Civil Technologies India Private Limited Vs ITO (ITAT Bangalore)
Summary: Civil Technologies India Private Limited appealed against the order dated 27 November 2021 passed by NFAC, Delhi for AY 2019-20, concerning penalty under section 270A. The assessee had filed its return on 20 April 2023 pursuant to notice under section 148, declaring total income of ₹4,060,100, which was accepted by the Assessing Officer in the reassessment order dated 21 March 2024. Penalty of ₹527,830 was subsequently levied for alleged under-reporting. The assessee contended that it had paid the tax and interest and had not appealed against the reassessment order, while its application in Form No. 68 for immunity under section 270AA had been rejected. It relied, among others, on Natarajan Anandh Kumar v. Deputy Commissioner of Income Tax. The ITAT held that the immunity application required fresh consideration and restored the matter to the Assessing Officer, directing him to examine compliance with clauses (a) to (c) of section 270AA(1). The Tribunal further directed that, if immunity was found unavailable, the Assessing Officer could pass a speaking order under section 270A after giving an opportunity of hearing and, where rejection was based on delay in Form No. 68, consider the Madras High Court decision dated 23 January 2024. The appeal was allowed for statistical purposes.
Where an assessee files the return of income for the first time only in response to a reassessment notice, the returned income may constitute under-reported income under section 270A; however, an application for immunity under section 270AA cannot be rejected without identifying the unfulfilled statutory conditions and without affording the assessee an effective opportunity of hearing.
Facts. The assessee-company had taxable receipts and income during the relevant assessment year but did not file its original return of income under section 139 of the Income-tax Act. Information available with the Department through TDS records indicated receipts of approximately Rs. 90.50 lakh which had not initially been disclosed through a return of income. Proceedings under the reassessment provisions were therefore initiated.
The assessee did not respond to the notice issued under section 148A(a), nor to the subsequent opportunity provided under section 148A(b). Consequently, notice under section 148 was issued on 21 March 2023. In response to the reassessment notice, the assessee filed its return of income on 20 April 2023 declaring a total income of Rs. 40,60,100.
The Assessing Officer examined the information and completed the reassessment under section 147 by accepting the income returned by the assessee without making any further addition or variation. Nevertheless, since the assessee had not filed its original return under section 139 despite having taxable income, penalty proceedings under section 270A were initiated on the ground that the income disclosed for the first time in response to the notice under section 148 constituted under-reported income.
The assessee had also applied for immunity from penalty under section 270AA by filing Form No. 68. According to the assessee, it had paid the tax and interest payable under the reassessment order and had not filed any appeal against the reassessment order. There was, however, a delay of 30 days in filing the application for immunity, for which condonation was sought.
The application for immunity was rejected, and thereafter the Assessing Officer levied a penalty of Rs. 5,27,830 under section 270A. The assessee challenged the penalty before the CIT(A), but the appeal was dismissed.
AO / CIT(A) Findings. The Assessing Officer held that the assessee’s payment of tax and interest and non-filing of an appeal against the reassessment order were not, by themselves, sufficient to grant immunity under section 270AA. Since the immunity application had been rejected, the Assessing Officer proceeded with the penalty proceedings under section 270A.
The Assessing Officer rejected the assessee’s contention that there was no under-reporting merely because the income declared in the return filed under section 148 had ultimately been accepted without any variation. According to the Revenue, the relevant circumstance was that the assessee had taxable income but had failed to file the original return under section 139 and disclosed the income only after initiation of reassessment proceedings.
The CIT(A) upheld the penalty. It held that the case was covered by section 270A(2)(b), under which a person can be regarded as having under-reported income where the return is furnished for the first time under section 148 and the assessed income exceeds the maximum amount not chargeable to tax.
The CIT(A) further held that the failure to file the return despite having taxable income and the consequent non-payment of taxes amounted to misrepresentation or suppression of facts. The CIT(A) also accepted the conclusion that the assessee had failed to satisfy the conditions necessary for immunity under section 270AA and therefore sustained the penalty.
