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C.I.T. v. M/S A.C. Co. - INCOME TAX REFERENCE No. 151 of 1991  RD-AH 272 (28 January 2005)
Court No. 37
I.T.R. No. 151 of 1991
CIT. Vs.. M/s.Ashok Construction Co., Mirzapur.
Hon'ble R.K. Agrawal, J.
Hon'ble Prakash Krishna, J.
The Income Tax Appellate Tribunal, Allahabad has referred the following question of law under Section 256 (1) of the Income Tax 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 u/s 263 of the I.T. 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 u/s 271 B which attracted in assessee's case due to contravention of the provisions of section 44 AB?" case due to contravention of the provisions of section 44 AB?"
The reference relates to the assessment year 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 Section 44 AB 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 15thSeptember,, 1986. The assessment was completed by the assessing officer failed to initiate penalty proceedings as envisaged under Section 271-B of the Act for the failure to obtain audit report within the specified period. The Commissioner of Income Tax examined the assessment record and other materials and being of the opinion that the failure to initiate penalty proceedings under Section 271-B 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 Section 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 Section 271-B 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 Commissioner of Income Tax under Section 263 of the Act on the following grounds :-
"Coming to the substantiality of the Commissioner's order u/s 263 of the I.T. Act, we notice that the same can not be sustained by us. There are definite parameters within which alone the provisions of section 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 sec. 263 can not be invoked. Applying this test we notice that this primary condition for invoking and sustaining the provisions of section 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 section 263 for initiating penalty proceedings. For this reason we annul the order of the Commissioner of Income Tax and cancel order dated 28th March, u/s 263 of the I.T. Act, 1961."
So far as the credit of TDS certificate was concerned it had recorded the statement of the respondent that necessary action under Section 154of 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 I.T.R. No. 148 of 1984, C.I.T. (Central) Kanpur Vs.. Sri Surendra Prasad Agrawal, Allahabad decided on September 1, 2004 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 Commissioner of Income Tax under Section 263 of the Act. That apart proceedings under Section 263 of the Act was initiated by the Commissioner of Income Tax also on the ground that certain TDS certificates bearing the date 17th June, 1986 have been given credit towards the tax deposited by the assessing officer, the date falls out side 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 Section 154 of the Act but nonetheless it does not oust the jurisdiction of the Commissioner of Income Tax under Section 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 Commissioner of Income Tax under Section 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.
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