Rajasthan High Court - Jodhpur
G R Infraprojects Limited vs Assistant Commissioner Of Income-Tax on 2 January, 2024
Author: Vijay Bishnoi
Bench: Vijay Bishnoi
[2023:RJ-JD:44789-DB]
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
D.B. Civil Writ Petition No. 5594/2023
G R Infraprojects Limited, Through Its General Manager Shri
Kuldeep Jain (Age 46 Years), Having Head Office At G R House,
Hiran Magri, Sector-11, Udaipur (Rajasthan)- 313002.
----Petitioner
Versus
1. Assistant Commissioner Of Income-Tax, Circle-2, Aaykar
Bhawan, Subcity Center, Savina, Udaipur Rajasthan -
313001.
2. Principal Chief Commissioner Of Income-Tax, Income-Tax
Department, Ncr Building, Statue Circle, Jaipur
(Rajasthan)- 302005.
3. Central Board Of Direct Taxes, Through Chairperson,
Type-7, Bungalow No. 75, New Moti Bagh, New Delhi -
110021.
----Respondents
For Petitioner(s) : Mr. Vikas Balia, Sr. Advocate
assisted by Mr. Prateek Gattani
For Respondent(s) : Mr. K. K. Bissa
HON'BLE MR. JUSTICE VIJAY BISHNOI
HON'BLE MR. JUSTICE MUNNURI LAXMAN
Judgment
02/01/2024 (Per Hon'ble Vijay Bishnoi, J.)
1. This writ petition is filed by the petitioner seeking following
reliefs:
"It is, therefore, most humbly prayed that this Hon'ble
Court may kindly be pleased to:-
a. Issue writ in the nature of mandamus or any other
appropriate writ, order or direction for quashing and/or
set-aside the Impugned Penalty Order dated
31.03.2023 (Annexure-11) passed under Section 270A
of the Income-tax Act, 1961 by the Respondent No.1;
b. Issue writ in the nature of mandamus or any other
appropriate writ, order or direction for quashing and/or
[2023:RJ-JD:44789-DB] (2 of 16) [CW-5594/2023]
set-aside consequential demand notice dated
31.03.2023 (Annexure-11) issued under Section 156 of
the Income-tax Act, 1961 by the Respondent No.1;
c. To issue writ of mandamus and/or any other
appropriate writ to declare that disallowance of
deduction in respect any surcharge of cess which is not
allowable as deduction under Section 40 then in terms
of Section 155(18) of the Act for the purpose of levy of
penalty under Section 270A of the Act the same shall
be considered as under- reported income and therefore
immunity from Imposition of penalty as envisaged
under Section 270AA of the Act shall not be denied if an
assessee qualifies conditions as enumerated under sub
section (1) and (2) of Section 270AA of the Act
d. Allow the writ petition with costs;
e. Grant any other relief as deemed to be fit and proper
under the facts and circumstances of the case."
2. The facts, not in dispute, are that the petitioner is a public
limited company and engaged in execution of turnkey infra-
projects. The petitioner-company is regularly filing its income tax
return as per applicable provisions of Income Tax Act, 1961
(hereinafter referred as 'the Act').
3. The petitioner-company filed return of income for the financial
year 2019-2020 i.e. assessment year 2020-21 on 13.02.2021. A
show cause notice dated 29.06.2021 under Section 143(2) of the
Act was issued to the petitioner-company. Subsequently, notices
under Section 142 (1) of the Act were issued to the petitioner-
company on 26.11.2021 and 26.02.2022 which were replied by
the petitioner-company vide notice dated 16.03.2022. The
petitioner-company was asked to show cause why not its claim for
deduction of edcuation cess of Rs.12,85,58,982/- be disallowed
[2023:RJ-JD:44789-DB] (3 of 16) [CW-5594/2023]
and be added back to its income for the relevant financial year
and penalty proceeding be initiated under Section 270-A of the
Act.
4. In response to the notice dated 16.03.2022, the petitioner-
company vide reply dated 19.03.2022 has withdrawn its claim for
deduction of education cess and accepted the proposed variation.
