Chambal Fertilizers And Chemicals Limited vs Office Of The Principal Commissiner Of Income Tax

Chambal Fertilizers and Chemicals Limited, CFCL Complex Gadepan, Gadepan - 325208, Rajasthan through its authorised Representative Anuj Jain, S/o Mr. JBK Jain, aged about 59 years, R/o Flat No. 303, Rainbow Apartments, Sector 43, Gurgaon, Haryana- 122009 ----Petitioner Versus 1. Office of the Principal Commissioner of Income Tax, Aaykar Bhawan, Subcity Centre, Savina, Udaipur - 313001, Rajasthan. 2. Office of the Deputy Commissioner of Income Tax, DCIT/ACIT, Central Revenue Building, Rawat Bhata Road, Kota - 324009, Rajasthan. ----Respondents

For Petitioner(s) : Mr. Sanjay Jhanwar, Sr. Advocate assisted by Ms. Vrinda Lakhotia, Mr. Rajat Sharma & Mr. Aryan Singh Chouhan.

For Respondent(s) : Mr. Shantanu Sharma with Ms. Bhawana Laddha.

HON'BLE MR. JUSTICE ARUN BHANSALI HON'BLE MRS. JUSTICE SHUBHA MEHTA

Order

04/01/2024

1. This writ petition has been filed by the petitioner aggrieved

of order dated 13.03.2023 (Annex.14) passed by the Principal

Commissioner of Income Tax, Udaipur whereby revision petition

filed by the petitioner under Section 264 of the Income Tax Act,

1961 ('the Act') has been rejected.

2. The petitioner had filed its original return of income under

Section 139 (1) of the Act on 30.11.2018 for the Assessment Year

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2018-19 and revised return of income on 29.03.2019 under

Section 139 (5) of the Act. The case of the petitioner was selected

for complete scrutiny and an exhaustive list of issues was

communicated by notice under Section 164 (2) of the Act on

22.09.2019. During the course of scrutiny, various notices under

Section 142 (1) of the Act were issued and replies to the same

were submitted by the petitioner.

3. It is claimed that during the course of scrutiny proceedings,

the petitioner realized that 'provision for doubtful GST input tax

credit' amounting to Rs.16,30,91,496/- had been inadvertently

merged with another expense account and mistakenly claimed as

expenses under the IT provisions. Accordingly, the said amount

was suo moto surrendered by the petitioner by revising its return

of income and adding back the amount 'provision for doubtful GST

input tax credit', to the total income. The said aspect was

communicated vide letter dated 24.02.2021 alongwith submission

of revised computation.

4. The assessment order (Annex.6) under Section 143 (3) of

the Act was passed by the National E-Assessment Centre ('NeAC')

making only addition of suo moto surrendered amount of

Rs.16,30,91,496/-, however, it was observed in the order that the

penalty under Section 270A of the Act is imposed for misreporting

of the income.

5. The petitioner filed an application under Section 270AA of

the Act against the penalty order before the Deputy

Commissioner, which came to be rejected by order dated

27.07.2021 (Annex.9).

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6. The petitioner challenged the order of rejection by filing

revision petition under Section 264 of the Act, inter-alia, on the

ground that no opportunity of hearing was provided to the

petitioner, which was in non-compliance of Section 270AA of the

Act and that the order rejecting the application did not specify how

there was misreporting of the income when the amount was

disclosed by the petitioner on its own volition and that the case of

the petitioner did not fall in any of the exceptions under Section

270AA of the Act. However, the revision petition came to be

rejected by order dated 13.03.2023.

7. Learned counsel for the petitioner, with reference to order

dated 27.07.2021 (Annex.9), passed by the Deputy Commissioner

rejecting the application under Section 270AA of the Act made

submissions that the said order has been passed contrary to the

express provisions of the Act. Submissions have been made that

in the application filed under Section 270AA of the Act (Annex.7),

the petitioner had clearly sought opportunity of being heard,

however, no opportunity was provided to the petitioner, which

action of the authority is in clear violation of the proviso to Section

270AA (4) of the Act. Further submissions have been made that

the order is wholly non-speaking, inasmuch as only one line order

has been passed that on perusal of the application the authority

did not find the same tenable and on that count, the order

deserves to be set aside.

8. Further submissions have been made that the revisional

authority, instead of appreciating the defect in the order passed by

the Deputy Commissioner, has rejected the application by

observing that the case of the petitioner is within the ambit of

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Clauses (a) and (c) of Section 270A (9) of the Act and, therefore,

Clause (3) of Section 270AA would apply to its case. It is

submitted that the said observations are also without any basis,

as nowhere it has been shown as to how the case would fall within

Clause (a) or (c) of Section 270A (9) of the Act. It was

emphasized that the petitioner on its own, suo moto, had during

the course of scrutiny proceedings, offered the amount by revising

its return of income and adding back the amount to total income

and, therefore, the same was not a case of misrepresentation or

suppression of facts or claim of expenses not substantiated by any

evidence, as required by sub-Clauses (a) and (c) of Section 270A

(9) and, therefore, on that count also the order passed by the

revisional authority deserves to be set aside.

