BT Global Communications India Private Ltd. Vs Assessment Unit (Delhi High Court)
Section 270A Penalty Cannot Be Imposed While Quantum Appeal Is Pending Before ITAT: Delhi High Court Quashes Penalty Order
Issue Before the Court
The question before the High Court was whether the Assessing Officer could pass an order imposing penalty under Section 270A while the appeal against the underlying assessment order remained pending before the Income Tax Appellate Tribunal.
The assessee contended that Section 275(1)(a) required the penalty proceedings to be kept in abeyance during the pendency of the Tribunal appeal. Accordingly, the penalty order passed before disposal of that appeal was challenged as being without jurisdiction and contrary to the statutory provision.
Facts of the Case
The Assessing Officer passed an assessment order for AY 2018–19 on 28 July 2022 under Section 143(3) read with Section 144C(13).
While completing the assessment, the Assessing Officer recorded satisfaction for initiating penalty proceedings and issued a notice under Section 270A on the same day.
The assessee submitted its initial reply to the penalty notice on 17 August 2022. Thereafter, on 29 August 2022, it filed an appeal against the assessment order before the Tribunal under Section 253. The assessee also informed the Assessing Officer about the filing of that appeal on the same date.
Despite the pending quantum appeal, the Assessing Officer proceeded to impose penalty through an order dated 24 March 2023.
The assessee challenged this order before the High Court. Its principal grievance was that the Assessing Officer had concluded the penalty proceedings even though the assessment giving rise to those proceedings was already under challenge before the Tribunal.
Submissions Before the Court
The assessee argued that Section 275(1)(a) required penalty proceedings to remain in abeyance while an appeal under Section 253 was pending. Since the Tribunal had not decided the quantum appeal, the Assessing Officer could not have passed the impugned penalty order.
The Revenue referred to the recital in the impugned order indicating that the assessee was merely in the process of filing an appeal.
The distinction was material because the assessee’s first reply, dated 17 August 2022, preceded the actual filing of the appeal on 29 August 2022. The Court therefore examined whether the recital reflected the position when penalty was imposed or merely reproduced the earlier reply.
Findings of the High Court
The quantum appeal had already been filed
The High Court observed that the statement suggesting that the assessee was still preparing to file an appeal appeared to have been taken from its initial reply dated 17 August 2022.
There was no denial that the assessee had actually filed the Tribunal appeal on 29 August 2022 and had intimated the Assessing Officer accordingly.
Thus, when the penalty order was passed on 24 March 2023, the quantum appeal was already pending.
Intimation to the Assessing Officer was not decisive
The Court went further and held that whether the Assessing Officer had been informed about the appeal was immaterial to the operation of the provision.
The decisive circumstance was that an appeal under Section 253 was pending when the penalty order was passed. The Court also recorded that the appeal continued to remain pending at the time of its judgment.
Section 275(1)(a) required the proceedings to remain in abeyance
After reproducing Section 275(1)(a), the High Court expressly interpreted it as requiring penalty proceedings to be kept in abeyance during the pendency of the Tribunal appeal.
On that interpretation, the Assessing Officer’s action in imposing penalty before disposal of the appeal was contrary to the statutory provision.
The Court’s conclusion concerned the timing and legality of the penalty order. It did not examine whether the underlying addition was correct or whether the assessee’s conduct otherwise satisfied the conditions for penalty under Section 270A.
Decision of the Court
The High Court allowed the writ petition and quashed the penalty order dated 24 March 2023 as contrary to Section 275(1)(a).
However, the Court expressly preserved the Assessing Officer’s liberty to take up penalty proceedings afresh if the Tribunal decided the quantum appeal against the assessee and the law otherwise permitted such action.
The relief therefore did not amount to an unconditional or permanent immunity from penalty. Any subsequent proceedings would remain subject to the Tribunal’s decision and the applicable legal requirements.
Author’s Comments
The significant feature of this judgment is the Court’s interpretation of Section 275(1)(a) as requiring deferment of penalty proceedings, although the reproduced provision is framed in terms of the outer time limit for passing a penalty order. The judgment thus rests on an express judicial interpretation; practitioners should identify that reasoning when relying upon it.
