High Court Of Allahabad
CIT vs. Ashok Construction Co.
Section 263, 271B
Asst. Year 1986-87
R.K. Agrawal & Prakash Krishna, JJ.
IT Ref. No. 151 of 1991
28th January, 2005
Counsel Appeared :
A.N. Mahajan, for the Revenue : None, for the Assessee
ORDER
By the court :
The Tribunal, Allahabad has referred the following question of law under s. 256(1) of the IT Act, 1961 (hereinafter referred to as ‘the Act’) for opinion to this Court : “Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the order under s. 263 of the IT Act when the order of the ITO was erroneous and prejudicial to the interest of the Revenue on account of his failure to initiate penalty proceedings under s. 271B which attracted in assessee’s case due to contravention of the provisions of s. 44AB ?”
2. The reference relates to the asst. yr. 1986-87. Briefly stated the facts giving rise to the present reference are as follows : The respondent/assessee is a firm engaged in the execution of contract work. It was required to obtain audit report in terms of s. 44AB of the Act by 30th June, 1986. The respondent did not obtain the report and the same was enclosed with the return for the assessment year, which we find was filed on 15th Sept., 1986. The assessment was completed by the AO. He failed to initiate penalty proceedings as envisaged under s. 271B of the Act for the failure to obtain audit report within the specified period. The CIT examined the assessment record and other materials and being of the opinion that the failure to initiate penalty proceedings under s. 271B of the Act by the assessing authority while passing assessment order had caused the assessment order erroneous as also prejudicial to the interest of Revenue warranting action under s. 263 of the Act. He issued notice and after giving an opportunity of hearing set aside the assessment order with a direction that the feasibility of initiation of proceedings under s. 271B of the Act be examined and after providing necessary opportunity of hearing to the respondent/assessee decided the issue in accordance with law. He was also of the opinion that the wrong credit of TDS be also looked into and necessary relief be granted after examining as to whether the TDS was deposited for the assessment year in question or not and credit should be given accordingly. Feeling aggrieved the respondent/assessee preferred an appeal before the Tribunal. The Tribunal had set aside the order of the CIT under s. 263 of the Act on the following grounds : “Coming to the substantiality of the CIT’s order under s. 263 of the IT Act, we notice that the same cannot be sustained by us. There are definite parameters within which alone the provisions of s. 263 can be invoked. Unless the order of the ITO is erroneous and prejudicial to the interest of the Revenue, in clear terms the provisions of s. 263 cannot be invoked. Applying this test we notice that this primary condition for invoking and sustaining the provisions of s. 263 is not fulfilled. Judicial Courts even otherwise are very slow in allowing the executive a free hand in initiating penalty proceedings in such matters. Therefore, it will be a travesty of justice if we agree with the Revenue in invoking the provisions of s. 263 for initiating penalty proceedings. For this reason we annul the order of the CIT and cancel order, dt. 28th March, under s. 263 of the IT Act, 1961.”
3. So far as the credit of TDS certificate was concerned it had recorded the statement of the respondent that necessary action under s. 154 of the Act be taken and the respondent would not raise any objection. We have heard Shri A.N. Mahajan, learned standing counsel for the Revenue. Nobody has appeared on behalf of the respondent-assessee. We find that this Court in CIT vs. Surendra Prasad Agrawal (IT Ref. No. 148 of 1984, dt. 1st Sept., 2004) [reported at (2005) 194 CTR (All) 161—Ed.] has held that failure to initiate penalty proceedings at the time of passing of the assessment order does render the order erroneous and prejudicial to the interest of Revenue. In this view of the matter the Tribunal was not justified in setting aside the order passed by the CIT under s. 263 of the Act. That apart proceedings under s. 263 of the Act were initiated by the CIT also on the ground that certain TDS certificates bearing the dt. 17th June, 1986 have been given credit towards the tax deposited by the AO when the date falls outside the assessment year in question and, therefore, on this ground also the assessment order had been rendered erroneous and prejudicial to the interest of Revenue. No doubt the said mistake could be rectified under s. 154 of the Act but nonetheless it does not oust the jurisdiction of the CIT under s. 263 of the Act. In view of the foregoing discussion, we are of the considered opinion that the Tribunal was not justified in setting aside the order passed by the CIT under s. 263 of the Act. We, therefore, answer the question referred to us in negative, i.e., in favour of the Revenue and against the assessee. However, there shall be no order as to costs.
[Citation : 280 ITR 368]
