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TMI Blog2025 (4) TMI 1451X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 143(3) of the Act through Computer Assisted Scrutiny Selection (CASS), primarily to examine following: - High liabilities as compared to low income/receipts, - Sale consideration reported in ITR being less than sale consideration reported in SFT, - Deduction from total income under Chapter VI-A, - Non-compliance with Income Computation and Disclosure Standards. 3. During the course of assessment proceedings, it was noticed that the assessee had claimed deduction of Rs. 50,05,571/- towards payment of Health and Education Cess. The Assessing Officer, after issuing a show-cause notice, disallowed the said claim, treating it as not allowable in view of the decision of the Hon'ble Supreme Court in the case of CIT v. K. Srinivasan [(1972) 83 ITR 346 (SC)] and the retrospective amendment brought by the Finance Act, 2022, inserting Explanation 3 to section 40(a)(ii) of the Act. Consequently, penalty proceedings under section 270A of the Actwere initiated, and penalty of Rs. 34,98,290/- was levied on account of alleged under-reporting of income. In appeal before the CIT(A), the assessee contended that the claim was made based on judicial pronouncements prevailing at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be deemed to be under-reported income for the purposes of sub-section (3) of section 270A of the Act if an application is made to the Assessing Officer in the prescribed form. However, as the form itself was not notified at the time of passing of order u/s. 143(3) of the Act, the provisions of section 155(18) cannot be applied to levy the penalty u/s. 270A of the Act. 5. The appellant reserves the right to add/alter or remove any of the above grounds of appeal. 6. During the course of hearing before us, the learned Authorized Representative ("AR") of the assessee submitted the timeline of the events and stated that the assessee had claimed the said deduction under section 37(1) of the Act, and that the provisions of section 40(a)(ii), as they stood at the time did not explicitly disallow deduction of cess. In support, reliance was placed on judicial precedents namely, Sesa Goa Ltd. v. JCIT [(2020) 117 taxmann.com 96 (Bom)] and Chambal Fertilizers & Chemicals Ltd. v. JCIT [D.B. Income Tax Appeal No. 52/2018, decided on 31.07.2018 (Raj HC)], wherein the respective Hon'ble High Courts had held that education cess is an allowable business expenditure. It was contended that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee could have availed section 155(18) option before penalty was levied. 8. We have carefully considered the rival submissions, perused the material available on record, and examined the statutory provisions and judicial precedents cited before us. The penalty in the present case has been levied under section 270A of the Act. Applicable statutory framework governing penalty under Section 270A is summarized as follows - Section 270A(1): The Assessing Officer may, during the course of any proceedings under this Act, direct that any person who has under-reported his income shall be liable to pay a penalty in addition to tax, if any, on the under-reported income. Section 270A(2)(a): A person shall be considered to have under-reported his income if the income assessed is greater than the income determined in the return processed under section 143(1)(a). Section 270A(6)(a): The under-reported income shall not include the amount of income in respect of which the assessee offers an explanation and the Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, is satisfied that the expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of total income by the Assessing Officer suo motu upon such application being filed. It does not automatically provide for withdrawal or waiver of penalty proceedings already initiated and concluded on or before availability of such procedural remedy. - Moreover, it is trite law that a procedural opportunity which was not available on the date of an adverse action (i.e., disallowance and initiation of penalty) cannot be cited against the assessee. The maxim "Lex non cogit ad impossibilia" (the law does not compel a person to do that which he cannot possibly perform) squarely applies to the assessee's situation. - Thus, we hold that the assessee cannot be faulted for not availing the benefit of section 155(18) once the assessment was already finalized and penalty proceedings initiated. The subsequent availability of procedural remedy cannot retrospectively cure the defect or justify the imposition of penalty. 8.4. In any case, applying the mandate of section 270A(6)(a), we find merit in the contention of the AR for the reasons that - The claim for deduction was made based on existing legal interpretation available at the time of filing return. - Judicial pronouncements cl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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