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2024 Supreme(Raj) 19
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR
MUNNURI LAXMAN, VIJAY BISHNOI, JJ.
G.R. Infraprojects Limited, Through Its General Manager- Shri Kuldeep Jain - Petitioner
Versus
Assistant Commissioner Of Income-Tax, Circle-2, Rajasthan and Ors. – Respondents
D.B. Civil Writ Petition No. 5594 Of 2023
Decided On : 02-01-2024
For the Petitioner: Mr. Vikas Balia, Sr. Adv. assisted by Mr. Prateek Gattani.
For the Respondents: Mr. K.K. Bissa.
IMPORTANT POINT
The main legal point established in the judgment is that a taxpayer may be entitled to immunity from penalty under Section 270A of the Income Tax Act if they withdraw a claim for deduction before the relevant amendment comes into force, and the Assessing Officer's failure to specify the grounds for penalty initiation and non-decision of the taxpayer's application for immunity within the prescribed time renders the penalty imposition illegal.
Headnote:
Penalty - Income Tax - Income Tax Act, 1961 - Section 270A, Section 155(18), Section 270AA - The court allowed the writ petition and set aside the penalty order dated 31.03.2023 passed under Section 270A of the Income Tax Act and the demand notice issued by the respondent under Section 156 of the Income Tax Act. The respondent was directed to grant immunity under Section 270AA of the Income Tax Act to the petitioner-company.
Fact of the Case:
The petitioner, a public limited company, filed a writ petition seeking to quash the penalty order and consequential demand notice issued under Section 156 of the Income-tax Act, 1961. The petitioner had claimed deduction of education cess in its income tax return, but subsequently withdrew the claim. The Assessing Officer initiated penalty proceedings under Section 270A of the Act for misreporting by way of underreporting of income.
Finding of the Court:
The court found that the petitioner was entitled to immunity from imposition of penalty under Section 270A of the Act as it had withdrawn its claim for deduction of education cess before the amendment to Section 155(18) came into force. The court also held that the Assessing Officer's failure to specify the grounds for penalty initiation and the non-decision of the petitioner's application for immunity within the prescribed time rendered the penalty imposition illegal.
Issues: The issues involved whether the petitioner was entitled to immunity from penalty under Section 270A of the Act and whether the penalty imposition was valid.
Ratio Decidendi: The court held that the petitioner was entitled to immunity from penalty under Section 270A of the Act as it had withdrawn its claim for deduction of education cess before the amendment to Section 155(18) came into force. The court also found that the Assessing Officer's failure to specify the grounds for penalty initiation and the non-decision of the petitioner's application for immunity within the prescribed time rendered the penalty imposition illegal.
Final Decision: The court allowed the writ petition, set aside the penalty order and demand notice, and directed the respondent to grant immunity under Section 270AA of the Income Tax Act to the petitioner-company.
JUDGMENT :
(Vijay Bishnoi, J.) :
1. This writ petition is filed by the petitioner seeking following reliefs :
"It is, therefore, most humbly prayed that this Hon'ble Court may kindly be pleased to:-
a. Issue writ in the nature of mandamus or any other appropriate writ, order or direction for quashing and/or set-aside the Impugned Penalty Order dated 31.03.2023 (Annexure-11) passed under Section 270A of the Income-tax Act, 1961 by the Respondent No.1;
b. Issue writ in the nature of mandamus or any other appropriate writ, order or direction for quashing and/or set-aside consequential demand notice dated 31.03.2023 (Annexure-11) issued under Section 156 of the Income-tax Act, 1961 by the Respondent No.1;
c. To issue writ of mandamus and/or any other appropriate writ to declare that disallowance of deduction in respect any surcharge of cess which is not allowable as deduction under Section 40 then in terms of Section 155(18) of the Act for the purpose of levy of penalty under Section 270A of the Act the same shall be considered as under- reported income and therefore immunity from Imposition of penalty as envisaged under Section 270AA of the Act shall not be denied if an assessee qualifies conditions as enumerated under sub section (1) and (2) of Section 270AA of the Act
d. Allow the writ petition with costs;
e. Grant any other relief as deemed to be fit and proper under the facts and circumstances of the case."
2. The facts, not in dispute, are that the petitioner is a public limited company and engaged in execution of turnkey infra-projects. The petitioner-company is regularly filing its income tax return as per applicable provisions of Income Tax Act, 1961 (hereinafter referred as 'the Act').
3. The petitioner-company filed return of income for the financial year 2019-2020 i.e. assessment year 2020-21 on 13.02.2021. A show cause notice dated 29.06.2021 under Section 143(2) of the Act was issued to the petitioner-company. Subsequently, notices under Section 142 (1) of the Act were issued to the petitioner-company on 26.11.2021 and 26.02.2022 which were replied by the petitioner-company vide notice dated 16.03.2022. The petitioner-company was asked to show cause why not its claim for deduction of edcuation cess of Rs.12,85,58,982/- be disallowed and be added back to its income for the relevant financial year and penalty proceeding be initiated under Section 270-A of the Act.
4. In response to the notice dated 16.03.2022, the petitioner-company vide reply dated 19.03.2022 has withdrawn its claim for deduction of education cess and accepted the proposed variation. The Assessing Officer has passed the assessment order dated 22.09.2022 whereby single addition in relation to deduction of education cess of Rs.12,85,58,982/- is made and added it back to the income of the petitioner-company and ordered for initiating penalty proceeding under Section 270A of the Act for misreporting by way of underreporting of income. Simultaneously, notice dated 22.09.2022 is issued to the petitioner-company under Section 274 read with Section 270A of the Act to show cause why penalty be not imposed on it. In response to the notice dated 22.09.2022, the petitioner-company filed its response vide reply dated 18.10.2022 and also filed an application under Section 270AA of the Act seeking immunity from imposition of penalty under Section 270A of the Act under prescribed form. Another show cause notice dated 06.02.2023 under Section 270A of the Act was issued by the Assessing Officer for imposing penalty which is also replied by the petitioner-company on 13.02.2023. Thereafter, again a show cause notice dated 30.03.2023 for imposing penalty under Section 270A of the Act was issued and the petitioner-company was asked to file reply on or before 31.03.2023 at 5:00 PM. As per the petitioner-company, reply to the same has been filed by it on 31.03.2023 before 5:00 PM however, the respondent-department passed the penalty order dated 31.03.2023 under Section 270A of the in