The Assessing Officer has passed the assessment order dated
22.09.2022 whereby single addition in relation to deduction of
education cess of Rs.12,85,58,982/- is made and added it back to
the income of the petitioner-company and ordered for initiating
penalty proceeding under Section 270A of the Act for misreporting
by way of underreporting of income. Simultaneously, notice dated
22.09.2022 is issued to the petitioner-company under Section 274
read with Section 270A of the Act to show cause why penalty be
not imposed on it. In response to the notice dated 22.09.2022,
the petitioner-company filed its response vide reply dated
18.10.2022 and also filed an application under Section 270AA of
the Act seeking immunity from imposition of penalty under Section
270A of the Act under prescribed form. Another show cause notice
dated 06.02.2023 under Section 270A of the Act was issued by
the Assessing Officer for imposing penalty which is also replied by
the petitioner-company on 13.02.2023. Thereafter, again a show
cause notice dated 30.03.2023 for imposing penalty under Section
270A of the Act was issued and the petitioner-company was asked
to file reply on or before 31.03.2023 at 5:00 PM. As per the
petitioner-company, reply to the same has been filed by it on
31.03.2023 before 5:00 PM however, the respondent-department
[2023:RJ-JD:44789-DB] (4 of 16) [CW-5594/2023]
passed the penalty order dated 31.03.2023 under Section 270A of
the income Tax Act and imposed a penalty of 200% of tax upon
the petitioner-company. Consequently, notice of demand dated
31.03.2023 under Section 156 of Income Tax Act was issued to
the petitioner-company. Being aggrieved with the same, the
petitioner-company has filed this writ petition.
5. Reply to the writ petition has been filed on behalf of the
respondents, wherein preliminary objection regarding
maintainability of the writ petition is raised on the ground of
availability of alternative remedy of filing an appeal. The
respondent-department has also justified its action in passing the
impugned order dated 31.03.2023 and the impugned notice dated
31.03.2023.
6. Learned counsel for the petitioner has submitted that though
the impugned order dated 31.03.2023 passed under Section 270A
of the Act is appelable under Section 246A of the Act but as the
impugned order has been passed in violation of principle of natural
justice and in contravention of the statutory scheme of the Act,
the petitioner-company has invoked the extraordinary powers of
this Court under Article 226 of the Constitution of India.
7. It is argued that issue raised by the petitioner-company in this
petition is purely legal and does not require any investigation into
the facts, the writ petition filed by the petitioner-company under
Article 226 of the Constitution of India is maintainable. Learned
counsel has placed reliance on a decision of Hon'ble Supreme
Court rendered in M/s Godrej Sara Lee Ltd. vs. The Excise
[2023:RJ-JD:44789-DB] (5 of 16) [CW-5594/2023]
and Taxation Officer-cum-Assessing Authority and Ors.,
2023 SCC OnLine SC 95.
8. On the other hand, learned counsel for the respondent-
department has submitted that in view of the availability of
alternative and statutory remedy of appeal to the petitioner-
company under Section 246A of the Act, the writ petition filed by
the petitioner-company is liable to be dismissed on the ground of
alternative remedy only. Learned counsel for the respondent-
department has placed reliance on a decision of Division Bench of
this Court rendered in Hindustan Zinc Limited vs. National
Faceless Assessment Centre & Ors. (D.B.Civil Writ Petition
No. 11772/2022) and one another connected writ petition
decided on 22.09.2022. He has also placed reliance on a decision
of Single Bench of this Court dated 13.12.2021 rendered in
Veetrag Buildcon Private Limited vs. Union of India and
Ors. (S.B.Civil Writ Petition No.12283/2021).
9. On merits, learned counsel for the petitioner-company has
submitted that while filing return for the financial year 2019-20,
the petitioner-company claimed the benefit of deduction of
education cess, which was permissible during the relevant time of
filing return of income in view of the judgment passed by this
Court in Chambal Fertilisers and Chemical Ltd. vs. JCIT,
Range 2, Kota (D.B. Income Tax Appeal No.52/2018),
wherein the Division Bench of this Court has categorically held
that cess is not tax. It is further submitted that the Bombay High
[2023:RJ-JD:44789-DB] (6 of 16) [CW-5594/2023]
Court in Sesa Goa Limited vs. JCIT (ITA No.17/2013) has
also held that education cess is allowable expenditure/deduction.
