TaxTMI 
TaxTMI 
TaxTMI 
2025 (5) TMI 1774
X X X X Extracts X X X X
X X X X Extracts X X X X
....s jurisdiction u/s 263 of IT Act. 2. That the learned Principal Commissioner of Income-tax, Raipur-1, failed to appreciate that the first appeal of the appellant against addition made in the assessment order on impugned issue, i.e. treating credit sale as unexplained cash credit u/s 68, was pending before the Commissioner (Appeals) NFAC and therefore the order u/s 147 r.w.s. 144B could not be revised u/s 263 of the Act. 3. That the learned Principal Commissioner of Income-tax Raipur-1, erred in law as well as on the facts of the case in assuming jurisdiction u/s 263 of the Act by wrongly and incorrectly holding that the AO instead of initiating penalty proceeding u/s 271AAC initiated the penalty proceedings u/s 271(1)(c) of the Act, hence, the assessment order passed by the AO on dated 26.03.2022 u/s 147 r.w.s. 144B, erroneous and prejudicial to the interest of revenue. The very assumption of jurisdiction is contrary to the provisions of law and facts on record. Hence, the proceedings so initiated u/s 263 of the Act and the impugned order dated 13.03.2024 deserves to be quashed. 4. That on the facts and circumstances of the case and in law, the learned Principal Commissioner ....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the assessee shall pay by way of penalty, in addition to tax payable under section 115BBE, a sum computed at a rate of 10% of the tax payable under clause (i) of sub section (1) of section 115BBE. In other words, penalty u/s 271AAC is applicable in this case instead of penalty u/s 271(1)(c) of the Income Tax Act, 1961. As such, the assessment order passed by the Assessing Officer was held to be erroneous in so far as it is prejudicial to the interest of Revenue. 5. Considering the facts narrated in the foregoing paras which have emanated from the case record, Ld. PCIT observed that the order passed u/s 147 r.w.s. 144B of the Income Tax Act, 1961 vide order dated 26.03.2022 is erroneous in so far as it is prejudicial to the interests of revenue, in the light of section 263 of the Income Tax Act, 1961. As per Ld. PCIT, since the issues discussed supra have not been properly verified by the AO while passing the assessment order by conducting proper enquiries. 6. In view of the above facts, a show cause e-notice u/s 263 dated 09.10.2023 was issued to the assessee, incorporating the above facts, asking to furnish his reply in support of his claim. 7. Subsequently, in response to th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tice u/s 143(2) can be generated through ITBA portal in a case wherein the return filed u/s 148 was not e-verified by the assessee, to which it was submitted by the Ld. CIT-DR that a notice u/s 143(2) cannot be generated / issued by the Ld. AO through the ITBA portal, if the returned filed by the assessee is pending for verification. 10.2 In rebuttal, it was the submission by Ld. AR on behalf of the assessee that the Ld. AO has acted upon the return filed by the assessee, therefore, in absence of issuance of notice u/s 143(2), the assessment completed would be an invalid assessment. Ld. AR further come up with an alternative plea, referring the additional ground raised on 12.12.2024, that if the return filed by the assessee is to be taken as a invalid return / no return then without prejudice to the grounds taken by the assessee in form 36, the assessment framed ought to have been passed u/s 144 of the Income Tax Act, and not u/s 143(3) r.w.s. 147 r.w.s. 144B of the Act, therefore, such assessment order is unsustainable in law and liable to be quashed, consequently, the order of Pr. CIT u/s 263 passed on such a non-est order had exceeded his jurisdiction u/s 263 of the I T Act. 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e was not verified by the assessee for the reasons best known to him, therefore, notice u/s 143(2) cannot be generated/issued by the AO through the ITBA portal. Thus, it is default on the part of the assessee as the return of income should have been verified by him. Further, section 144 of the Act states that order u/s 144 of the Act can be passed if either of the three conditions provided in section 144 of the Act is fulfilled. Firstly, if any person fails to make the return required under sub-section (1) of section 139 and has not made a return or a revised return under sub-section (4) or sub-section (5) of that section. Secondly, if any person fails to comply with all the terms of a notice issued under sub-section (1) of section 142 or fails to comply with a direction issued under sub-section (2A) of that section. Thirdly, if any person having made a return, fails to comply with all the terms of a notice issued under sub-section (2) of section 143. The section 144 of the Act is reproduced below for kind reference: "144. (1) If any person - (a) fails to make the return required under sub-section (1) of section 139 and has not made a return or a revised return under sub-sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....equiring him either to attend or to produce or cause to be produced any evidence before the Ld. AO on which the assessee may rely in support of the return. Accordingly, for issuance of notice u/s 143(2), there is a precondition that there should be a return u/s 139 or in response to notice u/s 142(1). In the present case, the return filed by the assessee in response to u/s 148, on which the provisions of Income Tax Act shall apply, as if such return was a return required to be furnished u/s 139 of the Act, consequently, the return shall be treated as a valid return if the same is filed in accordance with the prescribed provisions of section 139. To understand and interpret that whether the returned filed by the assessee in response to notice u/s 148 shall be treated as a valid return, we have to go through the provisions of section 139, wherein it is mandatory under clause (b) of sub section (1) of section 139 that being a person other than a company or a firm, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, on or before the due....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the First Appellate Authority, who is having powers/ entrusted with duties co-terminus with that of powers and duties of the Ld. AO, therefore, it would be premature to discuss and decide such issues, for which remedy is available to the assessee before the revenue authorities below. 10.6 In view of aforesaid facts, circumstances, and observations, we do not find substance in the contention raised by the Ld. AR, therefore, ground no. 1 of the present appeal and additional ground raised are dismissed. 11. Ground no. 2: Regarding initiating the revisionary proceedings u/s 263 by the Ld. PCIT, on an issue pending before the Commissioner of Income Tax (Appeals), NFAC 11.1 On this issue, Ld. AR submitted that as per various judicial pronouncements, the Ld. PCIT was not authorized to invoke or assume jurisdiction to initiate proceedings under the provisions of section 263, when the subject matter is pending before the First Appellate Authority. The case was relied upon by the Ld. AR are as under: 1) CIT vs VAM Resorts and Hotels Pvt. Ltd (418 ITR 723) Allahabad High Court 2) Smt. Renuka Philips vs ITO (409 ITR 567) Madras High Court 3) M/s. Golden Vats Private Limited vs ACIT C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....atute with effect from 01.10.1984 which was further amended by Direct Tax Laws (Amendment) Act, 1987, subsequently, substituted by the Finance Act, 1988 w.e.f. 01.06.1988. The provisions of aforesaid explanation have been taken into consideration by the Hon'ble High Court of Allahabad in the case of VAM Resorts (supra), following the judgment by Hon'ble Madras High Court in the case of Smt. Renuka Philip (supra), wherein after considering the facts of case that the issue which is pending before the Ld. CIT(A) has been taken up as the basis by the Ld. PCIT while invoking the powers u/s 263, therefore, have held as under: 9. The second limb of argument of counsel for the assessee is that appeal before the CIT(A) was pending, as such, the CIT has no jurisdiction to revise the order, in view of Clause (c) of Explanation-1 to Section 263 of the Act, which provides that when appeal is pending before the Commissioner, the exercise of jurisdiction under Section 263 of the Act is barred. He relied upon the judgment in the case of Smt. Renuka Philip v. ITO [2019] 101 taxmann.com 119/[2018] 409 ITR 567 (Mad), the relevant paragraphs of which are extracted hereunder: '21. With regard t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....time of examination by the CIT only, and not in subsequent order or fresh order passed thereafter under Section 263/143(3) of the Act, which could justify the proceedings under Section 263 carried out by the CIT, which should have been taken into consideration in backdrop of the facts before them so as to draw any inference in the present case considering the facts and circumstances. The relevant observations of Allahabad High Court in the case of VAM resorts (supra), are as under: 23. In the present case, the Tribunal rightly arrived at the finding that all the material in regard to land development expenses was before the Assessing Officer who had required the assessee to produce all the documents in relation to the same and after inquiring about the details of contract and the contract executed by assessee, the bill submitted and payment schedule made, the Assessing Officer accepted the books of account and only disallowed Rs.1,20,000/- and added to the income of the assessee, which was also set aside by order of the CIT(A) while exercising the power under Section 263 of the Act CIT did not have any material for invoking the said provision and it merely did the same on suspici....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e case on which the remand order hinges, as such the remand order was not sustainable in the eyes of law. 28. Considering the facts and circumstances of the case, we are of the considered opinion, that the revenue has failed to make any case for interference in the order of the ITAT, as the CIT had proceeded to remand the matter back to the assessing authority while the appeal of the assessee was pending under Section 250 and the power of exercise under Section 263 was barred by Clause (c) to Explanation 1 of Section 263 of the Act. Further, the remand order by the CIT was based merely on suspicion and presumption. 29. The appeal is devoid of merit and is hereby dismissed. The question of law is, therefore, answered against the revenue and in favour of the assessee. 