9. Reliance was placed on Schneider Electric South East Asia

(HQ) PTE Ltd. vs. Assistant Commissioner of Income Tax

International Taxation Circle-3 (1) (2), New Delhi & Ors. : WP (C)

5111/2022 decided on 28.03.2022 by Delhi High Court.

10. Learned counsel for the respondents made submissions that

the present was a case of clear misrepresentation and suppression

of facts, inasmuch as the petitioner had merged the provision for

doubtful GST input tax credit in expense account, whereas the

same was part of income and it is only during the scrutiny

proceedings that the said income was offered for taxation, the

plea raised that the petitioner has suo moto offered the income, is

not borne out from the record and, therefore, the plea raised in

this regard cannot be accepted. It was submitted that the Deputy

Commissioner was justified in rejecting the application seeking

immunity from imposition of penalty and the revisional authority

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has thoroughly considered all the aspects, as raised by the

petitioner, and has recorded a categoric finding that case of the

petitioner falls within sub-Clause (a) and (c) of Section 270A (9)

of the Act and, therefore, the orders impugned did not call for any

interference.

11. We have considered the submissions made by counsel for the

parties and have perused the material available on record.

12. The facts, are not in dispute, wherein on filing of original and

revised returns, the case of the petitioner was selected for

complete scrutiny and the petitioner was called upon to respond to

as many as ten issues by the NeAC. On all the ten issues, on

which the scrutiny was conducted, the response of the petitioner

was accepted. However, qua the amount of GST which was offered

by the petitioner for taxation, it was observed as under:

"5. Lastly, as per the revised computation of income dated 24/02/2021, the assessee has submitted and offered the GST Provision of Rs.16,30,91,496/- for taxation, which is added back to the total income of the assessee for the year under consideration.

(Addition Rs. - 16,30,91,496/-) Penalty u/s 270A of the Income Tax Act 1961 is imposed for misreporting of income"

13. From the above assessment order, one aspect is very clear

that the authorities under the Act had not detected the said aspect

of amount of provision for GST and it was voluntarily offered by

the petitioner.

14. As the order was passed for imposing penalty under Section

270A of the Act, the petitioner moved an application under Section

270AA of the Act, which reads as under:

"270AA. Immunity from imposition of penalty, etc.--

(1) An assessee may make an application to the Assessing Officer to grant immunity from imposition of penalty under section 270A and initiation of proceedings under section

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276C of section 276CC, if he fulfils the following conditions, namely:--

(a) the tax and interest payable as per the order of assessment or reassessment under sub-section (3) of section 143 or section 147, as the case may be, has been paid within the period specified in such notice of demand; and

(b) no appeal against the order referred to in clause

(a) has been filed.

(2) An application referred to in sub-section (1) shall be made within one month from the end of the month in which the order referred to in clause (a) of sub-section (1) has been received and shall be made in such form and verified in such manner as may be prescribed.

(3) The Assessing Officer shall, subject to fulfilment of the conditions specified in sub-section (1) and after the expiry of the period of filing the appeal as specified in clause (b) of sub-section (2) of section 249, grant immunity from imposition of penalty under section 270A and initiation of proceedings under section 276C or section 286CC, where the proceedings for penalty under section 270A has not been initiated under the circumstances referred to in sub-section (9) of the said section 270A.

(4) The Assessing Officer shall, within a period of one month from the end of the month in which the application under sub-section (1) is received, pass an order accepting or rejecting such application:

Provided that no order rejecting the application shall be passed unless the assessee has been given an opportunity of being heard.

(5) The order made under sub-section (4) shall be final.

(6) No appeal under section 246A or an application for revision under section 264 shall be admissible against the order of assessment or reassessment, referred to in clause (a) of sub-section (1), in a case where an order under sub-section (4) has been made accepting the application."

15. The provisions of Section 270A of the Act, to the extent

relevant, reads as under:

"270 (1) (2) xxx (9) The cases of misreporting of income referred to in sub-section (8) shall be the following, namely:--

(a) misrepresentation or suppression of facts;

(b) failure to record investments in the books of account;

c) claim of expenditure not substantiated by any evidence;

(d) recording of any false entry in the books of account;

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(e) failure to record any receipt in books of account having a bearing on total income; and

(f) failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply."

