCING)

Ms. Sunila Awasthi, Principal CIT – 12,
New Delhi.
E–802, Uniworld City East, Vs.
(RESPONDENT)
Sector : 30, Gurugram,

Haryana.

PAN : AAEPA9591J

(APPELLANT)

Assessee by : Shri Deepak Chopra, Adv.; &
Department by : Shri Harpreet Singh Ajmani,

Advocate;
Shri H. K. Chaudhary

[CIT] – DR;

Date of Hearing 01.07.2021
Date of Pronouncement 07.07.2021

O R D E R
PER PRASHANT MAHARISHI, AM :

01. This appeal is filed by the assessee against the order of the Ld. Pr.

Commissioner of Income Tax, Delhi–12, New Delhi, [ The ld PCIT] for

assessment year 2015-16 dated 30.03.2021, passed u/s 263 of The

Income tax Act, 1961 [ The Act] wherein it has been held that the

assessment order passed by the ACIT, Circle 61(1) New Delhi, [ the ld

AO] under Section 143(3) of the Income Tax Act, 1961 (the Act) dated

31st August, 2017 is erroneous and prejudicial to the interest of

Revenue as on the facts and circumstances of the case the ld.

Assessing Officer is not correct in not initiating penalty proceedings

under Section 271(1)(c) of the Act.

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02. However, the assessee has raised in all 15 grounds, but all challenges

are made towards the order passed by the ld. Pr. Commissioner of

Income Tax, under Section 263 of the Act.

03. Brief facts of the case shows that assessee is an Advocate by

profession and derives professional income. She filed her return of

income on 29.09.2015 declaring total income of Rs. 1,52,77,870/-.

This return was revised on 31st December 2016 declaring total income

of Rs. 1,97,54,000/-. The case of the assessee was selected for

limited scrutiny through computer added selection system and the

reasons were:

(i) Contract receipt / fees mis-match;

(ii) Sales turnover mis-match; and

(iii) Tax credit mis-match.

04. So the notice under Section 143(2) of the Act was issued on

20.09.2016. The ld. Assessing Officer accepted the revised return and

assessed the total income at Rs. 1,97,54,000/- as per order under

Section 143(3) of the Act passed on 31st August, 2017. In the

assessment order, the ld. AO did not initiate penalty proceedings

under Section 271(1) (c) of the Act.

05. On examination of the record of the assessee, the ld. Pr. CIT noted

that the order passed by the AO is erroneous and prejudicial to the

interest of Revenue. She found that the assessee has revised the

return on 31st December 2016 only when the assessee was asked to

reconcile the mis-match between the receipts shown in Income Tax

return and 26AS. According to Pr. CIT, section 139(5) of the Act has

been enacted when a bonafide mistake is discovered; assessee can

revise her return of income. Thus, according to her, assessee mis-

used this provision for her undue benefit. Ld Pr. CIT relied on Press

release dated 14.12.2016 of the CBDT. Based on these facts and

circumstances she noted that assessee has intentionally not offered for

tax the professional receipts amounting to Rs. 44,74,100/- in the

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original return of income and its deliberate suppression of facts, which

attracts penalty under Section 271(1)(c) of the Act. Therefore,

according to her, penalty on the income of Rs. 44,74,100/- which was

under-stated and offered for taxation by the assessee after its

detection by the Department is leviable. She, therefore, was of the

view that Assessing Officer did not apply his mind and did not make

due verification as she passed an order without initiating penalty

proceedings under Section 271(1)(c) of the Act and, therefore, the

order is erroneous in so far as it is prejudicial to the interest of

Revenue. Therefore, she issued a show cause notice on 23rd of March

2021.

06. The assessee submitted that during the course of assessment for

assessment year 2014-15 assessee discovered that tax counsel, who

prepared the return for assessment year 2014-15 did not reconcile the

professional receipts with Form No. 26AS and, therefore, she revised

return for assessment year 2014-15. As the counsel of the assessee

was the same for preparation of return for assessment year 2015-16

also, she hired the firm of Chartered Accountants for review of her

return for this year. As per reconciliation prepared by CA, the return

was revised and tax was paid by the assessee. A letter stating the

above facts was also placed before the Assessing Officer on 9 January

2017.

07. The ld. Pr. CIT noted that from the perusal of the record it is evident

that assessee had revised her return of income only after the notice

under Section 143(2) of the Act for scrutiny of the case was served on

her. The Assessing Officer is not correct in not initiating penalty

proceedings under Section 271(1) (c) of the Act and, therefore, the

order passed by the AO under Section 143(3) of the Act on 31.08.2017

without initiating penalty proceedings under Section 271(1) (c) of the

Act is erroneous in so far as it is prejudicial to the interest of Revenue.

