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Commissioner of Income-tax Vs. Keshrimal Parasmal - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtRajasthan High Court
Decided On
Case NumberD.B. Income-tax Case No. 37 of 1984
Judge
Reported in(1985)48CTR(Raj)61; [1986]157ITR484(Raj)
ActsIncome Tax Act, 1961 - Sections 256, 256(2), 263 and 271(1)
AppellantCommissioner of Income-tax
RespondentKeshrimal Parasmal
Appellant Advocate J.L. Daga, Adv.
Respondent Advocate Rajesh Balia, Adv.
Excerpt:
.....came into force - juvenile act, of 2000 has been given retrospective effect by rule 12 of juvenile justice rule, 2007 - as such, accused has to be treated as juvenile under the said act. - whether, on the facts and in the circumstances of the case, the tribunal was justified in cancelling the order under section 263 of the act when the order of the ito was erroneous and prejudicial to the interests of the revenue on account of his failure to initiate penalty proceedings under section 271(1)(c) notwithstanding a clear confession of concealment of true particulars of income on the part of the assessee by the act of surrendering the cash credit appearing in the name of m/s. was merely a hawala entry and as such admittedly a bogus one ;2. that the income-tax officer failed to..........erroneous and prejudicial to the interests of the revenue on account of his failure to initiate penalty proceedings under section 271(1)(c) notwithstanding a clear confession of concealment of true particulars of income on the part of the assessee by the act of surrendering the cash credit appearing in the name of m/s. bherunath mohanlal & co. as a havala entry '2. the assessee-respondent is a registered firm comprising of five partners. during the course of assessment proceedings for the assessment year 1977-78, the income-tax officer (ito) came across a cash credit of rs. 10,000 in the name of m/s. bherunath mohanlal & co., pali, a concern belonging to one shri mohanlal. the assessee surrendered this entry of cash credit beforethe income-tax officer and confessed to it being a.....
Judgment:

S.K. Mal Lodha, J.

1. The Commissioner of Income-tax, Jodhpur (' theCIT ') has filed this application under Section 256(2) of the Income-tax Act,1961 (for short ' the Act '), for a direction to the Income-tax AppellateTribunal, Jaipur Bench, Jaipur (hereinafter referred to as ' the Tribunal ');to state the case and refer the following question of law for the opinion ofthis court:

' Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the order under Section 263 of the Act when the order of the ITO was erroneous and prejudicial to the interests of the Revenue on account of his failure to initiate penalty proceedings under Section 271(1)(c) notwithstanding a clear confession of concealment of true particulars of income on the part of the assessee by the act of surrendering the cash credit appearing in the name of M/s. Bherunath Mohanlal & Co. as a havala entry '

2. The assessee-respondent is a registered firm comprising of five partners. During the course of assessment proceedings for the assessment year 1977-78, the Income-tax Officer (ITO) came across a cash credit of Rs. 10,000 in the name of M/s. Bherunath Mohanlal & Co., Pali, a concern belonging to one Shri Mohanlal. The assessee surrendered this entry of cash credit beforethe Income-tax Officer and confessed to it being a havala entry. The Income-tax Officer, however, did not initiate penalty proceedings under Section 271(1)(c) of the Act with reference to the above surrendered amount of Rs. 10,000. The Commissioner of Income-tax initiated proceedings under Section 263 of the Act on the following grounds :

1. That the Income-tax Officer committed a serious error in not initiating penalty proceedings under Section 271(1)(c) of the Act notwithstanding the clear-cut confession on the part of the assessee that the cash credit account appearing in the name of M/s. Bherunath Mohanlal & Co. was merely a hawala entry and as such admittedly a bogus one ;

2. That the Income-tax Officer failed to appreciate that circumstances existed for initiating penalty proceedings under Section 271(1)(c) before completing the assessment ;

3. That the assessment was concluded by the Income-tax Officer in a perfunctory manner without proper application of mind causing prejudice to the interests of the Revenue.

3. In response to the show-cause notice issued by the Commissioner of Income-tax, written submissions were made by the authorised representative of the assessee challenging the validity of action under Section 263 basically on the ground that the surrender of cash credit was made only in order to buy peace of mind and avoid prolonged litigation and not because the same was bogus. It was further submitted that the Income-tax Officer was justified in not initiating penalty proceedings under Section 271(1)(c) of the Act. The Commissioner of Income-tax was of the opinion that there were no sound reasons for not initiating penalty proceedings under Section 271(1)(c) for which a prima facie case existed and that the penalty proceedings could only have been initiated in the course of the assessment proceedings and since the Income-tax Officer has not applied his mind to this aspect, he committed an error and the completion of assessment was erroneous which requires interference under Section 263 of the Act. In support of the aforesaid finding, the Commissioner of Income-tax placed reliance on Addl. CIT v. Indian Pharmaceutical [1980] 123 ITR 875 . He also took into consideration the fact that the assessee's claim for registration is vitiated for the reasons mentioned in para. 5 of his order dated August 19, 1981. The Commissioner, therefore, set aside the assessment made by the Income-tax Officer and directed him to apply his mind to both the points mentioned in his order and to reframe the assessment in accordance with the provisions of law. The purport of the order passed by the Commissioner under Section 263 of the Act was to set aside the assessment and to give a direction to the Income-tax Officer for making a de novo assessment.

