ORDERScope–Assessing officer not initiated penalty proceedings
Catch Note:
Even if while examining the records of an assessment order in exercise of his powers of revision under section 263, the Commissioner finds that the assessing officer has not initiated penalty proceedings, he cannot direct the initiation of penalty proceedings because the penalty proceedings are not a part of the assessment proceedings and thus, the Commissioner cannot pass an order under section 263 pertaining to the penalty.
Ratio:
Even if while examining the records of an assessment order in exercise of his powers of revision under section 263, the Commissioner finds that the assessing officer has not initiated penalty proceedings, he cannot direct the initiation of penalty proceedings because the penalty proceedings are not a part of the assessment proceedings and thus, the Commissioner cannot pass an order under section 263 pertaining to the penalty.
Held:
The majority view should be followed by the Tribunal, in which the Hon’ble High Courts have held that a Commissioner cannot pass an order under section 263 of the Act pertaining to the initiation of penalty proceedings by the assessing officer. In this view of the matter and respectfully following the decisions J.K. D’Costa’s case and other decisions while considering the scope and powers of the Commissioner under section 263 of the Income Tax Act, it is held that even if, while examining the records of an assessment order in exercise of his powers of revision under section 263, the Commissioner finds that the assessing officer has not initiated penalty proceedings, he cannot direct the assessing officer to initiate the penalty proceedings against the assessee under section 271(1)(c) because the penalty proceedings are not a part of the assessment proceedings and also because the non-initiation of penalty proceedings by the assessing officer under section 271(1)(c) during the course of assessment proceedings neither makes the order of the assessing officer erroneous nor prejudicial to the interests of the revenue. Accordingly, the order of the Commissioner (Appeals) passed under section 263(1) after setting aside the assessment order of the assessing officer and directing the assessing officer to initiate penalty proceedings against the assessee, is set aside and the ground of appeal taken by the assessee is allowed.
Case Law Analysis:
Ramlal Kishore Lal v. CIT ( 1972) 84 ITR 138 (All), Addl CIT v. Achal Kumar Jain (1983) 142 ITR 606 (Del), Surendera Parshad Singh v. CIT (1988) 173 ITR 510 (Gau), CWT v. A.N. Sarvaria (1986) 161 ITR 694 (Del) , P.C. Puri v. CIT(1985) 151 ITR 584 (Del) and Addl. CIT v. J.K D Costa (1982) 133 ITR 7 (Del) relied on.
Application:
Also to current assessment year.
Decision:
In favour of assessee.
Income Tax Act 1961 s.263
Revision under s. 263–ERRONEOUS AND PREJUDICIAL ORDERScope–Assessing officer not initiated penalty proceedings
Catch Note:
Even if while examining the records of an assessment order in exercise of his powers of revision under section 263, the Commissioner finds that the assessing officer has not initiated penalty proceedings, he cannot direct the initiation of penalty proceedings because the penalty proceedings are not a part of the assessment proceedings and thus, the Commissioner cannot pass an order under section 263 pertaining to the penalty.
Ratio:
Even if while examining the records of an assessment order in exercise of his powers of revision under section 263, the Commissioner finds that the assessing officer has not initiated penalty proceedings, he cannot direct the initiation of penalty proceedings because the penalty proceedings are not a part of the assessment proceedings and thus, the Commissioner cannot pass an order under section 263 pertaining to the penalty.
Held:
The majority view should be followed by the Tribunal, in which the Hon’ble High Courts have held that a Commissioner cannot pass an order under section 263 of the Act pertaining to the initiation of penalty proceedings by the assessing officer. In this view of the matter and respectfully following the decisions J.K. D’Costa’s case and other decisions while considering the scope and powers of the Commissioner under section 263 of the Income Tax Act, it is held that even if, while examining the records of an assessment order in exercise of his powers of revision under section 263, the Commissioner finds that the assessing officer has not initiated penalty proceedings, he cannot direct the assessing officer to initiate the penalty proceedings against the assessee under section 271(1)(c) because the penalty proceedings are not a part of the assessment proceedings and also because the non-initiation of penalty proceedings by the assessing officer under section 271(1)(c) during the course of assessment proceedings neither makes the order of the assessing officer erroneous nor prejudicial to the interests of the revenue. Accordingly, the order of the Commissioner (Appeals) passed under section 263(1) after setting aside the assessment order of the assessing officer and directing the assessing officer to initiate penalty proceedings against the assessee, is set aside and the ground of appeal taken by the assessee is allowed.
