TMI Blog2023 (4) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... acity of power of attorney holder and said sale of property was assessable in the hands of the original owners of the property, the AO has accepted the claim of the assessee and completed the assessment, which is evident from the fact that the AO has made additions towards interest income from very same FD, but does not made any addition towards source for said deposit - Thus the assumption of jurisdictional by the PCIT fails. AO made necessary enquiries and has taken a view. The assessment order passed by the AO is neither erroneous nor prejudicial to the interest of the Revenue. PCIT without satisfying as to how why the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue, invoked jurisdiction u/s.263 of the Act, and set aside the assessment order - Appeal filed by the assessee is allowed. - ITA No.181/Chny/2023 - - - Dated:- 6-4-2023 - Shri V. Durga Rao, Hon ble Judicial Member And Shri Manjunatha. G, Hon ble Accountant Member For the Appellant : Mr.S.Sridhar, Adv. (Erode) For the Respondent : Mr.R.Mohan Reddy, CIT ORDER PER MANJUNATHA.G, AM: This appeal filed by the assessee is directed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has raised the following grounds of appeal: 1. The order of the learned PCIT is bad and erroneous in law. 2. The learned PCIT erred in invoking Section 263 and passing orders directing the Assessing Officer to re-do the assessment afresh on issues other than the one selected for LIMITED SCRUTINY. 3. The learned PCIT exceeded his powers by invoking Section 263, when the appellant filed all the details called for which had been carefully considered and verified by the Assessing Officer. 4. The learned PCIT erred in not considering the scope and effect of Section 270AA(4), making the very Section 270AA otiose. And for other reasons that may be adduced at the time of hearing, it is prayed that the delay be condoned, appeal be admitted, considered and justice be rendered. 4. The brief facts of the case are that the assessee is an individual filed his return of income for the AY 2017-18 on 31.10.2017 declaring total income of Rs.10,27,800/-. The case has been selected for limited scrutiny under CASS for verification of cash deposits during demonetization period and mismatching receipts and accordingly, notice u/s.143(2) of the Income Tax Act, 1961, dated 24. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of the case, which rendered the assessment order is erroneous and prejudicial to the interest of the Revenue. 6. The PCIT after considering relevant submissions of the assessee and also taken note of certain judicial precedents opined that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue, because, the AO has completed assessment u/s.143(3) of the Act, without initiating penalty proceedings u/s.270A of the Act, with a proper satisfaction recorded as required under the law. Although, the AO has initiated penalty proceedings and dropped the same after considering relevant submissions of the assessee, but, fact remains that he ought to have recorded reasons why penalty proceedings have been initiated for under reporting of income. Since, the AO has failed to record satisfaction as required under the law, which caused prejudice to the Revenue. In so far as source for deposits, on which, interest income has been earned by the assessee, although, the AO has made addition towards interest income, but he failed to examine source for said interest. Therefore, non-verification of necessary facts with regard to so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the course of the assessment proceedings, it would be a case where the assessment order can be said to be erroneous as he has not decided a point nor recorded a finding on an issue which ought to have been done, or decides it wrongly as held by this Court in the case of Saraya Distillery (supra). Thus, the omission of the ITO to initiate penalty proceedings during the course of the assessment renders the assessment order erroneous and prejudicial to the interest of the Revenue. There are umpteen number of decisions delivered by the Hon'ble Courts and appellate authorities, which categorically state that recording of satisfaction is a prerequisite before issue of notice initiating penalty proceedings. However, perusing the aforesaid submissions and the impugned assessment order reveals that the said assessment order dated 13-12- 2019 was passed without considering the above legal proposition. The order so made, suffers in as much as it is erroneous and prejudicial to the interest of revenue, requiring an intervention to cure the order made erroneous and prejudicial to the interest of the Revenue. 6. With regard to the second issue of non-verification of the so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the issues specified in the notice and thus, when the AO cannot question other issues, the PCIT cannot step in and assume his powers on other issue, which was not subject matter of assessment proceedings. In this regard, he relied upon certain judicial precedents, including the decision of ITAT Chennai Bench in the case of Subbunadar Chandra Sekar v. ITO in ITA No.612/Chny/2021 order dated 06.12.2022. The Ld.Counsel for the assessee further submitted that even otherwise, the assessment order cannot be considered as erroneous in so far as it is prejudicial to the interest of the Revenue, because, the issues questioned by the PCIT has been examined by the AO in assessment proceedings, which is evident from the fact that the AO has initiated penalty proceedings u/s.270A of the Act, and dropped the same after considering relevant submissions of the assessee. In so far as source for cash deposits, the AO has made additions towards interest income on very same deposits, which means, the AO was aware of the deposits in bank and source for said deposits. Therefore, merely for the reason that the AO was not discussed the issue in the assessment order, it cannot be said that the AO has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO has made addition towards interest income from FDs with two banks, but, he has failed to verify source for FDs with said banks, which rendered the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue. 10. The provisions of Sec.263 of the Act, empowers the PCIT to invoke suo moto revision proceedings, in case, he satisfies that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue. In other words, before initiating revision proceedings u/s.263 of the Act, the PCIT must satisfy from the records that an erroneous order passed by the AO caused prejudice to the interest of the Revenue. In this case, if you go through the reasons given by the PCIT in the order passed u/s.263 of the Act, we find that the PCIT has questioned the assessment order passed by the AO on two issues. The first issue questioned by the PCIT was initiation of penalty proceedings u/s.270A of the Act. If you go through the reasons given by the PCIT on this issue, and the assessment proceedings, we find that the AO has issued notice u/s.274 r.w.s.270A of the Act, on 13.12.2019 and called u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly clear that the AO made necessary enquiries and has taken a view. Therefore, the case law cited by the Ld.DR is not applicable to the facts of the present case. In so far as the case law relied upon by the Ld.DR in the case of Associated Contractors Corporation (supra), we find that said decision is on the issue of non-initiation of penalty proceedings by assessing authority in the course of assessment proceedings, but, in the present case, the AO has initiated penalty proceedings and later dropped on being satisfied with explanation of the assessee. Therefore, above case laws is also not applicable to the facts of the present case. 13. 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. The PCIT without satisfying as to how why the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue, invoked jurisdiction u/s.263 of the Act, and set aside the assessment order. Thus, we quashed the order of the PCIT u/s.263 of the Act. 14. In the result, ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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