4. The assessee went in appeal. Before the Tribunal, it was contended on behalf of the assessee that the assessment order passed by the Income-tax Officer was neither erroneous nor prejudicial to the interests of the Revenue and, therefore, the Commissioner of Income-tax has wrongly resorted to the provisions of Section 263 of the Act. The Tribunal, in its order dated November 26, 1982, observed as under:

' This issue is already covered by an earlier decision of Jaipur Bench of the Appellate Tribunal, vide its order September 19, 1982, in ITA No. 1068/JP/81 relating to the assessment year 1977-78, in the case of Paras Fabrics, Pali v. ITO, A-Ward, Pali, in favour of the assessee. In view of the detailed reasons given therein, we hold that the order passed by the Income-tax Officer was not erroneous and prejudical to the interests of the Revenue in not recording the initiation of penalty proceedings under Section 271(1)(c) in the order passed by him. We, therefore, cancel the order passed by the CIT, under Section 263. '

5. An application under Section 256(1) of the Act was filed by the Commissioner before the Tribunal to refer the aforesaid question to this court for its opinion. The Tribunal, by its order dated August 12, 1983, rejected the reference application holding that the issue involved in the assessee's case was similar to the one which was involved in Paras Fabrics, Pali's case and in that case, the assessee had relied on Addl. CIT v. J.K.D' Costa : [1982]133ITR7(Delhi) , whereas the Revenue had relied on Indian Pharmaceuticals' case [1980] 123 ITR 875 and that the Tribunal in Paras Fabrics, Pali's case had adopted the view that was favourable to the assessee which was reported in J.K. D'Costa's case. Relying on CIT v. Vegetable Products Ltd. : [1973]88ITR192(SC) , the Tribunal, in its order dated August 12, 1983, observed as follows :

' It may be that in the ultimate analysis, one of the two views may be held to be erroneous, which has to be considered only when the decision of the Supreme Court is available, but so long as a decision of the Supreme Court is not there on the issue, it cannot be said that one order is erroneous against the other. In such circumstances, we do not consider that any referable question of law arises out of the order of the Tribunal. It may not be out of place to mention here that the Revenue has not made any reference application against the order of the Tribunal in the case of Paras Fabrics Pali, relied upon by the Tribunal in accepting the assessee's appeal in the case of the present assessee. '

6. The Tribunal, therefore, rejected the reference application. Hence, this application under Section 256(2) of the Act.

7. We have heard Mr. J.L. Daga, learned counsel for the Revenue, and Mr. R. Mehta, learned counsel for the assessee.

8. It was contended by Mr. J.L. Daga, learned counsel for the Revenue, that the question of law which has been stated in para. 5 of the reference application does arise out of the order of the Tribunal dated November 26, 1982, as the Tribunal itself has followed its earlier decision rendered in Paras Fabrics, Pali's case relating to the assessment year 1977-78. The Tribunal preferred the view taken in J.K. D'Costa's case : [1982]133ITR7(Delhi) and did not follow the contrary view taken in Indian Pharmaceuticals' case [1980] 123 ITR 875 .

9. On the other hand, Mr. R. Balia, learned counsel appearing for the assessee, has stoutly opposed the submission and urged that no referable question of law arises out of the order of the Tribunal dated November 26, 1982, for the special leave petition by the Department against the judgment in J.K. D'Costa's case : [1982]133ITR7(Delhi) was dismissed by the Supreme Court in CIT v. J.K. Da Costa (S.L.P. (Civil) Nos. 11391-11392 11391-11392 of 1981) decided on March 2, 1984. In : [1984]147ITR1(MP) , it is stated as under:

' Revision: Commissioner in revision in assessment order whether can direct initiation of penalty proceedings :

2-3-1984: Their Lordships P.N. BHAGWATI and A.N. SEN JJ. dismissed, as not being a fit case in which the question arising in the special leave petition should be decided, a special leave petition by the Department against the judgment dated 27-4-1981 of the Delhi High Court in I.T.R. No. 82 of 1974, reported in : [1982]133ITR7(Delhi) , whereby the High Court, on a reference, held that the Commissioner in a suo motu revision under Section 263 of the I.T. Act, 1961, of an assessment proceeding, 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 ITO to make fresh assessment and to initiate penalty proceedings : CIT v. J.K. Da Costa: S.L.P. (Civil) Nos. 11391-11392 11391-11392 of 1981.'

10. Thus, the position boils down to this that the view taken in J.K. D'Costa's case : [1982]133ITR7(Delhi) has been confirmed by the Supreme Court and according to this case, the Commissioner of Income-tax is 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 of Income-tax in the proceedings under Section 263 of the Act cannot direct the Income-tax Officer to make fresh assessment to initiate penalty proceedings. As the position stands concluded and settled by the Supreme Court, the question which is now sought to be referred by the Commissioner of Income-tax cannot be said to be a substantial question of law arising out of the Tribunal's order. It is only a question of academic nature.

11. In this view of the matter, it cannot be said that the decision of the Tribunal rejecting the reference application by its order dated August 12, 1983, is incorrect.

12. For the reasons aforesaid, no referable question of law arises out of theorder November 26, 1982, of the Tribunal.

13. The reference application under Section 256(2) of the Act filed by theCommissioner of Income-tax is, therefore, dismissed.

14. The parties are left to bear their own costs of this reference application.


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