She further held that there exists a prima facie case of concealment of

income in case of the assessee. Therefore, she directed the Ld

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Assessing Officer to initiate penalty proceedings under Section 271(1)

(c) of the Act for concealment of income and the order of the

Assessing Officer was modified to that extent. Such order under

Section 263 of the Act was passed on 30.03.2021.

08. Assessee is aggrieved with that order and, therefore, has preferred

this appeal.

09. The ld. AR submitted that assessee has revised her return of income

within the time available as per law. He further reiterated the

submissions made by her before ld AO and Ld PCIT. He repeated

submission of assessee vide letter dated 09th January, 2017, which

was also placed at page No. 14 of the Paper Book. He submitted that

though notice under Section 143(2) of the Act was issued to the

assessee on 20.09.2016, however, notice under Section 142(1) of

the Act was issued on 23 June 2017 wherein the basic information

including the computation of total income, audited accounts, and tax

audit report were asked for. He, therefore, submitted that the

assessee revised her return of income as soon as she came to know

about the bonafide error in the original return of income. He referred

to the provisions of the Act wherein according to Section 139(5) of the

Act assessee could validly revise her return of income as found bona

fide error in it. Therefore, his contention was that assessee revised

her return of income when she found a bonafide error in the original

return and it was before detection of such error by the Assessing

Officer. He also submitted that the CA, who committed the error, has

also submitted an affidavit dated 6 January 2017 wherein he owned

the mistake. Such affidavit is placed at page No. 20 of the Paper

book. He also submitted that identical facts existed in assessment

year 2014-15 wherein penalty was levied on the assessee of Rs.

14,08,420/- by the ld AO , which travelled up to the appellate stage of

the co-ordinate bench, who passed an order in ITA. No. 3611 (Del) of

2019 for assessment year 2014-15 dated 22.11.2019 wherein the

penalty was deleted. He, therefore, submitted that no such penalty

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can sustain for this year also as there is no change in the facts and
circumstances of the case. He further submitted that the issue is
squarely covered in favour of the assessee by following decisions of
various High Courts:

(i) Addl. CIT Vs. J. K. D’ Costa;
9 Taxman 88 (Del.);

(ii) Addl. CIT Vs. Achal Kumar Jain;
11 Taxman 228 (Del.);

(iii) CIT Vs. Rakesh Nain Trivedi
282 CTR 205 (P & H); &

(iv) Amarjeet Dhall Vs. CIT
46 taxmann.com168 (Chandigarh – Trib).

10. Based on the above decisions, he submitted that penalty proceedings

being independent from assessment proceedings, CIT dealing with

assessment proceedings could not expand his powers and direct the

Assessing Officer to initiate penalty proceedings, which are not before

him. He further relied upon several other judicial precedents on the

merits that no penalty could be levied on the facts and circumstances

of the case. He submitted that when revised return filed by an

assessee is accepted by Assessing Officer then merely by virtue of the

fact that such revised return discloses a higher income, penalty under

Section 271(1) (c) of the Act could not be imposed automatically. He

further submitted that even inadequate enquiry in itself cannot give

power to revise the order if LD AO has a different opinion in the

matter. He further submitted that even otherwise bonafide omission

with reasonable cause could not lead to imposition of penalty. He

submitted that even otherwise acting on the professional advice of the

expert is a reasonable cause. In the end, he referred to the Press

release dated 14 December 2016 of the CBDT, which was with respect

to filing of revised Income Tax return, by the taxpayer post-

demonetization of currency, which was relied by the LD PIT. He

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submitted that reliance on the above Press release is de void of any

merit as the case of the assessee does not have such facts. Therefore,

he submitted that the order passed by the ld. Pr. CIT is un-sustainable

and deserves to be set aside.

11. The ld. [CIT]–DR narrated the facts of the case once again and stated

that the case of the assessee was selected for scrutiny as there was a

mis-match found in the receipts of the profit and loss account with

Form No. 26AS. Therefore, it was detected at the time of selection of

the case itself. Therefore, on detection of the income shown lesser by

the assessee the assessee revised her return of income. Therefore, it

was not a case that assessee disclosed before detection any higher

income in revised return. He further submitted that when the

Assessing Officer failed to initiate the penalty proceedings the ld Pr.

CIT was within her power to examine that order and to hold that the

Assessing Officer should have initiated penalty proceedings, which AO

failed to initiate, and, therefore, the order is passed by the ld. Pr. CIT

finding that such assessment order is erroneous and prejudicial to the

interest of revenue. . She, therefore, is correct in passing the order

under Section 263 of the Act. He submitted that at present, we are

not concerned that assessee may be penalized or not, which could be

decided by the Assessing Officer later on levying the penalty

proceedings, but the matter here is that whether the order passed by

the Assessing Officer is erroneous or not. He submitted that it is so,

therefore, he supported the order of the ld. Pr. CIT.

