Neuland Laboratories Ltd Vs ACIT (ITAT Hyderabad)
The Hyderabad ITAT allowed the assessee’s appeal for statistical purposes and remanded the matter concerning penalty under Section 270A of the Income-tax Act, 1961. The assessee had filed its return for A.Y. 2018-19 declaring a loss and was subsequently assessed under Section 143(3), read with Sections 143(3A) and 143(3B), with disallowances under Section 40(a)(i) read with Section 195. The AO later imposed a penalty of ₹35,85,941 under Section 270A, which was upheld by the CIT(A).
Before the Tribunal, the assessee submitted that a computational mistake in the assessment order had resulted in a demand of ₹2,01,40,900. The mistake was rectified by the AO under Section 154 on 06.08.2021, after which the demand was deleted and the assessee became entitled to a refund of ₹41,14,553.
The assessee had also filed Form No. 68 under Section 270AA(2) seeking immunity from penalty. It submitted that Form 68 was filed on 30.04.2021, within the prescribed period, that no appeal had been filed against the assessment order, and that after rectification no tax demand remained payable. The AO rejected the immunity application, and penalty proceedings followed.
The Tribunal noted that Form 68 appeared to have been filed within the statutory period and that the rectification order resulted in a refund. It further observed that the lower authorities had not examined the effect of the rectification order on the assessee’s eligibility for immunity under Section 270AA, including whether the requirement concerning payment of tax and interest stood substantially complied with when no tax demand ultimately survived.
The Tribunal considered the Calcutta High Court’s decision in Amalgam Steel Pvt. Ltd. & Anr. Vs. ACIT, particularly its observation concerning a Section 270AA immunity claim where rectification resulted in no consequential demand.
Accordingly, the ITAT set aside the orders of the lower authorities and restored the matter to the AO. The AO was directed to reconsider the Section 270AA immunity application after considering Form 68, the Section 154 rectification order, absence of an appeal against the quantum assessment, the statutory provisions and the Calcutta High Court’s observations. The AO must pass a speaking order after giving reasonable opportunity of hearing. If required thereafter, the Section 270A penalty is to be decided afresh in accordance with law.
The appeal was allowed for statistical purposes.
Cases Discussed
- Amalgam Steel Pvt. Ltd. & Anr. Vs. ACIT (Calcutta High Court), WPA No. 28765 of 2025 dated 09.01.2026
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal is filed by M/s. Neuland Laboratories Ltd (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) (“Ld. CIT(A)”) dated 16.07.2025 for the A.Y. 2018-19.
2. The assessee has raised the following grounds of appeal:
1. The learned Commissioner of Income Tax (Appeals), erred in law and facts by dismissing the appeal as not maintainable and failing to adjudicate the grounds on merits; the order is bad in law and liable to be set aside.
2. The Ld CIT(A) erred in law and facts by upholding the penalty u/s 270A despite a timely application in Form-68; no speaking order u/s 270AA(4) has been passed. Penalty cannot stand without first deciding the 270AA application; alternatively, the matter be remanded for a speaking order u/s 270AA(4).
3. The Authorities did not clearly specify the exact limb (under-reporting vs. misreporting) in the notice/satisfaction. In the absence of a specific charge, initiation and levy u/s 270A are invalid.
4. The Ld CIT(A) erred in law and facts in confirming the penalty u/s 270A on payments to foreign subsidiaries for marketing/support services. All the primary facts were duly disclosed, the issue is DTAA-governed (business profits; no PE; no s.195 obligation) and, at minimum, debatable. The case falls within s.270A(6); hence no penalty.
5. The learned CIT(A) erred in law and on facts in confirming penalty u/s 270A at 50% of tax on the disallowance u/s 40(a)(i) r.w.s. 195. The expenditure’s genuineness is undisputed; all primary facts were fully disclosed, a mere statutory disallowance for TDS does not amount to concealment or inaccuracy. On a fully disclosed, legal-interpretation TDS issue, no penalty should be levied—this rationale applies equally under section 270A.
6. The appellant craves leave to add, alter, amend or withdraw any ground at the time of hearing.
PRAYER
In view of the above grounds and such other grounds as may be urged at the time of hearing, the appellant prays that the impugned order be set aside and the penalty u/s 270A be deleted; alternatively, the matter may be restored to the learned CIT(A)/A0 for fresh adjudication in accordance with law.
Any consequential relief, to which the Appellant may be entitled under the law in 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 justices.
