In order to provide immunity from penalty and prosecution in certain cases, a section 270AA has been inserted by the Finance Act, 2016 with effect from 01.04.2017 in the Income-tax Act under which an assessee may make an application to the Assessing Officer for grant of immunity from imposition of penalty under section 270A of the Income-tax Act and initiation of proceedings under section 276C or section 276CC of the Income-tax Act, provided he/she pays the tax and interest payable as per the order of assessment or reassessment within the period specified time in such notice of demand and does not prefer an appeal against such assessment order. The assessee can make such application, within one month from the end of the month in which the order of assessment or reassessment is received, in such form and manner, as may be prescribed.
It
is also provided that the Assessing Officer shall, on fulfilment of the conditions
and after the expiry of period of filing appeal as specified in sub-section (2)
of section 249 of the Income-tax Act, grant immunity from initiation of penalty
and proceeding under section 276C or section 276CC of the Income-tax Act, if
the penalty proceedings under section 270A of the Income-tax Act have not been
initiated on account of the following, namely:-
Immunity
from penalty under section 270AA will not apply
(a) Immunity
from penalty will not apply to misreporting of income or suppression of facts and
could be availed only in respect of under-reporting of income;
(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;
(e) failure to
record any receipt in books of account having a bearing on total income; or
(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 of the Income-tax Act apply.
The
Assessing Officer shall pass an order accepting or rejecting such application
within a period of one month from the end of the month in which such
application is received. However, in the interest of natural justice, no order
rejecting the application shall be passed by the Assessing Officer unless the
assessee has been given an opportunity of being heard. The order of Assessing
Officer under the said section shall be final.
Further,
no appeal under section 246A of the Income-tax Act or an application for
revision under section 264 of the Income-tax Act 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 section 270AA of the Income-tax
Act has been made accepting the application.
Text of Section 270AA
[1][270AA. Immunity from imposition of penalty,
etc.
270AA. (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 276C
or 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.
(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
276CC, where the proceedings for penalty under section 270A has not been
initiated under the circumstances referred to in sub-section (9) of the said
secion 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.]
KEY NOTE
1. Inserted by the Finance Act, 2016, with effect
from 01.04.2017.
Key considerations for opting for immunity
The
key considerations while opting for immunity are as under:
§ Where an immunity
application is accepted, no appeal or revision petition can be preferred
against the order, and it becomes final.
§ Where an immunity
application is made, the tax and interest due is to be paid within the period
specified in the notice of demand.
§ Opting for making an
application for immunity would result in speedy resolution of penalty
proceedings.
§ In view of CBDT Circular
no. 5 of 2018, the income-tax authorities shall not take an adverse view in the
proceedings for penalty under section 271(1)(c) in earlier years, merely on the
ground that the taxpayer has agreed to the issue in any later year by
preferring an immunity.
§ The grant of immunity
would be at the discretion of the tax officer, and he / she has the power to reject
the application.
§ The immunity also
extends to initiation of prosecution proceedings under sections 276C and 276CC.
§ Immunity has to be
sought on a year-on-year basis (even though penalty proceedings may be
initiated on the same disallowances / additions each year).
Conditions for making an application for grant
Immunity from imposition of penalty under section 270A and initiation of
proceedings under section 276C or 276CC [Section 270AA(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 276C or 276CC, if he fulfils the following conditions:
(a) The tax and interest payable as
per the order of assessment [under section 143(3)] or reassessment [under
section 147], as the case may be, has been paid within the periods specified
in such notice of demand; and
(b) No appeal against the order of assessment
or reassessment under section 143(3) or section 147 has been filed by the
assessee.
(c)
An application referred to in section 270AA(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.
Burden is on Assessee
The
burden for claiming immunity under section 270AA from imposition of penalty under
section 270A or from prosecution under section 276C/276CC is on the assessee to
prove that he is satisfies the condition laid down in section 270AA(1).
Time
period for making an application [Section 270AA(2)]
An
application referred to in section 270AA(1) shall be made within one month from
the end of the month in which the order referred to in section 270AA(1)(a) has
been received and shall be made in such form and verified in such manner as may
be prescribed.
Assessing Officer shall grant immunity from imposition
of penalty under section 270A or initiation of proceedings under section 276C
or section 276CC except in case of misreporting of income [Section 270AA(3)]
The
Assessing Officer shall, subject to fulfilment of the conditions specified in
section 270AA(1) and after the expiry of the period of filing the appeal as specified
in section 249(2)(b), grant immunity from imposition of penalty under section
270A and initiation of proceedings under section 276C or section 276CC, where
the proceedings for penalty under section 270A have not been initiated under
the circumstances referred to in secion 270A(9).
