Dept.'s Action Denying Immunity Benefit Merely Because Section 270A Penalty Was Initiated Is Erroneous: Rajasthan High Court

The Rajasthan High Court has held that the department's action of denying the benefit of immunity on the ground that the penalty was initiated under Section 270A of the Income Tax Act for misreporting of income is not only erroneous but also arbitrary and bereft of any reason, as in the penalty notice, the respondents have failed to specify the limb, "under-reporting" or "misreporting" of income, under which the penalty proceedings had been initiated.

The bench of Justice Arun Bhansali and Justice Shubha Mehta has observed that the Deputy Commissioner violated the provisions of proviso to Section 270AA (4) by not providing any opportunity of hearing, the order passed was wholly laconic, it did not indicate as to under which part of Section 270A (9), the case of the petitioner was covered, and the revisional authority, without giving any cogent reasons, has in a wholly cursory manner indicated the case of the petitioner was within the ambit of Clauses (a) and (c) of Section 270A (9).

The petitioner or assessee filed its original return of income under Section 139(1) for the assessment year 2018–19 and its revised return of income. The case of the petitioner was selected for complete scrutiny, and an exhaustive list of issues was communicated by notice under Section 164(2). During the course of scrutiny, various notices under Section 142(1) were issued, and replies were submitted by the petitioner.

During the course of scrutiny proceedings, the petitioner realized that the 'provision for doubtful GST input tax credit' had been inadvertently merged with another expense account and mistakenly claimed as expenses under the Income Tax provisions. The amount was suo moto surrendered by the petitioner by revising its return of income and adding back the amount 'provision for doubtful GST input tax credit', to the total income. The aspect was communicated along with the submission of the revised computation.

The assessment order under Section 143(3) was passed by the National E-Assessment Centre (NeAC), making only an addition to the suo moto surrendered amount. However, it was observed in the order that the penalty under Section 270A is imposed for misreporting the income.

The petitioner filed an application under Section 270AA against the penalty order before the Deputy Commissioner, which was rejected.

The petitioner challenged the order of rejection by filing a revision petition under Section 264 on the ground that no opportunity of a hearing was provided to the petitioner, which was in non-compliance with Section 270AA. The order rejecting the application did not specify how there was misreporting of the income when the amount was disclosed by the petitioner of its own volition. The case of the petitioner did not fall under any of the exceptions under Section 270AA. However, the revision petition was rejected.

The assessee contended that the order is wholly non-speaking, inasmuch as only one line order has been passed that, on perusal of the application, the authority did not find the same tenable, and on that count, the order deserves to be set aside.

The court noted that under Section 270AA(3), the Assessing Authority can grant immunity from imposition of penalty under Section 270A, where the proceedings for penalty under Section 270A have not been initiated under the circumstances referred to in Section 270A(9), and under the provisions of Sub-Section (4), it has been provided that no order rejecting the application shall be passed unless the assessee has been given an opportunity of being heard.

The court held that the Deputy Commissioner violated the provisions of Proviso to Section 270AA (4) by not providing any opportunity for a hearing. The order passed was wholly laconic.

Counsel For Petitioner: Sanjay Jhanwar

Counsel For Respondent: Shantanu Sharma

Case Title: Chambal Fertilizers and Chemicals Limited Versus Office of the Principal Commissioner of Income Tax

Case No.: D.B. Civil Writ Petition No. 10198/2023

Citation: Citation: 2024 LiveLaw (Raj) 4

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