TaxTMI 
TaxTMI 
2025 (3) TMI 711
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....e facts and in the circumstances of the case and in law, the CIT was not justified 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 ....
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....led to report his income as per the Income Tax Act, 1961 and the AO has not initiated penalty proceedings u/s 270A for non reporting of income. 4. In the light of the above, the 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 t....
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....n was to be filed, but unfortunately, due to non-cooperation, the firm could not file the return. Thus, since 99% of the tax was paid, justifying the intention of the firm to not hold back the return of income, the assessee 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, th....
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....on 143; (b) the income assessed is greater than the maximum amount not chargeable to tax, where no return of income has been furnished; (c) the income reassessed is greater than the income assessed or reassessed immediately before such reassessment; (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 no....
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.... 15. The learned PCIT, vide impugned order passed under section 263 of the Act, placed reliance upon the decision of the Hon'ble Allahabad High Court in CIT v/s Surender Prasad Agarwal, reported in [2005] 275 ITR 113 (All.), wherein the Hon'ble High Court held that omission of ITO to initiate 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 pa....
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....roneous, in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiries as he deemed necessary, pass such orders thereon as the circumstances of the case justify. In the present case, the Addl. Commissioner 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 pro....