ANITHA TEXCOT (INDIA) PRIVATE LIMITED,TIRUPPUR vs. PCIT - 2, CHENNAI
Facts
The assessee company underwent a search and seizure operation, leading to assessment orders for AYs 2018-19 to 2020-21. The Principal Commissioner (PCIT) invoked revisional jurisdiction under Section 263 of the Income Tax Act, 1961, citing the Assessing Officer's (AO) failure to initiate penalty proceedings under Section 270A.
Held
The Tribunal held that the PCIT erred in invoking revisional jurisdiction based on the omission to initiate penalty proceedings. It was found that the PCIT had distorted the assessment order by alleging a finding of concealed income, which was not present in the original assessment. The Tribunal relied on decisions from the Madras High Court.
Key Issues
Whether the PCIT's invocation of revisional jurisdiction under Section 263 was justified when the AO failed to initiate penalty proceedings under Section 270A, based on alleged concealment of income not explicitly found by the AO in the assessment order.
Sections Cited
263, 132, 153A, 143(3), 270A, 271AAB(1A)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI MANOJ KUMAR AGGARWAL
आदेश / O R D E R PER ABY T. VARKEY, JM: These are appeals preferred by the assessee against the order of
the Learned Principal Commissioner of Income Tax (Central), Chennai-2,
dated 05.03.2024 for the Assessment Years (hereinafter in short ‘AY’)
2018-19 to 2020-21 passed u/s.263 of the Income Tax Act, 1961
(hereinafter in short ‘the Act’).
At the outset, the Ld.AR of the assessee submitted that on wrong
assumption of fact, the Ld.PCIT has invoked his revisional jurisdiction
u/s.263 of the Act and therefore, the impugned order can’t be sustained
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in the eyes of law and therefore, it needs to be interfered by this Tribunal
and prayed that it be cancelled.
The brief facts are that the assessee company had undergone
search and seizure operation u/s.132 of the Act on 17.03.2021 and
pursuant to which, the case was centralized with the DCIT, Central Circle-
1, Coimbatore, who issued notice u/s.153A of the Act to the assessee
company for AYs 2015-16 to 2020-21 on 30.10.2021 and pursuant to it,
assessee filed return of income (RoI) for AY 2018-19 on 31.01.2022
declaring total taxable income of ₹16,07,55,090/-. Likewise, for AY 2019-
20, pursuant to the notice u/s.153A of the Act, the assessee filed RoI
declaring total taxable income of ₹25,97,75,910/-. Similarly, for AY
2020-21, the assessee filed return pursuant to notice u/s.153A of the Act
declaring a total taxable income of ₹31,58,43,390/-. Thereafter, the AO
made the following additions for the three assessment years (reflected in
the captioned appeals) by assessment order dated 02.08.2022 u/s.153A
r.w.s.143(3) of the Act:
The Ld.PCIT on 15.11.2023 issued show cause notice u/s.263 of the
Act conveying his desire to invoke his revisional jurisdiction against the
assessment order framed for the aforesaid three assessment years dated
02.08.2022 on the ground that the additions made for the aforesaid
three assessment years, attract the penalty u/s.270A of the Act, which
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was omitted to be initiated by the AO i.e. on the issues on which additions
were made by the AO, which for easy reference is captured in form of
Chart given below:
Assessment Particulars of addition in respect of which PCIT Year has directed invocation of provisions of section 270A 2018-19 1. Undisclosed interest income of Rs.1,00,000/- 2. Difference in income reported from sale of yarn of Rs.7,35,770/- 2019-20 1. Undisclosed interest income of Rs.1,26,000/- 2. Difference in income reported from sale of yarn of Rs.2,93,319/- 2020-21 Difference in income reported from sale of yarn of Rs.8,85,816/-
Referring to the chart (supra), it was pointed out that the Ld.PCIT
was of the opinion that the AO erred in passing these assessment orders
without initiating the relevant penalty proceedings u/s.270A of the Act,
which omission on the part of the AO was erroneous in so far as
prejudicial to the interest of the Revenue and therefore, he justified his
action to interfere u/s.263 of the Act. The assessee objected to the
impugned action of the Ld.PCIT invoking revisional jurisdiction to initiate
penalty proceedings and cited the decision of the Hon’ble jurisdictional
High Court in the case of CIT v. CRK Swamy reported in [2002] 254 ITR
0158 (Mad.), wherein the Hon’ble Madras High Court was pleased to
uphold the action of the Tribunal holding that revision of assessment by
the Commissioner on the ground that the penalty proceedings hadn’t
been initiated was unsustainable by relying on the decision of the Hon’ble
Delhi High Court in the case of CIT v. Sudershan Talkies reported in
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[1993] 200 ITR 153, wherein, it was held that failure on the part of the
AO to initiate penalty proceedings would not give rise to the Ld.PCIT to
pass order u/s.263 of the Act and direct initiation of such proceedings.
However, the Ld.PCIT wasn’t convinced by the contention of the assessee
and he relied on the decision of the Hon’ble Madras High Court in the case
of CIT v. CMRL dated 30.01.2018 reported in [2018] 92 taxmann.com
329 (Mad.) wherein, the Hon’ble Madras High Court observed at Para
Nos.14 & 15 as under:
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 ah 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 in the assessment order established that the Assessee had concealed his income by filing inaccurate particulars". There is no such finding in the order of assessment. The Principal Commissioner seems to have distorted the order of assessment. The finding of the Principal Commissioner is to that extent perverse.
