LI Network
Published on: January 6, 2024 at 00:08 IST
The Rajasthan High Court at its Jodhpur bench recently ruled on a significant matter regarding the imposition of penalties under Section 270A of the Income Tax Act.
The Court clarified that when a deduction claim for education cess is withdrawn, the assessee becomes immune from facing penalties under this section.
Justices Vijay Bishnoi and Munnuri Laxman, presiding over the bench, noted the absence of specific detailing in the assessment order or subsequent notices from the Assessing Officer regarding the coverage of the petitioner-company under Section 270A(9). Furthermore, the order failed to specify the exact segment of Section 270A(9) applicable to the case.
The case involved a public limited company engaged in executing turnkey infrastructure projects, which filed its income return for the financial year 2019-2020 (assessment year 2020-21) on February 13, 2021.
The company received notices under various sections of the Act, including a show cause notice challenging its claim for a deduction of education cess amounting to Rs. 12,85,58,982. The Assessing Officer’s subsequent actions included adding back this amount to the company’s income and initiating penalty proceedings under Section 270A for misreporting.
In response, the company withdrew its claim for education cess deduction, acknowledging the proposed alteration. Despite this, the Assessing Officer imposed a penalty under Section 270A, triggering the company’s application for immunity from penalties under Section 270AA, which the Assessing Officer did not decide within the prescribed time.
The court concluded that the Assessing Officer’s penalty imposition against the company lacked justification, especially considering the company’s timely withdrawal of the deduction claim following legal amendments.
Consequently, the Court set aside the penalty, citing the Assessing Officer’s failure to decide on the company’s immunity application within the stipulated period outlined in Section 270AA(4).