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Facts
The assessee received an amount of Rs. 53,05,934/- as ex-gratia on early termination of service, which was claimed as exempt income. The Assessing Officer (AO) treated this as salary and made an addition, also levying a penalty under Section 270A of the Income Tax Act.
Held
The Tribunal held that the assessee had fulfilled the conditions for immunity from penalty under Section 270AA of the Act, despite a minor delay in filing Form 68. The penalty levied under Section 270A for under-reporting of income was therefore deleted.
Key Issues
Whether the penalty under Section 270A is leviable when the assessee is eligible for immunity under Section 270AA, and whether the ex-gratia payment is taxable as salary.
Sections Cited
143(3), 270A, 270AA, 274
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI S.S. VISWANETHRA RAVI & SHRI S. R. RAGHUNATHA
अपीलाथ� की ओर से/Appellant by : Mr. N.Vijay Kumar, C.A. ��थ� की ओर से/Respondent by : Ms. Deeptha, Addl. C.I.T. सुनवाई की तारीख/Date of Hearing : 30.04.2025 घोषणा की तारीख/Date of Pronouncement : 15.05.2025 आदेश /O R D E R
PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER:
This appeal by the assessee is filed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2020-21, vide order dated 18.06.2024.
The grounds of appeal
raised by the assessee are as under:
1. For that the order of the Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case to the extent prejudicial to the interests of the appellant and is opposed to the principles of equity, natural justice and fair play.
2. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the penalty order of the Assessing Officer is without jurisdiction.
:-2-: ITA. No.:397/Chny/2025
For that the Commissioner of Income Tax (Appeals) erred in upholding the levy of penalty for under reporting of income under section 270A of the Income Tax Act, 1961 amounting to Rs.9,07,270-.
4. For that the provisions of section 270A are not invocable in the facts and circumstances of the case.
5. For that the Assessing Officer erred in not specifying the clause under which the instant case would fall u/s.270A (9) of the Income Tax Act 6. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the appellant has satisfied the conditions specified u/s.270AA of the Act to claim immunity from imposition of penalty, etc. 7. For that the Assessing Officer failed to appreciate that the penalty proceedings are independent of assessment proceedings. 8. For that the addition of Rs.53,05,934/- is not warranted in the facts and circumstances of the case. 3. At the outset, we find that there is a delay of 160 days in appeal filed by the assessee, for which the assessee has filed affidavit stating the reasons for delay, wherein, it is submitted that the assessee underwent Transradial Culprit PTCA and Stent to LAD and was advised strict medication and lifestyle modifications. Since the assessee was under continuous medication, facing immense physical and psychological stress, he was unable to attend to his income tax affairs. Therefore, the assessee didn’t respond to the notice issued by the CIT(A). After considering the Affidavit filed by the assessee and also hearing both the parties, we find that there is a reasonable cause for the assessee in not filing appeal on or before the due date prescribed under the law and thus, in the interests of justice, we condone delay in filing of appeal and admit the appeal filed by the assessee for adjudication.
Brief facts are that the assessee is an individual employed with M/s.Pfizer Health Care India Private Limited and filed his return of income on 14.08.2020 for the A.Y. 2020-21 by admitting a taxable income of Rs.8,65,750/-.
:-3-: ITA. No.:397/Chny/2025
The case was selected for scrutiny under CASS and statutory notices were issued to assessee and requested to furnish the details as per the notice. Assessee filed the details as and when called for. The assessee has claimed an amount of Rs.53,05,934/- as exempt income which he received from his employer on early termination of service. The assessee had contended that the said sum, being received as ex-gratia and not forming part of the terms of the employment contract, is in the nature of a capital receipt and hence not liable to tax.
The AO passed an order u/s.143(3) of the Act dated 05.09.2022 by disallowing the claim of ex-gratia (capital receipt) of Rs.53,05,934/- and treated the amount of Rs.53,05,934/- as profit in lieu of salary under the head salaries and raised a demand of Rs.21,11,380/-. Thereafter, the penalty u/s.274 r.w.s 270A of the Act was also initiated separately for ‘under reporting of income’ in consequence of ‘misreporting of income’.
Pursuant to the assessment order dated 05.09.2022, assessee remitted the tax computed at Rs.21,11,380/- on 21.09.2022 which is well within 30 days of the demand and did not file any appeal against the assessment order dated 05.09.2022.
