High Court Of Gujarat
CIT vs. Manilal Tarachand
Sections 263, 271(1)(c)
Asst. Year 1973-74
M.S. Shah & D.A. Mehta, JJ.
IT Ref. No. 95 of 1988
26th September, 2001
Akil Kureshi with Manish R. Bhatt, for the Petitioner : R.K. Patel, for the Respondent
D.A. MEHTA, J. :
The Tribunal, Ahmedabad Bench “A” has referred the following question for the opinion of this Court : “Whether, the Tribunal is right in setting aside the order made by the CIT under s. 263 of the IT Act, 1961 ?”
The assessee is an individual. For asst. yr. 1973-74 the relevant accounting period is S.Y. 2028. The ITO assessed the assessee under s. 143(3) r/w s. 147(a) of the IT Act, 1961 (hereinafter referred to as “the Act”). In the reassessment order, the ITO brought to tax long-term capital gains in relation to the compensation (including solatium) received, in the land acquisition proceedings, which admittedly the assessee had not disclosed in his return of income for the year under consideration. However, it is pertinent to note that the amount received by the assessee had been returned by the assessee in his return of income for asst. yr. 1975-76. In fact, the ITO initiated reassessment proceedings based on this disclosure made by the assessee for asst. yr. 1975-76.
The CIT, Rajkot, initiated proceedings under s. 263 of the Act stating that the assessment order framed on 8th March, 1985, under s. 143(3) r/w s. 147 of the Act, was erroneous and prejudicial to the interest of the Revenue as the ITO had failed to mention the point regarding initiation of penalty proceedings under s. 271(1)(c) of the Act on account of concealment of income or furnishing inaccurate particulars of income. The assessee resisted the notice for revision on twofold counts. Firstly, it was contended that the provisions of s. 263 did not empower the CIT to assume jurisdiction on account of failure to initiate penalty proceedings at the time of the assessment. Secondly, it was contended that in view of the facts and circumstances of the case, it could not be said that the assessee had concealed or furnished inaccurate particulars of income for which penalty proceedings could be initiated. The CIT did not accept the submissions made on behalf of the assessee and relying upon the decisions of the Madhya Pradesh High Court in the cases of Addl. CIT vs. Kantilal Jain (1980) 125 ITR 373 (MP) : TC 57R.252 and Addl. CIT vs. Indian Pharmaceuticals (1980) 123 ITR 874 (MP) : TC 57R.246 held that it was open to him to act under s. 263 of the Act when the ITO had failed to initiate the penalty proceedings. The CIT also further held that the assessee had furnished inaccurate particulars of income insofar as he had failed to disclose the fact of the property being notified for the purposes of acquisition and thus becoming entitled to compensation.
The assessee went in appeal before the Tribunal and the Tribunal relying upon the decisions in the cases of CIT vs. Narpat Singh Malkhan Singh (1980) 19 CTR (MP) 302 : (1981) 128 ITR 77 (MP) : TC 57R.454, Addl. CIT vs. J.K. DâCosta, (1981) 25 CTR (Del) 224 : (1982) 133 ITR 7 (Del) : TC 57R. 244 and CIT vs. Keshrimal Puranmal (1985) 48 CTR (Raj) 61 : TC 57R.288 came to the conclusion that the CIT was not justified in exercising his revisionary jurisdiction under s. 263 of the Act. The Tribunal also took note of the fact that against the aforesaid decision of the Delhi High Court in case of J.K. Dâ Costa (supra), the SLP filed by the Department had been dismissed by the Supreme Court in 147 ITR (St) 1. Though on merits the arguments were raised before the Tribunal that even on facts the penalty was not leviable, the Tribunal has not recovered any decision because, according to the Tribunal, the controversy before it was of a limited nature and since it has nothing to do with the actual imposition of penalty under s. 271(1)(c) of the Act, it was not open to it to give any finding on merits of the matter.
We have heard Mr. Akil Kureshi, learned counsel for the Revenue and Mr. R.K. Patel, learned counsel for the assessee.
In light of the facts as recorded by the ITO in the assessment order, we feel that this is not a case where penalty could be imposed on the assessee on the charge of either concealment of income or furnishing inaccurate particulars of income. The dispute in the assessment, between the assessee and the Department, was to the effect as to in which year the compensation received by the assessee was taxable. It appears that the assessee was under a belief that he would be liable to capital gains tax only on receipt of compensation and accordingly had shown the liability to capital gains tax in his return of income for asst. yr. 1975-76. Though for the purposes of reassessment proceedings, the ITO would be within his powers to initiate proceedings under s. 147 of the Act for asst. yr. 1973-74, it is not possible to hold that penalty under s. 271(1)(c) of the Act could be levied for the said assessment year.
In view of this fact situation, we feel that it is not necessary to enter into the larger controversy regarding the jurisdiction of the CIT, namely, whether the CIT could act under s. 263 of the Act to direct the ITO to initiate penalty proceedings under s. 271(1)(c) of the Act. On the facts stated hereinbefore, we hold that as no penalty was leviable on the assessee, the CIT could not have assumed jurisdiction under s. 263 of the Act. Therefore, the Tribunalâs ultimate conclusion that the CITâs order under s. 263 of the Act could be set aside is right in law though for the reasons given by us. We do not express any opinion in relation to the reasons which weighed with the Tribunal. The question referred to us is, therefore, answered in affirmative i.e. in favour of the assessee and against the Revenue.
The reference is disposed of accordingly with no order as to costs.
[Citation : 254 ITR 630]