11.7 After having been considered the aforesaid judgment and the facts involved therein, we observe that the decision granted by Hon'ble High Court was in the backdrop of the facts that the Ld. PCIT had invoked the provisions of section 263 for an issue which was already under consideration before the Ld. CIT(A), NFAC and also the PCIT referred to certain "records", which as per explanation 1(b) of section 263 cann....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lowing the aforesaid judicial pronouncements it can be held that, the issues which are not subject matter before the First Appellate Authority, if they are causing any prejudice to the interest of revenue for the errors committed by the Assessing Officers, the same can form the basis for revision by the Ld. PCIT. In terms of aforesaid observations as the issues pending in appeal are different then the issues raised by the Ld. PCIT by invoking the provisions of section 263, therefore, there was no illegality in the proceedings-initiated u/s 263, thus, that the contention raised by the Ld. AR that pendency of an appeal before the First Appellate Authority, precludes the Ld. PCIT to exercise the powers of revision u/s 263 is found to be bereft of substance, we, therefore, are unable to persuade and to concur with such contention raised by the Ld. AR, consequently, ground no. 2 of the present appeal of the assessee stands rejected, in terms of aforesaid discussion. 12. Ground No. 3: Regarding initiation of penalty u/s 271AAC by the Ld. PCIT, which was erroneously initiated by the Assessing Officer u/s 271(1)(c) 12.1 On this issue, Ld. AR submitted that the powers u/s 263 are being ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2/JP/2022) 7. We have heard the rival contentions, perused the material available on record, assessment order and impugned order and the case laws cited before us. Admittedly, the AO has initiated penalty proceedings u/s 271 AAB(1A) with the observations that the amount of investment made by the assessee for purchase of motorcycle in cash i.e. Rs.1,25,000/- is added to his total income treated as unexplained investment u/s 69 and tax is charged as per provisions of section 115BBE of the I.T. Act. The assessee has offered Rs.1,25,000/- for taxation during search proceedings in statement u/s 132(4), however, the assessee has not included Rs.1,25,000/- in the return filed u/s 153A, therefore, penalty proceedings u/s 271AAB(1A) is initiated accordingly. The Ld. AR argued that the AO has taken conscious decision to initiate the penalty proceedings u/s 271AAB(1A) of the Act. It may be noted that both u/s 271(1)(c) and u/s 271AAB it is the AO who is to satisfy himself whether on the additions made, penalty proceedings is required to be initiated or not and also the section under which it is to be initiated. The mandate under section 263 of the Act do not give any power to CIT to impose ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s that the Assessing Officer had not initiated penalty proceedings under Section 271 (1 )(c) of the Act in the assessment order, he cannot direct the Assessing Officer to initiate penalty proceedings under Section 271 (1 )(c) of the Act in exercise of revisional power under Section 263 of the Act. The relevant observations recorded therein read thus:- "9. Now adverting to the second limb, it may be noticed that the Delhi High Court in judgment reported in Addl. CIT vs. J.K.D. Costa (1981) 25 CTR (Del) 224 : (1982) 133 ITR 7 (Del) has held that the CIT cannot pass an order under s. 263 of the Act pertaining to imposition of penalty where the assessment order under s. 143(3) is silent in that respect. The relevant observations recorded are: "It is well established that proceedings for the levy of a penalty whether under s. 271 (1)(a) or under s. 273(b) are proceedings independent of and separate from the assessment proceedings. Though the expression "assessment" is used in the Act with different meanings in different contexts, so far as s. 263 is concerned, it refers to a particular proceeding that is being considered by the Commissioner and it is not possible when the Commission....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a mistake committed by the Ld. AO, causing laws of revenue to the exchequer, therefore, such error is covered by the issues to be picked up for revision by invoking the provisions of section 263, consequently, Ld. PCIT had rightly exercised his powers to correct the section of initiation of penalty. In view of such facts, it is requested to uphold the order of Ld. PCIT u/s 263. 12.4 We have considered the rival submissions, perused the material available on record and the judicial pronouncements relied upon by the parties. As per facts of the present case, ld. AO have made the addition u/s 68 and have also recorded the satisfaction to invoke provisions of section 271(1)(c) for levy of penalty on account of concealment of income by the assessee. It is to be noted that the penalty qua the addition's u/s 68 effective from 01.04.2017 are to be initiated u/s 271AAC. Such error was identified by the Ld. PCIT, though, as the issue has been dealt with and decided by Hon'ble High Courts, wherein it is clearly mandated that the initiation of penalty proceedings cannot be the subject matter of powers conferred upon the revisionary authority u/s 263, however, initiation of penalty under an i....