3. The brief facts of the case are that the assessee is a company which filed its return of income for Assessment Year 2018-19 on 30.11.2018 declaring loss of ₹47,34,23,222/-under the normal provisions of the Income Tax Act, 1961 (“the Act”) and book profit of ₹19,71,71,127/- under section 115JB of the Act. Subsequently, the assessee filed a revised return of income on 31.03.2019 declaring loss of ₹47,13,53,530/- under the normal provisions of the Act and book profit of ₹19,99,01,164/- under section 115JB of the Act. The case of the assessee was selected for scrutiny through CASS and the assessment was completed by the Learned Assessing Officer (“Ld. AO”) under section 143(3) read with sections 143(3A) and 143(3B) of the Act vide order dated 23.03.2021 making disallowance of ₹2,39,06,276/- under section 40(a)(i) read with section 195 of the Act and further making a protective disallowance of ₹11,62,96,888/- under section 40(a)(i) read with section 195 of the Act. The assessee did not prefer any appeal against the assessment order of the Ld. AO. Subsequently, the Ld. AO initiated penalty proceedings under section 270A of the Act on account of the additions/disallowances made in the assessment proceedings and finally levied penalty of ₹35,85,941/- under section 270A of the Act vide order dated 30.03.2022.
4. Aggrieved by the penalty order of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) upheld the action of the Ld. AO and dismissed the appeal of the assessee.
5. Aggrieved by the order of the Ld. CIT (A), the assessee is in appeal before the Tribunal. The Learned Authorized Representative (“Ld. AR”) submitted that there was a mistake in computation of tax demand in the original assessment order passed by the Ld. AO. Due to such mistake, a demand of ₹2,01,40,900/- was raised against the assessee pursuant to the assessment order dated 23.03.2021. It was submitted that the assessee filed an application under section 154 of the Act before the Ld. AO seeking rectification of the mistake. Consequently, the Ld. AO passed an order under section 154 read with section 143(3) of the Act dated 06.08.2021 rectifying the mistake. By virtue of the rectification order, the demand originally raised stood deleted and the assessee became entitled to refund of ₹41,14,553/-. The Ld. AR submitted that in substance there was no tax demand payable by the assessee pursuant to the assessment order and on the contrary the assessee was entitled to refund.
6. The Ld. AR invited our attention to Form No. 68 placed at page No. 38 of the paper book and submitted that the assessee had filed an application under section 270AA(2) of the Act seeking immunity from imposition of penalty under section 270A of the Act. The Ld. AR further invited our attention to the provisions of section 270AA and submitted that immunity from penalty can be granted if (a) The assessee has paid the tax and interest payable as per the assessment order within the period specified in the notice of demand; (b) No appeal has been filed against the assessment order; and (c) Application in Form No. 68 is filed within one month from the end of the month in which the assessment order is received. It was submitted that the assessment order was passed on 23.03.2021 and accordingly Form No. 68 was required to be filed on or before 30.04.2021. The Ld. AR invited our attention to the screenshot of the Income-tax Portal placed at page No. 39 of the paper book and submitted that Form No. 68 was filed by the assessee on 30.04.2021, i.e., within the time prescribed under section 270AA of the Act. The Ld. AR further submitted that admittedly no appeal was filed against the quantum assessment order. He invited our attention to the rectification order passed under section 154 of the Act placed at page nos. 17 to 23 of the paper book and submitted that after rectification, the tax demand stood adjusted against prepaid taxes and ultimately the assessee became entitled to refund of ₹41,14,553/-. Accordingly, it was submitted that all the conditions prescribed under section 270AA of the Act stood fulfilled by the assessee.
7. The Ld. AR further submitted that the application for immunity was rejected only on the ground that the assessee had not paid the demand raised in the original assessment order. Inviting our attention to Para no. 8 of Form No. 68, it was submitted that the assessee had specifically stated that no tax was payable because the demand had arisen due to a computational mistake in the assessment order and after rectification there would remain no demand. However, without considering the aforesaid contention and without examining the effect of the rectification proceedings, the Ld. AO rejected the immunity application. Thereafter, while imposing penalty, the Ld. AO observed that no order granting immunity under section 270AA of the Act had been produced by the assessee and accordingly proceeded to levy penalty under section 270A of the Act. The Ld. AR therefore submitted that the assessee was entitled to consideration of its claim for immunity under section 270AA of the Act and requested that the issue be restored to the file of the Ld. AO for fresh consideration. In support of the it’s contention, reliance was placed on the judgment of the Hon’ble Calcutta High Court in the case of Amalgam Steel Pvt. Ltd. & Anr. Vs. ACIT in WPA No. 28765 of 2025 dated 09.01.2026, particularly para no. 16 thereof.
