Schneider Electric South East Asia (HQ) Pte. Ltd. Vs. Asst. Commissioner of Income Tax International Taxation, Circle-3 (1)(2), New Delhi and Ors. - (High Court of Delhi) (28 Mar 2022)

Mere reference to the word "misreporting" in the assessment order to deny immunity from imposition of penalty and prosecution makes impugned order arbitrary

MANU/DE/0989/2022

Direct Taxation

Present writ petition has been filed challenging the impugned order passed by Respondent No. 1 under section 270AA(4) of the Income Tax Act, 1961 (IT Act) rejecting the application filed by the Petitioner seeking immunity from imposition of penalty under section 270A of the IT Act for the Assessment Year 2018-19. The petitioner also seeks a direction to Respondent No. 1 to grant immunity under Section 270AA of the IT Act to the Petitioner from imposition of penalty under Section 270A of the IT Act in respect of the income assessed vide assessment order dated 23rd June, 2021 for the Assessment Year 2018-19.

By way of the impugned order, the Petitioner's application was rejected on the ground that, the case of the Petitioner did not fall within the scope and ambit of Section 270AA of the IT Act.

The Respondents' action of denying the benefit of immunity on the ground that, the penalty was initiated under Section 270A of the IT 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 - "underreporting" or "misreporting" of income, under which the penalty proceedings had been initiated.

Present Court also finds that, there is not even a whisper as to which limb of Section 270A of the IT 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.

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.

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 IT Act to encourage/incentivize a taxpayer to (i) fast-track settlement of issue, (ii) recover tax demand; and (iii) reduce protracted litigation.

Consequently, the impugned order passed by Respondent No. 1 under Section 270AA (4) of the IT Act is set aside and Respondent No. 1 is directed to grant immunity under Section 270AA of the IT Act to the Petitioner. Petition disposed off.

Tags : IMMUNITY GRANT PENALTY