ITAT Findings
The Tribunal examined the matter primarily from two perspectives—first, the validity of the rejection of the assessee’s application for immunity under section 270AA and, secondly, whether the returned income disclosed for the first time in response to the notice under section 148 could constitute under-reported income for the purposes of section 270A.
On the issue of immunity, the Tribunal noted that although section 270AA(6) provides that an order rejecting an application for immunity is not appealable, the provision expressly requires that no order rejecting such an application can be passed without giving the assessee an opportunity of being heard.
The Tribunal found that the assessee had claimed to have fulfilled the substantive conditions prescribed under section 270AA(1), including payment of tax and interest and non-filing of an appeal against the relevant assessment order. However, the penalty order and the orders of the lower authorities did not clearly disclose which specific statutory condition for grant of immunity had remained unfulfilled.
The Tribunal therefore held that the immunity application could not be rejected in such a vague and non-speaking manner. The Assessing Officer was required to provide the assessee with an opportunity to establish compliance with the conditions contained in section 270AA(1)(a) to (c) and thereafter pass an appropriate decision on the application.
The Tribunal consequently restored the immunity application to the Assessing Officer for fresh adjudication. It directed the assessee to appear before the Assessing Officer and demonstrate compliance with the statutory requirements for immunity. If, upon examination, the assessee was found entitled to immunity, the consequential penalty proceedings would automatically become infructuous.
On the separate question of whether there was under-reporting of income, the Tribunal did not accept the assessee’s broad contention that acceptance of the return filed under section 148 automatically meant that there could be no under-reporting. The Tribunal specifically observed that the assessee had not filed the original return of income despite having taxable income and had disclosed the income only after receipt of the reassessment notice.
Importantly, the Tribunal noted that there was no explanation on record for the assessee’s failure to file the original return under section 139. In these circumstances, the Tribunal held that the income returned for the first time in response to the notice under section 148 constituted under-reported income, subject to the assessee’s entitlement to immunity under section 270AA.
The Tribunal also distinguished the decision of the Madras High Court in Natarajan Anandh Kumar, relied upon by the assessee. In that case, there was an explanation for the failure to file the return, namely circumstances relating to the assessee’s ill-health. In the present case, however, no comparable explanation had been brought on record. Therefore, the Tribunal held that the said precedent did not automatically assist the assessee on the issue of under-reporting.
The Tribunal finally directed that if, after fresh consideration, the Assessing Officer concludes that the assessee is not entitled to immunity under section 270AA, he may proceed to pass a fresh speaking penalty order under section 270A, but only after granting the assessee a proper opportunity of being heard. The Assessing Officer was also directed to consider the Madras High Court decision in Natarajan Anandh Kumar if the immunity application was rejected on the ground of delay in filing Form No. 68.
Outcome. Appeal allowed for statistical purposes.
The Tribunal restored the matter to the file of the Assessing Officer for fresh consideration of the assessee’s application for immunity under section 270AA after granting an appropriate opportunity of hearing.
If the assessee is found eligible for immunity, the penalty proceedings under section 270A shall become infructuous.
If immunity is denied, the Assessing Officer may initiate or continue the penalty proceedings and pass a fresh speaking order under section 270A, after giving the assessee a proper opportunity of being heard.
Ratio. An application for immunity from penalty under section 270AA, though its rejection may not be appealable, cannot be rejected without affording the assessee an opportunity of hearing and without clearly identifying the statutory condition that remains unfulfilled. Further, where an assessee having taxable income fails to file the original return and furnishes the return for the first time only in response to a notice under section 148, the returned income may constitute under-reported income under section 270A, particularly where no bona fide explanation for failure to file the original return is available. However, the question of immunity must first be properly adjudicated, and only upon denial of immunity can a reasoned penalty order be passed after granting due opportunity of hearing.
