Citadines OMR Aparthotel Pvt. Ltd Vs ITO (ITAT Chennai)
Penalty U/s 270A deleted – Immunity U/s 270AA allowed despite non-filing of Form-68; procedural lapse held technical – ITAT Chennai
In Citadines OMR Aparthotel Pvt. Ltd. vs ITO (A.Y. 2018-19), penalty of ₹21.30 lakh u/s 270A was levied for under-reporting of income arising from prior-period expenditure disallowed during revision u/s 263 proceedings. The assessee had accepted the disallowance, paid tax and interest, and did not file any appeal against the revised assessment.
The Tribunal noted that the assessee satisfied substantive conditions for immunity u/s 270AA — payment of tax & interest and non-filing of appeal — but had not filed Form-68 within time. Relying on coordinate bench precedent, ITAT held that non-filing of Form-68 is merely a technical or procedural lapse and cannot defeat the substantive right to immunity once statutory conditions are fulfilled.
Accordingly, penalty levied u/s 270A was deleted. Since the appeal was allowed on immunity grounds, alternate arguments on bona fide mistake were left open and the stay application was dismissed as infructuous.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal and stay application by the assessee are against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short “CIT(A)”) passed u/s. 250 of the Income Tax Act, 1961 (in short “the Act”) dated 05.12.2025 for Assessment Year (AY) 201819. The assessee raised the following ground of appeal:
“1. The Order passed by the Assessment Unit, Income tax Department (‘Ld. AO’) and the National Faceless Appeal Centre (‘CIT(A)’) are bad in law and contrary to the facts and circumstances of the case.
2. The Ld. CIT(A) has erred in sustaining the penalty of INR 21,30,143 levied by the Ld. AO under Section 270A of the Income-tax Act, 1961 (‘the Act’).
3. The Ld. CIT(A) has erred in law and on facts by failing to appreciate that the Appellant had made full and true disclosure of the impugned amount under Clause 27(b) of Form 3CD and that the explanation offered by the Appellant falls within the exceptions provided under Section 270A(6)(a) of the Act.
4. The Ld. CIT(A) has erred in ignoring the fact that the Appellant, during the course of proceedings under section 263 and revised assessment proceedings under section 143(3) read with section 263 of the Act, voluntarily admitted that the expenses were not allowable and accepted the corresponding disallowance.
5. The Appellant craves leave to add to, withdraw or modify any of the grounds of appeal at the time of hearing.”
2. The assessee is a company engaged in the business of construction, operation and management of service residences/apartments. The assessee filed the return of income for A.Y 2018-19 on 30.11.2018 declaring loss of Rs.13,56,62,267/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The A.O completed the assessment u/s. 143(3) of the Act determining the assessed income at Rs.50,389/- after making disallowance u/s. 40A(7) towards gratuity provision. Subsequently, the PCIT noticed that the A.O noticed from Form-3CD filed by the assessee that the following expenditure are reported as prior period expenditure:
| Sl. No. | Expenditure | Amount in INR | Grouping under profit and loss account |
| 1 | Business expenditure | 2,31,892 | Other expenses |
| 2 | Advertising expenses | 2,56,845 | Other expenses |
| 3. | LC Charges | 1,15,045 | Other expenses |
| 4. | POP T-Shirt expenses | 1,49,625 | Other expenses |
| 5. | Salaries and Wages | 1,18,77,633 | Employee benefit expenses |
| Total | 1,26,31,040 |
3. Since the assessee has not disallowed the above expenditure in the return of income and the A.O has also not considered the disallowance while completing the assessment u/s. 143(3) of the Act, the PCIT exercised jurisdiction u/s. 263 and issued a show cause notice to the assessee. The assessee during the course of proceedings u/s.263 of the Act submitted that the assessee has inadvertently omitted to disallow prior period expenditure and accordingly conceded to the disallowance. The PCIT accordingly held the order u/s.143(3) as erroneous and prejudicial to the interest of the revenue and set aside the order with a direction to the AO to consider the disallowance. The A.O passed the order u/s. 143(3) r.w.s 263 of the Act disallowed the prior period expenditure and the assessee paid the tax along with interest towards the disallowance made. The A.O subsequently initiated penalty proceedings u/s. 270A of the Act stating that the assessee has under reported the income. After considering the explanation furnished by the assessee, the A.O levied the penalty to the tune of Rs. 21,30,143/-. On further appeal, the CIT(A) confirmed the penalty levied by the A.O.