The ruling also distinguishes initiation of penalty proceedings from the passing of a penalty order. The Court quashed the completed penalty order and permitted fresh proceedings in the stated circumstances; it did not hold that the initial penalty notice issued along with the assessment was invalid.
For pending matters, the practical value lies in placing the Tribunal appeal acknowledgement and this judgment before the penalty authority while seeking that proceedings be kept in abeyance. The merits of the addition and the separate statutory requirements for imposing Section 270A penalty would still require independent examination.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. By way of the present writ petition, the petitioner has challenged the order dated 24.03.2023 passed by the respondent-Assessing Officer imposing penalty upon the petitioner under Section 270A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act of 1961’).
2. Assailing the impugned order, learned counsel for the petitioner argued that the order under challenge is void and without jurisdiction inasmuch as it was passed during the pendency of appeal before the Income Tax Appellate Tribunal (hereinafter referred to as ‘Tribunal’).
3. Apprising the Court about the relevant facts, learned counsel submitted that an assessment order dated 28.07.2022 came to be passed by the Assessing Officer for the assessment year 2018-19 under Section 143(3) read with 144C(13) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act of 1961’).
4. While passing the above assessment order the AO recorded satisfaction of initiation of penalty proceedings and issued a notice for penalty under Section 270A of the Act of 1961 on the very same day, i.e., 28.07.2022.
5. The petitioner filed a reply dated 17.08.2022 and thereafter filed an appeal against the above assessment order before the Tribunal (under Section 253 of the Act of 1961) on 29.08.2022. And on filing the appeal, the petitioner informed the Assessing Officer about the appeal against the assessment order dated 28.07.2022 having been filed.
6. The petitioner has approached this Court with a specific plea that the factum of appeal had been informed to the Assessing Officer during the pendency of the penalty proceedings and yet, he has passed the impugned penalty order flouting the mandate of Section 275(1)(a) of the Act of 1961.
7. Learned counsel for the petitioner argued that Sub-section 1(a) of Section 275 of the Act of 1961 leaves no manner of doubt that during the pendency of appeals including one filed under Section 253 of the Act of 1961, the penalty proceedings are to be kept in abeyance.
8. Mr. Anurag Ojha, learned Senior Standing Counsel, invited Court’s attention towards paragraph no.3 of the assessment order and submitted that the assessee had informed the Assessing Officer that he was in the process of filing the appeal.
9. Heard learned counsel for the parties.
10. A perusal of paragraph no.3 of the impugned order gives an impression that the petitioner was in the process of filing appeal but such inscription appears to have been taken from petitioner’s reply dated 17.08.2022 – being the first reply which the petitioner had filed.
11. There is no denial of the fact that the petitioner had filed appeal on 29.08.2022 and an intimation to this effect was given on 29.08.2022.
12. Be that as it may. Whether intimation was given or not, is immaterial, as Section 275(1)(a) of the Act of 1961 in no ambiguous terms provides that the penalty proceedings shall be kept in abeyance, in case, when an appeal under Section 253 of the Act of 1961 is pending. On the date of passing of the impugned order, the petitioner’s appeal was pending and it is still pending.
13. Section 275(1)(a) of the Act of 1961 is reproduced hereunder for ready reference:
“275. (1) No order imposing a penalty under this Chapter shall be passed-
(a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the Joint Commissioner (Appeals) or to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the Joint Commissioner (Appeals) or the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Principal Commissioner or Commissioner, whichever period expires later:
Provided that in a case where the relevant assessment or other order is the subject-matter of an appeal to the Joint Commissioner (Appeals) or the Commissioner (Appeals) under section 246 or section 246A, and the Joint Commissioner (Appeals) or the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Joint Commissioner (Appeals) or the Commissioner (Appeals) is received by the Principal Commissioner or Commissioner, whichever is later;………”
14. In view of the discussion foregoing, the writ petition is allowed. The impugned penalty order is, therefore, clearly contrary to provisions contained in Section 275(1)(a) of the Act of 1961 and is thus quashed and set aside.
15. The Assessing Officer shall however, be free to take up the penalty proceedings afresh, in case the Tribunal decides the appeal against the petitioner-assessee and in case law so permits.
16. The writ petition stands allowed.