Case Law Analysis:
Ramlal Kishore Lal v. CIT ( 1972) 84 ITR 138 (All), Addl CIT v. Achal Kumar Jain (1983) 142 ITR 606 (Del), Surendera Parshad Singh v. CIT (1988) 173 ITR 510 (Gau), CWT v. A.N. Sarvaria (1986) 161 ITR 694 (Del) , P.C. Puri v. CIT(1985) 151 ITR 584 (Del) and Addl. CIT v. J.K D Costa (1982) 133 ITR 7 (Del) relied on.
Application:
Also to current assessment year.
Decision:
In favour of assessee.
Income Tax Act 1961 s.263
In the ITAT Chandigarh Bench ‘B’ D.R. Singh, Judicial Member And Joginder Pall, Accountant Member
ORDER
Per D.R. Singh, J.M.
The assessee has filed this appeal against the order of CIT(C), Ludhiana, dated 11-1-1999 for the assessment year 1994-95, passed under section 263(1) of the Income Tax Act on the ground involving the issue whether the Commissioner was justified in setting aside the assessment order only for the limited issue of passing an order after taking into consideration the provisions of section 271(1)(c) of the Income Tax Act.
2. The relevant and material facts for the disposal of this ground of appeal are that on going through the assessment records, it was noticed that the assessee has filed a return declaring income of Rs. 89,123 and apart from salary/income from the firm M/s. Glory Knitting Industries and interest income from the bank, the assessee also reflected the agricultural income of Rs. 9,91,090. The assessing officer required the assessee to furnish the proof regarding the ownership of the agricultural land on lease basis and details of income from the agriculture in the form of copies of lease deeds and copies of vouchers evidencing payment of the lease money. The assessee furnished the requisite details of various expenses relating to agricultural operations. The assessing officer deputed her Inspector to conduct enquiries regarding the agricultural activities of the assessee. The inspector after conducting on the spot enquiries at Village Metholi, Distt. Moradabad (UP), concluded that the lease deeds produced by the assessee were not genuine as some of the Lessors who allegedly signed the deeds were illiterate and one of the Lessors had died about 10 years back, that the land owners denied having leased out their land, that the assessee had shown the sale of arhar whereas enquiries showed that the main crops of the area were wheat, sugarcane and menthol. When this report was confronted to the assessee by the assessing officer, the assessee came forward with surrender of Rs. 9,91,090 and the assessment was completed at an income of Rs. 10,80,210 vide order under section 143(3) dated 18-4-1996 subject to no penal action under section 271(1)(c) of the Act. According to the Commissioner, from these enquiries it was clearly established that the assessee had filed false documents to justify his agricultural income and only when the report of the Inquiry Officer was confronted to the assessee, then only the entire agricultural income amounting to Rs. 9,90,190 was surrendered and so the surrender made by the assessee was thus not spontaneous act because the surrender came only when the entire income was found to be non-genuine and the assessing officer had in her possession necessary concrete evidence to such effect. Thus, according to Commissioner, in such circumstances the assessing officer by accepting surrender of the assessee did not act in accordance with the law and in consequence thereof by not initiating penalty proceedings under section 271(1)(c) of the Income Tax Act, lawful revenue due to the State which could have been realised by levying penalty u/s 271(1)(c) has not been realised. Hence, the Commissioner, was of the opinion that the order passed by the assessing officer under section 143(3) was not only erroneous but also prejudicial to the interests of the revenue. So, he issued a show-cause notice under section 263 of the Income Tax Act requiring the assessee to state as to why the provisions of section 263(1) of the Income Tax Act should not be invoked for taking remedial action for the assessment year 1994-95. In its written submissions, the assessee contended that the penalty proceedings for levy of penalty are independent and separate from the assessment proceedings and powers of Commissioner under section 263 cannot be extended to rope in penalty proceedings as part of the assessment proceedings. The assessee further contended that the failure of the assessing officer to record his/her satisfaction for initiating penalty proceedings in the assessment order cannot make the order erroneous or prejudicial and it is merely an opinion and failure of an opinion cannot make an order erroneous. In support of his contentions, the assessee placed reliance on the following citations :
