MS. JINDAL POLY FILMS LTD.,UTTAR PRADESH V. ASSISTANT COMMISSIONER OF INCOME TAX, DELHI

ITA 1786/DEL/2024

AI Insights

The case involves M/s. Jindal Polyfilms Ltd, which appealed against the penalty imposed by the Assessing Officer (AO) under section 270A of the Income-tax Act for underreporting income related to the deduction claimed for education cess. The AO had disallowed the deduction and levied a penalty, which was upheld by the Commissioner of Income Tax (Appeals). The Tribunal, however, found that the assessee had complied with the legal provisions allowing for the withdrawal of the claim and had done so within the stipulated time, thus negating the grounds for the penalty. The Tribunal's decision was influenced by retrospective amendments to the law and the assessee's proactive steps in withdrawing the claim.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 34797 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2020-2021
• Other Referred Cases: CIT vs Hindustan Electro Graphites Ltd, Chambal Fertilisers & Chemicals Ltd vs JCIT, Sesa Goa Ltd vs JCIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OM PARKASH
• Assessee Lawyers: ROHIT JAIN; WAY OF A DEMAND NOTICE
• Keywords: Revised return; Retrospective amendment; Business expenditure
• Section: 143(3); 142(1); 48; 270AA

Judgement Text

"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “C”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND MS MADHUMITA ROY, JUDICIAL MEMBER ITA No. 1786/Del/2024 (Assessment Year: 2020-21) M/s. Jindal Polyfilms Ltd, Plot NO. 12, Sector-B-1, Local Shopping Complex, Vasant Kunj, New Delhi- 110070 Vs. ACIT, Circle-10, OSD, CR Building, IP Estate, New Delhi (Appellant) (Respondent) PAN:AAACJ7650E Assessee by : Shri Rohit Jain, Adv Shri Shivam Gupta, CA Revenue by: Shri Om Parkash, Sr. DR Date of Hearing 06/01/2025 Date of pronouncement 22/01/2025 O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.1786/Del/2024 for AY 2020-21, arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. NFAC’, in short] in Appeal No. ITBA/NFAC/S/250/2023- 24/1061348486(1) dated 22.02.2024 against the order of assessment passed u/s 270A of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 13.03.2023 by the Assessing Officer, Assessment Unit, Income Tax Department (hereinafter referred to as ‘ld. AO’). 2. Though the assessee has raised several grounds of appeal before us, the only effective issue to be decided in this appeal is as to whether the learned CITA was justified in confirming the levy of penalty under section ITA No. 1786/Del/2024 M/s. Jindal Polyfilms Ltd Page | 2 270A of the Act in respect of claim of deduction on account of education cess in the facts and circumstances of the instant case. 3. We have heard the rival submissions and perused the materials available on record. The assessee company is engaged mainly in the manufacture of polyester chips of all grades, biaxially oriented polyester film, biaxially oriented polypropylene film, metalized film, PVDC film, non- woven material fabrication, medical x-ray films and other items. The assessee company is also engaged in provision of export of information technology software services. The original return of income was filed by the assessee for the AY 2020-21 on 13-2-2021 declaring total income of Rs 521,93,02,290/-. The first revised return was filed by the assessee company on 30-3-2021 declaring the same total income. The second revised return was filed by the assessee company on 8-5-2021 declaring the same total income. The third revised return was filed by the assessee company on 31-5-2021 declaring total income of Rs 521,93,02,290/-. Admittedly, all these revised returns were filed within the time permitted under section 139(5) of the Act. The assessment was completed under section 143(3) read with section 144B of the Act determining total income at Rs 527,64,85,630/- by making an addition of Rs 4,89,66,487/- on account of disallowance of deduction claimed by the assessee in respect of education cess as business expenses. Penalty proceedings under section 270A of the Act stood initiated for under reporting of income. The assessee gave reply to the ld AO vide letter dated 27-10-2022 giving detailed factual and legal justification for claiming deduction for education cess at the time of filing of return of income. The assessee in the said letter also brought to the notice of the ld AO as to how such claim was suo motu withdrawn by it during quantum assessment proceedings considering the amendments proposed in the Finance Bill. Further the assessee also gave detailed legal ITA No. 1786/Del/2024 M/s. Jindal Polyfilms Ltd Page | 3 justification for non-levy of penalty by virtue of provisions of section 270A(6) of the Act. The learned AO however did not heed to these contentions of the assessee and ultimately penalty under section 270A of the Act was levied in the sum of Rs 61,61,942/- for under reporting of income calculated @ 50% of tax on under –reported income of Rs 4,89,66,487/- on account of deduction claimed for education cess on the following grounds:- a) that the assessee relied upon various case laws which stood nullified by the subsequent amendment in law ; b) that the