PCIT Cannot Direct Penalty Under Section 270A Without AO's Finding of Under-Reported Income

The ITAT quashed a revision order under s263 issued by the PCIT directing initiation of penalty proceedings under s270A for under-reported income. Following Chennai Metro Rail Ltd., the Tribunal held that the PCIT cannot invoke s263 without the AO first recording a finding regarding under-reporting of income under s270A(2). While the AO had initiated penalties under s271B and s271F, no determination of under-reported income was made. The PCIT improperly substituted his judgment for the AO's discretion, as the AO had deliberately chosen not to initiate s270A proceedings. The revision order was therefore invalid and the assessee's appeal was allowed. .....

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