10. It is contended that in the year 2022 vide Finance Act, 2022
sub-section (18) has been inserted in Section 155 of the Act and
the said amendment came into force on 01.04.2022. As per the
said amendment, it is provided that any deduction of any
surcharge or cess, which is not allowable as deduction under
Section 40 of the Act has been claimed and allowed in the case of
an assessee in any previous year, such claim shall be deemed to
be under-reported income of the assessee for such previous year
under sub-section (3) of Section 270A of the Act. It is further
provided that such claim of surcharge/cess shall not be considered
as under- reported in case the assessee makes an application to
the assessing officer in the prescribed form and within the
prescribed time, requesting for recomputation of total income of
the previous year without allowing the claim for deduction of
surcharge/cess and pay the amount of tax due thereon within
specified time.
11. Learned counsel has further argued that the benefit of
allowable deduction of education cess was claimed by the
petitioner-company when it was permitted as per law, however, as
soon as the amendment under Section 155 of the Act was
introduced by way of inserting sub-section (18), the petitioner-
company immediately suo moto withdrew its claim for cess
amounting to Rs. 12,85,58,982/- to buy mental peace and to
avoid litigation and levy of penalty etc. vide letter dated
[2023:RJ-JD:44789-DB] (7 of 16) [CW-5594/2023]
19.03.2022. In such circumstances, it cannot be said that the
petitioner-company has concealed any fact or misrepresented. In
the above circumstances, it cannot be said that the petitioner-
company has under-reported the income by way of misreporting.
12. It is further argued that penalty under Section 270A of the Act
can only be levied if an assesse misrepresent its income in
consequence of misreporting, which is categorized in sub-section
(9) of Section 270A of the Act. It is contended that from the
assessment order dated 22.09.2022 and further show-cause
notices issued by Assessing Officer, it is no where reflected that
which part of sub-section (9) of Section 270A is attracted in the
case of petitioner-company, hence the action of respondents of
rejecting the application of petitioner-company seeking immunity
from imposition of penalty under Section 270AA of the Act,
holding that the petitioner-company is not fulfilling the condition
mentioned in the sub-section (3) of the Section 270AA of the Act,
is arbitrary and illegal.
13. It is further submitted that as per the provisions of Section.
270AA of the Act, an assessing officer is bound to decide the
application filed by any assessee for granting immunity from
imposing penalty under Section 270A within specified time but in
the case of the petitioner, the said application has never been
decided within the prescribed time limit and straightway the
impugned order has been passed, whereby the said application for
granting immunity from imposing penalty has also been dismissed
in illegal manner.
[2023:RJ-JD:44789-DB] (8 of 16) [CW-5594/2023]
14. While relying on the decisions of Delhi High Court rendered in
Schneider Electric South East Asia (HQ) Pte Ltd. vs. Asst.
Commissioner of Income Tax International Taxation Circle
3(1)(2), New Delhi & Ors. [2022] 443 ITR 186 (Delhi),
Ultimate Infratech Private Limited vs. National Faceless
Assessment Centre Delhi & Anr., 2022(4) ΤΜΙ 1086 - DELHI
HIGH COURT and Rohit Kapur VS. Principal Commissioner of
Income Tax-7, New Delhi & Anr., 2023(3) TMI 930 DELHI
HIGH COURT, learned counsel for the petitioner-company has
prayed that the writ petition may be allowed and the reliefs
claimed in this writ petition may kindly be granted.
15. Per contra, learned counsel for the respondents countering the
submissions of counsel for petitioner on merits has argued that
the respondent-department has not committed any illegality in
passing the impugned order as the petitioner-company is not
eligible for immunity from levying of penalty under Section 270AA
of the Act.
16. Heard learned counsel for the rival parties.
17. So far as maintainability of this writ petition is concerned,
having gone through the material available on record, we find that
in the present case, there is no requirement of making an
investigation into facts and the question raised by the petitioner in
this writ petition is only this that whether the petitioner-company
is entitled to claim benefit of immunity from imposition of penalty
under Section 270A of the Act or not. The Hon'ble Supreme Court
in M/s Godrej Sara Lee Ltd. vs. The Excise and Taxation
[2023:RJ-JD:44789-DB] (9 of 16) [CW-5594/2023]
Officer-cum-Assessing Authority and Ors. (supra) has held
that where the controversy is purely legal one and does not
involve disputed question of fact but only question of law, then it
should be decided by the High Court instead of dismissing the writ
petition on the ground of alternative remedy. The relevant portion
of the decision is reproduced hereunder:
"8. That apart, we may also usefully refer to the
decisions of this Court reported in (1977) 2 SCC 724
(State of Uttar Pradesh & ors. vs. Indian Hume Pipe Co.
