Commissioner of Income Tax vs Dr. Suresh G. Shah

R.S. Garg, J.—Mrs. Mona Bhatt, learned Counsel for the Revenue. None for the respondent though served.

At the instance of the Revenue, the Income Tax Appellate Tribunal, Ahmedabad Bench "C", has referred the following question to this Court for its opinion, which arises out of Income Tax Appeal No. 2628/Ahd/91 pertaining to the assessment year 1986-87.

Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Commissioner of Income Tax cannot exercise jurisdiction u/s 263 for the purpose of initiating penalty proceedings under Sections 271(1)(a) and 273(2)(c)?

The short facts necessary for disposal of the present reference are that the Assessing Officer assessed the total income for the current year 1986-87 at Rs. 2,02,240 u/s 143(3) of the Income Tax Act. The Commissioner of Income Tax, on examination of the records, noticed that the assessment order passed by the Assessing Officer was erroneous and prejudicial to the interests of the Revenue on account of the fact, amongst others, that the Assessing Officer failed to initiate penalty proceedings u/s 271(1)(a) and Section 273(2)(c) while completing the assessment. After taking into consideration the reply to the show-cause notice u/s 263, the Commissioner of Income Tax recorded his disagreement with the submissions made by the assessee, set aside the assessment and directed initiation of penalty proceedings. The assessee being dissatisfied, took up the matter before the Tribunal. The Tribunal observed that the Commissioner of Income Tax, while exercising powers u/s 263 of the Act was not entitled to direct initiation of proceedings, because, it was within the jurisdiction of the Assessing Officer. The Revenue, feeling dissatisfied, requested the Tribunal to refer the question to this Court.

In the matter of Commissioner of Income Tax Vs. Parmanand M. Patel, , a Division Bench of this Court, in its judgment dated July 6, 2005, has observed that the Commissioner is not empowered to record satisfaction by invoking Section 271(1) of the Act and if he is not entitled to do so, on his own, he cannot do it by directing the assessing authority. The court observed that in other words, what the Commissioner himself cannot do, he cannot get it done through the assessing authority by exercising revisional powers.

In view of the authoritative pronouncement by this Court, the question will have to be answered against the interest of the Revenue and in favour of the assessee. It is accordingly answered. The reference stands disposed of. No costs.