Later the AO issued notice u/s.270A of the Act and despite having taken note of the assessee’s assertion that it had paid taxes and interest as per the assessment order u/s.143(3) of the Act dated 05.09.2022 which was very well within the period specified in the notice of demand and preferred no appeal against the assessment order u/s.143(3), still the AO levied penalty u/s.270A of the Act for the variation in respect of issue of salary income and imposed a :-4-: ITA. No.:397/Chny/2025 penalty u/s.270A of the Act for ‘under-reporting of income’ amounting to Rs.9,07,270/- @ 50% of the amount of tax payable on under-reported income. On appeal, the Ld. CIT(A) vide order dated 18.06.2024 has inter-alia confirmed the action of the AO and has held that the AO has correctly applied the provisions of Section 270A and levied a penalty of 50% for under-reported income and further held no further interference was called for.
Aggrieved by the aforesaid action of the Ld.CIT(A), the assessee is in appeal before this tribunal.
The ld.AR, assailing the action of Ld.CIT(A), submitted that Ld.CIT(A) has erred in confirming the penalty levied by the AO u/s.270A of the Act for under reporting its income, by levying 50% of total tax. The ld.AR advanced the argument by stating that the issue of amount received as Ex-gratia was not taxable being capital in nature has been decided in favour of the assessee at Hon’ble Pune Tribunal in Godavari Vijay Kulkarni L/H of Late Vijay Shrinivasrao Kulkarni V ITO in – Pune Trib and held that the Ex-Gratia amount received by the assessee being capital in nature cannot be added in the taxable income and deleted the additions and therefore prayed to delete the penalty imposed u/s.270A for under reporting of income @ 50% amounting to Rs.9,07,270/-. Further, the Ld.AR drew our attention to section 270AA of the Act and claimed that the assessee was eligible for immunity from imposition of penalty u/s.270A of the Act as the assessee has fulfilled both the conditions for grant of immunity as stipulated under clause (a) & clause (b) of sub-section (1) of section 270AA of the Act, which are substantive in nature except did not file form 68 before AO. Thereafter, Ld.CIT(A) confirming
:-5-: ITA. No.:397/Chny/2025 the action of the AO for imposing a penalty u/s.270A of the Act for under- reporting of income amounting to Rs.9,07,270/- @ 50% of the amount of tax payable on under-reported income, the assessee filed an application for immunity in Form 68 dated 12.07.2024 as prescribed in section 270AA(2) of the Act and further argued that the assessee had satisfied the condition of section 270AA(3) of the Act and prayed for immunity from imposition of penalty, etc.
Per contra the ld.DR supported the order of the lower authorities.
We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We find that facts discussed supra are not in dispute while adjudicating the issue in hand. We note that pursuant to the assessment order dated 05.09.2022, the assessee has discharged the tax and interest on 21.09.2022 amounting to Rs.21,11,380/- which is within the period/given time in the assessment order and demand notice and thus has fulfilled the conditions prescribed u/s.270AA of the Act for claiming immunity from imposition of penalty u/s.270A of the Act and did not file an appeal against the assessment order dated 05.09.2022. Thus, the assessee has fulfilled the conditions of clause (a) & clause (b) of sub- section 1 of section 270AA of the Act. We find that the show cause notice dated 05.09.2022 was initiated u/s.274 read with section 270A of the Income Tax Act, 1961 for under- reported income which is in consequence of misreporting of income, the assessee was not eligible to claim the immunity u/s.270AA of the Act and hence did not file form 68 before the AO well within the prescribed period as stated in sub-section (2) of section 270AA i.e. within one month from the end of the month in which the assessment order was received by the assessee. However, the AO
:-6-: ITA. No.:397/Chny/2025 passed the penalty order and levied penalty @ 50% of the taxes only for the reason for under-reporting of income and which was confirmed by the Ld.CIT(A). Therefore, the assessee became eligible to claim immunity from imposition of penalty u/s.270A of the Act and thus has satisfactorily fulfilled the condition of section 270AA(3) of the Act. In light of the above discussion, we are of the considered view that though form 68 was filed beyond 30 day before the AO, the assessee had fulfilled the conditions of 270AA of the Act. Hence, considering the overall facts of this case, we are of the view that the assessee is eligible for immunity from penalty and therefore no penalty ought to have been levied u/s.270A of the Act for under-reporting of income. Hence, we are inclined to delete the penalty-imposed u/s.270A of the Act, amounting to Rs.9,07,270/- by allowing the grounds of appeal raised by the assessee.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the court on 15th May, 2025 at Chennai.