TaxTMI 
TaxTMI 
2024 (9) TMI 1852
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.... b) The Ld. Commissioner of Income Tax(A) erred in law and facts by confirming the order passed by the Ld. Assessing Officer levying a penalty of 200 percent under section 270A(8) of Income tax Act, 1961 in respect of Cess claimed as deduction while arriving at taxable income as misreporting. 2. a) The Ld. Commissioner of Income Tax(A) erred in law and facts by confirming the order passed by the Ld. Assessing Officer for levy of penalty on the claim made by the Appellant in respect of employees contribution of Provident Fund remitted after the due date as per provisions of Provident Fund Act but paid before the due date for filing the return as per section 43(b) of Income tax Act, 1961, which was claimed based on jurisdictional High Court order as well as the orders passed by the Honourable ITAT, Bengaluru Bench. b) The Appellant submits that before the amendment carried out for Explanation-1 by the Finance Act 2021 with retrospective effect from 2021-2022. Honourable High Court of Karnataka as well as ITAT Bangalore Bench were allowing the employees contribution of Provident Fund remitted before the due date for filing the return of income. Hence, there ....
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....pursuance of the aforesaid grounds of appeal, or otherwise, may be thus granted. The Appellant may kindly be given an opportunity of being heard under the principles of natural justice. All the above grounds of Appeal are without prejudice and notwithstanding each other. The Appellant craves leave to add, alter, omit or substitute any or all of the above grounds of appeal, at any time before or at the time of appeal, to enable the learned Commissioner of Income Tax(Appeals) to decide the appeal according to law. 3. Brief facts of the case are that the assessee company is in the business of Micro finance which is approved by Reserve Bank of India as NBFC filed its return of income for the assessment year 2020-21 on 13.02.2021 declaring total income of Rs.126,85,87,430/-. Thereafter, the AO completed the assessment u/s 143(3) r.w.s. 144B of the Income Tax Act, 1961 (in short "The Act") on 16.9.2022 assessing the total income at Rs.128,25,28,401/- by making the following disallowancesa) a) Employees contribution of Provident Fund amounting to Rs.16,61,049/- u/s 36(1)(va) of the Act. b) The education cess amounting to Rs.1,22,79,936/- claimed as d....
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....hat from the plain reading of section 36(1)(va) of the Act, it is very much clear that the assessee has to deposit the employee's contribution within the stipulated date of the respective Acts and if not deposited the same will be treated as deemed income of the assessee and in the light of the above discussion the delay in deposit of employee's contribution by the assessee amounting to Rs.16,61,049/- was disallowed by the AO u/s 36(1)(va) r.w.s. 2(24)(x) of the Act. 3.3 Now with regard to disallowance of health and education cess claimed as deduction amounting to Rs.1,22,79,926/-, during the course of assessment proceedings, the assessee company submitted before the AO by heavily relying on the decisions of Hon'ble Bombay High Court in the case of Cessa Goa Ltd. Vs. ACIT (ITA No.17 of 2013) (Bom. HC), Hon'ble Rajasthan High Court in the case of Chambal Fertilizers and Chemicals Ltd. Vs. JCIT (ITA No. 52 of 2018) (Raj. HC), ITAT, Pune in the case of DCIT Vs. Tata Autocomp Hendrickson in ITA Nos. 2486 to 2488/PUN/2017 dated 18/09/2019 as well as ITAT, Kolkata in the case of M/s Philips India Limited Vs. ACIT in ITA Nos. 2097 & 2418/KOL/2018 dated 22/08/2023 that since all the abo....
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....ew of the judgement of Hon'ble Supreme Court in the case of Goetz (India) Ltd. Vs. CIT (2006) (284 ITR 323), the deduction claimed amounting to Rs.1,22,79,926/- was accordingly added to the returned income. 3.7 Finally, before completing the assessment proceedings, the AO initiated the penalty proceedings u/s 270A of the Act by stipulating the following reasons in the order of assessment- "As the assessee had suppressed its true income by misrepresentation of facts/suppression of facts, penalty proceedings u/s 270A of the Act are initiated separately for under reporting of income in consequence of misreporting of income." 3.8 Thereafter, the AO issued penalty notice u/s 274 r.w.s. 270A of the Act on 16.9.2022 asking the assessee to show cause as to why penalty u/s 270A of the Act should not be levied for under reporting in respect of late payment of Employees's share of PF contribution and mis-reporting of Income in respect of education cess claimed as deduction. 3.9 In the mean while the assessee had also filed an application u/s 270AA(2) of the Act in form No.68 on 06/10/2022 for granting of immunity. The opportunity of being heard was accorded to assessee....