In our view, in the absence of any finding of the Assessing Officer with regard to concealment of income or with regard to furnishing of inaccurate particulars of income, the Commissioner clearly erred in holding that omission to record satisfaction to initiate penalty proceedings was erroneous or prejudicial to the interest of Revenue. The learned Tribunal rightly set aside the direction of the Principal Commissioner directing the Assessing Officer to initiate penalty proceedings although we may not agree with the reasoning in its entirety.
And thereafter, the Ld.PCIT was of the view that since the order of
the Hon’ble Madras High Court in the case of CMRL (supra) was the latest
judgment vis-à-vis that of the decision cited by the assessee i.e. CIT v.
CRK Swamy (supra), he was of the view that he had jurisdiction to invoke
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the revisional jurisdiction and therefore, he held that the assessment
order passed by the AO u/s.143(3) of the Act dated 02.08.2022 for AYs
2018-19 to 2020-21 as erroneous in so far as prejudicial to the interest of
the Revenue to the extent that the assessment order framed by the AO
has omitted initiation of penalty u/s.270A of the Act and he modified the
assessment passed by the AO on 02.08.2022 with a direction to the AO to
invoke penalty proceedings u/s.270A of the Act for all the three
assessment years.
Aggrieved by the aforesaid action of the Ld.PCIT, the assessee is in
appeals before this Tribunal.
We have heard both the parties and perused the material available
on record. The Ld.AR submitted that the Ld.PCIT erred in relying on the
observations made by the Hon’ble Madras High Court in the case of CMRL
dated 30.06.2018 (supra), because, firstly in the later decision, the
Hon’ble Madras High Court hasn’t taken note of the co-ordinate Division
Bench decision in the case of CRK Swamy (supra). Further, according to
the Ld.AR, even if the order passed by the Hon’ble Madras High Court in
the case of CMRL (supra) is carefully read, it can be seen that the Hon’ble
Madras High Court has clearly pointed out in the last two Paragraphs of
the order i.e. Para No.14 in the case of M/s.CMRL (supra), the Hon’ble
High Court noted that Ld.PCIT has recorded a finding of fact that “on
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examination of the records, it is found that the AO had in the assessment
order established that the assessee had concealed his income for filing
inaccurate particulars”. However, the Hon’ble Madras High Court after
going through the records of that case [M/s.CMRL (supra)], found that
there was no such finding recorded by the AO in the order of assessment.
Therefore, the Hon’ble Madras High Court held that the Ld.PCIT seems to
have distorted the order of the assessment and to that extent, the
findings of the Ld.PCIT was held to be perverse and therefore, the Hon’ble
High Court held that in the absence of any findings of the AO with regard
to concealment of income or about furnishing of inaccurate particulars of
income, the Ld.PCIT erred in holding that omission to record satisfaction
to initiate penalty proceedings was erroneous or prejudicial to revenue.
In such factual matrix, the Hon’ble Madras High Court is noted to have
upheld the action of the Tribunal setting aside the direction of the Ld.PCIT
to initiate penalty proceedings.
According to the Ld.AR, in the present case also (as in the case of
M/s.CMRL (supra)], it can be seen at Para No.5.2, wherein, the Ld.PCIT
has made a similar factual finding (quote) “in this case, it can be seen
that the assessment order has a clear finding that the additions made in
the order attract penalty as per the provisions of Sec.270A”. The Ld.AR
drew our attention to the assessment orders in question and made us
scan through it and pointed out that there was no such finding in the
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order of the assessment as asserted by the Ld.PCIT. Therefore, in this
case also as in the case of M/s.CMRL, according to the Ld.AR, the Ld.PCIT
seems to have distorted the order of assessment and therefore, the
findings of the Ld.PCIT to that extent is perverse and therefore, in the
absence of clear finding of the AO that there was underreporting or
misreporting of income u/s.270A of the Act, the Ld.PCIT erred in holding
that omission to initiate penalty u/s.270A of the Act was erroneous in so
far as prejudicial to the interest of the Revenue. We find considerable
force in the submission of the Ld.AR and find that the Ld.PCIT erred in
recording a finding of fact in his impugned order u/s.263 of the Act that in
the assessment orders in question, the AO has given a clear finding that
the additions made in the assessment order attracted penalty as per the
provisions of Sec.270A of the Act. Further, it is noted that it is not the
case of the Ld.PCIT that the AO erred in initiating penalty u/s.271AAB(1A)
of the Act for all the three assessment years i.e. AY 2018-19 to 2020-21.
It is also noted that the AO in the assessment orders (under
consideration) hasn’t given any finding that the assessee has
underreported or misreported its income. Therefore, the Ld.PCIT erred in
holding that omission to record satisfaction to initiate penalty proceedings
u/s.270A of the Act was clearly erroneous being perverse. Therefore,
relying on the decision of the Hon’ble Madras High Court in the case of
CIT v. CRK Swamy & the case of CIT v. CMRL (supra), we set aside the
ITA Nos.1137 to 1139/Chny/2024 (AYs 2018-19 to 2020-21) M/s. Anitha Texcot (India) Pvt. Ltd. :: 8 :: impugned order of the Ld.PCIT on the peculiar facts and circumstances of the case.
In the result, appeals filed by the assessee for all the assessment years are allowed.
Order pronounced on the 25th day of September, 2024, in Chennai.
Sd/- Sd/- (मनोज कुमार अ�वाल) (एबी टी. वक�) (MANOJ KUMAR AGGARWAL) (ABY T. VARKEY) लेखा सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER चे�ई/Chennai, �दनांक/Dated: 25th September, 2024. TLN, Sr.PS आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF
