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TMI Blog2025 (3) TMI 711X X X X Extracts X X X X X X X X Extracts X X X X ..... nitiate penalty proceedings under section 270A of the Act, as the AO has chosen not to initiate the penalty proceedings.
Therefore, such being the facts, the learned PCIT cannot substitute his views and observe that the AO has passed erroneous order which is prejudicial to the interest of the Revenue. Thus, the impugned revision order passed by PCIT u/s 263 is quashed. Assessee appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... enses has been provided by you though the same were called for by the FAO. 2. You have not filed its return of income u/s 139 of the Act. The return has been filed first time in response to notice u/s148. 3. You have admitted that no books of accounts maintained during the year under consideration, it is quiet surprising how come the returned income has been accepted as no satisfaction has been noted by the AO either in the order sheet or in the assessment order. 4. You have not provided any detail so opening/closing stock. 5. If the project was completed in 2012, then whether any profit was declared by the assessee or not is not clear. 6. It could not be ascertained that you are whether maintaining percentage method or project completion method. 7. All fats were sold to family members. Copies of agreement/index Il were not provided. 8. The flats were hold by the firm, no rent income under the head income from house property has been declared/estimated by the AO. 9. What about the sundry debtors, creditors and other assets held by the firm is not clear. Further, it is also noted that you have not disclosed all the material facts necessary for the assessment. You h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r be not modified accordingly. In this regard, your case is fixed for hearing on 18th March, 2024." 7. Thus, vide notice dated 12/03/2024, issued pursuant to the assessee's submission, the learned PCIT confined the allegation only qua the non-initiation of penalty proceedings under section 270A of the Act on the basis that the assessee has under-reported its income as per the definition of the term contained in section 270A(2)(b) of the Act. 8. In response to the fresh notice dated 12/03/2024 issued under section 263 of the Act, the assessee submitted that the assessee could not file its return of income due to non-cooperation of one of its partners, who neither signed the accounts of the firm nor even made payments towards his share of taxes payable by the firm. The assessee also submitted that the firm paid the advance tax amounting to INR 10,26,56,016, but because there were disputes between the partners, therefore, the return of income could not be filed. The assessee further submitted that against total gross receipts of INR 35,71,00,001, the firm had declared a profit of INR 31,79,65,028, which shows the intention of the firm that the return was to be filed, but unfortunate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings. 11. On the other hand, the learned Departmental Representative vehemently relied upon the impugned order and submitted that the proceedings under section 263 of the Act have rightly been initiated in the present case as the AO did not follow the statutory provisions. 12. We have considered the submissions of both sides and perused the material available on record. In the present case, it is evident from the record that the only basis on which the learned PCIT assumed the jurisdiction under section 263 of the Act is to initiate the penalty under section 270A of the Act. As per the learned PCIT, since the AO did not initiate penalty proceedings despite under-reporting of the income by the assessee, thus the present case is squarely covered under the provisions of section 270A(2)(b) of the Act. Before proceeding further, it is relevant to note the provisions of section 270A(2)(b) of the Act, which reads as follows: - "(2) A person shall be considered to have under-reported his income, if- (a) the income assessed is greater than the income determined in the return processed under clause (a) of sub-section (1) of section 143; (b) the income assessed is greater than the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, the other partners have presently paid the balance tax out of their own funds. We find that the AO, vide order dated 30/03/2022 passed under section 147 of the Act, after considering the submissions filed by the assessee, assessed the total income of the assessee at the income returned. It is further evident from the assessment order that the AO also directed initiation of penalty proceedings under section 271B of the Act for failure of the assessee to get the accounts audited as mandated by the provisions of section 44AB of the Act, and also directed initiation of penalty proceedings under section 271F of the Act for failure on the part of the assessee to furnish the return of income as required under section 139(1) of the Act. However, it is clearly evident from the record that there was neither any recording of satisfaction by the AO for initiating the penalty proceedings under section 270A of the Act nor there was any direction in this regard. Thus, ostensibly, there is no observation of under-reporting or misreporting of income by the assessee in the assessment order. 15. The learned PCIT, vide impugned order passed under section 263 of the Act, placed reliance upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th regard to furnishing of inaccurate particulars of income, the learned PCIT cannot hold that omission to record satisfaction to initiate penalty proceedings is erroneous or prejudicial to the interest of the Revenue. In the present case, it is evident from the record that though the AO has directed initiation of penalty proceedings under section 271B and section 271F of the Act, however, there is no recording of any finding that there was under-reporting of income by the assessee under section 270A(2) of the Act. 17. We further find that the Hon'ble Delhi High Court in Addl. CIT v/s J.K. D's Costa, reported in [1982] 133 ITR 7 (Delhi), observed as follows: - "We have heard Mr. Wazir Singh, learned counsel for the department, but we are of opinion that the conclusion reached by the Tribunal is the only possible conclusion that can be arrived at in, the circumstances of the case. Section 263 enables the Commissioner to call for and examine the record of any proceedings under the Act and if he considers that any order passed therein by the ITO is erroneous, in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not possible when the Commissioner is dealing with the assessment proceedings and the assessment order to expand the scope of these proceedings and to view the penalty proceedings also as part of the proceedings which are being sought to be revised by the Commissioner. There is no identity between the assessment proceedings and the penalty proceedings; the latter are separate proceedings that may, in some cases, follow as a consequence of the assessment proceedings. As the Tribunal has pointed out, though it is usual for the ITO to record in the assessment order that penalty proceedings are being initiated, this is more a matter of convenience than of legal requirement. All that the law requires, so far as the penalty proceedings are concerned, is that they should be initiated in the course of the proceedings for assessment. It is sufficient if there is some record somewhere, even apart from the assessment order itself, that the ITO has recorded his satisfaction that the assessee is guilty of concealment or other default for which penalty action is called for. Indeed, in certain cases it is possible for the ITO to issue a penalty notice or initiate, penalty proceedings even lon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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