Cases Discussed / Relied Upon
- Natarajan Anandh Kumar v. Assessment Unit, Income Tax Department, New Delhi — 2024 (8) TMI 1432 – Madras High Court — Relied upon by the assessee in support of the contention that where a return is filed in response to reassessment proceedings and the circumstances explaining the failure to file the original return are bona fide, the matter may warrant consideration for immunity and condonation of delay. The Tribunal distinguished the decision because no explanation for failure to file the original return was available in the present case.
- Price Waterhouse Coopers (P.) Ltd. v. Commissioner of Income-tax — 2012 (9) TMI 775 – Supreme Court — Relied upon by the assessee in support of the general principles governing bona fide mistakes and penalty proceedings.
- Commissioner of Income-tax v. Reliance Petroproducts Pvt. Ltd. — 2010 (3) TMI 80 – Supreme Court — Relied upon by the assessee regarding the principles governing levy of penalty and the requirement that penalty cannot automatically follow merely because a claim or position taken by the assessee is not accepted.
- Hindustan Steel Ltd. v. State of Orissa — 1969 (8) TMI 31 – Supreme Court — Relied upon by the assessee for the established principle that penalty should not ordinarily be imposed merely because it is lawful to do so, particularly where the circumstances demonstrate absence of deliberate or contumacious conduct.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. Civil Technologies India Private Limited (the assessee/appellant) has filed this appeal against the order dated 27 November 2021 passed by the National Faceless Appeal Centre (NFAC), Delhi [the learned CIT(A)] for assessment year 2019-20. By that order, the NFAC confirmed the assessee’s appeal against the penalty order dated 25 September 2024 passed by the Income Tax Department under section 270A of the Income-tax Act, 1961, levying a penalty of ₹5,27,813/-.
2. The Assessee has raised the following grounds of appeal:
1. The appellant has paid tax and interest payable as per the Reassessment Order u/s 147 and no appeal against the said order u/s 147 has been filed, thereby satisfying the condition for availing immunity u/s 270AA against penalty proceedings u/s 270A.
2. There was a delay of 30 Days in filing the Form 68 seeking immunity u/s 270AA for which the appellant has requested for condonation of such delay. However, the application to grant immunity u/s 270AA was rejected on the grounds that there has been under-reporting of income as per provision of Section 270A(2) and 270A(3) of Income Tax Act, 1961.
3. Further, in spite of reiterating our contention regarding eligibility for immunity against penalty proceedings u/s 270AA and that the delay in filing of Form 68 is only a procedural lapse for which the benefit of immunity should not be denied, in response to the Show Cause Notice issued for penalty u/s 270A, the Competent Authority, Assessment Unit of Income Tax Department has erred in passing an order u/s 270A and levying a penalty of Rs. 5,27,813/- solely on the basis that the income has been under-reported.
4. Referring to provision of clause (a), sub-section 6 of Section 270A of Income Tax Act, 1961 which states,
“The under-reported income, for the purposes ofthis section, shall not include the following, namely: –
the amount of income in respect of which the assessee offers an explanation and the Assessing Officer or the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, is satisfied that the explanation is bona fide and the assessee has disclosed all the material facts to substantiate the explanation offered”
we would like to draw attention to the facts of the given case where, the submissions provided by the appellant in response to the notice u/s 148 was found acceptable by the Assessing Officer and order u/s 147 was passed with no variation being made. Hence, the return of income filed in response to the notice Section 148 cannot be construed as Under-Reporting of Income.
5. Further, referring to the case law of Natarajan Anandh Kumar vs Deputy Commissioner of Income Tax, Madras High Court, Dated:23.01.2024, where the assessee had filed the return of income in response to notice u/s 148 and AO was satisfied with the response provided, it was not construed as under-reporting of income. Considering the merit of the case, delay in filing of Form 68 u/s 270AA was condoned.
6. In the given case, the learned Commissioner of Income Tax (Appeals) has failed to appreciate the facts of the case and law applicable.
7. The Assessment Order u/s 250 states that,
“it is seen that the appellant failed to comply with the conditions laid down in Section 270AA of the Act….
