2022 (4) TMI 1086 - HC - Income Tax

Penalty u/s 270A - underreporting of income - right to be granted immunity under Section 270AA - HELD THAT - 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, (i) the tax has been paid on the additions; (ii) appeal has undisputedly not been filed; and (iii) 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. In fact, 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. Consequently, the impugned order under Section 270A of the Act is set aside and the respondents are directed to grant immunity under Section 270AA of the Act to the petitioner.

Summary

Issues:
Challenge to order under Section 270A of the Income Tax Act, 1961 for AY 2017-18, Seeking immunity under Section 270AA from penalty, Denial of immunity by Respondent No.1, Failure to pass order under Section 270AA within statutory timeline, Interpretation of conditions for grant of immunity, Prejudice due to inaction of Assessing Officer, Satisfaction of conditions for immunity, Legislative intent of Section 270AA.

Analysis:
The petitioner filed a writ petition challenging the order passed by Respondent No.1 under Section 270A of the Income Tax Act, 1961 for the Assessment Year 2017-18. The petitioner sought immunity under Section 270AA from the penalty imposed under Section 270A. The Respondent denied immunity, citing the absence of an order under Section 270AA within the statutory timeline. The petitioner argued that once the conditions specified in Section 270AA are met, immunity must be granted, emphasizing that penalty initiation was for underreporting, not misreporting of income.

The Court noted that immunity from penalty and prosecution under Section 270AA is prohibited only in cases of alleged misreporting of income. The statutory scheme for immunity requires satisfaction of three fundamental conditions: payment of tax demand, non-institution of appeal, and initiation of penalty for underreporting. The Court held that the petitioner cannot be prejudiced by the Assessing Officer's inaction in passing an order under Section 270AA within the statutory time limit, as no prejudice can be caused to the assessee due to Revenue delay or default.

In the present case, the petitioner fulfilled the necessary conditions: tax payment on additions, no appeal filed, and penalty initiation for underreporting of income. Consequently, the Court ruled that the petitioner had the right to be granted immunity under Section 270AA. Referring to a previous judgment, the Court highlighted the legislative intent of Section 270AA to expedite issue resolution, recover tax demand, and reduce prolonged litigation. Accordingly, the impugned order under Section 270A was set aside, directing the respondents to grant immunity under Section 270AA to the petitioner, thereby disposing of the writ petition and pending applications.