GM Modular Private Limited Vs PCIT (Bombay High Court)
The Bombay High Court considered a writ petition challenging an order passed under Section 264 of the Income-tax Act, 1961, which had summarily rejected a revision application without reasons, and a penalty order under Section 270A for Assessment Year 2019–20. The dispute arose from disallowance of employees’ contribution to PF/ESI under Section 36(1)(va), initially made while processing the return under Section 143(1)(a) and subsequently reiterated in assessment proceedings under Sections 143(3) read with 153A. Although the disallowance was confirmed by the Tribunal based on a later Supreme Court judgment, penalty was levied for alleged under-reporting of income.
The Court first addressed the maintainability of the revision under Section 264 and held that the provision confers wide powers on the Commissioner to revise any order, including penalty orders, except in limited circumstances specified in Section 264(4). It clarified that an assessee has the discretion to choose between filing an appeal or seeking revision, and there is no statutory bar to invoking revision merely because the order is appealable. Accordingly, the rejection of the revision application without examining merits was held to be erroneous.
On merits, the Court found that penalty under Section 270A is discretionary and not automatic. It held that in the present case, there was no “under-reported income” as defined under Sections 270A(2) and 270A(3), since the disallowance had already been made at the stage of processing under Section 143(1)(a), and the assessment order merely reiterated the same addition. Therefore, the assessed income did not exceed the processed income, and the statutory conditions for invoking penalty were not satisfied.