Ltd.) and (2000) 10 SCC 482 (Union of India vs. State
of Haryana). What appears on a plain reading of the
former decision is that whether a certain item falls
within an entry in a sales tax statute, raises a pure
question of law and if investigation into facts is
unnecessary, the high court could entertain a writ
petition in its discretion even though the alternative
remedy was not availed of; and, unless exercise of
discretion is shown to be unreasonable or perverse, this
Court would not interfere. In the latter decision, this
Court found the issue raised by the appellant to be
pristinely legal requiring determination by the high
court without putting the appellant through the mill of
statutory appeals in the hierarchy. What follows from
the said decisions is that where the controversy is a
purely legal one and it does not involve disputed
questions of fact but only questions of law, then it
should be decided by the high court instead of
dismissing the writ petition on the ground of an
alternative remedy being available."
18. In view of the above, the preliminary objection raised by the
respondents regarding maintainability of the writ petition is
rejected.
19. For proper adjudication of controversy involved, we deem it
appropriate to quote the relevant provisions of the Income Tax
Act, which read thus:
"155. Other amendments
[2023:RJ-JD:44789-DB] (10 of 16) [CW-5594/2023]
(18) Where any deduction in respect of any surcharge
or cess, which is not allowable as deduction under
section 40, has been claimed and allowed in the case of
an assessee in any previous year, such claim shall be
deemed to be under-reported income of the assessee
for such previous year for the purposes of sub- section
(3) of section 270A, notwithstanding anything
contained in sub-section (6) of section 270A, and the
Assessing Officer shall recompute the total income of
the assessee for such previous year and make
necessary amendment; and the provisions of section
154 shall, so far as may be, apply thereto, the period of
four years specified in sub-section (7) of section 154
being reckoned from the end of the previous year
commencing on the 1st day of April, 2021: Provided
that in a case where the assessee makes an application
to the Assessing Officer in the prescribed form and
within the prescribed time, requesting for
recomputation of the total income of the previous year
without allowing the claim for deduction of surcharge or
cess and pays the amount due thereon within the
specified time, such claim shall not be deemed to be
under-reported income for the purposes of sub-section
(3) of section 270A.
270A. Penalty for under reporting and misreporting of
income.
(9) The cases of misreporting of income referred to in
sub- section (8) shall be the following, namely:-
(a) misrepresentation or suppression of facts;
(b) failure to record investments in the books of
account;
(c) claim of expenditure not substantiated by any
evidence;
(d) recording of any false entry in the books of account;
(e) failure to record any receipt in books of account
having a bearing on total income; and
(f) failure to report any international transaction or any
transaction deemed to be an international transaction
or any specified domestic transaction, to which the
provisions of Chapter X apply.
270AA. Immunity from imposition of penalty, etc.
(1) An assessee may make an application to the
Assessing Officer to grant immunity from imposition of
penalty under section 270A and initiation of
proceedings under section 276C or section 276CC, if he
fulfils the following conditions, namely:-
[2023:RJ-JD:44789-DB] (11 of 16) [CW-5594/2023]
(a) the tax and interest payable as per the order of
assessment or reassessment under sub-section (3) of
section 143 or section 147, as the case may be, has
been paid within the period specified in such notice of
demand; and
(b) no appeal against the order referred to in clause (a)
has been filed.
(2) An application referred to in sub-section (1) shall be
made within one month from the end of the month in
which the order referred to in clause (a) of sub-section
(1) has been received and shall be made in such form
and verified in such manner as may be prescribed.
(3) The Assessing Officer shall, subject to fulfilment of
the conditions specified in sub-section (1) and after the
expiry of the period of filing the appeal as specified in
clause (b) of sub-section (2) of section 249, grant
immunity from imposition of penalty under section
270A and initiation of proceedings under section 276C
or section 276CC, where the proceedings for penalty
under section 270A has not been initiated under the
circumstances referred to in sub-section (9) of the said
section 270A.
