2022 (4) TMI 910 - HC - Income Tax

Penalty under Section 270A - Period of limitation for initiating penalty proceedings - under-reported income - HELD THAT - 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. 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. In the present case, the petitioner has satisfied the aforesaid conditions, inasmuch as,the tax has been paid on the additions, appeal has undisputedly not been filed; and penalty (as would be evident from the penalty notice) has been initiated on account of underreporting of income. Consequently, this Court is of the view that the petitioner acquired a right to be granted immunity under Section 270AA of the Act. This Court, in Schneider Electric South East Asia (HQ) Pte Ltd. 2022 (3) TMI 1295 - DELHI HIGH COURT has held, This Court is further of the view that the impugned action of Respondent No.1 is contrary to the avowed Legislative intent of Section 270AA of the Act to encourage/incentivize a taxpayer to (i) fast-track settlement of issue, (ii) recover tax demand; and (iii) reduce protracted litigation. The impugned order under Section 270A of the Act is set aside and the respondent is directed to grant immunity under Section 270AA of the Act to the petitioner. - Decided in favour of assessee.

Summary

Issues:
Challenge to order under Section 270A of the Income Tax Act, 1961 for assessment year 2018-19; Seeking immunity under Section 270AA from penalty imposition; Denial of immunity by respondent; Interpretation of conditions for grant of immunity under Section 270AA; Prejudice due to delay in passing order under Section 270AA; Satisfaction of conditions for immunity; Judicial view on grant of immunity based on statutory scheme; Settled law on prejudice due to Revenue's delay.

Analysis:
The petitioner filed a writ petition challenging the order passed by the respondent under Section 270A of the Income Tax Act, 1961 for the assessment year 2018-19 and sought immunity under Section 270AA from penalty imposition. The petitioner declared a loss in the return of income, which was later assessed as "business income," resulting in a tax demand. A show cause notice for penalty under Section 270A was issued, prompting the petitioner to apply for immunity under Section 270AA. The respondent denied immunity, citing the absence of an order under Section 270AA within the statutory timeline.

The petitioner contended that once the conditions specified in Section 270AA are met, the assessing officer is obligated to grant immunity. The court noted that immunity is prohibited only in cases of alleged misreporting of income, not underreporting. It emphasized the three fundamental conditions for immunity: payment of tax demand, non-filing of appeal, and initiation of penalty for underreporting. The court held that the petitioner, having satisfied these conditions, had the right to immunity under Section 270AA.

Furthermore, the court ruled that the petitioner cannot be prejudiced by the assessing officer's inaction in passing an order under Section 270AA within the statutory time limit. Citing previous judgments, the court highlighted that no prejudice can be caused to an assessee due to delay or default by the Revenue. The court set aside the impugned order under Section 270A and directed the respondent to grant immunity to the petitioner under Section 270AA. The decision aimed to align with the legislative intent of encouraging taxpayers to expedite issue resolution, recover tax demand, and reduce prolonged litigation.

In conclusion, the court disposed of the writ petition and pending applications, providing relief to the petitioner by granting immunity under Section 270AA of the Income Tax Act, 1961 for the assessment year 2018-19.