KAG India Pvt Ltd. Vs PCIT (ITAT Chennai)
ITAT Chennai held that revisionary proceedings under section 263 of the Income Tax Act for invoking penalty provisions u/s. 270A(9)(e) without issue of intimation under section 143(1)(a) of the Income Tax Act is unjustifiable and untenable in law.
Facts- A search u/s.132 of the Act was conducted on 26.02.2021 in the assessee’s group and consequently notice u/s.153A of the Act was issued on 03.09.2021. AO made an addition of Rs.32,25,627/- by alleging that there was a difference between the undisclosed income quantified and that admitted in the return filed in response to the notice u/s.153A of the Act and passed the assessment order on 25.03.2022.
Thereafter, the AO initiated penalty proceedings u/s.270A of the Act, alleging underreporting of income to the tune of Rs.32,25,627/- on account of undisclosed sales. The only issue need to be examined is whether the Ld.PCIT’s action of invoking section 263 of the Act and interfering with the Assessing Officer’s order passed dated 25.03.2022 by modifying the assessment order with a direction to Assessing Officer to “invoke the applicable penalty provisions u/s.270A(9)(e) of the Act on the entire sum of Rs.7,41,89,422/- for the assessment year 2021-22”.
Conclusion- Held that it is undisputed that there has been no ‘Intimation’ issued by the revenue u/s.143(1)(a) of the Act. Therefore, it can be safely presumed that the assessee cannot be considered to have under-reported his income within the meaning of sub-section(2) of section 270A of the Act. In that event, unless assessee’s case falls in the ken of sub-section 2, the invocation of sub-section (9) of section 270A does not arise. Moreover, in this case as noted (supra), the machinery provisions to levy penalty u/s. 270A of the Act also fails because, the penalty is computed @50% of the amount of tax payable on the under-reported income in consequence to mis-reporting of income or @200%of the amount of tax payable on the under-reported income in consequence to mis- reporting of income. So, without computing “under-reporting income” as per sub-section (2) of section 270A of the Act, machinery provisions also fails. It is a trite law that the penalty provisions must be construed strictly. Therefore, the direction given by the Ld.PCIT modifying the assessment order with a direction to Assessing Officer to invoke the applicable penalty provisions u/s. 270A(9)(e) of the Act on the entire sum of Rs.7,41,89,422/- for the assessment year 2021-22 vide impugned order is legally untenable in the peculiar facts and circumstances of the case and hence the same is interdicted and we set aside the impugned direction and therefore, the impugned action is held to be bad in law.