1. Ramlal Kishore Lal v. CIT (1972) 84 ITR 138 (All).
2. Addl. CIT v. Achal Kumar Jain (1983) 142 ITR 606(Del).
3. Surendera Parshad Singh v. CIT(1988) 173 ITR 510 (Gau.).
4. CWT v. A.N. Sarvaria (1986) 161 ITR 694 (Del).
5. P C. Puri v. CIT(I985) 151 ITR 584 (Del).
6. Addl. CIT v. J.K. DCosta (1982) 133 ITR 73 (Del).
2.1 The Commissioner after considering these submissions and citations of the assessee and placing reliance on Addl. CIT v. Indian Pharmaceuticals (1980) 123 ITR 874 (MP), Addl. CWT v. Nathoolal Balaram (1980) 125 ITR 596 (MP), Addl . CIT v. Kantilal Jain (1980) 125 ITR 373 (MP), CIT v. Narpat Singh Malkhan Singh (1981) 128 ITR 77 (MP) exercised his revisional jurisdiction under section 263 of the Act, set aside the order passed by the assessing officer under section 143(3) and directed the assessing officer to frame afresh assessment keeping in view the facts attracting the penal action under section 271(1)(c) by making the following observations in his order:
“I have gone through the assessment records of the assessee and written submissions filed in response to the show cause. The enquiries got made by the assessing officer revealed that the assessee had filed false documents to justify his agricultural income and when the assessee was confronted by concrete evidence in possession of the department, the said agricultural income amounting to Rs. 9,91,090 was surrendered. The assessing officer by accepting the surrender when income from agricultural was established to be non-genuine, did not act according to the provisions of law and by not initiating penalty proceedings under section 271(1)(c) the state was deprived of lawful revenue which could have been realised by imposing penalty under section 271(1)(c).”
“On examination of the assessment proceedings and the assessment order it is seen that the orders under section 143(3) dated 18-4-1996 was passed by the assessing officer disregarding, facts on record w.r.t. furnishing of inaccurate particulars of income by the assessee. By not initiating penalty proceedings under section 271(1)(c) of the Income Tax Act, at the time of completion of assessment, an assessment order was passed which was not only erroneous but also prejudicial to the interests of the revenue.”
2.2 Before us, learned authorised representative for the assessee made identical submissions which he made before the Commissioner and contended that since the penalty proceedings are independent and separate from the assessment proceedings, so the powers of Commissioner cannot be extended for directing the assessing officer to initiate penalty proceedings against the assessee treating the same as part of the assessment proceedings. He further contended that failure of the assessing officer to record his/her satisfaction for initiating the penalty proceedings in the assessment order cannot make the assessment order erroneous or prejudicial to the interests of the revenue and so, revisional order passed by the Commissioner under section 263(1) of the Income Tax Act is liable to be set aside. In support his contention, besides placing reliance on the citations as referred to before the Commissioner. He placed reliance on Addl CIT v. Sudershan Talkies ( 1993) 200 ITR 153 (Delhi), G.R. Radhakrishnan v. Appropriate Authority (2002) 120 Taxman 34 (Mad.), Addl. CIT v. Precision Metal Works (1984) 19 Taxman 584 (Del).