12. We have carefully considered the rival contentions and perused the

orders of the lower authorities. We have also considered the various

judicial precedents relied upon by the learned authorised

representative. Facts are already culled out above. We find that the

issue is squarely covered in favour of the assessee by the decision of

the honourable jurisdictional High Court holding that the assessment

proceeding is a separate proceedings from penalty proceedings. When

the learned principal Commissioner of income tax is assuming

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jurisdiction u/s 263 of the income tax act, she does not have any right

to direct the learned assessing officer to initiate penalty proceedings

u/s 271 (1) © of the act. Honourable Delhi High Court in Addl. CIT

vs. J.K.D.’Costa (1981) 25 CTR (Del) 224 : (1982) 133 ITR 7 (Del) has

held that the CIT cannot pass an order under s. 263 of the Act

pertaining to imposition of penalty where the assessment order under

s. 143(3) is silent in that respect. The relevant observations recorded

are :

"It is well established that proceedings for the levy of a penalty
whether under s. 271(1)(a) or under s. 273(b) are proceedings
independent of and separate from the assessment proceedings.
Though the expression 'assessment' is used in the Act with
different meanings in different contexts, so far as s. 263 is
concerned, it refers to a particular proceeding that is being
considered by the CIT and it is not possible when the CIT is
dealing with the assessment proceedings and the assessment
order to expand the scope of these proceedings and to view the
penalty proceedings also as part of the proceedings which are
being sought to be revised by the CIT. There is no identity
between the assessment proceedings and the penalty
proceedings; the latter are separate proceedings that may, in
some cases, follow as a consequence of the assessment
proceedings. 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, as 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 finalized. 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

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Revenue because of the failure of the ITO to record his opinion
about the leviability of penalty in the case."

13. Special leave petition against the said decision was dismissed by the

apex Court (1984) 147 ITR (St) 1. The same view was reiterated by

the Delhi High Court in CIT vs. Sudershan Talkies (1993) 112 CTR

(Del) 165 : (1993) 201 ITR 289 (Del) and followed in CIT vs. Nihal

Chand Rekyan (1999) 156 CTR (Del) 59 : (2000) 242 ITR 45 (Del).

The Rajasthan High Court in CIT vs. Keshrimal Parasmal (1985) 48

CTR (Raj) 61 : (1986) 157 ITR 484 (Raj), Gauhati High Court in

Surendra Prasad Singh &Ors. vs. CIT (1988) 71 CTR (Gau) 125 :

(1988) 173 ITR 510 (Gau) and Calcutta High Court in CIT vs. Linotype

& Machinery Ltd. (1991) 192 ITR 337 (Cal) have followed the

judgment of Delhi High Court in J.K.D' Costa's case (supra).

14. However, Honourable Madhya Pradesh High Court in Addl. CIT vs.

Indian Pharmaceuticals (1980) 123 ITR 874 (MP) which has been

followed by the same Honourable High Court in Addl. CIT vs. Kantilal

Jain (1980) 125 ITR 373 (MP) and Addl. CWT vs. Nathoolal Balaram

(1980) 125 ITR 596 (MP) has adopted diametrically opposite

approach.

15. We are also mindful that it is not the case where ld AO has initiated

penalty proceedings and dropped it later on. Case before us is the ld

AO did not initiate proceedings at the first instance and ld PCIT has

invoked his jurisdiction u/s 263 Of the Act. We are also mindful of the

argument of the learned departmental representative that assessing

officer is required to initiate penalty proceedings in the assessment

order itself by recording the satisfaction about the concealment or

furnishing of inaccurate particulars of income for initiation of penalty

proceedings u/s 271 (1) © of the act. The satisfaction of the assessing

officer is always the part of the order of assessment. Therefore,

initiation of penalty proceedings is always the part of the order of the

assessment. The non-initiation of penalty proceedings by the learned

assessing officer makes the order of the learned assessing officer

ITA. No.496/Del/2021

erroneous. He submitted that the various judicial precedents

submitted by the learned authorised representative related to the

penalty proceedings with respect to late filing of the return etc and

subsequently followed for other penalty proceedings. He also referred

to the several judicial precedent where it was held that the learned

assessing officer is required to record the satisfaction with respect to

the initiation of the penalty proceedings. Therefore, it cannot be said

that non-initiation of the penalty proceedings is not part of the

assessment order. He also stated that penalty proceedings by issue of

show cause notice u/s 274 of the act is a separate proceedings

thereafter but initiation of the penalty proceedings and recording the

satisfaction of the assessing officer are part of the assessment

proceedings. Therefore the decisions relied upon by the learned

authorised representative should not have been applied. He otherwise

stated that there is no alternative left with the revenue wherein the

assessing officer does not initiate penalty proceedings. He submitted

that there is no other provisions of the law with safeguards the

interest of the revenue in such circumstances. We have also carefully

perused the arguments of the learned departmental representative

However, in view of the decision of the honourable Delhi High Court,

we are duty-bound to follow it.

