Sangam Almirah Private Limited Vs NFAC (ITAT Patna)
The Income Tax Appellate Tribunal (ITAT), Kolkata Bench, allowed the appeal of Sangam Almirah Private Limited, cancelling the penalty levied under section 270A of the Income Tax Act, 1961, for the Assessment Year 2018-19. The penalty of ₹1,95,048/- was imposed after the Assessing Officer (AO) made an addition of ₹3,80,091/- to the company’s income. This addition resulted from the disallowance of certain expenditure (related to Provident Fund and ESI for a three-month period) which belonged to a preceding proprietorship business but was incorrectly debited to the company’s Profit & Loss account. The AO and the CIT(A)-NFAC had treated this as misreporting of income, warranting a 200% penalty.
Grounds for Penalty Cancellation
The ITAT’s decision to cancel the penalty was based primarily on two grounds. Firstly, the Tribunal noted a procedural lapse regarding the assessee’s application for immunity from penalty under section 270AA of the Act. The assessee had filed the application in the prescribed form within the statutory one-month period and had fulfilled the mandatory conditions by accepting the addition, paying the tax and interest, and not filing an appeal against the assessment order. However, the AO failed to pass a separate order—either accepting or rejecting the application—within the stipulated one-month timeframe as required by section 270AA(4). This omission, coupled with the failure to provide an opportunity of being heard before effectively rejecting the application, rendered the subsequent penalty order invalid.
