2022 (6) TMI 1058 - AT - Income Tax

Revision u/s 263 - Understatement of interest income - CIT on perusal of records found that the interest income is under-reported by the assessee to the above extent as detected from the corresponding AIR information available to the Department - HELD THAT - TDS amount was deducted on the higher figure and also claimed by the assessee in the return of income the assessee has reported interest income lower to above extent. In these facts, the Pr.CIT has invoked the jurisdiction under Section 263 of the Act and has set aside the matter to the file of the Assessing Officer. In our view, the action of the Pr.CIT cannot be condemned as without jurisdiction. Pr.CIT has sufficient basis to presume error in the assessment order in the absence of any inquiry in this regard by the Assessing Officer. While the assessee has attempted to justify its case that the impugned interest income has not accrued to it at all and is not in existence, this aspect requires objective verification which was not done by the Assessing Officer. While the assessee may possibly explain its stance with factual corroboration in the proceedings before the Assessing Officer arising from revisional proceedings, the action of the Pr. CIT cannot be faulted per se. We thus are not inclined to interfere with the order of the Pr.CIT. Hence, this ground in the assessee s appeal is dismissed. Initiation of penalty proceedings from Section 271AAB to Section 271(1)(c) - Hon ble Delhi High Court in case of Addl. CIT vs. JK D Costa 1981 (4) TMI 68 - DELHI HIGH COURT has observed that failure of the Assessing Officer in recording satisfaction for initiation of penalty proceedings cannot be said to be a factor for vitiating the assessment order or making it erroneous or prejudicial to the interest of the Revenue. The revisional Commissioner is thus not vested with power to rectify/modify such alleged errors in the revisional jurisdiction. Similar view has been expressed in Sunila Asasthi 2021 (7) TMI 299 - ITAT DELHI and Amarjeet Dhall 2014 (4) TMI 1170 - ITAT CHANDIGARH by placing reliance on series of decisions rendered in this regard. The plea of the assessee is thus found to be consistent with binding judicial precedents. In view of the Jurisdictional High Court expressing its view in favour of the assessee, we do not deem it necessary to refer to the judgment delivered in the case of Surendra Prasad Agrawal ( 2004 (9) TMI 45 - ALLAHABAD HIGH COURT ) relied upon by Revenue. Action of the Pr. CIT directing the Assessing Officer to modify the initiation of penalty proceedings under Section 271(1)(c) instead of 271AAB(1)(c) of the Act is set aside. The ground pertaining to the aforesaid issue is thus allowed.

Summary

Issues involved:
1. Understatement of interest income
2. Modification of charge for initiation of penalty proceedings

Understatement of interest income:
The appeals were filed by the assessee against the revisional orders of the Principal Commissioner of Income Tax-XII, Delhi, challenging the assessment orders passed by the Assessing Officer under Section 143(3) r.w. Section 153A of the Income Tax Act, 1961. The first issue revolved around the alleged understatement of interest income by the assessee. The Principal Commissioner found a variance in the interest income reported by the assessee and the information available to the Department. The assessee contended that the disputed interest income did not belong to them and was not accrued, supporting their claim with ledger accounts and other evidence. The Tribunal noted that the Assessing Officer failed to objectively verify this aspect, leading the Principal Commissioner to set aside the matter for further examination. The Tribunal upheld the Principal Commissioner's decision, emphasizing the need for verification and objective assessment in such cases.

Modification of charge for initiation of penalty proceedings:
The second issue pertained to the modification of the charge for initiating penalty proceedings from Section 271AAB to Section 271(1)(c) by the Principal Commissioner in the revisional order. The assessee argued that such modification was beyond the scope of revisional powers under Section 263 of the Act, citing relevant judicial precedents. The Tribunal agreed with the assessee, referencing judgments that highlighted the limitations on the revisional Commissioner's authority to alter penalty provisions determined by the Assessing Officer. Relying on established legal principles, the Tribunal set aside the direction to modify the penalty proceedings charge, ruling in favor of the assessee. This issue was consistent with the decision made in a similar case for the assessment year 2013-14. Consequently, the Tribunal partially allowed the appeal on this ground.

In conclusion, the Tribunal upheld the Principal Commissioner's decision regarding the understatement of interest income due to lack of objective verification by the Assessing Officer. However, the Tribunal ruled in favor of the assessee concerning the modification of the charge for initiating penalty proceedings, emphasizing the limitations on the revisional Commissioner's authority in altering penalty provisions determined by the Assessing Officer. As a result, both appeals of the assessee were partially allowed.