This appeal of the assessee arises from the order of the CIT (Central) Ludhiana dt. 12th March, 2013 for the asst. yr. 2008-09. The assessee has raised following grounds of appeal:
"I. That the order of the learned CIT (Central) holding assessment order being erroneous and prejudicial to the interest of Revenue is against law and facts of the case and therefore s. 263 of the IT Act has wrongly been applied.
2. That there was no opportunity granted by the CIT (Central) to the assessee to offer his comments on the report of the AO as the notice for appearance before the CIT (Central) for 7th March, 2013 was never served on the assessee and therefore the order passed by the CIT is illegal, void ab initio on the issue of lack of opportunity.
3. That non-deduction of tax on commission payment of Rs. 47,925 during the year and its consequent disallowance under s. 40(a)(ia) which has been made as one of the reasons for taking resort· to s. 263 is uncalled for as the IDS provisions did not apply to the assessee and which fact when brought to the notice of CIT (Central) while replying to show cause notice issued by him chose not to write even a single line in rebuttal and therefore this reason does not exist at all.
4. that the second reason for takin resort to s. 263 is the non-initiation of penalty proceeding under s. 27l( l)(c) r /w Expln. 5A which too is illegal if the facts and legal position is to be seen, as the assessee had arrived at an agreement with the Department for non-levy of penalty under s.
271(1)(c) which has wrongly been brushed aside. '
5. That without prejudice to ground No. 4 above, the non-initiation of penalty under s. 271(1)(c) is no ground where the provisions of s. 263 can be applied as held by the jurisdictional High Court of Punjab & Haryana in the case of CIT vs. 5ubhash Kumar Jain (2011) 335 ITR 364 (P&H) and the CIT has simply ignored this decision and has gone by old decision of Allahabad High Court to suit his own convenience.
6. That the third reason for non-initiation of penalty under ss. 271A and 271B too gets covered by the decision of jurisdictional High Court in (2011) 335 ITR 364 (P&H) (supra) and gets a further support from the fact that penalty proceedings under ss. 271A and 271B are not related to assessment and can be initiated any time and therefore the assessment framed is not affected and therefore there is no scope of applying the provisions of s. 263 of the Act.
7. That the Department is keeping different standards for different asses sees as the same Central Circle at the same point of time accepts the agreement of spread over in the case of another assessee and penalty under s. 27l(1)(c) is not initiated and consequently s. 263 is not invoked and at the same time the same Circle applies a different yardstick in the case of assessee where provision of s. 263 has been applied despite the agreement with the Department.
8. Such other grounds as may be urged on hearing:'
2. The learned counsel for the assessee, Mr. S.S. Kalra, chartered accountant, did not press ground No.1 and therefore, the same is dismissed as not pressed.
3. Ground No. 8 is general in nature and therefore, does not require adjudication.
4. As regards ground No. I, the brief facts of the case are that search and seizure under s. 132 of the Act was carried out by the Director of IT (Inv.) Jalandhar on 11th Dec., 2008. During the search, certain incriminating documents were found and seized. Notice under s. 153A was issued on 20th May, 2009 in response to which assessee filed his return declaring income of Rs. 78,16,530 on 31st March, 2009. The assessment was completed accepting the returned income vide order dt. 8th Dec., 2010 under s. 153A of the IT Act, 1961. On perusal of records, it was noticed that assessment order has become erroneous insofar as it is prejudicial to the interest of Revenue on account of following issues:
(i) The assessee has paid commission of Rs. 47,925. However, no tax has been deducted on commission. Hence, the expenses of Rs. 47,925 required to be disallowed under s. 40(a)(ia) of the Act which has not been done. Consequently, interest under s. 234B would also increase.
(ii) Penalty under s. 271(1)(c) r/w Expln. 5A was not initiated.
(iii) Perusal of P&L a/ c reveals that the receipts of the assessee for the year were more than Rs. 40 lacs. Therefore, the assessee was required to maintain books of accounts under s. 44AA of the Act and get his accounts audited under s. 44AB of the Act. As the assessee has failed to comply with the provisions of ss. 44AA and 44AB, penalty proceedings under ss. 271A and 271B should have been initiated and imposed. As the penalty under ss. 271A and 271B were not initiated during the assessment proceedings the order passed by the AO is erroneous and prejudicial to the interest of the Revenue.
Accordingly, a show cause notice under s. 263(1) of the Act was issued to the assessee vide letter dt. 20th Dec., 2012 in response to which Authorised Representative of the assessee Sh. 5.5. Kalra submitted his reply dt. 9th Jan., 2013. On assessee's submissions, a report was called for from the AO which was submitted by the AO vide his letter dt. 30th Jan., 2013 forwarded by the Add!. CIT, Range Central, Ludhiana vide office letter dt. 4th Feb., 2013. Copy of the above report has been sent to the assessee for his reply. Vide letter dt. 28th Feb., 2013, assessee was asked to submit his explanations on the report of the AO fIXing the case for hearing on 7th March, 2013. However, neither anyone attended nor any reply was received. In view of the above, written submissions made by the Authorised Representative vide letter dt. 9th Jan., 2013, which were considered by the learned CIT.
5. The learned counsel for the assessee,' Mr. 5.5. Kalra, chartered accountant submitted objection to the initiation of proceedings under s. 263(1) of the Act and the learned CIT after considering the same in paras 4 to 16 of his order held that the order of the assessment passed by the AO is erroneous and prejudicial to the interest of Revenue and accordingly the order passed by the AO was cancelled and AO was directed to reframe the order in accordance with the provisions of the IT Act.
