Law:

Section:

Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1977-78 - Whether omission of ITO to initiate penalty proceedings in course of assessment renders assessment order erroneous and prejudicial to interests of revenue and Commissioner has jurisdiction to revise such an order under section 263 - Held, yes FACTS The ITO issued a notice under section 210 to the respondent for payment of advance tax. However, the respondent paid only a partial amount of advance tax and also did not file any estimate of advance tax as required by section 212. The respondent filed his return and he was assessed to income-tax. While passing the assessment order, the ITO omitted to charge interest under section 217(1A) and to initiate penalty proceedings under section 273. The Commissioner held that omission of the ITO to charge interest and initiate penalty proceedings was erroneous and prejudicial to the interest of the revenue. After giving notice and opportunity of hearing, the Commissioner, in exercise of powers under section 263, cancelled the assessment order and directed the ITO to reframe the same in accordance with law. On appeal, the Tribunal relying upon the decision of the High Court in Asstt. CIT v. Saraiya Distillery [1978] 115 ITR 34 held that the Commissioner could revise the order of the ITO in respect of not charging interest under section 217(1A). It, however, held that the Commissioner had no jurisdiction to cancel the assessment with a view to initiate penalty proceedings. The Tribunal, consequently, allowed the appeal in part. On reference : HELD It is well established that the Assessing Officer has to initiate proceedings for imposition of penalty during the course of assessment itself. If he fails to initiate or record his satisfaction for the initiation of the penalty proceedings during the course of the assessment proceedings it would be a case where the assessment order can be said to be erroneous as he has not decided a point nor recorded a finding on an issue which ought to have been done or decides it wrongly. Thus, the omission of the ITO to initiate penalty proceedings during the course of…

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