Commissioner of Income Tax vs K. Moideen Kutty Haji

C.N. Ramachandran Nair, J.—The appeal is filed against the order of the Income Tax Appellate Tribunal cancelling the suo motu revision order issued by the Commissioner of Income Tax u/s 263 of the Income Tax Act against the order of the assessing officer dropping the proposal for penalty.

We have heard the standing counsel appearing for the Appellant and Adv. Sri T.M. Sreedharan appearing for the Respondent. The Assessee was a PWD contractor against whom survey was conducted u/s 133A of the Income Tax Act. However, in the course of reassessment proceedings initiated for the assessment year 2005-2006, pursuant to the survey, Assessee offered an additional income of Rs. 50 lakhs for assessment. Out of Rs. 50 lakhs so offered, Rs. 35 lakhs was assessed for 2005-2006 and Rs. 15 lakhs assessed for the year 2006-2007 which were done in terms of the proposal of the Assessee accepted by the assessing officer. Even though notice u/s 271(1)(c) was issued initiating penalty for the year 2005-2006, Assessee contended before the officer that since assessment is on agreed assessment, no penalty could be initiated. The assessing officer therefore dropped the proposal for penalty. The proceedings of the officer dropping the penalty was treated by the Commissioner as an order prejudicial to the interest of the revenue and he therefore cancelled the same in exercise of the powers u/s 263 and directed the assessing officer to consider levy of penalty. It is against this order the Assessee filed appeal before the Tribunal and Tribunal cancelled it stating that proceedings dropping penalty initiated u/s 271(1)(c) on facts is not an order prejudicial to the interest of the revenue. Revenue is in appeal against this order before us.

The senior counsel appearing for the revenue has relied on the decisions of the Supreme Court reported in C.A. Abraham, Uppoottil, Kottayam Vs. The Income Tax Officer, Kottayam and Another, and UNION OF INDIA Vs. BANWARI LAL AGARWAL, and also a decision of this Court reported in Commissioner of Income Tax Vs. D.K.B. and Co., in support of his contention that penalty proceedings is maintainable against the Assessee and dropping of the proceedings by the officer without assigning any reason is an order prejudicial to the interest of the revenue that could be revised in Section 263 proceedings. However, learned Counsel appearing for the Assessee relied on the unreported decision of ours in ITR 24 of 2009 wherein we declined to interfere with and our two decisions, one in I.T.A. 24 of 2009 and Anr. in I.T.A. 1515 of 2009 wherein this Court held that no penalty could be initiated u/s 271(1)(c) in the case of agreed assessments. We notice from the Tribunal''s order that they have extracted the Assessee''s letter wherein it is clearly stated that assessment initiated based on survey conducted u/s 133A was completed on an agreed basis, that is by accepting the additional income of Rs. 50 lakhs offered by the Assessee for the two years. Admittedly the assessing officer completed the assessment based on the concession made by the Assessee. So much so, the fact that assessments completed are agreed assessments or compromise assessments, is not in dispute. The question now to be considered is whether penalty for concealment initiated by the assessing officer was rightly dropped by him and the order dropping it is prejudicial to the interest of the revenue. In order to consider the issue, we have to first consider as to what would have happened if the Assessee had not agreed for specific addtions or if Assessee had not offered any additional income for assessment. The fact that the assessing officer accepted the additional income for assessment on agreed basis only indicates that he cannot sustain any addition by evidence or based on his own reasoning. In other words, but for the concession offered by the Assessee, in offering additional income for assessment, the assessing officer probably would not have been able to sustain the assessment for so much of the amounts offered by the Assessee. In fact, the advantage of an agreed assessment for the department is that the Assessee is precluded from challenging the assessment and whatever is the additional income offered for assessment and accepted by the assessing officer, is the final amount assessed on which tax is payable and in fact the Assessee paid the assessed tax. So much so we feel that the assessing officer was protecting the interest of the revenue by going for an agreed assessment based on the amount offered by the Assessee without contest. We therefore feel that in such case, assessing officer cannot conclude that the income assessed based on offer made by the Assessee could be treated as concealed income detected by him, no matter he would have made assessment of additional income based on evidence collected by him in the course of survey if the Assessee had not made any offer for agreed assessment or compromise assessment. So much so, we feel that the officer rightly dropped the penalty proceedings and the Commissioner cannot call such order prejudicial to the interest of the revenue because the order dropping the penalty proceedings has to be evaluated with reference to the additional income assessed by the officer based on offer made by the Assessee. Further, we feel after disabling the Assessee from filing appeal or challenging an assessment made on agreed basis, the department cannot hold the Assessee guilty of concealment. If the assessing officer is confident of establishing concealment, men he should sustain assessment, based on material collected and relied on by him instead of depending on Assessee''s offer of any amount for assessment. In other words, if the assessment has legs to stand of it''s own, the officer is not at the mercy of the Assessee and he can reject any offer made by the Assessee and proceed to complete assessment and then proceed with levy of penalty for concealment. However, in our view, after accepting the offer of the Assessee for assessment of additional income, assessing officer cannot simultaneously levey penalty treating such income as concealed income. We therefore uphold the order of the Tribunal. The appeal is accordingly dismissed.