16. Therefore, respectfully following the decision of the honourable Delhi

High Court we do not find any reason to sustain the order passed by

the learned principal Commissioner of income tax u/s 263 of the

income tax act.

17. Even otherwise we find that the assessee filed the original return on

29/9/2015, notice u/s 143 (2) was issued by the learned AO on

20/9/2016, assessee revised her return of income on 31 December

2016 and first notice u/s 142 (1) was issued to the assessee on 23rd of

June 2017 wherein the copy of the income tax return, balance sheet et

cetera were asked. This was the first instance where the assessing

officer got hold of the record of the assessee where AO could have find

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out the error. No doubt the case of the assessee was selected for

scrutiny with respect to the mismatch between the financial

statements and 26 AS, however when the assessing officer received

the details of income tax return and the annual accounts by letter

dated 17 July 2017 of the assessee in response to notice u/s 142 (1)

of the act, that was the first instance i.e. 17 July 2017 wherein the

assessing officer would have the first instance to detect that there was

an error in turnover reported by the assessee in her annual accounts

as well as in26AS. However, the assessee has revised return of income

on 31 December 2016 itself. Therefore, it is a clear-cut case that

before the detection by the learned assessing officer of an error in the

return of income, she revised return of income. Therefore even

otherwise in such cases penalty u/s 271 (1) © of the act could not

have been levied. Therefore, now the initiation of penalty proceedings

by the learned assessing officer is also guided by the above clear-cut

facts. Therefore, the order of the learned assessing officer cannot be

said to be erroneous order, if she did not initiate penalty proceedings

on the above fact.

18. Meanwhile in the case of the assessee for assessment year 2014 – 15

on identical facts and circumstances the coordinate bench in ITA

number 3611/del/2019 dated 22/11/2019 deleted the penalty levied

by the learned assessing officer. The learned interval Commissioner of

income tax issued show cause notice for assuming jurisdiction u/s 263

of the act on 23/3/2021. Therefore, at the time of examination of the

record by the learned principal Commissioner of income tax, issue is

squarely covered in favour of the assessee by the decision in her own

case in previous year, therefore, she was not justified in passing an

order on the identical facts by directing the learned assessing officer to

initiate the penalty proceedings for concealment of income. Thus on

this count also the order of the learned principal Commissioner of

income tax is not sustainable.

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19. Further more on going through the order passed by the learned

principal Commissioner of income tax u/s 263 of the income tax act it

is clear-cut that she relied on the president is dated 14 December

2016 issued by the government of India, central board of direct taxes

with respect to the filing of income tax return by the taxpayers post de

monetization of currency. Those she relied on the paragraph number

two of that pretzel in stating that if there is no omission or wrong

statement made in the original return of income the assessee cannot

revise the return filed originally. However, in the present case, we find

that there is an omission and a wrong statement, which is bona fide,

and therefore the assessee was entitled to revise a return of income. It

is also a fact that it is not a case of demonetization of currency.

Therefore, the assessee is validly entitled to revise a return of income.

If the argument of the learned principal Commissioner of income tax is

accepted then the sanctity of revising the return of income then in

assessee finds an error or omission in the originally filed return,

automatically in all such cases initiation of the penalty proceedings

would be mandatory. Such is not the mandate of law and therefore on

this count also the order passed by the learned principal Commissioner

of income tax is not sustainable.

20. In view of the above facts and reasoning, we hold that the order

passed by the learned principal Commissioner of income tax u/s 263 of

the act on 30th of March 2021 is not sustainable in law and therefore it

is quashed.

21. In the result, appeal filed by the assessee is allowed.

Order pronounced in the open court on :07/07/2021

-Sd/- -Sd/-
(SUCHITRA KAMBLE) (PRASHANT MAHARISHI)
JUDICIAL MEMBER
ACCOUNTANT MEMBER
Dated: 07/07/2021.
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*MEHTA*
Copy forwarded to: ITA. No.496/Del/2021
1. Appellant
2. Respondent ASSISTANT REGISTRAR
3. CIT ITAT NEW DELHI
4. CIT (Appeals)
5. DR: ITAT

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