2.3 On the other hand, learned Departmental representative for the revenue placing strong reliance on the reasoning given in the order of the Commissioner , submitted that the citations relied upon by the Commissioner were directly applicable to the case of the assessee and so relying on these citations revisional jurisdiction has been rightly invoked under section 263(1) and so the order passed by the Commissioner is liable to be upheld.
2.4 We have considered the rival submissions of both the parties, perused the records and carefully gone through the orders of the tax authorities below as well as the case laws relied upon by the Commissioner as well as before us by both the parties. From the arguments of both the parties, the issue required to be decided by us is whether the Commissioner can invoke powers under section 263(1) of the Income Tax Act so as to set aside the assessment order and directing the initiation of penalty proceedings in a case where the penalty proceedings were not initiated by the assessing officer before or at the time of making the assessment. The Commissioner relying on the decisions of Madhya Pradesh High Court in Indian Pharmaceutical’s case (supra), Nathoolal Balaram’s case (supra), Kantilal Jain’s case (supra) and Narpat Singh Malkhan Singh’s case (supra) and applying the same to the instant case of the assessee, invoked his powers under section 263(1) to set aside the assessment and directed the assessing officer to frame afresh assessment keeping in view the facts attracting the penal action under section 271(1)(c) of the Income Tax Act because in these cases, the M.P. High Court was of the view that Commissioner can invoke his powers under section 263(1) to set aside the assessment order and directing the assessing officer to make afresh assessment in accordance with the law keeping the applicability of the penalty provisions. Whereas on the other hand, in the following cases relied upon by the learned authorised representative for the assessee as well as mentioned in the book of Chaturvedi and Pithisaria’s Income Tax 5th Edition, various, High Courts and the Tribunals have taken a view that where the penalty proceedings were not initiated before or at the time of making the assessment, the Commissioner cannot invoke powers under section 263(1) of the Income Tax Act so as to set aside the assessment order and direct initiation of the penalty proceedings.
(i) In the case of J.K. DCosta (supra), their Lordships while observing:
“Section 263 of the Income Tax Act, 1961 refers to a particular proceeding that is being considered by the Commissioner and it is not possible, when the Commissioner in dealing with the assessment proceedings and assessment order, to expand the scope of these proceedings which are being sought to be revised by the Commissioner. Proceedings for the levy of a penalty whether under section 271(1)(a) or section 273(b) are proceedings independent of and separate from the assessment proceedings. There is no identity between the two. Though it is usual for the Income Tax Officer to record in the assessment order that penalty proceedings are being initiated, there 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 course of the proceedings for assessment. Failure of the Income Tax Officer 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 because of the failure of the Income Tax Officer to record his opinion about the leviability of the penalty in the case”.
Held
“Affirming the decision of the Tribunal, that the Commissioner while revising an assessment order, could not pass orders relating to penalties.”
(ii) In the case of Achal Kumar Jain (supra). Their Lordships of Delhi High Court, following their decision in J.K. DCostas case (supra) and dissenting from the decision of the M.P. High Court in Indian Pharmaceutical’s case (supra), Kantilal Jain’s case (supra), Nathoolal Balaram’s case (supra) and Narpat Singh Malkhan Singh case (supra) observed:
“Penalty proceedings do not form part of the assessment proceedings. Recording by the Income Tax Officer of a satisfaction or direction to issue a notice under section 271(1)(a) of the Income Tax Act, 1961 for late filing of return or under section 273(b) for failure to file an estimate of advance tax and pay the tax, is not an integral part of the assessment order so that a failure to do so would render it erroneous or prejudicial to the revenue. In the context of section 263, the expression “assessment” refers to the particular “proceeding” that is to be considered. If the Commissioner is dealing with assessment proceedings and the assessment order, he cannot expand his powers to deal with penalty proceedings when they are not before him.”