Assessing Officer to pass an order within a period of
one month accepting or rejecting the application referred to in section
270AA(1)[Section 270AA(4)]
The
Assessing Officer shall, within a period of one month from the end of the month
in which the application under section 270AA(1) is received, pass an order
accepting or rejecting such application. However, no order rejecting the application
shall be passed unless the assessee has been given an opportunity of being
heard.
Order
passed under section 270AA(4) will be final [Section 270AA(5)]
Section
270AA(5) provides that the order passed under section 270AA(4) by the assessing
officer shall be final and further recourse in respect of the same will not be
available to the assessee concerned.
Assessment
or reassessment order passed after accepting the application under section
270AA(4) is not appealable or subject to revision [Section 270AA(6)]
Under sub-section 6
of section 270AA, no appeal under section 246(A) 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. This only means that when an assessee
makes an application under sub-section 1 of section 270AA and
such an application has been accepted under sub-section 4 of section 270AA,
the assessee cannot file an appeal under section 246(A) or an
application for revision under section 264 against the order of
assessment or reassessment passed under sub-section 3 of section 143
or section 147. However, this does not provide for any bar or
prohibition against the assessee challenging an order passed by the Assessing
Officer, rejecting its application made under sub- section 1 of section
270AA.
Time shall be excluded for filing an appeal before CIT(A) [Second Proviso to Clause (b) of sub-section (2) of section 249]
Clause
(b) of sub-section (2) of section 249 of the Income-tax Act provides that an
appeal before the Commissioner (Appeals) is to be made within thirty days of
the receipt of the notice of demand relating to an assessment order.
In
section 249(2)(b) of the Income-tax Act, by the Finance Act, 2016, with effect
from 01.04.2017, the second provisio has been inserted to provide that in a
case where the assessee makes an application under section 270AA(1) of the
Income-tax Act seeking immunity from penalty and prosecution, then, the period
beginning from the date on which such application is made to the date on which
the order rejecting the application is served on the assessee shall be excluded
for calculation of the aforesaid thirty days period. The said amendment is
consequential to the insertion of section 270AA of the Income-tax Act.
Clarification issued by the CBDT that preferring
immunity under section 270AA is no bar to challenge on same issue in earlier
years
The
CBDT, vide Circular No. 05/2018, dated 16th August, 2018, has clarified that an
application made by an assessee under section 270AA of the Act seeking immunity,
will not bar the assessee from contesting the same issue in any earlier assessment
year. The circular also clarifies that the tax authority shall not take an
adverse view in penalty proceedings for earlier assessment years under old penalty
regime merely because the taxpayer has applied for immunity under the new
penalty regime (i.e., section 270AA).
CBDT’s
Circular No. 5/2018, dated 16.08.2018 – [F. No. 370149/155/2018-TPL]
Subject:– Clarification on the immunity
provided under section 270AA of the Income-tax Act, 1961
Section
270AA of the Income-tax Act, 1961 (the Act) inter alia provides that
w.e.f. 1st April, 2017, the Assessing Officer, on an application made by an assessee,
may grant immunity from imposition of penalty under section 270A (not being
penalty for misreporting) and initiation of proceedings under section 276C or section
276CC, subject to the conditions specified therein.
2.
Apprehensions have been raised that where an assessee makes an application
seeking immunity under section 270AA of the Act, and in the earlier year(s)
penalty under section 271(1)(c) of the Act has been initiated on the same issue,
the Income-tax Authority may contend that the assessee has acquiesced on the
issue in such earlier year (s), by seeking immunity under section 270AA of the
Act and therefore, take an adverse view in the proceedings for penalty under
section 271(1)(c) of the Act.
3.
In this matter, it is hereby clarified that where an assessee makes an application
seeking immunity under section 270AA of the Act, it shall not preclude such
assessee from contesting the same issue in any earlier assessment year.
Further, the Income-tax Authority, shall not take an adverse view in the proceedings
for penalty under section 271(1)(c) of the Act in earlier assessment years
merely on the ground that the assessee has acquiesced on the issue in any later
assessment year by preferring an immunity on such issue under section 270AA of
the Act.
Text
of Rule-129 of Income-tax Rules, 1962
[1][Form of application under section 270AA
129. An application to the Assessing Officer to grant
immunity from imposition of penalty under section 270A and from initiation of proceedings
under section 276C or section 276CC shall be made in Form No.68.]