8. Per contra, the Learned Departmental Representative (“Ld. DR”) relied upon the orders of the lower authorities.
9. We have considered the rival submissions and perused the material available on record including the case laws relied upon. There is no dispute about the fact that the assessment order was passed on 23.03.2021. We further find from the screenshot of the Income-tax Portal placed at page no. 39 of the paper book that Form No. 68 seeking immunity under section 270AA of the Act was filed by the assessee on 30.04.2021, which prima facie appears to be within the time prescribed under the statute. We further find from the rectification order dated 06.08.2021 passed under section 154 read with section 143(3) of the Act placed at page no. 17 to 23 of the paper book that the demand originally raised pursuant to the assessment order stood rectified and ultimately the assessee became entitled to refund of ₹41,14,553/-. Further, a perusal of Para no. 8 of Form No. 68 placed at page no. 38 of the paper book also shows that the assessee had specifically brought to the notice of the Ld. AO that the demand raised pursuant to the assessment order was on account of an apparent computational mistake and that after rectification there would remain no demand payable by the assessee. We have also gone through para no. 16 of the order of the Hon’ble Calcutta High Court in the case of Amalgam Steel Pvt. Ltd. & Anr. Vs. ACIT (supra), which is to the following effect:
“16. In such view of the matter, it cannot be said that no application was filed by the petitioner seeking immunity. In the said application the petitioner (2022) 1 High Court Cases (Del ) 792 has, in support of its contention that it has satisfied the conditions required for grant of immunity in terms of Section 270AA of the said Act of 1961 stated as follows:
“3.0 Sec 270AA of the Act provides that the Assessing Officer may grant immunity from imposition of penalty under sec 270A of the Act provided the following conditions are met:
a) Demand determined in the order is being duly paid:
It may be stated that against the order passed under section 143(3) dated 28-03-2025, the company has filed rectification petition under section 154 dated 07-04-2025. Once the order under sec 143(3) is rectified by your kind self, there will be no taxable income in case of the company for the instant assessment year and hence, no consequential demand payable for the said assessment year. Copy of the petition filed under sec 154 is enclosed herewith and marked as Annexure-2.
b) No Appeal is being filed against the order – In the instant case, the company has decided not to file an appeal against the captioned order.
c) Application in Form 68 is filed within one month from the end of the month in which the order has been received – The Company had filed the application in Form 68 on 09-04-2025 which is well within the prescribed timeline.
d) Proceedings for penalty under section 270A had not been initiated under the circumstances referred to in subsection (9) of the said section 270A.”
4.0 On perusal of above, it is seen that the company satisfies all the conditions prescribed in Sec 270AA for grant of immunity from imposition of penalty under sec 270A of the Act.”.
10. On perusal of the above, we find that the Hon’ble High Court has observed that where the demand determined in the original assessment order stands duly adjusted and after rectification under section 154 of the Act no consequential demand survives for the relevant assessment year, the matter requires consideration in the context of the assessee’s claim for immunity under section 270AA of the Act. In the present case, we find that neither the penalty order nor the appellate order contains any detailed examination of the impact of the rectification order dated 06.08.2021 on the assessee’s eligibility for immunity under section 270AA of the Act. The authorities below have also not examined whether, in the peculiar facts of the case, the condition regarding payment of tax and interest stood substantially complied with when ultimately no tax demand survived and the assessee became entitled to refund. Considering the totality of facts and circumstances, the documents placed before us and the ratio laid down by the Hon’ble Calcutta High Court in the aforesaid decision, we are of the considered opinion that the issue requires fresh examination at the level of the Ld. AO. Accordingly, we set aside the orders of the lower authorities and restore the matter to the file of the Ld. AO with a direction to reconsider the application filed by the assessee under section 270AA of the Act for grant of immunity from penalty under section 270A of the Act after taking into consideration (i) the provisions of section 270AA of the Act; (ii) Form No. 68 filed by the assessee on 30.04.2021; (iii) the rectification order passed under section 154 of the Act dated 06.08.2021; (iv) the fact that the assessee did not file any appeal against the quantum assessment order; and (v) the observations of the Hon’ble Calcutta High Court in the case of Amalgam Steel Pvt. Ltd. & Anr. Vs. ACIT (supra). The Ld. AO shall decide the assessee’s claim for immunity under section 270AA of the Act by passing a speaking order in accordance with law after providing reasonable opportunity of being heard to the assessee. Thereafter, if required, the issue of levy of penalty under section 270A of the Act shall be decided afresh in accordance with law.
11. In the result, the appeal of the assessee is allowed for statistical purposes
Order pronounced in the Open Court on 15th July, 2026.
