JOYDEEP MUKHERJEE,PRESENTLY RESIDING AT USA vs. DCIT, INTL TAXATION CIRCLE 1(2), BANGALORE, BMTC BUILDING, KORAMANGALA

Accordingly the notice under section 148 was issued on 7 April 2022 in response to which the assessee filed return of income on 23 April 2023 at a total income of ₹ 414,92,315. The assessment was completed under section 147 read with section 144 of the Act on 2 February 2024 accepting the income returned by the assessee at assessed income of ₹ 41,272,320.

As the assessee has not filed any return of income under section 139 (1) or under section 139 (4) of the Act and the return filed by the assessee

In response to the above penalty show cause notice the assessee submitted that assessee has filed an application in form No. 68 under section 270AA(2) on 8 February 2024 requesting the assessing officer to grant immunity from imposition of penalty and initiation of proceedings under section 276C. The assessee submitted that rectification application dated 6 February 2024 had been filed. Another letter was issued to the assessee which was replied on 17 August 2024 wherein the assessee submitted that he had filed a rectification application on 4 April 2024.

The ld. Ao noted that , on verification it was seen that no application for rectification has been filed in his office. Therefore the learned assessing officer initiated the penalty proceedings and concluded that as assessee has not filed any reply and has also not filed any appeal against the assessment order, the assessee is liable for penalty under section 270A of the Act.

With respect to the application of the assessee for rectification wherein the assessee has stated that if rectification is carried out, the entire demand raised pursuant to the assessment would be reduced to Rs. Nil. The learned assessing officer on verification found that no application for rectification has been filed in the office of the assessing officer. According to the AO the assessee should have paid the above amount of outstanding tax as per the period specified in the notice of demand in order to qualify for immunity. As the assessee has not paid the demand, the learned assessing officer further rejected the claim of the assessee for immunity from penalty.

In the end the learned assessing officer held that as assessee has disclosed this income in response to a notice under section 148 of the Act, the assessee is liable for penalty of underreporting of income to the extent of Rs.141,25,216 and levied the penalty at ₹ 7,062,608 on underreported income of ₹ 41,272,320. The penalty order was passed on 30 August 2024.

The assessee aggrieved with the same preferred an appeal before the learned CIT – A. On the grounds of appeal

The learned CIT – A considered the application of the assessee as well as the explanation given by the assessee. She held that as the assessee has not paid the demand raised within the period specified in the notice of demand, the appellant should have paid such demand within a period specified in the order to qualify for granting of immunity from imposition of penalty under section 270A of the Act. As the assessee has not fulfilled those conditions the immunity is correctly rejected. Accordingly she confirmed the order of the penalty.

The assessee is aggrieved with the same and is in appeal before us. The learned authorised representative vehemently submitted that assessee has made an application to the assessing officer for granting immunity from imposition of penalty under section 270A of the Act. The assessee

The learned departmental representative vehemently submitted that the assessee has failed to comply with the conditions mentioned under section 270AA of the Act. As the assessee has not complied with the condition, the learned assessing officer has correctly rejected the application for immunity against the penalty. He further submitted that as the assessee has not submitted any explanation before the learned AO or before the learned CIT – A, and assessee has filed his return of income in response to a notice under section 148 of the Act, there is no reason that assessee should not be penalised under the section 270A of the Act. Therefore he submitted that the order of the learned lower authorities deserves to be confirmed.

We have carefully considered the rival contention and perused the orders of the learned lower authorities. The admitted facts coming out of from the orders of the learned lower authorities show that the assessee did not file any return of income but on the basis of the information available with the Income Tax Department, a notice under section 148 of the Act was issued to the assessee. In response to that the assessee furnished his return of income, which is accepted as it is. However as the assessee did not disclose the return of income under section 139 (1) or under section 139 (4) of the Act, the learned AO levied the penalty under section 270A of the Act for underreporting of the income of ₹ 4 crores. At the time of show cause notice issued by the learned assessing officer for the levy of penalty under section 270A of the Act, the assessee submitted form No. 68 and stated that he is entitled to the immunity from penalty and prosecution. The assessee further referred to certain rectification application. The learned assessing officer noted that no such application is found and he rejected the application for immunity against the penalty. Before granting or rejecting the immunity against the penalty, the learned assessing officer is duty-bound to give an opportunity of hearing to the assessee that why his application for immunity cannot be entertained. This is the mandate of the provisions of section 270AA (4) of the act wherein in the proviso to that subsection it is mentioned that before rejecting the immunity application of the assessee, the learned assessing officer is duty-bound to give an opportunity of hearing to the assessee. This is the principle of natural justice enshrined in that section of the Income Tax Act itself. The same has not been followed by the learned assessing officer. Further it is a fact that assessee has filed an application for rectification which was stated before the assessing officer twice, the learned assessing officer noted that he did not find any application for rectification and thereafter, he straightway rejected the immunity application of the assessee. He should have asked the assessee that what rectification he is requesting for. Without asking for the same, the learned assessing officer has rejected the application for immunity against the penalty.

In view of the above facts we find that the issue needs to be restored to the file of the learned assessing officer, where the irregularity has occurred, to examine the application made by the assessee for immunity from imposition of penalty under section 270AA of the Act. If the assessee does not fulfil the condition or any further information is required and then assessing officer is of the view that assessee is not entitled to immunity, before passing such an order the assessee must be given an opportunity of hearing. In this regard we direct the learned assessing officer to grant an opportunity of hearing to the assessee and then pass an order in accordance with the law.

After that the assessee must also be given an opportunity to contest the penalty u/s 270A of the act on its merits.

In view of the above facts the appeal of the assessee is allowed for statistical purposes.