Terai Fruits Company Vs ITO (ITAT Kolkata)
Income Tax Appellate Tribunal (ITAT) Kolkata recently allowed the appeal of Terai Fruits Company in a case concerning a penalty levied under Section 270A of the Income Tax Act. The case originated from a reassessment proceeding where the assessee, Terai Fruits Company, was found to have conducted significant cash transactions but had not filed an income tax return for the relevant assessment year. Following the reassessment, the Assessing Officer (AO) imposed a penalty for misreporting of income. While the assessee paid the assessed tax and interest and applied for immunity from the penalty under Section 270AA, the application was not made in the prescribed Form 68.
The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the penalty, citing the assessee’s failure to file Form 68 as required by Rule 129 of the Income Tax Rules. The CIT(A) emphasized the mandatory nature of the form for claiming immunity under Section 270AA. However, the ITAT overturned this decision, noting that the assessee had substantively complied with the requirements of Section 270AA by paying the tax and interest and applying for immunity, albeit on plain paper. The tribunal emphasized the distinction between substantive and procedural compliance, citing the Supreme Court’s decision in Mangalore Chemicals & Fertilizers Ltd. v. Deputy Commissioner which held that not all statutory requirements are of equal importance.
The ITAT also pointed out a crucial flaw in the AO’s order: the failure to specify the particular clause of Section 270A(9) under which the penalty for misreporting was imposed. Section 270A(9) lists various types of misreporting, each with different penalty implications. The tribunal stressed the importance of specifying the exact nature of the misreporting to justify the penalty amount. Furthermore, the ITAT observed that the case might at best be considered one of underreporting, and even then, if the assessee’s explanation is bona fide, no penalty is warranted as per Section 270A(6).
Consequently, the ITAT set aside the order of the CIT(A) and remanded the case back to the CIT(A) for reconsideration. The CIT(A) was directed to examine whether the requirement of filing Form 68 could be dispensed with, given the assessee’s substantive compliance and payment of taxes. The CIT(A) was also tasked with clearly determining whether the case constituted misreporting of income and, if so, which specific clause of Section 270A(9) was applicable. The assessee was directed to provide all necessary evidence and cooperate with the CIT(A) during the remand proceedings.