16. A perusal of above provisions would reveal that under sub-

Section (3) of Section 270AA of the Act, the Assessing Authority

can grant immunity from imposition of penalty under Section

270A, where the proceedings for penalty under Section 270A has

not been initiated under the circumstances, referred to in sub-

Section (9) of Section 270A of the Act and under the provisions of

sub-Section (4), it has been provided that no order rejecting

application shall be passed unless the assessee has been given an

opportunity of being heard.

17. Admittedly, the petitioner in its application under Section

270AA of the Act had sought personal hearing and the authority

was bound to provide such personal hearing, however, admittedly

no opportunity of hearing was provided to the petitioner. The

application came to be rejected by the Deputy Commissioner by

observing as under:

"7. Under the facts and circumstances of the case, as the assessee has fulfilled all the conditions laid down under the Section 270AA (1) of the Act except the condition envisaged under sub-section 3 of the Section 270AA of the Act which is as under:-

The Assessing Officer shall, subject to fulfilment of the conditions specified in sub-section (1) and after the expiry of the period of filing the appeal as specified in clause (b) of sub-section (2) of section 249, grant immunity from imposition of penalty under section 270A and initiation of proceedings under section 276C or section 286CC, where the proceedings for penalty under section 270A has not been initiated under the circumstances referred to in sub-section (9) of the said section 270A.

8. In view of above facts and circumstances of the case, application of the assessee company in respect of immunity from imposition of penalty under Section 270AA of the Act is perused but not found tenable as the penalty u/s 270A of the Act for the AY 2018-19 has been initiated

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under the circumstances referred to in sub-section (9) of the said Section 270A of the Act and is hereby rejected."

18. A perusal of above order would reveal that the authority had

passed a wholly non-speaking order by only reiterating the

provisions of sub-Section (3) of Section 270AA and indicated that

the application was not found tenable, as penalty under Section

270AA of the Act has been initiated under the circumstances,

referred to in sub-Section (9) of Section 270A of the Act.

19. Neither in the order dated 19.04.2021 (Annex.6) nor in the

order impugned (Annex.9) anything has been indicated as to

under which sub-clause of Section 270A (9), the case of the

petitioner falls and only mechanical observations have been made

to justify the imposition of penalty.

20. The revisional authority, in its order dated 13.03.2023

(Annex.14), cursorily observed that the case is observed to be

within the ambit of Clause (a) and (c) of Section 270A (9) of the

Act, therefore, 270AA (c) may apply to petitioner's case. The

revisional authority apparently did not consider the fact that the

petitioner was not afforded opportunity of hearing in violation of

provisions of proviso to Section 270AA (4) and that the order

impugned before it was wholly non-speaking and attempted to

justify imposition of penalty under Section 270A (9) (a) and (c).

The very fact that the indications were made that the matter fall

within (a) and (c), necessarily means that even the revisional

authority was not sure whether it was a case of misrepresentation

or suppression of facts or claim of expense, not substantiated by

any evidence.

21. The Delhi High Court in Schneider Electric South East Asia

(HQ) PTE Ltd. (supra), inter-alia, observed and directed as under: (Downloaded on 04/01/2024 at 08:49:34 PM)

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"6. Having perused the impugned order dated 09 March, 2022, this Court is of the view that the Respondents' action of denying the benefit of 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 - "under reporting" 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 09th 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.

11. With the aforesaid directions, the present writ petition along with pending applications stand disposed of."

22. The finding recorded by the revisional authority is apparently

contrary to the facts and essentially based on assumptions only on

account of the fact that the petitioner on its own disclosed the

income in question. As noticed hereinbefore, though several

notices were issued under Section 142 of the Act, during the

course of scrutiny proceedings and as many as ten issues were

raised, on which the authority could not make any additions, the

aspect of merging GST Input Credit with expenses was not pointed

out/detected and the same was only pointed out voluntarily by the

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petitioner and, therefore, apparently sub-Clauses (a) and (c) of

Section 270A (9) of the Act are not attracted.

23. In view of above, it is apparent that the Deputy

Commissioner violated the provisions of proviso to Section 270AA

(4) of the Act by not providing any opportunity of hearing, the

order passed was wholly laconic, the same did not indicate as to

under which part of Section 270A (9), the case of the petitioner

was covered and the revisional authority without giving any

cogent reasons, has in a wholly cursory manner indicated the case

of the petitioner, was within the ambit of Clause (a) and (c) of

Section 270A (9) of the Act and, therefore, the order passed by

the assessing authority rejecting application under Section 270AA

and the order passed by the revisional authority rejecting revision

petition, cannot be sustained.

24. Consequently, the writ petition is allowed. The orders

impugned dated 27.07.2021 (Annex.9) passed by the Deputy

Commissioner and 13.03.2023 (Annex.14) passed by the

revisional authority are quashed and set aside. The respondents

are directed to grant immunity under Section 270AA of the Act to

the petitioner.

(SHUBHA MEHTA),J (ARUN BHANSALI),J

(R) DJ/-

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