Held :
“Accordingly that while examining the records of an assessment order in exercise of his powers of revision under section 263, the Commissioner was not justified in setting aside the assessment order and directing the initiation of penalty proceedings because the Commissioner found that the Income Tax Officer had not initiated penalty proceedings either under section 271 (1)(a) for late filing of return or under section 273 for failure to file an estimate of advance tax in terms of section 212(3) and paying tax accordingly.”
(iii) In 147 ITR (St.) 1 (SC), their Lordships of Apex Court dismissed the special leave petition of the department against this judgment of Delhi High Court in J.K DCostas case (supra) whereby the High Court on a reference held that the Commissioner in a suo motu revision under section 263 of the Income Tax Act, 1961 of an assessment proceedings, was not entitled to set aside the assessment order on the ground that there was no mention of initiation of penalty proceedings in the assessment order and to direct the Income Tax Officer to make fresh assessment and to initiate penalty proceedings.
(iv) In the case of P.C Puri (supra) on difference of opinion between the two judges justice Rohtagi concurring with Justice Chadha, held:
“that the penalty proceedings do not form part of assessment proceedings and the Commissioner cannot, in exercise of his powers under section 263 revise an assessment order and direct the assessing officer to initiate proceedings for the imposition of the penalty under section 273(a).”
In this case also, their Lordships of Delhi High Court following the decision in J.K D’Costas case (supra) and Achal Kumar Jain’s case (supra) dissented from the decision of the M.P. High Court in Indian Pharmaceutical’s case (supra), Kantilal Jains case (supra) and Nathoolal Balaram’s case (supra).
(v) In the case of Precision Metal Works case (supra), held:
“That the Commissioner was not justified in setting aside the assessment order and directing the Income Tax Officer to initiate penalty proceedings under sections 273 and 271(1)(c).”
In this case, their Lordships of Delhi High Court, followed the decision of Delhi High Court in Achal Kumar Jain’s case (supra).
(vi) In the case of CIT v. Keshrimal Parasmal (1986) 157 ITR 484 (Raj.) observed:
“The Commissioner held that there was no sound reason for the Income Tax Officer for not initiating proceedings under section 271(1)(c) of the Income Tax Act, 1961 for which a prima facie case existed since there was a clear confession of concealment of true particulars of income by the assessee by the act of surrendering a cash credit and hence the order of the Income Tax Officer was erroneous and prejudicial to the interests of the revenue which required interference under section 263 and set aside the order of the Income Tax Officer and directed him to make a de novo assessment. The Tribunal cancelled the order of the Commissioner and also rejected the application of the revenue for referring a question of law on an application under section 256(2)”:
Held :
“that the Commissioner was not entitled to set aside the assessment order passed by the Income Tax Officer on the ground that there was no mention of initiation of penalty proceedings in the assessment order and the Commissioner in the proceedings under section 263 could not direct the Income Tax Officer to make a fresh assessment for initiating penalty proceedings. Therefore, no question of law arose out of the order of the Tribunal.”
In this case, their Lordships of Rajasthan High Court followed the decision in J.K. DCosta’s case (supra) and dissented from the decision in Indian Pharmaceuticals case (supra).
(vii) In the case of A.N. Sarvaria (supra) their Lordship held:
“The Commissioner of Wealth Tax has no power under section 25(2) of the Wealth Tax Act, 1957 to revise the, order of assessment passed by the Wealth Tax Officer on the ground that it is erroneous merely because the Wealth Tax Officer failed to initiate penalty proceedings under section 18(1)(a) read with section 18(2) of the Wealth Tax Act.”
In this case, their Lordships of Delhi High Court followed the decision in J.K. D’Costa case (supra) Achal Kumar Jain’s case (supra) and dissented from the decision in Indian Pharmaceutical’s case (supra), Nathoolal Balaram’s case (supra), Kantilal Jain’s case (supra) and Narpat Singh Malkhan Singh’s case (supra).