(4) The Assessing Officer shall, within a period of one
month from the end of the month in which the
application under sub-section (1) is received, pass an
order accepting or rejecting such application:
Provided that no order rejecting the application shall
be passed unless the assessee has been given an
opportunity of being heard.
(5) The order made under sub-section (4) shall be final.
(6) No appeal under section [section 246 or] section
246A or an application for revision under section 264
shall be admissible against the order of assessment or
reassessment, referred to in clause (a) of sub-section
(1), in a case where an order under sub- section (4)
has been made accepting the application."
20. Sub-section (18) of Section 155 of the Income Tax Act is
inserted vide Finance Act, 2022 w.e.f. 01.04.2022. The above
referred provisions provide that deduction of any surcharge, cess,
which is not allowable as deduction under Section 40 of the
Income Tax Act, then such claim shall be deemed to be under-
[2023:RJ-JD:44789-DB] (12 of 16) [CW-5594/2023]
reported income of the assessee for the purpose of levy of penalty
under Section 270A of the Act. It further provides that if an
assessee makes an application to the assessing officer in
prescribed form in prescribed time requesting for recomputation of
income of previous year deducting the surcharge or cess and pays
the difference amount within specified time, his claim shall not be
deemed to be unreported income.
21. Section 270A of the Act specifies penalty for under-reporting
and misreporting, wherein sub-section (9) of Section 270AA of the
Act categorizes the cases of misreporting of income.
22. Sub-section (3) of Section 270AA of the Income Tax Act
empowers the assessing officer to grant immunity from imposition
of penalty under Section 270A and initiation of proceedings under
Section 276C or under Section 276CC of the Income Tax Act on
fulfillment of the conditions of sub-section (1) of Section 270AA
after the expiry of the period of filing the appeal if the proceeding
has not been initiated against the assessee under the
circumstances referred to in sub-section (9) of Section 270A.
23. Sub-section (4) of Section 270AA provides that the assessing
officer shall pass an order accepting or rejecting any application
filed by the assessee seeking immunity from imposition of penalty
under Section 270A within a period of one month from the end of
month in which the application under sub-section (1) is received.
24. In the case of Schneider Electric South East Asia (HQ) Pte
Ltd. (supra), Delhi High Court has held as under:
[2023:RJ-JD:44789-DB] (13 of 16) [CW-5594/2023]
"6. Having perused the impugned order dated 09th
March, 2022, this Court is of the view that the
Respondents' action of denying the benefit of immunity
on the ground that the penalty was initiated under
Section 270A of the Act for misreporting of income is
not only erroneous but also arbitrary and bereft of any
reason as in the penalty notice the Respondents have
failed to specify the limb - "underreporting" or
"misreporting" of income, under which the penalty
proceedings had been initiated.
7. This Court also finds that there is not even a whisper
as to which limb of Section 270A of the Act is attracted
and how the ingredient of sub-section (9) of Section
270A is satisfied. In the absence of such particulars, the
mere reference to the word "misreporting" by the
Respondents in the assessment order to deny immunity
from imposition of penalty and prosecution makes the
impugned order manifestly arbitrary.
8. This Court is of the opinion that the entire edifice of
the assessment order framed by Respondent No.1 was
actually voluntary computation of income filed by the
Petitioner to buy peace and avoid litigation, which fact
has been duly noted and accepted in the assessment
order as well and consequently, there is no question of
any misreporting.
9. This Court is further of the view that the impugned
action of Respondent No.1 is contrary to the avowed
Legislative intent of Section 270AA of the Act to
encourage/incentivize a taxpayer to (i) fast-track
settlement of issue, (ii) recover tax demand; and
(iii) reduce protracted litigation.
[Emphasis supplied]
25. In Ultimate Infratech Private Limited vs. National
Faceless Assessment Centre Delhi & Anr.(supra), Delhi High
Court has held as under:
"5. Having heard learned counsel for the petitioner, this
Court is of the view that it is only in cases where
proceedings for levy of penalty have been initiated on
account of alleged misreporting of income that an
assessee is prohibited from applying and availing the
benefit of immunity from penalty and prosecution under
Section 270AA.
