Court/Forum: HC
Bench: HON'BLE MR. JUSTICE MANMOHAN, HON'BLE MR. JUSTICE DINESH KUMAR SHARMA
Order Date: 2022-03-28
Year: 2022
Outcome: Assessee
Sections: Section 270A, Section 270AA
The denial of immunity under Section 270AA is arbitrary if the Revenue does not specify the grounds for misreporting.
The High Court set aside the impugned order rejecting the petitioner's application for immunity from penalty under Section 270AA of the Income Tax Act. The Court found the denial of immunity arbitrary and lacking in reason, as the Revenue failed to specify the grounds for misreporting.
Assessee
The central legal question was whether the petitioner was entitled to immunity from penalty under Section 270AA given the circumstances of the case.
The petitioner filed for immunity from penalty under Section 270AA after an assessment order was passed. The application was rejected by the Revenue, claiming misreporting of income, which the petitioner contested as erroneous.
The petitioner argued that the impugned order was barred by limitation and that all submitted information was accepted, with no misreporting involved.
The Revenue contended that the petitioner was not entitled to immunity as the penalty was initiated for misreporting of income.
Section 270A pertains to penalties for underreporting and misreporting of income, while Section 270AA provides for immunity from such penalties under certain conditions.
The Court emphasized that the Revenue's failure to clarify the basis for misreporting rendered the impugned order arbitrary. The legislative intent of Section 270AA is to encourage taxpayers to settle issues quickly and reduce litigation.
Tax practitioners should ensure that the Revenue clearly specifies grounds for penalties to avoid arbitrary decisions and uphold taxpayer rights.
W.P.(C) 5111/20222 Page 1 of 4
$~87
+ W.P.(C) 5111/2022 & C.M.Nos.15165-15166/2022
..... Petitioner Through Mr.Sachit Jolly with Mr.Rohit Garg, Ms.Disha Jham, Ms.Mehak Sachdeva and Mr.Sohum Dua, Advocates.
versus
..... Respondents Through Mr.Sunil Agarwal, senior standing counsel with Mr. Tushar Gupta and Mr. Amarth Chaudhari, Advocates for the Revenue.
% Date of Decision: 28 th March, 2022
MANMOHAN, J (Oral)
1. Present writ petition has been filed challenging the impugned order dated 09 : th March, 2022 passed by Respondent No.1 under section 270AA(4) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) rejecting
W.P.(C) 5111/20222 Page 2 of 4
the application filed by the Petitioner seeking immunity from imposition of penalty under section 270A of the Act for the Assessment Year 2018-19. The petitioner also seeks a direction to Respondent No.1 to grant immunity under Section 270AA of the Act to the Petitioner from imposition of penalty under Section 270A of the Act in respect of the income assessed vide assessment order dated 23 rd 2. By way of the impugned order, dated 09 June, 2021 for the Assessment Year 2018-19. th 3. Learned counsel for the Petitioner submits that the impugned order is barred by limitation in terms of Section 270AA(4) of the Act, having been passed well beyond the period of one month from the end of the month in which the Petitioner had filed the application seeking immunity. March, 2022, the Petitioner’s application was rejected on the ground that the case of the Petitioner did not fall within the scope and ambit of Section 270AA of the Act.
4. He states that in the instant case, all the facts, information, documents and figures submitted by the Petitioner had been accepted by the Respondents and the subject matter of dispute is a pure question of law, being interpretation of the contracts and the provisions of the Act & DTAA, for which there cannot be any allegation of "misreporting" of income on the part of the Petitioner.
5. Issue notice. Mr.Sunil Agarwal, learned senior standing counsel accepts notice on behalf of the Respondents. He relies on the impugned order dated 09 th 6. Having perused the impugned order dated 09 March, 2022 to contend that the Petitioner is not entitled to the benefit of immunity under Section 270AA of the Act. th March, 2022, this Court is of the view that the Respondents’ action of denying the benefit of
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immunity on the ground that the penalty was initiated under Section 270A of the Act for misreporting of income is not only erroneous but also arbitrary and bereft of any reason as in the penalty notice the Respondents have failed to specify the limb - "underreporting" or "misreporting" of income, under which the penalty proceedings had been initiated.
7. This Court also finds that there is not even a whisper as to which limb of Section 270A of the Act is attracted and how the ingredient of sub-section (9) of Section 270A is satisfied. In the absence of such particulars, the mere reference to the word "misreporting" by the Respondents in the assessment order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary.
8. This Court is of the opinion that the entire edifice of the assessment order framed by Respondent No.1 was actually voluntary computation of income filed by the Petitioner to buy peace and avoid litigation, which fact has been duly noted and accepted in the assessment order as well and consequently, there is no question of any misreporting.
9. 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.
10. Consequently, the impugned order dated 09 th
March, 2022 passed by Respondent No.1 under Section 270AA (4) of the Act is set aside and Respondent No.1 is directed to grant immunity under Section 270AA of the Act to the Petitioner.
W.P.(C) 5111/20222 Page 4 of 4
11. With the aforesaid directions, the present writ petition along with pending applications stand disposed of.
KA