Penalty under Section 270A quashed for voluntary disclosure during scrutiny proceedings despite authority's non-detection

The Rajasthan HC allowed the petitioner's revision petition challenging penalty imposition under Section 270A. The assessee had voluntarily disclosed GST input tax credit provision merged with expenses during scrutiny proceedings, which authorities had not detected despite issuing multiple notices under Section 142. The court found that the assessing authority violated natural justice by denying requested personal hearing and passed a non-speaking order without specifying which sub-clause of Section 270A(9) applied. The revisional authority's cursory finding that clauses (a) and (c) applied was based on assumptions rather than facts. Since the income was voluntarily disclosed and not detected by authorities, sub-clauses (a) and (c) of Section 270A(9) were not attracted, making penalty waiver under Section 270AA applicable.

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Issues Involved:
1. Rejection of revision petition under Section 264 of the Income Tax Act.
2. Imposition of penalty under Section 270A for misreporting of income.
3. Denial of immunity from penalty under Section 270AA without providing an opportunity of hearing.

Summary:

1. Rejection of Revision Petition under Section 264:
The petitioner filed a writ petition challenging the order dated 13.03.2023 by the Principal Commissioner of Income Tax, Udaipur, which rejected the revision petition under Section 264 of the Income Tax Act, 1961. The petitioner had initially filed its return of income and later revised it, suo moto surrendering the amount of 'provision for doubtful GST input tax credit' which had been mistakenly claimed as expenses.

2. Imposition of Penalty under Section 270A:
The National E-Assessment Centre (NeAC) added the surrendered amount to the total income and imposed a penalty under Section 270A for misreporting of income. The petitioner argued that the amount was voluntarily disclosed during scrutiny proceedings and did not fall under misrepresentation or suppression of facts as per Section 270A (9).

3. Denial of Immunity from Penalty under Section 270AA:
The petitioner sought immunity from penalty under Section 270AA, which was rejected by the Deputy Commissioner without providing an opportunity of hearing, violating the proviso to Section 270AA (4). The rejection order was non-speaking and did not specify how the case fell under Section 270A (9). The revisional authority also cursorily upheld the penalty without addressing the lack of hearing or providing substantial reasons.

Judgment:
The court found that the authorities failed to detect the GST provision issue, which was voluntarily disclosed by the petitioner. The Deputy Commissioner violated Section 270AA (4) by not providing a hearing, and both the rejection orders were non-speaking and lacked justification. Citing the Delhi High Court's decision in Schneider Electric South East Asia (HQ) PTE Ltd., the court emphasized the legislative intent of Section 270AA to encourage voluntary disclosure and reduce litigation.

Conclusion:
The writ petition was allowed, and the orders dated 27.07.2021 and 13.03.2023 were quashed. The respondents were directed to grant immunity under Section 270AA to the petitioner.

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