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....th & Education cess along with the revised computation since the filing of the revised return was barred by time. The AR of the assessee also vehemently submitted that as the claims of expenditure were bonafide based on the honest belief since there were judicial pronouncements in favour of the assessee company, the penalty levied is liable to be deleted. Lastly the AR of the assessee submitted that the penalty should not be levied in a routine or casual manner since the assessee has neither under reported nor mis-reported any income & the conduct of the assessee company is fair. 4. The ld. D.R. on the other hand, supported the orders of the authorities below. 5. We have heard the rival submissions and perused the materials available on record. The AO has passed an order u/s 143(3) r.w.s. 144B of the Act on 16.9.2022 with a total income of Rs.128,25,28,401/- by making two disallowances in the assessment order viz. (a) disallowance of employee's share of provident contribution u/s 36(1)(va) of the Act amounting to Rs.16,61,049/- and (b) disallowance of education cess claimed as deduction u/s 37 of the Act amounting to Rs.1,22,79,936/-. It is an undisputed fact that the Return ....
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....n 12/10/2022 i.e. way after filing the return of Income and till this order of the Hon'ble Apex Court, the ld. AO should have followed the jurisdictional High Court's order. As submitted by the AR of the Assessee company that the disallowance under the employee' share to PF was also not contested before the higher Authorities and the assessee company accepted the Assessment Order as well. Therefore, we are of opinion that the assessee's contention before the authorities below that there was neither under reporting of Income nor mis reporting of Income seems to be correct. Now with regard to the deduction claimed in respect of Health & education cess amounting to Rs.1,22,79,926/-, the assessee contended that such deduction was claimed based on decision of the Hon'ble High Court of Mumbai as well as Hon'ble Rajasthan High Court noted (supra), which were also followed by Income Tax Tribunal, Pune and Kolkata. Since the deduction of Health & education cess was claimed on an honest & bonafide belief based on certain judicial pronouncements in favour of the assessee, there is no question of under reporting or misreporting of income. Further, the assessee contention that the Finance Act, ....
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....(b) the income assessed is greater than the maximum amount not chargeable to tax, where no return of income has been furnished or where return has been furnished for the first time under section 148; (c) the income reassessed is greater than the income assessed or reassessed immediately before such reassessment; (d) the amount of deemed total income assessed or reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income determined in the return processed under clause (a) of sub-section (1) of section 143; (e) the amount of deemed total income assessed as per the provisions of section 115JB or section 115JC is greater than the maximum amount not chargeable to tax, where no return of income has been furnished or where return has been furnished for the first time under section 148; (f) the amount of deemed total income reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income assessed or reassessed immediately before such reassessment; (g) the income assessed or reassessed has the effect of reducing the l....
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....n (1) has been initiated; (b) in a case where an assessment or reassessment has the effect of reducing the loss declared in the return or converting that loss into income, the amount of under-reported income shall be the difference between the loss claimed and the income or loss, as the case may be, assessed or reassessed. (4) Subject to the provisions of sub-section (6), where the source of any receipt, deposit or investment in any assessment year is claimed to be an amount added to income or deducted while computing loss, as the case may be, in the assessment of such person in any year prior to the assessment year in which such receipt, deposit or investment appears (hereinafter referred to as "preceding year") and no penalty was levied for such preceding year, then, the under-reported income shall include such amount as is sufficient to cover such receipt, deposit or investment. (5) The amount referred to in sub-section (4) shall be deemed to be amount of income under-reported for the preceding year in the following order- (a) the preceding year immediately before the year in which the receipt, deposit or investment appears, being the first pr....
