No Penalty Proceedings u/s 270A If Additions Were Made Based on Voluntary Disclosure By Assessee | HC

Case Details: Chambal Fertilizers and Chemicals Ltd. vs. Office of the Principal Commissioner of Income-tax - [2024] 158 taxmann.com 184 (Rajasthan)

Judiciary and Counsel Details

• • Arun Bhansali & Shubha Mehta, JJ.
  • Sanjay Jhanwar, Sr. Adv. Ms Vrinda Lakhotia, Rajat Sharma & Aryan Singh Chouhan for the Petitioner.
  • Shantanu Sharma & Ms Bhawana Laddha for the Respondent.

Facts of the Case

The assessee filed its original return of income under Section 139(1) for the Assessment Year 2018-19. During the scrutiny proceedings, the assessee realized that the ‘provision for doubtful GST input tax credit’ had been inadvertently merged with another expense account and mistakenly claimed as deduction.

Accordingly, the said amount was suo moto surrendered by the assessee by revising its return of income and adding back the amount’ provision for doubtful GST input tax credit’, to the total income. The Assessing Officer (AO) passed the assessment order, and a penalty under section 270A was imposed for misreporting of income.

The assessee filed an application under section 270AA against such penalty order, but it was rejected. Subsequently, the assessee challenged the rejection through a petition under section 264, which was also denied.

Assessee filed a writ petition before the Rajasthan High Court.

High Court Held

The High Court ruled that the revising authority, without providing any substantial reasons and in a perfunctory manner, merely suggested that the assessee’s case fell under both Clause (a) and (c) of Section 270A(9).

The merging GST Input Credit with expenses was not pointed out/detected by AO, and the same was only pointed out voluntarily by the assessee. Therefore, sub-Clauses (a) and (c) of Section 270A (9) are not attracted.

Moreover, it was evident that the Deputy Commissioner breached the stipulations of the proviso to Section 270AA(4) by neglecting to afford any opportunity for a hearing. The order he issued was extremely brief, and it failed to specify the section under which the assessee’s case fell within Section 270A(9).

The fact that the indications were made that the matter falls within (a) and (c) necessarily means that even he was not sure whether it was a case of misrepresentation, suppression of facts, or claim of expense not substantiated by any evidence.

Therefore, the order passed by the revisional authority rejecting the revision petition cannot be sustained.