PCIT has no Jurisdiction to Revise Assessment u/s 263 of the Income Tax Act When Assessment Order Attained Finality by Court Order: Madras HC [Read Order]

The Madras High Court has held that the Principal Commissioner of Income Tax (PCIT) has no jurisdiction to revise the assessment under section 263 of the Income Tax Act when the assessment order attained finality by court order.

R.Revathy, the appellant challenged the Impugned Order passed by the 2nd Respondent – Principal Commissioner of Income Tax. It was challenged that the order had not been made by any order, direction or instruction issued by the Board. It was argued that the order has not been passed by any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.

Clause (a) of Explanation to 263 states that an order shall be deemed to be erroneous if it has been passed without making enquiries or verification, which should have been made. Hence, what is relevant for clause (a) of Explanation 2 to Section 263 is whether the Assessing Officer has passed the order after carrying out enquiries or verification, which a reasonable and prudent officer would have carried out or not. Therefore, the order passed by the Assessing Officer is not only erroneous but also prejudicial to the interest of Revenue.

The petitioner had suffered an adverse Assessment Order at the hands of the Assessing Officer under Section 143(3) of the Income Tax Act, 1961 for the assessment year 2012-2013. The said Assessment Order has attained finality, as no further appeal was preferred by the petitioner. Thereafter, an order dated 23.09.2014 was passed by the 1st respondent under Section 274 r/w 271(1)(c) of the Income Tax Act, 1961, whereby a penalty was imposed on the petitioner.

By the aforesaid order, the 1st respondent proceeded to impose the penalty of Rs.14,51,713/- on the petitioner under Section 271(1)(c) of the Income Tax Act, 1962. The aforesaid order was passed with the approval of the Joint Commissioner of Income Tax vide the proceedings dated 25.09.2014 as per Section 274 of the Income Tax Act, 1961.

The Appellate Commissioner had passed an order dated 22.02.2016 under Section 250(6) of the Income Tax Act, 1961. The Appellate Commissioner dropped the penalty and the proceedings holding that the gold jewellery was received by the petitioner during her marriage cannot be ruled out and therefore no concealment was established beyond doubt and simply because the petitioner failed to file an appeal before the quantum addition, the question of imposing penalty automatically did not arise.

The Tribunal allowed the Revenue's Appeal and dismissed the Cross Objection filed by the petitioner It was submitted that the 2nd respondent failed to note that the 1st respondent had acted reasonably by the directions of the Court's order and dropped the penalty after enquiry.

It is submitted that in respect of penalty, the issue has been already dealt before CIT (Appeals), Income Tax Tribunal and the Court and the assessment attained finality. Hence, the 2nd respondent has no jurisdiction to give direction to revise the assessment under Section 263 of the Income Tax Act, 1961.

The petitioner declared a huge quantity of 101442.5 gms of gold jewellery at the time of VDI Scheme, 1997. The jewellery that was found during search operation on 18.08.2011 was at the petitioner's son's residence, viz., R.Sabapathy's residence.

During the search operation, 6136.90 gms of unaccounted gold was found in the hands of the petitioner's co-sister. Out of 6136.90 gms of gold, 3650 gms was set off as that of the gold of her mother-in-law late Smt. Prema, who had declared the aforesaid grams of gold under the VDI Scheme, 1997. In the present case, 2034.1 gms of gold was found at the residence of petitioner's son R.Sabapathy on 18.08.2011.

It was found that the petitioner has declared 101442.5 gms under the same VDI Scheme, 1997. During the search operation in the petitioner's son's residence viz., R.Sabapathy's residence, where 2034.1 gms of gold was found it was claimed to be 101442.5 gms declared by the petitioner in VDI Scheme, 1997.

A Singe bench of Justice C Saravanan observed that the High Court merely gave a fresh opportunity to the petitioner to explain the case afresh. The Assessing Officer has passed a consequential order by stating that the case does not attract a penalty since the additional income towards investment in jewellery was offered only to purchase peace with the Department. The Court dismissed the Writ Petition.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates