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2024 (1) TMI 163 - HC - Income TaxLevying of penalty u/s 270A - misreporting by way of underreporting of income - disallowance of deduction in respect any surcharge of cess which is not allowable as deduction under Section 40 - action of respondents of rejecting the application of petitioner-company seeking immunity from imposition of penalty under Section 270AA of the Act, holding that the petitioner-company is not fulfilling the condition mentioned in the sub-section (3) of the Section 270AA - HELD THAT - Maintainability of writ petition - We find that in the present case, there is no requirement of making an investigation into facts and the question raised by the petitioner in this writ petition is only this that whether the petitioner-company is entitled to claim benefit of immunity from imposition of penalty under Section 270A of the Act or not. The Hon'ble Supreme Court in M/s Godrej Sara Lee Ltd. 2023 (2) TMI 64 - SUPREME COURT has held that where the controversy is purely legal one and does not involve disputed question of fact but only question of law, then it should be decided by the High Court instead of dismissing the writ petition on the ground of alternative remedy. Thus the preliminary objection raised by the respondents regarding maintainability of the writ petition is rejected. Penalty for under reporting and misreporting of income - Section 270A of the Act specifies penalty for under-reporting and misreporting, wherein sub-section (9) of Section 270AA of the Act categorizes the cases of misreporting of income. Sub-section (3) of Section 270AA of the Income Tax Act empowers the assessing officer to grant immunity from imposition of penalty under Section 270A and initiation of proceedings under Section 276C or under Section 276CC of the Income Tax Act on fulfillment of the conditions of sub-section (1) of Section 270AA after the expiry of the period of filing the appeal if the proceeding has not been initiated against the assessee under the circumstances referred to in sub-section (9) of Section 270A. Sub-section (4) of Section 270AA provides that the assessing officer shall pass an order accepting or rejecting any application filed by the assessee seeking immunity from imposition of penalty under Section 270A within a period of one month from the end of month in which the application under sub-section (1) is received. In the present case, neither in the assessment order nor in the subsequent show-cause notices, the Assessing Officer has specified that the case of the petitioner-company is covered under which part of sub-section (9) of Section 270A of the Act. Even in the impugned order dated 31.03.2023 also, it is not specified that which part of sub-section (9) of Section 270A of the Act is attracted in the case of petitioner. Otherwise also, the petitioner-company in its reply to show cause notice and subsequent replies to the different show cause notices has justified its claim for deduction of education cess, however, the Assessing Officer without considering the said justification or rejecting the same has passed the impugned order mechanically. We are of the view that once the petitioner-company has withdrawn its claim for deduction of education cess in view of insertion of sub-Section (18) of Section 155 before it came into force w.e.f. 01.04.2022, the petitioner-company is entitled for immunity from imposition of penalty under Section 270A of the Act though the proceedings against it were initiated for imposition of penalty. Moreover, while initiating the said proceedings vide order dated 22.09.2022, the Assessing Officer has failed to specify that which part of sub-Section (9) of Section 270A is attracted in the case of petitioner-company, the said initiation is nonest. The respondent vide impugned order dated 31.03.2022 has clarified that the petitioner-company is fulfilling the conditions mentioned in sub-Section (1) and (2) of Section 270AA, however, its conclusion that the petitioner-company do not fulfill the condition mentioned in sub-section (3) of Section 270AA of the Act is illegal and cannot be sustained. Apart from that the application filed by the petitioner-company under Section 270AA of the Act seeking immunity from imposition of penalty has not been decided by the Assessing Officer within prescribed time as per sub-section (4) of Section 270AA of the Act, the impugned action of the Assessing Officer of imposing penalty against the petitioner-company is liable to be set aside. Resultantly, this writ petition is allowed. The penalty order passed under Section 270A of the Income Tax Act is set aside
Issues Involved:
1. Maintainability of the writ petition. 2. Legality of the penalty order under Section 270A of the Income-tax Act, 1961. 3. Entitlement of the petitioner-company to immunity under Section 270AA of the Income-tax Act, 1961. Summary: 1. Maintainability of the Writ Petition: The court addressed the preliminary objection regarding the maintainability of the writ petition. The respondents argued that the petitioner should have availed the alternative remedy of appeal under Section 246A of the Income-tax Act. However, the court found that the issue raised was purely legal and did not require an investigation into facts. Citing the Supreme Court decision in M/s Godrej Sara Lee Ltd. vs. The Excise and Taxation Officer-cum-Assessing Authority and Ors., the court held that the writ petition was maintainable since it involved a question of law. 2. Legality of the Penalty Order: The petitioner-company had claimed a deduction for education cess, which was later disallowed following an amendment to Section 155 of the Income-tax Act. The petitioner withdrew the claim to avoid litigation and penalty. The Assessing Officer initiated penalty proceedings under Section 270A for misreporting by underreporting income. The court noted that neither the assessment order nor the subsequent show-cause notices specified which part of sub-section (9) of Section 270A was applicable. The court found this omission to be a significant procedural lapse, rendering the penalty proceedings nonest. The court also observed that the petitioner had complied with the conditions for immunity under Section 270AA but was not granted the same within the prescribed time limit. 3. Entitlement to Immunity under Section 270AA: The court examined the provisions of Section 270AA, which allows an assessee to seek immunity from penalty if certain conditions are met. The petitioner had fulfilled these conditions, including paying the tax and interest and not filing an appeal. The court cited Delhi High Court decisions in Schneider Electric South East Asia (HQ) Pte Ltd. vs. Asst. Commissioner of Income Tax International Taxation Circle 3(1)(2), New Delhi & Ors., Ultimate Infratech Private Limited vs. National Faceless Assessment Centre Delhi & Anr., and Rohit Kapur VS. Principal Commissioner of Income Tax-7, New Delhi & Anr., which emphasized the need for clarity in penalty notices and the mandatory nature of granting immunity when conditions are met. The court concluded that the Assessing Officer's failure to specify the applicable part of sub-section (9) of Section 270A and the delay in deciding the immunity application were grounds to set aside the penalty order. Conclusion: The writ petition was allowed. The penalty order dated 31.03.2023 under Section 270A and the consequential demand notice were set aside. The respondent was directed to grant immunity to the petitioner-company under Section 270AA of the Income-tax Act. No order as to costs was made.
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