TERRA INFRA DEVELOPMENT LIMITED,NAGPUR V. .ACIT CIRCLE-3, NAGPUR

ITA 297/NAG/2024

AI Insights

The case involves Terra Infra Development Ltd., which appealed against a penalty imposed by the Assistant Commissioner of Income Tax under section 270A for underreporting income. The penalty was based on disallowances made during the assessment, which the assessee contested. The Tribunal found that the assessee had filed for immunity under section 270AA, which was unjustly rejected without a proper hearing. The Tribunal also noted that the additions made to the income were debatable and thus, penalties under section 270A were not applicable. The Tribunal's decision emphasized the importance of providing a reasonable opportunity of being heard and the applicability of section 270AA in cases where the conditions for immunity are satisfied.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 24253 (ITAT-NAGPUR)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 14-05-2024
• Other Referred Cases: Narayani Ispat Pvt. Ltd., ITA no.2127/Kol./2014
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHAY Y. MARATHE
• Assessee Lawyers: KISHORE P. DEWANI
• Keywords: Business expenditure; Depreciation; Tax effect; Principle of natural justice; TDS
• Section: 270AA

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI K.M. ROY, ACCOUNTANT, MEMBER ITA no.297/Nag./2024 (Assessment Year : 2017–18) Terra Infra Development Ltd. T–40, Hingna Road, MIDC Industrial Area, Nagpur 440 016 PAN – AAACN7166R ……………. Appellant v/s Asstt. Commissioner of Income Tax Circle–3, Nagpur ……………. Respondent Assessee by : Shri Kishore P. Dewani Revenue by : Shri Abhay Y. Marathe Date of Hearing – 03/12/2024 Date of Order – 12/12/2024 O R D E R PER V. DURGA RAO, J.M. Aforesaid appeal by the assessee against the impugned order dated 08/03/2024, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2017–18, emanating against penalty order dated 16/02/2022, passed u/s 270A of the Income Tax Act, 1961 (\"the Act\"). 2. In its appeal, the assessee has raised following grounds:– “1. The order passed by CIT(A) is without providing reasonable opportunity of being heard and is in violation of principles of natural justice. Dismissal of grounds is unjustified and unwarranted. 2. The order passed by Commissioner of Income Tax (Appeals), National Faceless Appeal Centre dated 08/03/2024 is illegal, invalid and bad in law. 3. The order imposing penalty u/s 270A of I.T. Act 1961 at Rs.79,132/- is unjustified, unwarranted and bad in law. 2 Terra Infra Development Ltd. 4. The order imposing penalty without giving reasonable opportunity of being heard is in violation of principles of natural justice and is bad in law. 5. The learned A.O. ought not to have levied penalty in view of application for immunity having been submitted u/s 270AA of I.T. Act 1961 and requisite conditions for grant of immunity being available on record. 6. The learned A.O. erred in levying penalty u/s 270A of I.T. Act 1961 by holding that assessee has under reported income. 7. Levy of penalty u/s 270A of I.T. Act 1961 is unjustified, unwarranted and bad in law 3. The assessee company, for the year under consideration, filed its return of income declaring total income at ` nil, due to current year loss of ` 93,94,104. The case of the assessee was selected for scrutiny through CASS. Statutory notices were issued by the Assessing Officer which were served on the assessee. The Assessing Officer completed regular assessment on 11/12/2019, determining loss at ` 88,81,922, as against the loss reported in the return of income at ` 93,94,104, by disallowing interest on TDS and depreciation. 4. The Assessing Officer made addition in respect to disallowance of interest on TDS and depreciation as discussed in the assessment order. The Assessing Officer also initiated penalty proceeding under section 270A of the Act against the disallowance made in the assessment order on account of underreporting of income. 5. The assessee has not filed appeal challenging the addition made in view of no tax effect. The assessee furnished Form no.68, seeking immunity from penalty under section 270A of the Act in terms of provisions of section 270AA(2) on 07/01/2020 by accepting the disallowance and not filing appeal. 