Penalty U/S 270A cannot be levied arbitrarily: Rajasthan HC Cha

Chambal Fertilizers and Chemicals Limited Vs PCIT (Civil Writ Petition No. 10198/2023)

Facts:

The petitioner realized during the course of scrutiny proceedings, 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.

The assessment order under Section 143 (3) of the Income Tax 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.

The petitioner filed an application under Section 270AA of the Act against the penalty before the Deputy Commissioner, which came to be rejected by order dated 27.07.2021.

The petitioner filed a revision petition U/S 264 and maintained that he had on his own, suo moto, 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 the order passed by the revisional authority deserves to be set aside.

Finally, 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 whereby the revision petition was rejected.

Hon Rajasthan HC held as below:

From the 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.

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.