While upholding an order of revision, the Income Tax Appellate Tribunal, Kolkata bench recently held that non-initiation of penalty proceedings in the order of assessment would amount to error causing prejudice to the interest of the Revenue as per section 263 of the Income Tax Act, 1961.
A division bench comprising of judicial member Shri N.V.Vasudevan and accountant member Shri Waseem Ahmed held so while dismissing the appeal of assessee and upholds for a revision.
This is an appeal by the assessee against the order of Commissioner of Income Tax-17-Kolkata passed u/s 263 of the Income Tax Act, 1961 for assessment year 2006-07.
In the present appeal the assessee is an individual and engaged in the business of consultancy, supervision, planning and designing, estimating and evaluation. During the assessment proceedings it was found an addition of sum of Rs. 1, 62, 75,000/ as unexplained investment.
However the CIT had an opinion that the penalty proceedings u/s 271(1) (c) of the Act has not been initiated by the AO. According to him the order passed by AO was incorrect in so far as prejudicial to the interest of Revenue on account of non-initiation of penalty proceedings.
The assessee against the penalty order passed u/s. 271(1) (c) of the Act dated 27.03.2014 preferred an appeal before CIT (A) who deleted the penalty vide its order by submitting that penalty order was passed beyond the limitation period. The CIT (A) is set aside to the extent of initiation of penalty proceeding u/s.271 (1)(c) after examining the nature of addition made u/s.69A on account of unexplained investment in RBI Taxable Bonds.
Aggrieved by this order the assessee had come up before appellant authority, and submitted that CIT u/s 263 of the Act cannot expand his power to deal with penalty proceedings which are not before him. He further submitted that CIT (A) has already deleted the penalty levied by the AO on the ground that the order was time barred.
After perusal of record submitted by assessee, the tribunal relied on the judgment of Hon’ble Delhi High Court in the case of CIT vs. Surendra Talkies and CIT vs. C.R. K. Swami has held that non initiation of penalty proceedings in the assessment order amounts to error causing prejudice to the interest of Revenue.
The court bring into the notice of prescribed time limit u/s 275 of the Act to pass a penalty order. In this connection, no argument was advance by Ld. AR for the assessee. Finally the tribunal held that impugned order passed by Ld. Pr. CIT u/s. 263 of the Act is correct and as per the provision of law and accordingly dismissed the grounds raised by assessee.
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