KEY NOTE
1. Substituted for “PAN” by the IT (Twelth Amdt.) Rules, 2019, with retrospective effect from 01.09.2019.
“FORM No. 68
FORM OF APPLICATION UNDER SECTION
270AA(2) OF THE INCOMETAX ACT, 1961
|
Personal
Information |
First
Name |
Middle
Name
|
Last
Name or Name
of Entity |
[1] [Permanent Account
number or Aadhaar number] |
|
Flat/Door/Block
No. |
Name
of Premises/ Building/Village |
Road/Street/
Post Office |
||
|
Area/Locality |
Town/City/District |
State |
||
|
Country |
Pin
Code |
Phone
No. with STD code/Mobile No. |
Email
Address |
|
|
Details
of
orders and pay-ments |
1
|
Assessment
Year |
|
|
2 |
Section
under which assessment/ reassessment* order is passed |
|
|
|
3 |
Date
of the assessment/reassess-ment* order |
|
|
|
4
|
Date
of service of the assessment/ reassessment* order |
|
|
|
5
|
Amount
of income assessed as per the
assessment/reassessment* order |
|
|
|
|
6
|
Tax
and interest payable as per notice of demand (in Rs.) |
|
|
|
7
|
Due
date for payment as per notice of demand |
|
|
|
8
|
Details
of amounts paid |
|
|
|
|
S.
No. |
BSR
Code |
Date
of Deposit (DD/MM/ YYYY) |
Serial
Number of Challan |
Amount
(Rs.) |
|
|
|
|
|
|
|
|
Form of verification
I,
____________________________son/daughter* of_____________________ do hereby
declare that what is stated above is true to the best of my information and
belief. I further declare that no appeal has been filed in respect of the order
mentioned in column 2 above. I also undertake that no appeal shall be filed in
respect of the said order before the expiry of the period specified in section 270AA(4)
of the Income-tax Act, 1961. I declare that I am making this application in my
capacity as ____________________ and I
am also competent to file this application and verify it.
Place:
Signature
Date:
Seal
(wherever applicable)
*Strike
off whichever is not applicable”
No penalty for
under section 270A misreporting of income if Assessing Officer & assessee
used same details to arrive at different conclusions, impugned penalty order
was to be quashed and revenue was to be directed to grant immunity under
section 270AA
By way of
impugned order, penalty was levied on assessee under section 270A
alleging misreporting of income. Assessee challenged impugned order and also
sought a direction to revenue to grant immunity under section 270AA. It
was found that only addition in assessment was in respect of disallowance
under section 14A. Assessee had made a disallowance of Rs. 3.20
crores which was recomputed by Assessing Officer at Rs. 6.82 crores. Underreporting
allegedly done by assessee could not amount to misreporting as assessee had
furnished all details of transactions relating to disallowance made under section 14A
and Assessing Officer as well as assessee had used same details to arrive at
different conclusions i.e. differing quantum of disallowances under section 14A.
This by no stretch of imagination could be held to be ‘misreporting’. Further,
in absence of details as to which limb of section 270A was attracted
and how ingredient of sub-section (9) of section 270A was
satisfied, mere reference to word ‘misreporting’ by revenue in penalty order to
deny immunity from imposition of penalty and prosecution makes impugned order
manifestly arbitrary. In the case of Schneider Electric South East Asia (HQ)
PTE Ltd. v. ACIT (International Taxation) [W.P. (C) No. 5111 of 2022, dated 28.03.2022],
the Court 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.
Therefore,
impugned penalty order was to be quashed and revenue was to be directed to grant
immunity under section 270AA. [In favour of assessee] (Related Assessment year : 2018-19) – [Prem Brothers Infrastructure LLP v. National
Faceless Assessment Centre (2022) 288 Taxman 768 : 142 taxmann.com 38 (Del.)]
