CIT revisional order setting aside dropping of penalty proceedings u/s 271(1)(c) by the AO was quashed by ITAT as AO took one of the possible views as per the judgment of Apex Court
ABCAUS Case Law Citation
ABCAUS 2361 (2018) 06 ITAT
In the all the cases covered under the instant judgment, several appeals had been filed against the respective orders passed under section 263 of the Income Tax Act, 1961 (the Act) by the Commissioner of Income Tax (CIT) revising the order of the Assessing Officer (AO) dropping the penalty proceeding initiated under Section 271(1)(c) of the Act. All the appeals were disposed of by a common order.
A search operation took place in the case of a company. It was found that the appellant assessees sold jewellery to the asid company during the year under consideration. With respect to the source for the acquisition of jewellery, the explanation of the assessees that these were received by them during the course of their marriage from the parents and relatives, was rejected by the Assessing Officer and the assessments were completed accordingly. The Assessing Officer also initiated penalty proceeding under Section 271(1)(c) of the Act.
The assessees also filed revised return before initiation of the penalty proceeding disclosing all the jewellery and offered the same for taxation. The revised returns were accepted by the Assessing Officer and no addition was made. The AO, after considering the decision of the Tribunal and the judgment of Apex Court dropped the penalty proceeding considering it not a fit case for levy of penalty.
However, the CIT invoking his revisional jurisdiction under Section 263 of the Act, found that dropping the penalty proceeding was erroneous and prejudicial to the interests of Revenue.
Before the Tribunal, it was submitted that under the Income tax Act, the authority who initiated penalty proceeding, was not obliged to levy penalty when he was satisfied with the explanation of the assessee in the course of penalty proceeding. Referring to Section 271(1)(c) of the Act, it was submitted that the AO may levy penalty for concealment of income or furnishing inaccurate particulars of such income, whereas in the instant case, the return were revised admitting their entire income and therefore, there was no question of any concealment or furnishing inaccurate particulars. Moreover, when the AO accepted the explanation offered by the assessees and found that it was not a case for levy of penalty, the Commissioner cannot substitute his view to that of the Assessing Officer by holding that the dropping the penalty proceeding was erroneous and prejudicial to the interests of Revenue.
It was argued that when the Assessing Officer, by placing reliance on the judgment of Apex Court took one of the possible views, the same cannot be considered to be erroneous and prejudicial to the interests of Revenue.
The Tribunal observed that as per the provisions of secrion 271(1)(c), it is obvious that if the Assessing Officer or the Commissioner, in the course of any proceeding under the provisions of Income-tax Act, is satisfied that any person concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct such person shall pay penalty. Therefore, discretion was vested on the Assessing Officer to levy penalty in case the Assessing Officer is satisfied that there was concealment of income or the assessee has furnished inaccurate particulars of his income. In the instant case, the assessees after the search proceeding in the case of the said company, filed their revised return and offered the value of the jewellery as income and paid the taxes. The Assessing Officer accepted the return filed by the assessees without any alteration or addition.
The Tribunal opined that when the assessees offered the income voluntarily and offered the same for taxation and the source of acquisition of such jewellery was also explained before the Assessing Officer as the gifts from relatives, friends and parents, which are accepted, there was no need to proceed further with penalty proceeding. The AO rightly placed his reliance on the judgment of Apex Court.
The Tribunal opined that the view taken by the Assessing Officer for dropping the penalty proceeding initiated under Section 271(1)(c) of the Act was one of the possible views supported by the judgment of Apex Court. Therefore, it was not justified for the Commissioner to substitute his view by setting aside the order of the Assessing Officer dropping the penalty proceeding initiated. The Tribunal set aside the orders of the Commissioner passed under Section 263 of the Act and the orders of the Assessing Officer dropping the penalty proceeding were restored.
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