Hence, the appellant is not eligible for immunity u/s. 270AA of the Act.”
However, there has only been delay in the filing of Form 68 and all the other conditions laid u/s 270AA of Income Tax Act, 1961 i.e., the requirement of payment of tax and interest as per the assessment order u/s 147 and non-filing appeal against the same order has been satisfied.
8. The learned CIT(A) erred in,
i. treating the case as one involving misrepresentation or suppression of facts under section 270A(9)(a), despite the absence of any finding of false entry, false explanation, or concealment, and in the absence of any addition in assessment.
ii. failed to appreciate that the Appellant had fully cooperated in the reassessment proceedings, disclosed all material facts and paid due taxes and interest.
iii. upholding the rejection of immunity under section 270AA merely on account of a procedural delay in filing Form 68, without appreciating that such delay was minor, unintentional, and liable to be condoned in the interest of justice.
9. Further, Section 270AA is a beneficial provision intended to encourage tax compliance, and minor procedural delays should not defeat the grant of immunity when substantive conditions are satisfied.
10. On the basis of the line of reasoning put forth in the above grounds of appeal, which explicitly refers to the relevant law and precedent, the impugned penalty order is bad in law and is liable to be quashed.
3. Briefly stated, the facts show that the assessee entered into several transactions, and the tax-deduction-at-source information available to the assessee indicated receipts of ₹9,050,794 that had not been disclosed. Accordingly, notice under section 148A(a) was issued. The assessee did not respond. A further opportunity was then given by issuing notice under section 148A(b) of the Act on 23 February 2023, which also remained uncomplied with. Consequently, notice under section 148 was issued on 21 March 2023. In response, the assessee filed its return of income on 20 April 2023, declaring total income of ₹4,060,100. The Assessing Officer noted that, as per the return, the assessee had disclosed revenue from operations of ₹6,976,582 and interest income of ₹1,167,168, resulting in total income of ₹4,060,100. Based on the information received, the assessee’s total gross receipts were ₹7,863,626. Of this, ₹6,976,582 was shown as revenue from operations, and the balance of ₹1,255,785 represented 18% goods and services tax. The Assessing Officer therefore completed the assessment at the returned income of ₹4,060,100 by order dated 21 March 2024. However, penalty proceedings under section 270A were initiated for under-reporting of income, on the ground that the assessee had not filed a return under section 139 despite having taxable income of ₹4,060,100.
4. The Assessing Officer thereafter passed the penalty order under section 270A of the Act on 25 September 2024, levying a penalty of ₹527,830. He noted that a show-cause notice had been issued on 4 August 2024 asking why penalty should not be imposed for under-reporting of income. In response, the assessee submitted that it had filed its return in response to notice under section 148, declaring total income of ₹4,060,100, which was also accepted as the assessed income; therefore, there was no under-reporting. The assessee further stated that it had sought immunity under section 270AA by filing Form No. 68 and was eligible for such immunity under section 270AA(1), though the application had been rejected. The Assessing Officer observed that the assessee’s only contention related to immunity, and held that payment of tax and non-filing of appeal, though necessary conditions, were not by themselves sufficient for grant of immunity. He accordingly rejected the claim and levied penalty under section 270A amounting to ₹527,830.
5. The assessee appealed before the learned CIT(A), reiterating the same submissions and contending that there was no under-reporting of income within the meaning of section 270A(6) of the Act. The assessee relied on the decision of the Hon’ble Supreme Court in CIT v. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 and other judicial precedents, and submitted that the penalty order was unsustainable and liable to be deleted. The learned CIT(A) held that the appellant had taxable income of ₹4,060,100 for the year under consideration but had not filed a return under section 139, and filed the return only in response to notice under section 148. Although the returned income of ₹4,060,100 was accepted in reassessment, the CIT(A) held that the case was covered by section 270A(2)(b), under which a person is deemed to have under-reported income where the income assessed exceeds the maximum amount not chargeable to tax and the return is first furnished under section 148. He further held that failure to furnish the return despite taxable income and non-payment of tax amounted to misrepresentation or suppression of facts under section 270A(9)(a). As regards immunity, he held that the assessee had failed to comply with the conditions of section 270AA and that the rejection of the immunity application was therefore justified. Accordingly, he dismissed the assessee’s appeal.