6. In fact, the statutory scheme for grant of immunity
is based on satisfaction of three fundamental
conditions, namely, (i) payment of tax demand; (ii)
[2023:RJ-JD:44789-DB] (14 of 16) [CW-5594/2023]
non-institution of appeal; and (iii) initiation of penalty
on account of under reporting of income and not on
account of misreporting of income.
7. This Court is also of the view that the petitioner
cannot be prejudiced by the inaction of the Assessing
Officer in passing an order under Section 270AA of the
Act within the statutory time limit as it is settled law
that no prejudice can be caused to any assessee on
account of delay/default on the part of the Revenue.
8. In the present case, the petitioner has satisfied the
aforesaid conditions, inasmuch as, (i) the tax has been
paid on the additions; (ii) appeal has undisputedly not
been filed; and (iii) penalty (as would be evident from
the penalty notice) has been initiated on account of
"underreporting" of income."
26. In Rohit Kapur VS. Principal Commissioner of Income
Tax-7, New Delhi & Anr. (supra), Delhi High Court has held as
under:
"12. Before proceeding further, it is relevant to refer to
Sub-section 4 of Section 270AA of the Act, which reads
as under:
270AA xxxx xxxx xxxx
The Assessing Officer shall, within a period of
one month from the end of the month in
which the application under sub-section (1) is
received, pass an order accepting or rejecting
such application:
Provided that no order rejecting the
application shall be passed unless the
assessee has been given an opportunity of
being heard.
xxxx xxxx xxxx
13. The proviso to Sub-section (4) of Section 270AA
of the Act makes it amply clear that before an
application of rejected, the applicant must be given
an opportunity of being heard. In the present case,
there is no dispute that the petitioner was not
afforded the said opportunity.
[2023:RJ-JD:44789-DB] (15 of 16) [CW-5594/2023]
14. In view of the above, this Court considers it
apposite to set aside the impugned order as the
same has been passed without following the
procedure as set out in Section 270AA(4) of the
Act."
27. In the present case, neither in the assessment order dated
22.09.2022 nor in the subsequent show-cause notices, the
Assessing Officer has specified that the case of the petitioner-
company is covered under which part of sub-section (9) of Section
270A of the Act. Even in the impugned order dated 31.03.2023
also, it is not specified that which part of sub-section (9) of
Section 270A of the Act is attracted in the case of petitioner.
28. Otherwise also, the petitioner-company in its reply to show
cause notice dated 16.03.2022 and subsequent replies to the
different show cause notices has justified its claim for deduction of
education cess, however, the Assessing Officer without considering
the said justification or rejecting the same has passed the
impugned order mechanically. We are of the view that once the
petitioner-company has withdrawn its claim vide letter dated
19.03.2022 for deduction of education cess in view of insertion of
sub-Section (18) of Section 155 before it came into force w.e.f.
01.04.2022, the petitioner-company is entitled for immunity from
imposition of penalty under Section 270A of the Act though the
proceedings against it were initiated for imposition of penalty.
Moreover, while initiating the said proceedings vide order dated
22.09.2022, the Assessing Officer has failed to specify that which
part of sub-Section (9) of Section 270A is attracted in the case of
petitioner-company, the said initiation is nonest. The respondent
[2023:RJ-JD:44789-DB] (16 of 16) [CW-5594/2023]
vide impugned order dated 31.03.2022 has clarified that the
petitioner-company is fulfilling the conditions mentioned in sub-
Section (1) and (2) of Section 270AA, however, its conclusion that
the petitioner-company do not fulfill the condition mentioned in
sub-section (3) of Section 270AA of the Act is illegal and cannot
be sustained.
29. Apart from that the application filed by the petitioner-company
under Section 270AA of the Act seeking immunity from imposition
of penalty has not been decided by the Assessing Officer within
prescribed time as per sub-section (4) of Section 270AA of the
Act, the impugned action of the Assessing Officer of imposing
penalty against the petitioner-company is liable to be set aside.
30. Resultantly, this writ petition is allowed. The penalty order
dated 31.03.2023 passed under Section 270A of the Income Tax
Act is set aside. The demand notice issued by the respondent No.1
under Section 156 of the Income Tax Act is also set aside. The
respondent No.1 is directed to grant immunity under Section
270AA of the Income Tax Act to the petitioner-company.
31. No order as to cost.
(MUNNURI LAXMAN),J (VIJAY BISHNOI),J
masif/-D.R.
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