Revenue’s
inaction on immunity application cannot prejudice Assessee since prerequisites
satisfied; Quashes penalty, grants immunity
Delhi High Court allows writ petition challenging penalty order and
seeking immunity from imposition of penalty by holding that the Assessee
fulfilled the requisite conditions viz., (i) payment of taxes on the additions;
(ii) non-filing of appeal; and (iii) penalty initiated on account of
‘under-reporting’ of income; Assessee-Company furnished a loss return of
Rs.2.17 Cr. for Assessment year 2018-19 and was subjected to scrutiny
assessment whereby Rs. 2.16 Cr. was brought to tax as business income which was
followed by penalty proceedings under Section 270A; Assessee preferred an
application for immunity from imposition of penalty under Section 270AA in Form
No. 68 on 03.03.2021 pursuant to show cause notice dated 22.02.2021 whereas the
Revenue passed the order on 16.03.2022 to impose penalty and deny immunity from
penalty and prosecution; Assessee submitted that the Revenue failed to
appreciate that once the conditions specified in Section 270AA are satisfied,
the Revenue was bound to grant immunity to the Assessee; High Court observes
that immunity from penalty and prosecution can be denied only in the cases
initiated on account of alleged misreporting of income; High Court notes that
the Assessee had fulfilled the pre-conditions for availing the immunity and
observes that the Assessee “cannot be prejudiced by the inaction of the
Assessing Officer in passing an order under Section 270AA of the Act within the
statutory time limit as it is settled law that no prejudice can be caused to
any assessee on account of delay/default on the part of the Revenue” ; High
Court relies on the recent ruling in Schneider Electric South East Asia (HQ) Pvt. Ltd. v.
ACIT International Taxation, WP(C) 5111/2022 where the assessee was granted
immunity on the basis that “…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.”;
Thus, High Court sets aside the impugned order under Section 270A and directs
the Revenue to grant immunity under Section 270AA. – [Nirman Overseas (P)
Ltd. v. NFAC – Date of Judgement : 08.04.2022 (ITAT Delhi)]
Mere
mention of ‘misreporting’ for denying immunity from penalty, manifestly
arbitrary; Notice without ‘specific limb’, unreasonable
Delhi High Court allows Schneider Electric’s writ petition,
quashes order rejecting immunity under Section 270AA(4) and directs Revenue to
grant immunity from penalty under Section 270A; High Court holds that the
Revenue merely stated misreporting of income in the assessment order to deny
immunity from imposition of penalty which is manifestly arbitrary and failed to
show which limb of Section 270A got attracted in Assessee’s case and how the
ingredient of Section 270A(9) got satisfied; Assessee-Company was denied the
benefit of immunity for Assessment year 2018-19 on the basis that its case did
not fall within the scope and ambit of Section 270AA; Assessee submitted that
all the facts, information, documents and figures were accepted by the Revenue
and the subject matter of dispute was a pure question of law involving
interpretation of the contracts and the provisions of the Act & DTAA, thus,
there could not be an allegation of ‘misreporting’ of income by the Assessee;
High Court, from the impugned order, finds that initiation of penalty under
Section 270A for misreporting of income was not only erroneous but also
arbitrary and bereft of any reason as in the penalty notice failed to specify
the limb of ‘underreporting’ or ‘misreporting’ of income, under which the
penalty proceedings had been initiated; Also opines that entire edifice of
the assessment order was voluntariness to buy peace and avoid litigation which
Revenue noted and accepted in the assessment order, thus, there was no question
of ‘misreporting’; Finds Revenue’s stand contrary to the legislative intention
behind Section 270AA which is to encourage or incentivize a taxpayer to: (i)
fast-track the settlement of issue, (ii) recover tax demand; and (iii) reduce
protracted litigation; Thus, quashes the impugned order and directs Revenue to
grant immunity. [In favour of assessee] (Related Assessment year ; 2018-19) – [Schneider
Electric South East Asia (Hq) Pvt. Ltd. v.
ACIT – Date of Judgement : 28.03.2022 (Del.)]
An assessee makes an application
under section 270AA(1) and such an application has been accepted under section
270AA(4), assessee cannot file an appeal under section 246(A) or an application
for revision under section 264 against order of assessment or reassessment
passed under section 143(3) or section 147; however, he can challenge order
passed by Assessing Officer, rejecting its application made under section
270AA(1), the matter is remanded back to Assessing Officer
Under sub-section 6 of section
270AA, no appeal under section 246(A) 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. This only means that
when an assessee makes an application under sub-section 1 of section 270AA and
such an application has been accepted under sub-section 4 of section 270AA, the
assessee cannot file an appeal under section 246(A) or an application for
revision under section 264 against the order of assessment or reassessment
passed under sub-section 3 of section 143 or section 147. This does not provide
for any bar or prohibition against the assessee challenging an order passed by
the Assessing Officer, rejecting its application made under sub- section 1 of
section 270AA. The matter is remanded back to Assessing Officer to consider de
novo, the application filed by Petitioner under section 264 impugning the order
passed by the Assessing Officer under sub-section 4 of section 270AA and pass
such orders as he deems fit in accordance with law after granting personal
hearing to Petitioner. [Matter remanded] - [Haren Textiles (P) Ltd. v.
PCIT 284
Taxman 58 : (2021) 132 taxmann.com 39 (Bom.)]
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