SAMIT ASHOK SONIMINDE,MUMBAI vs. INT TAX COMMISSIONER OF INCOME TAX-4(2)(1), MUMBAI

Date of Hearing 05.03.2025 Date of Pronouncement 10.03.2025 आदेश / ORDER

PER SANDEEP GOSAIN, JM:

1. The Pr. CIT Mumbai erred in law as well as on the facts of the case in invoking the provisions of section 263 of the Act and therefore the impugned order dated 30.03.2024 passed under section 263 of Act be quashed.

2 Samit Ashok Soniminde, Mumbai The ld. Pr. CIT Mumbai 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 A.O. failed to intitate penalty proceedings u/s 270A (9) of the Income Tax Act 1961 hence the assessment order passed by the A.O. on 18.11.2021 u/s 144 r.w.s.144C (3) of the Income Tax Act was erroneous and prejudicial to the interest of the Revenue. The very assumption of jurisdiction is contrary to the provision of law and facts of the record and same be set aside or quashed.

3 Samit Ashok Soniminde, Mumbai

6. We have heard both the parties, perused the materials available on record and gone through the orders of the authority below. The sole basis for the PCIT to assume jurisdiction u/s.263 of the Act, is to initiate penalty proceedings u/s.270A of the Act. The provisions of Sec.270A of the Act, deals with levy of penalty for underreporting or misreporting of income. Therefore, in order to decide whether the PCIT is right in invoking the provisions of Sec.263 of the Act, and revise assessment order or not, one has to understand the additions made by the AO in the assessment order. The AO has made additions towards disallowance of cost of improvement claimed against computation of long term capital gains derived from sale of property. The AO has disallowed cost of improvement on the ground that the assessee has not furnished supporting documentary evidence to substantiate his claim towards cost of improvement. Except this, there is no observation in the assessment order regarding unsustainability of claim made by the assessee towards cost of improvement. From the above, what we understand is that although the AO has made additions towards disallowance of cost of improvement, but chosen not to initiate penalty proceedings u/s.270A of the Act, because, prima facie there is no materials with the AO to allege that there is an underreporting or misreporting of income.

7. In the above factual back ground, if you examine the reasons given by the PCIT to revise the assessment order u/s.263 of the Act, we find that the PCIT has set aside the assessment order only for the reasons that the AO has failed to initiate penalty proceedings u/s.270A of the Act, although, there is an observation of underreporting or misreporting of income. The PCIT had also relied upon the decision of the Hon'ble Allahabad High Court in the case of CIT v. Surendra Prasad Aggarwal reported in [2005] 275 ITR 113 (Allahabad) and held that the revisionary powers can be exercised for 5 Samit Ashok Soniminde, Mumbai initiation of penalty proceedings. We find that although the Hon'ble Allahabad High Court in the case of CIT v. Surendra Prasad Aggarwal (supra), has uphold 263 order passed by the PCIT for initiation of penalty proceedings, but the jurisdictional the Hon'ble Madras High Court in the case of CIT v. Chennai Metro Rail Ltd. (supra), has taken a contrary view after considering the decision of the Hon'ble Allahabad High Court in the case of CIT v. Surendra Prasad Aggarwal (supra), and held that in the absence of any findings in the assessment order regarding underreporting or misreporting of income, the PCIT cannot revise the assessment order to initiate penalty proceedings. Therefore, we are of the considered view that the PCIT has erred in invoking revisional powers u/s.263 of the Act, and set aside the assessment order to initiate penalty proceedings u/s.270A of the Act, because, the AO has chosen not to initiate penalty proceedings. The PCIT cannot substitute his views and observed that, the AO has passed erroneous order which resulted in loss of Revenue to the Department.

8. In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that the assessment order passed by the AO is neither erroneous nor prejudicial to the interest of the Revenue and thus, we are of the considered view that the PCIT is erred in revising the assessment order u/s.263 of the Act. Hence, we quashed the revision order passed by the PCIT u/s.263 of the Act.

10 Although Allahabad High Court in the case of CIT Vs Suresh Prasad Agarwala has uphold orders passed u/s 263 of the Act by PCIT for initiating of penalty. But again, the fact remains that in the case of CIT Vs. vegetable products, 88 ITR 192 (SC), the Hon’ble Supreme Court ruled that when there are multiple interpretations of the taxing provisions, then the interpretation that favours the assessee should be used. Admittedly, no judgment of jurisdictional High Court has been referred or relied upon by either of the parties.

11 Therefore, considering the overall facts of the present case, and while relying upon the decision of Hon’ble Delhi High Court in the case CIT Vs Sudarshan talkies (supra) and the decision of Coordinate Bench in the case of Coimbatore Vyapari Maathesh (supra) we conclude that failure to initiate penalty proceedings would not give jurisdiction to the Commissioner of income tax to pass an order u/s 263 of the Act and direct the AO for initiation of penalty proceedings. Hence, we quash the order passed by PCIT u/s 263 of the act.

7 Samit Ashok Soniminde, Mumbai