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....all be the following, namely:- (a) mis-representation or suppression of facts; (b) failure to record investments in the books of account; (c) claim of expenditure not substantiated by any evidence; (d) recording of any false entry in the books of account; (e) failure to record any receipt in books of account having a bearing on total income; and (f) failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply. (10) The tax payable in respect of the under-reported income shall be- (a) where no return of income has been furnished or where return has been furnished for the first time under section 148 and the income has been assessed for the first time, the amount of tax calculated on the under-reported income as increased by the maximum amount not chargeable to tax as if it were the total income; (b) where the total income determined under clause (a) of sub-section (1) of section 143 or assessed, reassessed or recomputed in a preceding order is a loss, the amount of tax calcul....
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.... section 270A has not been initiated under the circumstances referred to in sub-section (9) of the said section 270A. (4) The Assessing Officer shall, within a period of one month from the end of the month in which the application under sub-section (1) is received, pass an order accepting or rejecting such application: Provided that no order rejecting the application shall be passed unless the assessee has been given an opportunity of being heard. (5) The order made under sub-section (4) shall be final. (6) No appeal under section 246A or an application for revision under section 264 shall be admissible against the order of assessment or reassessment, referred to in clause (a) of sub-section (1), in a case where an order under sub-section (4) has been made accepting the application.". 5.3 Before leaping to section 270A of the Act, we first consider section 270AA of the Act in order to find out whether the Form 68 filed by the Assessee Company on 06/10/2022 was valid. On plain reading of section 270AA of the Act, we are of the opinion that statutory scheme for grant of immunity is based on the satisfaction of the five conditions namely, ....
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....unity from penalty and prosecution under s. 270AA. 6. In fact, the statutory scheme for grant of immunity is based on satisfaction of three fundamental conditions, namely, (i) payment of tax demand; (ii) non-institution of appeal; and (iii) initiation of penalty on account of underreporting of income and not on account of misreporting of income. 7. This Court is also of the view that the petitioner cannot be prejudiced by the inaction of the AO in passing an order under s. 270AA of the Act within the statutory time limit as it is settled law that no prejudice can be caused to any assessee on account of delay/default on the part of the Revenue. 8. In the present case, the petitioner has satisfied the aforesaid conditions, in as much as, (i) the tax has been paid on the additions; (ii) appeal has undisputedly not been filed; and (iii) penalty (as would be evident from the penalty notice) has been initiated on account of "underreporting" of income. 9. Consequently, this Court is of the view that the petitioner acquired a right to be granted immunity under s. 270AA of the Act. In fact, this Court, in Schneider Electric South East Asia (HQ) Pte Ltd. v....
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....r reporting, the under reporting gets confirmed. 4. Once the charge of underreporting is confirmed, then the AO has to establish whether the underreporting is in consequence of any of the clauses (a) to (f) of Section 270A(9) of misreporting. If Yes, under which clause (limb) the assessee has misreported the income? 5.8 Therefore, we are of the considered opinion that without the charge of under reporting of income, the AO cannot jump directly with the charge of misreporting of income. In the present case although the AO specifically mentioned the exact limb of underreporting as per section 270A(2)(a) of the Act as the income assessed is greater than the income determined in the return processed u/s 143(1)(a) but there is not even a whisper as to how the ingredient of sub section (9) of section 270A is satisfied. 5.9 By respectfully following the judgment of Hon'ble High court of Delhi in the case of Schneider Electric South East Asia (HQ) PTE Ltd. V. Commissioner of Income Tax (International Taxation) & Ors. (2022) 443 ITR 186, we are of the considered view that failure on the part of the AO to show cause which of the specific action of the assessee company from cla....
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....ecisions of Hon'ble Supreme Court without understanding the real issues involved in the case of assessee company. Therefore, we are of the opinion that the explanation offered by the assessee is bonafide and the assessee has disclosed all material facts to substantiate the explanation. With the above observations, we delete the penalty levied u/s 270A of the Act and allow the appeal of the assessee. 6. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 27th Sept, 2024 ============= Document 1 Acknowledgement Receipt of Income Tax Forms (Other Than Income Tax Return) e-Filing Anywhere Anyone Income Tax Department, Government of India e-Filing Acknowledgement Number / Quarterly Statement Receipt Number Date of e-Filing 06-Oct-2022 619633880061022 Name : IIFL SAMASTA FINANCE LIMITED PAN/TAN : AAACC4577H Address : 110/3, Lalbagh Main Road, Krishnappa Layout,, Near Urvasi Theatre, Behind SBI ATM, Bangalore South, Sampangiramnagar S.O,BANGALORE,Karnataka,INDIA,560027 Form No. Form 68 Form Description Form of application under section 270AA(2) of the Income-tax Act, 1961 Assessment Year : 2020-21 Fi....
