SRIYANS KUMAR JAIN HUF,BERASIA vs. PCIT (CENTRAL), BHOPAL, BHOPAL
Facts
The assessee, engaged in trading gold/silver and money lending, surrendered additional income of Rs. 33,86,608/- during a survey. The Assessing Officer (AO) accepted the returned income but taxed the surrendered income at a higher rate under Section 115BBE. The Principal Commissioner of Income Tax (PCIT) initiated revision proceedings under Section 263, viewing the AO's order as erroneous and prejudicial to revenue for not initiating penalty proceedings under Section 271AAC(1).
Held
The Tribunal held that the imposition of penalty under Section 271AAC(1) is not compulsory, as indicated by the word 'may'. The AO has discretion in imposing such penalties. Therefore, the AO's failure to initiate penalty proceedings was not an error. The PCIT's revision order, based on this premise, was considered erroneous.
Key Issues
Whether the non-initiation of penalty proceedings under Section 271AAC(1) by the AO renders the assessment order erroneous and prejudicial to the interest of revenue, justifying revision under Section 263.
Sections Cited
263, 133A, 115BBE, 271AAC(1), 139, 270A, 274, 275
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
आदेश / O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by revision-order dated 14.03.2024 passed by learned Pr. Commissioner of Income-Tax (Central), Bhopal [“PCIT”] u/s 263 of Income- tax Act, 1961 [“the Act”] which in turn arises out of assessment-order dated 18.09.2021 passed by learned DCIT, Central Circle-2, Bhopal [“AO”] u/s 143(3) of the act for Assessment-Year [“AY”] 2019-20, the assessee has filed this appeal on the grounds raised in Appeal-Memo (Form No. 36).
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Sriyans Kumar Jain HUF ITA No. 289/Ind/2024 – AY 2019-20
The background facts leading to present appeal are such that the
assessee-HUF is engaged in the business of trading of gold and silver
ornaments/articles and money lending business. A survey u/s 133A was
conducted upon business premises of assessee on 07.03.2019 during
financial year 2018-19 relevant to AY 2019-20 wherein the assessee
surrendered additional income of Rs. 33,86,608/- on account of excess
stock of gold and silver items. Subsequently, the assessee filed return of AY
2019-20 on 23.11.2019 showing total income of Rs. 46,73,000/- including
the surrendered income of Rs. 33,86,608/- offered during survey. The case
of assessee was selected for scrutiny assessment. While completing
assessment, the AO accepted returned income of assessee but, however,
taxed the surrendered income of Rs. 33,86,608/- as per higher rate of tax
u/s 115BBE.
Subsequently, Ld. PCIT examined the record of assessment-
proceeding and viewed that the assessment-order passed by AO is erroneous
in so far it is prejudicial to the interest of revenue which attracts
revisionary-jurisdiction u/s 263. Accordingly, the PCIT issued show-cause
notice dated 24.02.2024 and finally passed revision-order dated 14.03.2024
setting aside AO’s order. Aggrieved by such revision-order, the assessee has
come in this appeal before us.
On hearing learned Representatives of both sides and perusing the
orders of lower-authority, we find that the Ld. PCIT has invoked revisionary
jurisdiction u/s 263 precisely for the reason that the AO, while passing
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Sriyans Kumar Jain HUF ITA No. 289/Ind/2024 – AY 2019-20
assessment-order, has failed to initiate penalty proceeding u/s 271AAC(1)
qua the income of Rs. 33,86,608/- surrendered by assessee during survey.
Therefore, according to Ld. PCIT, the non-initiation of penalty proceedings
u/s 271AAC(1) has rendered the assessment-order as erroneous-cum-
prejudicial to the interest of revenue.
However, the provision of section 271AAC(1) reads as under:
“Penalty in respect of certain income. 271AAC. (1) The Assessing Officer or the Commissioner (Appeals) may, notwithstanding anything contained in this Act other than the provisions of section 271AAB, direct that, in a case where the income determined includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D for any previous year, the assessee shall pay by way of penalty, in addition to tax payable under section 115BBE, a sum computed at the rate of ten per cent of the tax payable under clause (i) of sub-section (1) of section 115BBE: Provided that no penalty shall be levied in respect of income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D to the extent such income has been included by the assessee in the return of income furnished under section 139 and the tax in accordance with the provisions of clause (i) of sub-section (1) of section 115BBE has been paid on or before the end of the relevant previous year. (2) No penalty under the provisions of section 270A shall be imposed upon the assessee in respect of the income referred to in sub-section (1). (3) The provisions of sections 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section.” 6. A careful reading of above section 271AAC clearly reflects that the
imposition of penalty is not compulsory in every case, the use of words “may
direct” shows discretion available to the AO. Therefore, the AO may or may
not impose penalty as per his analysis. When it is so, it cannot be said that
there is any error in the order of AO. We are mindful of the following view
taken by Hon’ble Supreme Court in Malabar Industrial Co. Ltd. v.
Commissioner of Income Tax, (2000) 243 ITR 83 (SC):
“The phrase prejudicial to the interests of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every
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Sriyans Kumar Jain HUF ITA No. 289/Ind/2024 – AY 2019-20
loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income- tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law.” 7. Therefore, in present case, the order passed by AO cannot be said to
be erroneous for non-initiation of penalty proceeding when the imposition of
penalty is not mandatory and one of the discretion of AO. In the
circumstance, we are inclined to quash the revision order passed by PCIT
wrongly holding that the AO’s order is erroneous. We order accordingly to
quash the revision-order and restore the AO’s order. The assessee succeeds
in this appeal.
Resultantly, this appeal is allowed.
Order pronounced in open court on 08.10.2024
Sd/- sd/- (VIJAY PAL RAO) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक /Dated : 08.10.2024 CPU/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPYAssistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore
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