2023 (9) TMI 332 - HC - Income Tax

Penalty imposed on Excess deduction u/s 35(2AB) - expenditure incurred on research and development - petitioner ended up claiming deduction at the rate of 200% - argument of breach of the principles of natural justice - According to the petitioner, this was a mistake which occurred because the law was amended after AY 2017-18 and also averred by the petitioner that between 2018-19 and 2019-20, the cap for deduction was pegged at 150% - petitioner says that the impugned penalty order was passed without according personal hearing to the petitioner s authorized representative - HELD THAT - As petitioner sought personal hearing, our attention has been drawn to the screenshot of the designated portal on which the request was made. This fact which emerges from the record is not disputed by Respondents. Having regard to the fact that personal hearing was not granted, we are inclined to set aside the impugned order and the consequential notice.It is ordered accordingly. Liberty is, however, given to the AO to pass a fresh order after according personal hearing to the authorized representative of the petitioner. For this purpose, the AO will issue a notice to the petitioner indicating the date and time of the hearing.

Summary

Issues involved:
The judgment concerns a writ petition related to the penalty order and demand notice for Assessment Year 2021-22, where the petitioner claimed excess deduction under Section 35(2AB) of the Income Tax Act, 1961.

Details of the judgment:

Issue 1: Excess Deduction Claimed
The petitioner was allowed to claim a deduction at the rate of 100% but claimed it at the rate of 200%, citing a mistake due to a law amendment after AY 2017-18. The petitioner contended that the cap for deduction was 150% between 2018-19 and 2019-20. The main ground raised was a breach of natural justice.

Issue 2: Lack of Personal Hearing
The petitioner argued that the penalty order was passed without granting a personal hearing to the authorized representative. Evidence of the request for a personal hearing was presented, which was not disputed by the respondent's counsel. Due to the absence of a personal hearing, the court decided to set aside the penalty order and the consequential notice.

Resolution:
The court ordered the Assessing Officer (AO) to pass a fresh order after granting a personal hearing to the petitioner's authorized representative. The AO was directed to issue a notice indicating the date and time of the hearing. The new order should address all contentions of the petitioner, including the claim of misreporting. The petitioner should receive a copy of the speaking order. The AO was also instructed to decide on the pending immunity application as per the law. The writ petition was disposed of accordingly, clarifying that the directions given would not impact any future order by the AO. Pending interlocutory applications were closed, and parties were directed to act based on the digitally signed copy of the order.