2025 (2) TMI 914 - AT - Income Tax

Rice Trader Wins Appeal: Penalty Under IT Act Section 270A Revoked Due to Substantive Compliance with Section 270AA

New Dawath Traders Versus The ITO, Ward-1, Kumbakonam.

The Appellate Tribunal in Chennai allowed the appeal by the assessee, a wholesale rice trader, against the penalty imposed under section 270A of the ... Penalty levied u/s. 270A - under reporting of income - assessee didn’t file Form 68 before AO - assessee’s failure to explain on merits against disallowance/addition made in the assessment order - Pursuant to survey u/s. 133A return was selected for scrutiny and the AO made an addition - HELD THAT:- Since, the assessee offered Rs. 30 lakhs under PMGKY scheme, the net-assessed income was computed at Rs. 25,46,812/-. Pursuant thereto, assessee paid tax & interest within the period/time given in the assessment order/demand notice and thus it is an undisputed fact that the assessee has fulfilled conditions prescribed u/s. 270AA of the Act for claiming immunity from imposition of penalty. Assessee has fulfilled both the conditions for grant of immunity as stipulated under clause (a) & (b) of sub-section (1) of section 270AA of the Act, which are substantive in nature except didn’t file Form 68 before AO. Therefore, in substance assessee was entitled for claiming immunity from imposition of penalty u/s. 270A of the Act. In this context, it has to be kept in mind that courts are meant to do substantial justice between the parties, and that technical rules or procedure should not be given precedence over doing substantial justice. Undoubtedly, justice according to the law, doesn’t merely mean technical justice, but means that law is to be administered to advance justice [refer the decision Pankaj Bhai Rameshbhai Zalavadiya v. Jethabhai Kalabhai Zalavadiya [2017 (10) TMI 1397 - SUPREME COURT]]. In the given factual background, according to us, non-filing of Form 68 is only a technical or venial breach which should not snatch away the substantive right to claim immunity from levy of penalty, which assessee got vested with on fulfillment of substantive conditions mandated in Clause (a) & (b) of sub-section (1) of section u/s. 270AA of the Act. Thus no penalty ought to have been levied u/s. 270A of the Act for under-reporting of income - Decided in favour of assessee. The Appellate Tribunal in Chennai considered an appeal by an assessee against the order of the Commissioner of Income Tax (Appeals) confirming a penalty imposed under section 270A of the Income Tax Act, 1961 for underreporting income. The key issue was whether the assessee was entitled to immunity from the penalty under section 270AA of the Act due to fulfillment of certain conditions, despite not filing Form 68 within the stipulated period.The Tribunal noted that the assessee, a wholesale rice trader, initially disclosed total income of Rs. 6,52,740/- in the return of income for the Assessment Year 2017-18. Following a survey under section 133A of the Act, the Assessing Officer assessed total income at Rs. 55,46,812/-, reduced to Rs. 25,46,812/- after the assessee offered Rs. 30 lakhs under the PMGKY Scheme. The assessee paid the tax and interest as per the assessment order and did not appeal against it, claiming eligibility for immunity from penalty under section 270AA. However, the AO levied a penalty under section 270A for underreporting income, citing the failure to file Form 68 within the prescribed period.The Tribunal emphasized that the assessee had fulfilled the substantive conditions for immunity under section 270AA, except for not filing Form 68. It highlighted the principle that courts should prioritize substantial justice over technicalities, citing a Supreme Court decision. The Tribunal acknowledged the subsequent filing of Form 68 by the assessee and concluded that the failure to file it earlier should not negate the right to claim immunity. Therefore, the Tribunal held that no penalty should have been levied under section 270A and directed its deletion, allowing the assessee's appeal.In summary, the Tribunal's significant holdings include recognizing the assessee's entitlement to immunity from penalty under section 270AA despite the technical breach of not filing Form 68 within the stipulated period. The Tribunal's decision focused on the substantive fulfillment of conditions for immunity and the overarching principle of advancing substantial justice.