2024 (10) TMI 642 - AT - Income Tax

Revision u/s 263 - underreporting or misreporting of income u/s. 270A - HELD THAT - PCIT seems to have distorted the order of assessment and therefore, the findings of the Ld.PCIT to that extent is perverse and therefore, in the absence of clear finding of the AO that there was underreporting or misreporting of income u/s. 270A of the Act, PCIT erred in holding that omission to initiate penalty u/s. 270A of the Act was erroneous in so far as prejudicial to the interest of the Revenue. We find considerable force in the submission of AR and find that the Ld.PCIT erred in recording a finding of fact in his impugned order u/s. 263 of the Act that in the assessment orders in question, the AO has given a clear finding that the additions made in the assessment order attracted penalty as per the provisions of Sec.270A. As noted that it is not the case of the Ld.PCIT that the AO erred in initiating penalty u/s. 271AAB(1A) of the Act for all the three assessment years i.e. AY 2018-19 to 2020-21. It is also noted that the AO in the assessment orders (under consideration) hasn t given any finding that the assessee has underreported or misreported its income. PCIT erred in holding that omission to record satisfaction to initiate penalty proceedings u/s. 270A of the Act was clearly erroneous being perverse. Therefore, relying on the decision of CRK Swamy 2001 (11) TMI 56 - MADRAS HIGH COURT the case of CIT v. CMRL 2018 (3) TMI 1586 - MADRAS HIGH COURT we set aside the impugned order of the PCIT on the peculiar facts and circumstances of the case. Assessee appeal allowed.

Summary

Issues:
Appeal against order of Principal Commissioner of Income Tax invoking revisional jurisdiction under section 263 of the Income Tax Act for Assessment Years 2018-19 to 2020-21.

Analysis:

1. Background:
The appellant filed appeals against the order of the Principal Commissioner of Income Tax (Central), Chennai-2, dated 05.03.2024 for the Assessment Years 2018-19 to 2020-21 under section 263 of the Income Tax Act, 1961.

2. Contentions of the Assessee:
The appellant contended that the Principal Commissioner erred in invoking revisional jurisdiction under section 263 based on wrong assumptions of fact. The appellant argued that the impugned order cannot be sustained in law and requested its cancellation.

3. Assessment and Additions:
The assessee underwent a search and seizure operation under section 132 of the Act, leading to the assessment for the mentioned years. The Assessing Officer (AO) made additions for undisclosed interest income and differences in income reported from the sale of yarn for the three assessment years.

4. Principal Commissioner's Action:
The Principal Commissioner issued a show-cause notice under section 263, citing the AO's failure to initiate penalty proceedings under section 270A for the additions made. The Principal Commissioner justified his action based on the omission by the AO, leading to prejudicial consequences for revenue.

5. Legal Arguments:
The assessee cited precedents where the High Courts held that the failure to initiate penalty proceedings does not warrant revision under section 263. The Principal Commissioner, however, relied on a recent judgment to support his decision.

6. Tribunal's Decision:
After hearing both parties, the Tribunal found that the Principal Commissioner's reliance on the recent judgment was misplaced. The Tribunal noted discrepancies in the Principal Commissioner's findings regarding the AO's assessment orders and concluded that the omission to initiate penalty proceedings was not erroneous. Relying on previous judgments, the Tribunal set aside the Principal Commissioner's order and allowed the appeals filed by the assessee for all assessment years.

7. Conclusion:
The Tribunal pronounced the order on 25th September 2024 in Chennai, allowing the appeals and rejecting the Principal Commissioner's decision to invoke revisional jurisdiction under section 263 for the mentioned assessment years.