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....th regard to the deduction claimed in respect of the Education Cess amounting to Rs. 1,22,79,926/- as expenditure is concerned, such deducton was claimed based on various orders of Hon'ble High Court of Mumbai, which was also followed by Income Tax Appellate Tribunal, Pune & Kolkota. Therefore, there is no underreporting or misreporting of income since the same is based on certain judicial pronouncements. However, in the Finance Act 2022, a clarification was made by the Hon'ble Finance Minister amending the provisions of Section 40(a)(ii) with retrospective effect from 2005, bringing the word 'Cess' within the meaning of tax. Therefore, the assessee company, before the completion of assessment, filed a letter together with revised computation of income withdrawing the claim of deduction of the Cess as expenses since as per provisions of Income tax Act, the revised return could not be filed, and intimation in the form of letter was made. But for the amendment with retrospective effect, the amount of Cess should have been allowed as deduction based on High Court order. In view of the above, kindly note that there is no misreporting/underreporting of income was made by the assessee....
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....ant Company is liable to pay Provident Fund as per provisions of PF Act. As per the PF Act, portion of PF is collected from employees as contribution and deposited to PF Commissioner. As per section 36(1)(va), said PF collected from employees is required to be deposited before the due date as per the said Act. However, Jurisdictional High Court had held in the case of Essae Teraoka Pvt.Ltd. Vs DCIT that, if payment of PF collected from employees are paid before the due date for filing the Income tax returns, no disallowance should be made for violation of section 36(1)(va). Based on this, even Jurisdictional ITAT has been allowing such remittances made before the due date for filing the return of income in their order. The Central Government amended the provisions of the section and clarified that any such delay in payment of employee's contribution shall not be allowed as deduction, if the same is paid beyond the due date of remittance as per the provisions of PF and ESI Act. This amendment is made subsequent to filing of the return of Income by the appellant and till the date of acknowledgement the Jurisdictional High Court order was being followed in the state of Kamataka. Honou....
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....ment or in favour of the appellant assesse. Further, it is not clear whether the appellant has filed an appeal against the quantum / original Assessment order or not. vi. The Assessing officer in its Penalty Order has stated that Appellant Assessee has not paid the employees contributions towards PF and ESI before the due date mentioned in the respective statue. The Assessing Officer has placed reliance on the Judgment of the Hon'ble Supreme Court in case of Checkmate Services Pvt Ltd vs DCIT in which the Court has stated that, the employees contributions towards PF and ESI are deductible only if they are paid before the due date, but in the case of the appellant assessee, it has been paid after the due date. vii. It is very much evident that the explanation/submission offered by the Appellant Assessee are not acceptable as the appellant assessee has not provided any proof/documentary evidences in support of its claim, it means that the appellant assessee has under reported his income by not providing the relevant proofs/documents. viii. It is noted, that the AO has made addition of Rs. Rs. 16,61,049/-, u/s. 36(1)(va) of the Act and found the assessed income is greater tha....
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.... the GOI vide a Finance Act 2022 introduced an amendment inserting an explanation with retrospective effect from 2005 onwards, bringing the word Cess also within the frame work of tax. Thus, the claim of the Appellant is incorrect and should have been withdrawn. iii. The Appellant Assessee has not provided any documentary evidences with its submissions in support of its claim. This Appellate Authority without the documentary evidences is deciding this appeal of the appellant assessee on the material available on record as many opportunities have been provided to the appellant assessee. iv The appellant assessee has also not stated whether the appellant had filed an appeal against the quantum/ original assessment order before the CIT(A) concerned and if yes, then at what stage are the proceedings before the CIT(A)'s. The Appellant Assessee is silent on the issue whether the said appeal has been decided in favour of the department or in favour of the appellant assesse. Further, it is not clear whether the appellant has filed an appeal against the quantum / original Assessment order or not. v. The case laws on which reliance has been placed by the Ld. AO in its Assessment Ord....