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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 ..... tified in rejecting the justified and bonafide explanation of the appellant for not filing the return of income holding that the revision proceedings were not the right forum for the justification. 3. WITHOUT PREJUDICE TO THE ABOVE The CIT has grossly erred in coming to a conclusion that non initiation of penalty proceedings u/s 270A of the Act, amounts to allowing relief to the appellant to term the assessment order passed u/s 143(3) as erroneous and prejudicial to the interest of the revenue." 3. The only grievance of the assessee is against the revisionary proceedings initiated under section 263 of the Act. 4. The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is a partnership firm and did not file its original return of income for the year under consideration. Subsequently, on the basis of the information available in the AIMS module of the ITBA system that the assessee is a non-filler of income despite conducting high-value transactions in respect of transfer of immovable property, notice under section 148 of the Act was issued on 23/03/2021 and proceedings under section 147 of the Act were initiated. In response to noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undersigned proposes to revise the assessment u/s. 263 as the said assessment order passed u/s 143(3) r.w.s 147 of the I.T Act, 1961 for A. Y 2017-18 was passed on 30.03.2022 is 'erroneous' and 'prejudicial to the interest of the revenue' in the light of the facts mentioned above. 5. In this regard, you are hereby given an opportunity to file your written submission in this office latest by 11.03.2024. In case, there is no compliance till the given date, it will be presumed that you did not wish to avail this opportunity and order u/s. 263(1) of the I.T. Act. 1961 will be passed, as above." 6. After considering the response from the assessee dated 11/03/2024, the learned PCIT issued fresh notice dated 12/03/2024 under section 263 of the Act, observing as follows: - "Please refer to the assessment framed in your case u/s 143(3) read with section 147 of the Income Tax Act, 1961 for Asst. Year 2017-18dated 30.03.2022. From the facts of the case, it is ascertained that you had not filed the return of income for A.Y. 2017-18. The return was filed only after the notice u/s. 148 was issued. In response thereto, you filed the return of income on 10.03.2022 declaring th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee submitted that there was bona fide explanation, which does not justify levy of penalty under section 270A of the Act. 9. The learned PCIT, vide impugned order, disagreed with the submissions of the assessee and held that the AO did not initiate penalty proceedings despite under-reporting of income by the assessee, being squarely covered under section 270A(2)(b) of the Act, and because of the non-initiation of penalty proceedings, the penalty payable in respect of the under-reported income cannot be contemplated. Accordingly, it was held that due to non-initiation of the relevant penalty, the assessment order passed under section 143(3) read with section 147 of the Act is rendered erroneous and prejudicial to the interest of the Revenue as envisaged under section 263 of the Act. Accordingly, the learned PCIT directed the AO to initiate penalty proceedings under section 270A for under-reporting of income as per section 270A(2)(b) of the Act. Being aggrieved, the assessee is in appeal before us. 10. During the hearing, the learned Authorised Representative ("learned AR") reiterating the submissions made before the lower authorities and submitted that the assessee could not file t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment; (d) the amount of deemed total income assessed or reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income determined in the return processed under clause (a) of sub-section (1) of section 143; (e) the amount of deemed total income assessed as per the provisions of section 115JB or section 115JC is greater than the maximum amount not chargeable to tax, where no return of income has been filed; (f) the amount of deemed total income reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income assessed or reassessed immediately before such reassessment; (g) the income assessed or reassessed has the effect of reducing the loss or converting such loss into income." 13. Therefore, as per the learned PCIT, since in the present case, the assessee did not file its original return of income and the income assessed vide order passed under section 143(3) read with section 147 of the Act is greater than the maximum amount not chargeable to tax, therefore, the assessee has under-reported its income. Accordingly, as per the learned PCIT, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te penalty proceedings in course of assessment renders assessment order erroneous and prejudicial to interests of the Revenue and the Commissioner has jurisdiction to revise such an order under section 263 of the Act. We find that the Hon'ble Madras High Court in CIT v/s Chennai Metro Rail Ltd., reported in [2018] 92 taxmann.com 329 (Mad.), after considering the aforesaid decision of the Hon'ble Allahabad High Court, observed as follows: - "14. In view of Section 271(1) read with Section 263 of the Act, the Principal Commissioner might pass such order as the circumstances of the case might justify, which could include an order enhancing or modifying the assessment or cancelling the assessment or directing a fresh assessment. Directing fresh assessment would, in our view, include assessment of penalty. It cannot, therefore, be said that the Principal Commissioner had no jurisdiction to pass such order. The issue has been decided by a Division Bench of the High Court of Allahabad in CIT v. Surendra Prasad Agrawal [2005] 142 Taxman 653. However, the Principal Commissioner, we find, has recorded a finding that "on examination of the records, it is found that the Assessing Officer had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner called for the record of the assessment proceedings and it is also clear from this order that in his view the assessment orders passed by the ITO on 28th March, 1969, were erroneous and prejudicial to the interest of the revenue. As the Tribunal has rightly pointed out, his jurisdiction was confined to the proceedings of assessment and the assessment orders, and he had full powers to revise the assessment order in regard to any error he may discover therein which is prejudicial to the interest of the revenue. In the present case, the complaint of the Addl. Commissioner is that while completing the assessment and passing the assessment orders, the ITO had failed to take steps to charge interest and that he had also failed to initiate penalty proceedings against the assessee. The question, therefore, is whether these two aspects of the matter formed part of the proceedings which were being examined by the Commissioner and also whether these are two aspects which form an integral part of the assessment orders which the Commissioner is seeking to revise. The Tribunal has held, so far as the question of interest is concerned, that it is a part of the proceedings of assessment a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty proceedings do not form part of the assessment proceedings and that the failure of the ITO to record in the assessment order his satisfaction Or the lack of it in regard to the leviability of penalty cannot be said to be a factor vitiating the assessment order in any respect. An assessment cannot be said to be erroneous or prejudicial to the interest of the revenue because of the failure of the. ITO to record his opinion about the leviability of penalty in the case. We, therefore, answer the first question referred to us in the affirmative and in favour of the assessee." (emphasis supplied) 18. Therefore, in view of the facts and circumstances of the present case and the decisions of the Hon'ble Delhi High Court and the Hon'ble Madras High Court as noted above, we are of the considered view that the learned PCIT erred in invoking the provisions of section 263 of the Act, and directing the AO to initiate penalty proceedings under section 270A of the Act, as the AO has chosen not to initiate the penalty proceedings. Therefore, we are of the considered view that such being the facts, the learned PCIT cannot substitute his views and observe that the AO has passed erroneous or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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