Assessee Not Immune From Penalty U/S 270AA Income Tax Act Where Proceedings Initiated For Misreporting Of Income: Delhi High Court

The Delhi High Court has observed that it is only in cases where proceedings for levy of penalty have been initiated on account of alleged "misreporting of income" that an assessee is prohibited from applying and availing the benefit of immunity from penalty and prosecution under Section 270AA of the Income Tax Act, 1961.

A division bench comprising of Justice Manmohan and Justice Dinesh Kumar Sharma was dealing with a plea challenging the order dated 26th March, 2022 passed by the National Faceless Assessment Centre Delhi under sec. 270A for the Assessment Year 2017-18.

The Petitioner also sought immunity under Section 270AA from imposition of penalty under sec. 270A in respect of the income assessed vide assessment order dated 15th December, 2019 for the said Assessment Year.

Counsel representing the petitioner stated that the Petitioner had filed its return of income for the assessment year 2017-18 declaring a loss of Rs.1,51,57,259. It was argued that the Petitioner's case was selected for scrutiny and an order dated 15th December, 2019 was passed under sec. 143(3) bringing to tax Rs.43,55,548 as "business income" of the Petitioner and consequently assessed the total income of the Petitioner at a loss of Rs.1,08,01,711 raising tax demand of Rs.NIL.

It was further stated that a show cause notice dated 15th December, 2019 seeking to levy penalty under sec. 270A read with sec. 274 of the Act was issued by requiring the Petitioner to show cause as to why the penalty for under-reported income be not levied.

The Petitioner had then filed an application on 29th January, 2020 in Form No.68 in terms of sec. 270AA(2) seeking immunity from imposition of penalty under the Act.

It was thus submitted that the impugned order was passed denying the immunity from penalty and prosecuting the Petitioner on the ground that since no order under sec. 270AA was passed by the jurisdictional Assessing Officer within the statutory timeline, it may be treated as no order granting immunity to the assessee had been passed.

"Having heard learned counsel for the petitioner, this Court is of the view that it is only in cases where proceedings for levy of penalty have been initiated on account of alleged misreporting of income that an assessee is prohibited from applying and availing the benefit of immunity from penalty and prosecution under Section 270AA," the Court said.

The Court also noted that the statutory scheme for grant of immunity is based on satisfaction of three fundamental conditions:

- payment of tax demand

- non-institution of appeal; and

- initiation of penalty on account of underreporting of income and not on account of misreporting of income.

"This Court is also of the view that the petitioner cannot be prejudiced by the inaction of the Assessing Officer in passing an order under Section 270AA of the Act within the statutory time limit as it is settled law that no prejudice can be caused to any assessee on account of delay/default on the part of the Revenue," the Court observed.

Accordingly, the Court set aside the impugned order under sec. 270A of the Act and directed the respondents to grant immunity under sec. 270AA of the Act to the petitioner.

Case Title: ULTIMATE INFRATECH PRIVATE LIMITED v. NATIONAL FACELESS ASSESSMENT CENTRE DELHI & ANR.

Citation: 2022 LiveLaw (Del) 360

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