(viii) In the case of Surendera Parshad Singh (supra),,their Lordships of Gauhati High Court held:
“That the order of the Addl. Commissioner in so far as it held the assessment order as vitiated because the penalty proceedings had not been initiated was not valid. The Addl. Commissioner had no jurisdiction while acting under section 263 to an unqualified direction to the Income Tax Officer to initiate penalty proceedings.”
In this case also, their Lordships of Gauhati High Court followed the decision in J.K. DCosta’s case (supra).
(ix) In the case of Sudershan Talkies (supra), their Lordship of Delhi High Court observing:
“Proceedings for levy of penalty, whether under section 271(1)(a) or section 273(b) of the Income Tax Act, 1961 are proceedings independent of, and separate from the assessment proceedings. Failure to initiate penalty proceedings would not give jurisdiction to the Commissioner to pass an order under section 263 and direct the initiation of penalty proceedings by the Income Tax Officer.”
Held :
“That the Tribunal was correct in holding that the question of levying penalty under section 273(b) was extraneous to the scope of the assessment order and it could not be covered by recourse to section 263 inasmuch as it was neither prejudicial to the interests of the revenue nor was it erroneous.”
In this case also, their Lordships of Delhi High Court followed the decision in J.K. D’Costa, case (supra) and dissented from the decision in Indian Pharmaceutical case (supra), Kantilal Jain case (supra) and Nathoolal Balaram’s case (supra),
(x) In the case of CIT v. Linotype & Machinery Ltd. ( 1991) 192 ITR 337 (Cal), their Lordships of Calcutta High Court observed :
“Penalty proceedings do not form part of the assessment proceedings. Recording by the Income Tax Officer of satisfaction or direction to issue a notice under section 273 of the Income Tax Act, 1961 for default committed under section 273(a) in filing of estimate of advance tax which the assessee knew or had reason to believe to be untrue, is not an integral part of the assessment order so that failure to do so would render it ipso facto erroneous or prejudicial to the interests of the revenue. In the context of section 263, the expression ‘assessment’ refers to the particular ‘proceeding’ which is to be considered. The Commissioner in dealing with the assessment proceedings and the assessment order cannot expand his powers to deal with the penalty proceedings when they are not before him.”
In this very case, their Lordships of Calcutta High Court also observed that for failure of the Income Tax Officer to record in the assessment order his satisfaction or the lack of it, the assessment order cannot be said to be erroneous or prejudicial to the interests of the revenue, the Income Tax Officer must record his opinion about the leviability of the penalty on the facts of the case. On further referring to the decision of the Delhi High Court in the case of Achal Kumar Jain (supra) P.C. Puri’s case (supra) and A.N. Sarvaria’s case (supra) have reiterated the same view. The Rajasthan High Court in Keshrimal, Paraamal’s case (supra) and Gauhati High Court in Surendra Parshad Singh’s case (supra) following the decision of the Delhi High Court in J.K. D’Costa case (supra) also too the same view. It may be mentioned that on 2-3-1984, the special leave petition filed by the department against the judgment of the Delhi High Court in J.K. D’Costa’s case (supra) was rejected. Their Lordships of Calcutta High Court held :
“that the Commissioner was not entitled to exercise his powers of revision under section 263 for failure of the Income Tax Officer to initiate penalty proceedings under section 273(a) of the Act.”
(xi) In the case of Sudershan Talkies (supra), their Lordships of Delhi High Court have held:
“that the decision of the Tribunal against the order passed under section 263 had been upheld by the High Court. As a consequence thereof, only interest could be charged but no proceedings under section 273(b) could be initiated.”
(xii) In the case of CIT v. Nihal Chand Rekyan (2000) 242 ITR 45 (Del), their Lordships of Delhi High Court observed as under:-
“While examining the records of an assessment order, in exercise of powers of revision under section 263 of the Income Tax Act, 1961, if the Commissioner finds that the assessing officer had not initiated penalty proceedings, the Commissioner cannot direct initiation of penalty proceedings because the penalty proceedings are not a part of the assessment proceedings.
2.5 On examining the above-mentioned citations, referred to by both the parties, it is clear that there were only five decisions of Madhya Pradesh High Court in which the Hon’ble High Court held that the Commissioner in exercise of powers of revision under section 263 of the Income Tax Act can direct the assessing officer to initiate penalty proceedings in case the assessing officer has not initiated penalty proceedings. Whereas, on the other hand, the initial decision of Delhi ‘ High Court in J.K. D’Costa’s case (supra) against which even the SLP has been dismissed by the Apex Court in 147 ITR (St.) 1 (SC) in which the Delhi High Court held that even if while examining the records of an assessment order in exercise of his powers of revision under the said section, the Commissioner finds that the assessing officer has not initiated penalty proceedings, he cannot direct initiation of penalty proceedings because penalty proceedings are not a part of the assessment proceedings. It was further held that the Commissioner cannot pass an order under section 263 of the Act pertaining to the penalty while dissenting from the decision of Madhya Pradesh High Court (supra) has been followed by the Delhi High Court in a catena of decisions (supra) referred to hereinabove in this order. The other High Courts, Gauhati, Calcutta and Rajasthan, have also taken a similar view as that taken by the Delhi High Court in M. D’Costa case (supra) after dissenting from the decision of the M.P. High Court (supra) and by mainly following the decision of Delhi High Court in J.K. D’Costa case (supra) besides other decision of Delhi High Court cited (supra) and detailed by us hereinabove in our order.
2.6 In this view of the matter, the law of judicial precedents demands that the majority view of the High Court cited (supra), wherein it has been held that even if while examining the records of an assessment order in exercise of his powers of revision under section 263, the Commissioner finds that the assessing officer has not initiated penalty proceedings, he cannot direct the initiation of penalty proceedings because the penalty proceedings are not a part of the assessment proceedings and thus, the Commissioner cannot pass an order under section 263 of the Act pertaining to the penalty, should be followed by the Tribunal instead of following the decisions of M.P. High Court (supra) which after proper discussion have been dissented from by the above-mentioned High Court in the decisions (supra), whereas, there is no other decision of any other High Court brought to our notice, agreeing with the view taken by the M.P. High Court nor there is any subsequent decision of M.P. High Court dissenting from the decision delivered by the High Courts in the case cited (supra). Lastly, the main decision of Delhi High Court J.K. DCostas case (supra) following which the subsequent decisions cited (supra) were delivered by the High Court against which, even the SLP filed by the department has been dismissed by the Apex Court in 147 ITR (St.) 1 (SC) should be followed by this Tribunal.
2.7 Hence, in view of our detailed discussions mentioned hereinabove with regard to the decision of the High Court to be followed by the Bench, we are of the opinion that the majority view should be followed by the Tribunal, in which the Hon’ble High Courts have held that a Commissioner cannot pass an order under section 263 of the Act pertaining to the initiation of penalty proceedings by the assessing officer. In this view of the matter and respectfully following the decisions J.K. D’Costa’s case (supra) and other decisions. (supra) while considering the scope and powers of the Commissioner under section 263 of the Income Tax Act, it is held that even if, while examining the records of an assessment order in exercise of his powers of revision under section 263, the Commissioner finds that the assessing officer has not initiated penalty proceedings, he cannot direct the assessing officer to initiate the penalty proceedings against the assessee under section 271(1)(c) because the penalty proceedings are not a part of the assessment proceedings and also because the non-initiation of penalty proceedings by the assessing officer under section 271(1)(c) during the course of assessment proceedings neither make the order of the assessing officer erroneous nor prejudicial to the interests of the revenue. Accordingly, the order of the Commissioner (Appeals) passed under section 263(1) of the Income Tax Act after setting aside the assessment order of the assessing officer and directing the assessing officer to initiate penalty proceedings against the assessee, is set aside and the ground of appeal taken by the assessee is allowed.
3. In the result, the appeal is allowed.