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TMI Blog2025 (1) TMI 1472X X X X Extracts X X X X X X X X Extracts X X X X ..... ice u/s. 153A of the Act was issued on 03.09.2021 and pursuant to that assessee filed its return of income (RoI) of Rs. 17,39,87,610/- on 30.11.2021. The AO made an addition of Rs. 32,25,627/- by alleging that there was a difference between the undisclosed income quantified and that admitted in the return filed in response to the notice u/s. 153A of the Act [22% of Gross Profit addition @ 23% of unaccounted sales of Rs. 32,25,62,705/- which works out to Rs. 7,41,89,422/- led to the addition of Rs. 32,25,627/-] and passed the assessment order on 25.03.2022. Thereafter, the AO initiated penalty proceedings u/s. 270A of the Act, alleging underreporting of income to the tune of Rs. 32,25,627/- on account of undisclosed sales. Thereafter, the Ld.CIT(A) issued show cause notice to the assessee on 28.02.2024 conveying his desire to revise the assessment order dated 25.03.2022. According to the Ld.PCIT, while completing the assessment, the AO had initiated penalty u/s. 270A of the Act for under reporting of income of Rs. 32,25,627/- which addition was made in the assessment order passed pursuant to assessment passed u/s. 153A of the Act. According to him, sec.270A(9)(e) of the Act provides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld.PCIT in that case, to the extent that Assessing Officer in the assessment order has made a finding that there was concealment of income, whereas there was no such finding of fact made by Assessing Officer in the assessment order. Therefore, the Hon'ble High Court held that the Ld.PCIT had distorted the order of assessment and held it to be perverse and therefore, according to the Ld.PCIT, in the peculiar facts of the case of CIT v. Chennai Metro Rail Ltd. (supra), the Hon'ble Madras High Court gave relief to the assessee. Therefore, according to the Ld.PCIT, in the present case, he has jurisdiction to direct initiation of penalty u/s. 270A of the Act (misreporting of income of Rs. 7,41,89,422/-). Further, the Ld.PCIT noted that in this case, the concealment was well established by the search team consequent to which the assessee had admitted the suppressed sales in the return of income, by returning an income of Rs. 17.39 Crores. whereas, in the original Return of income it was offered only Rs. 9.85 Crores as its income. According to the Ld.PCIT, since the said disclosure was found short of what the actual suppression was, further additions were made by the AO in the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order u/s 143(3) r.w.s. 153A of the Act dated on 25/03/2022 passed by the assessing officer for the AY 2020-21 is erroneous and prejudicial to the interest of the revenue to that extent that the order had omitted initiating of penalty u/s 270A(9)(e) on the sum of Rs. 7,41,89,422/-, Accordingly, in exercise of powers conferred on me u/s. 263(1) of the Act, do hereby modify the assessment order passed u/s 143(3) r.w.s. 153A of the Act on 25.03.2022 with a direction to the assessing officer to invoke the applicable penalty provisions of section 270A(9)(e) on the entire sum of Rs. 7,41,89,422/- for the AY 2020-21. 5. The Ld.AR cited the decision in the case of CIT v. CRK Swamy reported in [2002] 254 ITR 158 (Mad.) and he also cited the decision of the Hon'ble Rajasthan High Court in the case of CIT v. Keshrimal Parasmal reported in [1986] 157 ITR 484 (Raj.) to assail the impugned action of the Ld.PCIT invoking his revisional jurisdiction u/s. 263 of the Act to interfere with the initiation of penalty by the AO in the assessment order. 6. Per contra, the ld.DR supporting the action of the ld.PCIT, doesn't want us to interfere with the impugned order of the ld.PCIT u/s. 263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (g) the income assessed or reassessed has the effect of reducing the loss or converting such loss into income. (3) The amount of under-reported income shall be,- (i) in a case where income has been assessed for the first time,- (a) if return has been furnished, the difference between the amount of income assessed and the amount of income determined under clause (a) of sub-section (1) of section 143; (b) in a case where no return of income has been furnished or where return has been furnished for the first time under section 148,- (A) the amount of income assessed, in the case of a company, firm or local authority; and (B) the difference between the amount of income assessed and the maximum amount not chargeable to tax, in a case not covered in item (A); (ii) in any other case, the difference between the amount of income reassessed or recomputed and the amount of income assessed, reassessed or recomputed in a preceding order: Provided that where under-reported income arises out of determination of deemed total income in accordance with the provisions of section 115JB or section 115JC, the amount of total under-reported income shall be determined in accorda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmined by the Transfer Pricing Officer, where the assessee had maintained information and documents as prescribed under section 92D, declared the international transaction under Chapter X, and, disclosed all the material facts relating to the transaction; and (e) the amount of undisclosed income referred to in section 271AAB. (7) The penalty referred to in sub-section (1) shall be a sum equal to fifty per cent of the amount of tax payable on under-reported income. (8) Notwithstanding anything contained in sub-section (6) or sub- section (7), where under-reported income is in consequence of any misreporting thereof by any person, the penalty referred to in sub-section (1) shall be equal to two hundred per cent of the amount of tax payable on under-reported income. (9) The cases of misreporting of income referred to in sub-section (8) shall be the following, namely:- (a) misrepresentation or suppression of facts; (b) failure to record investments in the books of account; (c) claim of expenditure not substantiated by any evidence; (d) recording of any false entry in the books of account; (e) failure to record any receipt in books of account having a bearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2022 with a direction to Assessing Officer"to invoke the applicable penalty provisions u/s. 270A(9)(e) of the Act on the entire sum of Rs. 7,41,89,422/- for the assessment year 2021-22". In other words, the Assessing Officer has been directed to initiate penalty u/s. 270A(9)(e) of the Act, which enacts cases of mis-reporting of income of referred to in section 270A(8) of the Act inter alia for failure to record any receipt in books of accounts having a bearing on total income. Such an impugned action of the ld.PCIT has been challenged as not tenable in the eyes of law. A bare reading of section 270A of the Act would reveal that unless a person is considered to have under-reported his income as contemplated by sub-section (2) of section 270A, he cannot be found to have attracted the penalty u/s. 270A of the Act as envisaged for "under- reporting of income in consequence of mis-reporting". Therefore, first of all we have to see whether the assessee's case as narrated by the Ld.PCIT would fall in the ken of sub-section (2) of section 270A of the Act. For convenience again sub-section (2) is reproduced:- "270A(2) A person shall be considered to have under-reported his income, if- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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