High Court Upholds Remand Order for AO to Pass Reasoned Order in Case of Erroneous Dropping of Proceedings under Section 271C (of Income Tax Act, 1961).

The petitioner's counsel was heard, and the delay in the case was condoned. Leave was granted to proceed with the case. The court decided not to interfere with the impugned order of the High Court. The High Court had held that the Assessing Officer had dropped the penalty proceedings without indicating any basis for doing so. The Tribunal referred to certain aspects and deemed the initiation of proceedings under Section 263 (of Income Tax Act, 1961) impermissible based on the materials presented by the assessee. The High Court required the Assessing Officer to pass a reasoned order, emphasizing that the Tribunal could not substitute its own reasoning. The petitioner argued that all relevant aspects were presented for consideration, and any lack of reasons by the officer should not be faulted. The court decided not to interfere at this stage, but emphasized that the Assessing Officer should consider all relevant aspects, including materials presented by the assessee, and pass a reasoned order upon remand. The appeal was dismissed with the aforementioned observations.

Heard learned counsel for the petitioner.

Delay condoned.

Leave granted.

We are not inclined to interfere with the impugned order of the High Court.

The High Court has held that the Assessing Officer had disposed the proceedings stating the penalty proceedings initiated in this case u/s 271 (of Income Tax Act, 1961) C read with Section 274 (of Income Tax Act, 1961) are hereby dropped.

According to the High Court, there was no basis indicated for dropping the proceedings. The Tribunal referred to certain aspects and held that the initiation of proceedings under Section 263 (of Income Tax Act, 1961) (in short, the I.T.Act) was impermissible when considered in the background of the materials purportedly placed by the assessee before the Assessing

Officer. What the High Court has done is to require the Assessing Officer to pass a reasoned order. The High Court was of the view that Tribunal could not have substituted its own reasonings which were required to be recorded by the Assessing Officer. According to the assessee all relevant aspects were placed for consideration and if the officer did not record reasons, assessee can not be faulted.

We do not think it necessary to interfere at this stage. It goes without saying that when the matter be taken up by the Assessing Officer on remand, it shall be his duty to take into account all the relevant aspects including the materials, if any, already placed by the assessee, and pass a reasoned order.

The appeal is dismissed with the aforesaid observations.

(Dr.Arijit Pasayat)

(Dr.Mukundakam Sharma)

New Delhi,

August 25, 2008