2024 (10) TMI 1488 - HC - Income Tax

Penalty imposed u/s 270A when the rectification application itself was pending - while computing the tax liability of the petitioner, the AO did not give credit of the TDS and charged interest for alleged non-payment of taxes - case of the petitioner is that since non-grant of the TDS was a mistake apparent on a face of the record , the petitioner made an application under Section 154 seeking correction of this apparent mistake - due to Technical difficulties delayed the uploading of the application, but it was eventually filed on 27 April 2022 HELD THAT - The petitioner would be correct in his contention that in view of the subsequent developments and in pursuance of the orders passed by this Court, a rectification order was passed. Also the demand raised under the rectification order, which was for payment of tax of Rs. 303/- was complied by the petitioner. In this view of the matter, the penalty proceedings are also rendered inconsequential as the very foundation of such penalty proceedings stood extinguished in view of rectification order being passed. Admittedly, the demand and penalty proceedings under the Assessment Order dated 30 March 2022 would lose their sanctity, in view of the rectification order dated 3 January 2023, as necessarily, the assessment order has merged into the rectification order dated 3 January 2023. In view of the clear position which was brought about from the compliance of the rectification order 3 January 2023, the application of the petitioner under Section 270AA of the Act although was filed on 7 January 2023, need not be taken forward. This for the reason that in view of the order dated 3 January 2023, passed on the rectification application of the petitioner, the issue in regard to the demands as also the penalty or any other issue which would possibly arise under the Assessment Order dated 30 March 2022, which was apparently held to be not correct, was accordingly interfered in the rectification proceedings. Thus, the assessment order as originally passed cannot continue to prejudice the petitioner for any actions to be taken thereunder. In the aforesaid circumstances, we are inclined to allow the petition. The order passed u/s 270A is quashed and set aside.

Summary

Issues:
Petitioner seeking relief under Article 226 of the Constitution for rectification of tax assessment, credit of TDS, and quashing of penalty under Income-tax Act.

Analysis:
The petitioner, a salaried individual, filed a petition under Article 226 seeking various reliefs related to the assessment year 2017-18. The petitioner's employer deducted Rs. 26,43,323/- as tax at source, reflected in Form No. 16 and Form No. 26AS. However, the Assessing Officer did not credit this TDS amount in the assessment order dated 30 March 2022, leading to a demand of Rs. 55,43,799/- and a penalty notice under Section 270A of the Act. The petitioner filed a rectification application under Section 154 on 11 April 2022, seeking correction of this apparent mistake. Technical difficulties delayed the uploading of the application, but it was eventually filed on 27 April 2022. Despite the pending rectification application, penalty proceedings were initiated, culminating in an order imposing a penalty of Rs. 52,87,072/- on 27 September 2022.

The High Court intervened, directing the disposal of the rectification application and staying further penalty proceedings. Subsequently, on 3 January 2023, the rectification application was allowed, crediting the TDS amount and issuing a fresh tax demand of Rs. 303/-. The petitioner complied with this demand promptly. Considering the rectification order and compliance, the penalty proceedings were deemed inconsequential, as the foundation for the penalty no longer existed. The Assessment Order dated 30 March 2022 lost its validity post the rectification order, merging into the latter.

The Court acknowledged the rectification order's impact on the assessment order, rendering the penalty and demand proceedings under the initial assessment order null and void. Consequently, the Court quashed the penalty order dated 27 September 2022 and declared that no further proceedings should be initiated under the Assessment Order dated 30 March 2022. The petitioner's application under Section 270AA was also deemed unnecessary in light of the rectification order's effect on the assessment order. The petition was disposed of accordingly, with no costs awarded.