6. Aggrieved, the assessee is in appeal before us. The learned Authorised Representative, Shri Ashray Srinivas Hosakote, CA, furnished a paper book comprising 54 pages and relied on the judicial precedents in Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26 (SC), CIT v. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC), PricewaterhouseCoopers Pvt. Ltd. v. CIT (2012) 348 ITR 306 (SC), and Natarajan Anandhkumar v. Deputy Commissioner of Income Tax (2024: MHC:5928) (Madras High Court), dated 23 January 2024, to contend that penalty under section 270A could not have been levied. He submitted that, in the Madras High Court decision, the assessee had not filed a return under section 139 of the Act but had filed the return only in response to the reopening notice. In that case also, the assessee filed an application for immunity, and the delay of 30 days was condoned. Referring to paragraph 9 of that judgment, he submitted that where the assessee offers a bona fide explanation, section 270A(6)(a) protects the assessee and penalty cannot be levied.
7. The learned Senior Departmental Representative, Shri Venkatesh, Additional Commissioner of Income Tax, submitted that immunity from penalty is governed by section 270AA of the Act, and that the Assessing Officer had given reasons for not granting such immunity. He further submitted that the assessee had not shown any reason why the income should not be treated as under-reported, nor offered any explanation; therefore, section 270A(6) did not apply.
8. We have carefully considered the rival submissions and perused the orders of the lower authorities. The assessee submitted that it had filed an application for immunity under section 270AA of the Act and had fulfilled all the conditions prescribed under sub-section (1), yet immunity was not granted. Although sub-section (6) bars an appeal against rejection of such an application, it also provides that no order rejecting the application shall be passed without giving the assessee an opportunity of being heard. In the present case, the Assessing Officer ought to have granted such opportunity before rejecting the assessee’s application for immunity from penalty. We therefore restore the matter to the file of the Assessing Officer, with a direction that the assessee shall appear before him and demonstrate compliance with the conditions specified in clauses (a) to (c) of section 270AA(1) of the Act. The penalty order does not indicate which conditions, if any, were not fulfilled by the assessee for obtaining immunity. The Assessing Officer is directed to examine the immunity application afresh and, if it is found to be in order, grant immunity from penalty.
9. We also find no explanation on record for the assessee’s failure to file the original return of income. In the absence of such return, the income returned under section 148 of the Act becomes under-reported income. The assessee must therefore explain why penalty should not be levied on such under-reported income.
10. As per form No. 36 filed before us the first ground of appeal relates to the rejection of immunity under section 270AA of the income tax act merely on account of the procedural delay in filing form No. 68 thereby imposing penalties under section 270A despite requesting for condonation of delay.
11. In view of the above facts, we do not find that any of the decision relied upon by assessee has the case of the assessee for the reason that even the decision of the honourable madras High Court is with respect to the reason that assessee could not file any return of income because of the unaccounted of ill-health. No such explanation is available before us. Even in that case, the honourable High Court held that immunity application was delayed by only 30 days. In this case we do not know for what reason the learned assessing officer has rejected the immunity application of the assessee. Therefore, it is necessary that the immunity application of the assessee needs to be decided, if it is decided that the assessee deserves the immunity, all subsequent proceedings becomes infructuous.
12. After deciding the assessee’s application for immunity from penalty, if the Assessing Officer concludes that the assessee is not eligible for such immunity, he may pass a speaking order under section 270A of the Act after giving the assessee an opportunity of being heard. If the application is rejected on the ground of delay in filing Form No. 68, the Assessing Officer shall also consider the decision of the Hon’ble Madras High Court dated 23 January 2024 in Natarajan Anandh Kumar (supra) before deciding the application.
13. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 31st August, 2026.