3 Terra Infra Development Ltd. The Assessing Officer, vide communication dated 14/02/2022, rejected the immunity application. The Assessing Officer did not pass the order under section 270AA of the Act before 28/02/2020. However, he noted from the ledger account that the assessee paid 'interest on TDS' which was reflected in the books of the assessee (Siltara Energy) which was filed online during assessment proceedings. The assessee has also paid interest on TDS at ` 2,07,138 and this amount was inadmissible as deduction being expenditure penal in nature. Therefore, amount of ` 2,07,138, was disallowed and added to the total income of the assessee. Depreciation was disallowed to the extent of ` 3,05,044. As the assessee has under reported the income, therefore, penalty proceedings u/s 270A of the Act is initiated separately. 6. On appeal, the learned CIT(A) in its order vide Para–9, has noted that the amount of depreciation is liable for taxation since the use towards business could not be substantiated by the assessee. The interest on TDS paid by the assessee being penal in nature hence the Assessing Officer was justified in disallowing the same. The learned CIT(A) in its order vide Para–6 at Page–5, has also noted that the Jurisdictional Assessing Officer filed reply dated 14/02/2022, wherein no immunity order was passed. 7. Before us, the learned Counsel for the assessee submitted that the assessee has not been granted opportunity in terms of proviso to section 270AA(4) of the Act before passing the order for rejection of immunity for imposition of penalty. He submitted that the interest paid for delay in payment of TDS is compensatory in nature and is allowable deduction. In support of this contention, the learned Counsel relied upon the decision of the 4 Terra Infra Development Ltd. Co–ordinate Bench, Kolkata, rendered in Narayani Ispat Pvt. Ltd., ITA no.2127/Kol./2014, vide order dated 30/08/2017, wherein it has been held that interest on delayed payment of TDS is compensatory and not penal in nature and is allowable business expenditure. In the regular assessment framed disallowance of interest paid on TDS and deprecation was made on the basis of information as provided by the assessee in the return and assessment proceedings. It is explained in statement of facts before the learned CIT(A) that addition made is of debatable nature and the assessee was under a bona fide belief. In terms of statutory provisions of section 270A(6), the Assessing Officer ought not to have levied the penalty under section 270A of Act, as matter of disallowance are supported by bona fide explanation. The case of assessee is not underreporting of income in terms of provisions of section 270A(6) of the Act is exigible for imposition of penalty. 8. Per–contra, the learned Departmental Representative relied on the order of the authorities below and prayed that the concurrent findings of the learned CIT(A) need not be disturbed. 9. We have heard the rival arguments, perused the material available on record and gone through the orders of the authorities below. The levy of penalty by the Assessing Officer ignoring the application for immunity which was upheld by the learned CIT(A) has no valid reason and/or justification. The requisite condition for grant of immunity stands satisfied by the assessee and therefore, there was no scope for non–grant of immunity available to the assessee in terms of statutory provisions of section 270AA of the Act and that too without giving opportunity to the assessee. On this count itself the 5 Terra Infra Development Ltd. penalty order passed by the Assessing Officer and confirmed by the learned CIT(A) is liable to be quashed. It is well settled proposition that no penalty under section 270A of the Act is leviable in respect of debatable addition made in the assessment framed particularly when the explanation is bona fide and the assessee has disclosed all material facts to substantiate the explanation offered. Thus, we hold that the order imposing penalty under section 270A at ` 79,132, is unwarranted and is hereby quashed. The grounds raised by the assessee are allowed. 10. In the result, appeal filed by the assessee is allowed. Order pronounced in the open Court on 12/12/2024 Sd/- K.M. ROY ACCOUNTANT MEMBER Sd/- V. DURGA RAO JUDICIAL MEMBER NAGPUR, DATED: 12/12/2024 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Nagpur; and (5) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Sr. Private Secretary ITAT, Nagpur "