6. The learned counsel for the assessee, Mr. 5.5. Kalra, chartered accountant, at the outset argued that provisions of s. 194H are not applicable. As regards the applicability of s. 40 (a)(ia) of the Act is concerned, since the turnover for the year ending 31st March, 2007 was Rs. 5,43,519 only which was below Rs. 40 lacs and TDS provisions are applicable only if the gross receipts exceeded Rs. 40 lacs in the immediately preceding year to the impugned year. Accordingly, there is no applicability of s. 40(a)(ia) of the Act. He argued that the learned CIT is misconceived of the legal provisions in this regard and therefore, the provisions of s. 263(1) of the Act cannot be made applicable.
7. As regards the penalty proceedings under s. 271(1)(c) of the Act r/w Expln. 5A. Mrs. S.S. Kalra, chartered accountant argued and invited our attention to PB-5 being the letter, which is'statement under s. 132(4) of the Act of the assessee, in which the assessee has very categorically made a surrender under s. 132(4) and where in the said letter, it has been stated that surrender under s. 132(4) is made in order to buy peace 'and gain the immunity from penal action under s. 271(1)(c) or 276 of the IT Act. As regards the Expln. 5A to s. 271(1)(c) of the Act, the return has been filed within due date as prescribed under the Act and due date does not only refer to t.p.e provisions of s. 139(1) but the same includes the return filed under s. 139(4) of the Act and return in the present case has been filed on 31st March, 2009 under s. 139(4) of the Act, which is within due date prescribed under the Act. He relied upon the decision of Mumbai Bench of Tribunal in the case of 1TO us. Gope M. Rochlani (2013) 158 ITJ (Mumbai) 120 : (2013) 95 DTR (Mumbai){Trib) 33 in this regard. He also relied upon the decision of the Hon'ble Punjab & Haryana High Court in the case of CIT us. Jagtar Singh Chawla (2013) 259 C7R (P&H) 388 : (2013) 87 DTR (P&H) 217 : (2013) 215 Taxman 154 (P&H), where it has been held that sub-so (4) of s. 139 of the Act is, in fact, a proviso to s. 139(1) of the Act. Sec. 139(4) provides for extension in period of due date in certain circumstances. The said decision is available at paper book 14 to 18. Therefore, penal action under S. 271(1)(c) of the Act r/w Expln. 5A is not applicable and the learned CIT(A) is misconceived with the said provision.
8. As regards the applicability of s. 40 (a)(ia) (sic-44AA) and s. 44AB, where the assessee was required to maintain books of account and get its accounts audited respectively, these penalty proceedings are independent to assessment proceedings and can be levied independent of assessment and these have nothing to do with the assessment proceedings. On this account, the learned CIT has misconceived all the provisions of law. Accordingly, the learned counsel for the assessee prayed to cancel the order of the learned CIT (Central), Ludhiana since the order passed by the AO is neither erroneous nor prejudicial to the interest of Revenue.
9. The learned Departmental Representative, Mr. Tarsem Lal, on the other hand, relied upon the order of CIT (Central), Ludhiana.
10. We have heard the rival contentions and perused the facts of the case. As regards the applicability of provisions of s. 40(a)(ia) and 194H of the Act, we are convinced with the arguments made by the learned counsel before the learned CIT (Central), Ludhiana and before us that the TDS provisions under S. 194H are applicable if the gross receipts exceed Rs. 40 lacs in the immediately preceding year whereas in the present case, the assessee's turnover is just Rs. 5.43 lacs and therefore, IDS provisions under s. 194H of the Act cannot be made applicable in the impugned year. Accordingly, the provisions of s. 40(a)(ia) of the Act are not applicable. Therefore, the learned CIT (Central) Ludhiana is not justified in concluding that the order of the AO is erroneous or prejudicial to the interest of the Revenue and the same is cancelled to that extent.
10.1 As regards tile surrender made. there was surrender and statement under s. 132(4) of the assessee is available at paper book-5 where categorically it was stated that the surrender was made in order to buy peace and to get immunity from penal action under ss. 271(I)(c) or 276 of the Act. Therefore. penal provisions cannot be made applicable in the facts and circumstances of the present case.
10.2 As regards filing of the return within due date as prescribed under the Act. we are convinced with the arguments made by the leamed counsel for the assessee. Mr. S.S. Kalra. chartered accountant that due date includes return filed under s. 139(4) of the Act in view ~f the decisions referred to by the learned counsel for the assessee. Therefore. on this account as well. the leamed CIT (Central). Ludhiana is not justified in concluding the order of the assessment as erroneous and prejudicial to the interest of the Revenue. Accordingly. the order of the leamed CIT (Central). Ludhiana is cancelled on this account. as well.
10.3 As regards the levy of penalty under ss. 44AA and 44AB of the Act. they are independent of assessment proceedings. which could be levied independent of the assessment. Therefore. the views of the learned CIT (Central) Ludhiana to hold that assessment was made erroneous and prejudicial to the interest of the Revenue. cannot be upheld and the same is reversed.
10.4 As regards the arguments made by the learned CIT (Central) Ludhiana. that the AO has not made application of mind with regard to levy of penalty. cannot be held good in view of our decision hereinabove. Accordingly. on all the three counts. the order of the learned CIT (Central). Ludhiana is directed to be cancelled and all the ground Nos. 1. 3. 4. 5. 6 and 7 of the assessee are allowed.
11. In the result. the appeal filed by the assessee in ITA No. 300/Asr/20I3 is partly allowed.