NAND KUMAR PRASAD SAH,MUZAFFARPUR vs. AC/DCIT CENTRAL CIRCLE, MUZAFFARPUR

Assessee has raised following grounds of appeal in ITA No. 163/PAT/2023 for A.Y. 2017-18:-

For that the Ld. CIT(A) has not followed the procedure given in Sub-section (4) of section 270A. It is a clear mandate that the A.O. shall within one month from the end of the month in which the application was received pass an order accepting for rejecting such application. Provided that no order rejecting the application shall be passed. Unless the assessee has been given an opportunity of being heard. Further, the word used each shall not may. The procedure prescribed in Sub-section (4) has not been followed while passing the penalty order which is against the intention of legislature behind the introduction of new regime of penalty is to create less litigation environment. It is well settled law that substantive right accrue to the applicant should not be defeated citing the procedural defects which is capable of being cured.

For that the Ld. CIT(A) has erred in passing a vague and cryptic order.

For that whole order is bad in fact and the law of the case and is fit to be quashed.

For that other grounds, if any, shall be urged at the time of hearing of the appeal.”

Facts in brief are that the assessee is an individual and earns income from salary, interest income, consultancy fees and hire rental charges. Regular return of income u/s 139(1) of the Act on 11th November, 2017, declaring income of ₹8,35,425/-. Subsequently, search, seizure and survey operation u/s 132 of the Act and 133A of the Act, conducted on the business premises of Nand Kumar Prasad Sah and other related concerns on 17th September, 2020, and assessee was also subjected to search and certain incriminating material / loose paper / tally data were found. Pursuant to the of search, notice u/s 153A of the Act were issued and incompliance, assessee furnished the return for A.Y. 2017-18 to 2020-21. In this return furnished for A.Y. 2017-18, assessee offered total income of ₹13,97,271/-, which included the additional income of ₹5,15,000/-. The return of income furnished in response to notice u/s 153A of the Act was accepted as assessed income by the learned Assessing Officer in the assessment proceedings carried out

The learned counsel for the assessee referring to the written submission, firstly, contended that the penalty order is not as per law and the learned Assessing Officer erred in holding that assessee is liable to be penalized as per Section 270A(A) of the Act. He further referring to the judgement of Hon'ble Delhi High Court in case of PCIT vs. Neeraj Jindal (2017) 393 ITR 0001 (Delhi), stated that once the assessee is subjected to search and notice u/s 153A of the Act is issued for furnishing the return and the assessee furnished

On the other hand, the learned Departmental Representative vehemently argued, supporting the orders of the learned lower authorities.

We have heard the rival contentions and perused the records placed before us. Finding of learned CIT (A) confirming the levy of penalty u/s 270A of the Act for alleged under reporting of income is in challenge before us at the instance of the assessee. Uncontroverted facts are that the assessee filed regular return on 11th November, 2017, declaring income of ₹8,35,425/-. Search and survey

Now, the learned Assessing Officer has initiated the penalty proceedings for under reporting income by considering the income originally declared in the return filed u/s 139 of the Act on 11th July, 2017 as against the return filed in reply to notice u/s 153A of the Act. Before us, two-fold of arguments were submitted by the learned counsel for the assessee. Firstly, the case of the assessee do not fall u/s 270A(2)(A) of the Act and secondly, since, the assessee has fulfilled the conditions of Section 270AA(1)(a) and (b) of the Act, assessee deserves immunity from imposition of penalty.

We will first take up the second fold of argument that the assessee deserves immunity from imposition of penalty u/s 270AA of the Act and that case of the assessee is squarely covered by the judgements of Hon'ble Madrass High Court in case of Natarajan Anandh Kumar (Supra).

Now, for grant of immunity application has to be filed within one month from the end of month in which the assessment order is received by the assessee. Now, in the instant case, assessment order has been framed on 31st March, 2022, and the application u/s270AA(1) of the Act has been furnished on 16th June, 2022. Even if we, consider that the assessee received the assessment order on the very date of its passing, there is a delay of around 45 days. Now the assessee’s application has been rejected without providing any opportunity of being heard and also no order has been passed rejecting the assessee’s application. Now, under there given facts and circumstances, we find pertinent to note that Hon'ble Madras High Court in case of Natarajan Anandh Kumar (supra) had dealt with almost identical issue and has held as under: -

We also note that Hon'ble Delhi High Court in case of Ultimate Infratech Private Limited Vs. National Faceless Assessment Centre in WP 6305/2022 dated 20th April, 2022, dealing with similar issue has held as under: -

In fact, the statutory scheme for grant of immunity is based on satisfaction of three fundamental conditions, namely, (i) payment of tax demand; (ii) non-institution of appeal; and (iii) initiation of penalty on account of underreporting of income and not on account of misreporting of income.

This Court is also of the view that the petitioner cannot be prejudiced by the inaction of the Assessing Officer in passing an

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 "under-reporting" 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. Vs.Asst. Commissioner of Income Tax International Taxation Circle 3(1)(2), New Delhi and Ors., WP(C) $111/2022, has held, "This Court is further of the view that the impugned action of Respondent No. I 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

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. With the aforesaid directions, the present writ petition along with pending applications stands disposed of.”

Further, Hon'ble Rajasthan High Court in case of GR Infraprojects Ltd. vs. ACIT (2024) 158 taxmann.com 80 (Rajasthan), held as under: -

Since, we have already deleted the impugned penalty on the second fold of arguments raised by the learned counsel for the assessee raised in ground no.2 and 4, dealing with the first fold of arguments would be merely academic in nature. Thus, the findings of the learned CIT (A) is set aside and impugned penalty u/s 270A of the Act is deleted.

As far as remaining appeal in ITA nos. 164 to 166, 170 & 172 /PAT/2023, for A.Ys. 2018-19 to 2020-21, are concerned, since the issue in these appeals raised are verbatim similar to that of ITA No. 163/PAT/2023, except the change in figures and this fact being not controverted by both the sides, we apply our decision of ITA No. 163/PAT/2023 mutatis mutandis on ITA Nos. in ITA nos. 164 to 166, 170 & 172 /PAT/2023 and delete the impugned penalties levied u/s 270A of the Act and allow the effective grounds raised in all these appeals.

In the result, all the appeals of the assessee (s) in ITA Nos. 163 to 166, 170 & 172 /PAT/2023 are allowed.

Order pronounced in the open court on 29/08/2024.