assessee surrendered its claim only after the issuance of show cause notice dated 26-9-2022; and c) that the assessee did not apply for immunity under section 270AA of the Act. 4. This action of the learned AO was upheld by the learned CITA. 5. The following list of gists and events would be relevant for better understanding of the present appeal :- a) Original and revised returns were filed between 13-2-2021 to 31-5- 2021 claiming deduction on account of education cess. b) On 10-11-2021, notice under section 142(1) of the Act was issued by the learned AO vide question number 6, the AO required the assessee to furnish explanation qua deduction claimed in the return of income which included education cess. c) On 1-2-2022, Finance Bill , 2022 was introduced proposing to insert Explanation 3 to section 40(a)(ii) of the Act to prohibit claim of deduction for education cess with retrospective effect from 1-4-2005. ITA No. 1786/Del/2024 M/s. Jindal Polyfilms Ltd Page | 4 d) On 2-3-2022, reply was filed by the assessee to notice under section 142(1) of the Act wherein vide para 9 of the reply, the assessee gave detailed explanation on claim of allowability of education cess as a deductible expenditure. Simultaneously, the assessee also communicated its willingness to suo motu forego claim of deduction of education cess. e) On 1-4-2022, Finance Bill became Finance Act, 2022 and Explanation 3 to section 40(a)(ii) of the Act was inserted in the statute prohibiting claim of deduction for education cess with retrospective effect from 1-4-2005. Simultaneously, section 155(18) of the Act was inserted whereby the assessee was granted time to suo motu withdraw its claim of deduction of education cess, by way of an application in the prescribed form, in order to avoid penalty under section 270A of the Act. f) On 1-10-2022, in line with the aforesaid provision, Rule 132 was inserted in the Income Tax Rules, 1962 providing as follows:- (i) Application for withdrawal of claim of deduction to be made by assessee in Form No. 69 by 31-3-2023 ; (ii) The learned AO to recompute the total income considering withdrawal of such claim and to determine tax payable by the assessee by way of a demand notice ; and (iii) Assessee to make payment of the tax so determined within time specified in the demand notice and to furnish tax payment details to the learned AO in Form No. 70. g) On 24-8-2022, notice under section 142(1) of the Act was issued during assessment proceedings. ITA No. 1786/Del/2024 M/s. Jindal Polyfilms Ltd Page | 5 h) On 6-9-2022, reply to notice dated 24-8-2022 was filed by the assessee wherein assessee confirmed that all the required details have already been furnished and reiterated its reply to Question No. 6 raised vide notice dated 10-11-2021. i) On 26-9-2022, show cause notice was issued during assessment proceedings vide para 2.4. requiring the assessee to furnish detailed explanation qua allowability of education cess. j) On 27-9-2022, reply to show cause notice dated 26-9-2022 was filed by the assessee giving detailed explanation qua allowability of education cess claimed in the return of income. The assessee also pointed out that it had suo motu surrendered its claim of deduction qua education cess vide letter dated 2-3-2022 ad reiterated vide letter dated 6-9-2022. Further the assessee, along with the present reply to show cause notice, also filed a revised computation of income for withdrawal of such claim of deduction. k) On 29-9-2022, order was passed under section 143(3) of the Act make disallowance of education cess in the sum of Rs 4,89,66,487/- and raising a demand of Rs 8,36,910/-. The learned AO duly took note of the assessee’s acceptance to the said disallowance. l) On 28-10-2022, demand of Rs 8,36,910/- was duly paid by the assessee within 30 days of notice of demand. 6. In any event, we hold that penalty is not leviable pursuant to the retrospective amendment in law. Reliance in this regard is placed on the decision of the Hon’ble Supreme Court in the case of CIT vs Hindustan Electro Graphites Ltd reported in 243 ITR 48 (SC). As on the date of filing the original return of income and revised returns of income, the assessee was having the benefit of the following decisions in its favour:- ITA No. 1786/Del/2024 M/s. Jindal Polyfilms Ltd Page | 6 a) Hon’ble Rajasthan High Court in the case of Chambal Fertilisers & Chemicals Ltd vs JCIT reported in 107 taxmann.com 484 (Raj) b) Hon’ble Bombay High Court in the case of Sesa Goa Ltd vs JCIT reported in 117 taxmann.com 96 (Bom) 7. From the above list of gists and events, it could be seen that assessee had voluntarily surrendered the claim of deduction on account of education cess within the time prescribed under Rule 132 of the Income Tax Rules. Hence this is not a fit case for levy of penalty under section 270A of the Act in the hands of the assessee and accordingly we direct the learned AO to delete the same. Accordingly, the grounds raised by the assessee are allowed. 8. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 22/01/2025. -Sd/- -Sd/- (MADHUMITA ROY) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 22/01/2025 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "