Chambal Fertilizers And Chemicals Limited, Cfcl Complexgadepan, Gadepan v. Order

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Civil Writ Petition No. 10198/2023 Chambal Fertilizers and Chemicals Limited, CFCL ComplexGadepan, Gadepan - 325208, Rajasthan through its authorisedRepresentative Anuj Jain, S/o Mr. JBK Jain, aged about 59 years,R/o Flat No. 303, Rainbow Apartments, Sector 43, Gurgaon,Haryana- 122009 ----Petitioner Versus 1. Office of the Principal Commissioner of Income Tax,Aaykar Bhawan, Subcity Centre, Savina, Udaipur -313001, Rajasthan.Aaykar Bhawan, Subcity Centre, Savina, Udaipur -313001, Rajasthan. 2. Office of the Deputy Commissioner of Income Tax,DCIT/ACIT, Central Revenue Building, Rawat Bhata Road,Kota - 324009, Rajasthan.DCIT/ACIT, Central Revenue Building, Rawat Bhata Road,Kota - 324009, Rajasthan. ----Respondents For Petitioner(s) : Mr. Sanjay Jhanwar, Sr. Advocateassisted by Ms. Vrinda Lakhotia, Mr.Rajat Sharma & Mr. Aryan SinghChouhan. assisted by Ms. Vrinda Lakhotia, Mr.Rajat Sharma & Mr. Aryan SinghChouhan. For Respondent(s): Mr. Shantanu Sharma with Ms. Bhawana Laddha.Ms. Bhawana Laddha. HON'BLE MR. JUSTICE ARUN BHANSALI HON'BLE MRS. JUSTICE SHUBHA MEHTA Order 04/01/2024 1.This writ petition has been filed by the petitioner aggrievedof order dated 13.03.2023 (Annex.14) passed by the PrincipalCommissioner of Income Tax, Udaipur whereby revision petitionfiled by the petitioner under Section 264 of the Income Tax Act,1961 (‘the Act’) has been rejected. 2.The petitioner had filed its original return of income underSection 139 (1) of the Act on 30.11.2018 for the Assessment Year 2018-19 and revised return of income on 29.03.2019 underSection 139 (5) of the Act. The case of the petitioner was selectedfor complete scrutiny and an exhaustive list of issues wascommunicated by notice under Section 164 (2) of the Act on22.09.2019. During the course of scrutiny, various notices underSection 142 (1) of the Act were issued and replies to the samewere submitted by the petitioner. 3.It is claimed that during the course of scrutiny proceedings,the petitioner realized that ‘provision for doubtful GST input taxcredit’ amounting to Rs.16,30,91,496/- had been inadvertentlymerged with another expense account and mistakenly claimed asexpenses under the IT provisions. Accordingly, the said amountwas suo moto surrendered by the petitioner by revising its returnof income and adding back the amount ‘provision for doubtful GSTinput tax credit’, to the total income. The said aspect wascommunicated vide letter dated 24.02.2021 alongwith submissionof revised computation. 4.The assessment order (Annex.6) under Section 143 (3) ofthe Act was passed by the National E-Assessment Centre (‘NeAC’)making only addition of suo moto surrendered amount ofRs.16,30,91,496/-, however, it was observed in the order that thepenalty under Section 270A of the Act is imposed for misreportingof the income. 5.The petitioner filed an application under Section 270AA ofthe Act against the penalty order before the DeputyCommissioner, which came to be rejected by order dated27.07.2021 (Annex.9). 6.The petitioner challenged the order of rejection by filingrevision petition under Section 264 of the Act, inter-alia, on theground that no opportunity of hearing was provided to thepetitioner, which was in non-compliance of Section 270AA of theAct and that the order rejecting the application did not specify howthere was misreporting of the income when the amount wasdisclosed by the petitioner on its own volition and that the case ofthe petitioner did not fall in any of the exceptions under Section270AA of the Act. However, the revision petition came to berejected by order dated 13.03.2023. 6.The petitioner challenged the order of rejection by filingrevision petition under Section 264 of the Act, inter-alia, on theground that no opportunity of hearing was provided to thepetitioner, which was in non-compliance of Section 270AA of theAct and that the order rejecting the application did not specify howthere was misreporting of the income when the amount wasdisclosed by the petitioner on its own volition and that the case ofthe petitioner did not fall in any of the exceptions under Section270AA of the Act. However, the revision petition came to berejected by order dated 13.03.2023. 7.Learned counsel for the petitioner, with reference to orderdated 27.07.2021 (Annex.9), passed by the Deputy Commissionerrejecting the application under Section 270AA of the Act madesubmissions that the said order has been passed contrary to theexpress provisions of the Act. Submissions have been made thatin the application filed under Section 270AA of the Act (Annex.7),the petitioner had clearly sought opportunity of being heard,however, no opportunity was provided to the petitioner, whichaction of the authority is in clear violation of the proviso to Section270AA (4) of the Act. Further submissions have been made thatthe order is wholly non-speaking, inasmuch as only one line orderhas been passed that on perusal of the application the authoritydid not find the same tenable and on that count, the orderdeserves to be set aside. 8.Further submissions have been made that the revisionalauthority, instead of appreciating the defect in the order passed bythe Deputy Commissioner, has rejected the application byobserving that the case of the petitioner is within the ambit of Clauses (a) and (c) of Section 270A (9) of the Act and, therefore,Clause (3) of Section 270AA would apply to its case. It issubmitted that the said observations are also without any basis,as nowhere it has been shown as to how the case would fall withinClause (a) or (c) of Section 270A (9) of the Act. It wasemphasized that the petitioner on its own, suo moto, had duringthe course of scrutiny proceedings, offered the amount by revisingits return of income and adding back the amount to total incomeand, therefore, the same was not a case of misrepresentation orsuppression of facts or claim of expenses not substantiated by anyevidence, as required by sub-Clauses (a) and (c) of Section 270A(9) and, therefore, on that count also the order passed by therevisional authority deserves to be set aside. 9.Reliance was placed on Schneider Electric South East Asia(HQ) PTE Ltd. vs. Assistant Commissioner of Income TaxInternational Taxation Circle-3 (1) (2), New Delhi & Ors. : WP (C)5111/2022 decided on 28.03.2022 by Delhi High Court. 10.Learned counsel for the respondents made submissions thatthe present was a case of clear misrepresentation and suppressionof facts, inasmuch as the petitioner had merged the provision fordoubtful GST input tax credit in expense account, whereas thesame was part of income and it is only during the scrutinyproceedings that the said income was offered for taxation, theplea raised that the petitioner has suo moto offered the income, isnot borne out from the record and, therefore, the plea raised inthis regard cannot be accepted. It was submitted that the DeputyCommissioner was justified in rejecting the application seekingimmunity from imposition of penalty and the revisional authority has thoroughly considered all the aspects, as raised by thepetitioner, and has recorded a categoric finding that case of thepetitioner falls within sub-Clause (a) and (c) of Section 270A (9)of the Act and, therefore, the orders impugned did not call for anyinterference. 11.We have considered the submissions made by counsel for theparties and have perused the material available on record. has thoroughly considered all the aspects, as raised by thepetitioner, and has recorded a categoric finding that case of thepetitioner falls within sub-Clause (a) and (c) of Section 270A (9)of the Act and, therefore, the orders impugned did not call for anyinterference. 11.We have considered the submissions made by counsel for theparties and have perused the material available on record. 12.The facts, are not in dispute, wherein on filing of original andrevised returns, the case of the petitioner was selected forcomplete scrutiny and the petitioner was called upon to respond toas many as ten issues by the NeAC. On all the ten issues, onwhich the scrutiny was conducted, the response of the petitionerwas accepted. However, qua the amount of GST which was offered by the petitioner for taxation, it was observed as under: “5. Lastly, as per the revised computation of incomedated 24/02/2021, the assessee has submitted andoffered the GST Provision of Rs.16,30,91,496/- fortaxation, which is added back to the total income of theassessee for the year under consideration. (Addition Rs. - 16,30,91,496/-)Penalty u/s 270A of the Income Tax Act 1961 is imposedfor misreporting of income” 13.From the above assessment order, one aspect is very clear that the authorities under the Act had not detected the said aspectof amount of provision for GST and it was voluntarily offered bythe petitioner. 14.As the order was passed for imposing penalty under Section270A of the Act, the petitioner moved an application under Section270AA of the Act, which reads as under: “270AA. Immunity from imposition of penalty, etc.—(1) An assessee may make an application to the AssessingOfficer to grant immunity from imposition of penalty undersection 270A and initiation of proceedings under section 276C of section 276CC, if he fulfils the following conditions, namely:— (a) the tax and interest payable as per the order ofassessment or reassessment under sub-section (3) ofsection 143 or section 147, as the case may be, has beenpaid 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) shallbe made within one month from the end of the month inwhich the order referred to in clause (a) of sub-section (1)has been received and shall be made in such form andverified in such manner as may be prescribed. (3) The Assessing Officer shall, subject to fulfilmentof the conditions specified in sub-section (1) and after theexpiry of the period of filing the appeal as specified inclause (b) of sub-section (2) of section 249, grantimmunity from imposition of penalty under section 270Aand initiation of proceedings under section 276C or section286CC, where the proceedings for penalty under section270A has not been initiated under the circumstancesreferred to in sub-section (9) of the said section 270A. (4) The Assessing Officer shall, within a period of onemonth from the end of the month in which the applicationunder sub-section (1) is received, pass an order acceptingor rejecting such application: Provided that no order rejecting the application shallbe passed unless the assessee has been given anopportunity of being heard. (5) The order made under sub-section (4) shall be final. (6) No appeal under section 246A or an applicationfor revision under section 264 shall be admissible againstthe order of assessment or reassessment, referred to inclause (a) of sub-section (1), in a case where an orderunder sub-section (4) has been made accepting theapplication." 15.The provisions of Section 270A of the Act, to the extent relevant, reads as under: “270 (1) (2) xxx (4) The Assessing Officer shall, within a period of onemonth from the end of the month in which the applicationunder sub-section (1) is received, pass an order acceptingor rejecting such application: Provided that no order rejecting the application shallbe passed unless the assessee has been given anopportunity of being heard. (5) The order made under sub-section (4) shall be final. (6) No appeal under section 246A or an applicationfor revision under section 264 shall be admissible againstthe order of assessment or reassessment, referred to inclause (a) of sub-section (1), in a case where an orderunder sub-section (4) has been made accepting theapplication." 15.The provisions of Section 270A of the Act, to the extent relevant, reads as under: “270 (1) (2) xxx (9) The cases of misreporting of income referred to insub-section (8) shall be the following, namely:—(a) misrepresentation or suppression of facts;(b) failure to record investments in the books ofaccount;c) claim of expenditure not substantiated by anyevidence;(d) recording of any false entry in the books of account; (e) failure to record any receipt in books of accounthaving a bearing on total income; and (f) failure to report any international transaction or anytransaction deemed to be an international transaction orany specified domestic transaction, to which theprovisions of Chapter X apply.” 16.A perusal of above provisions would reveal that under sub-Section (3) of Section 270AA of the Act, the Assessing Authoritycan grant immunity from imposition of penalty under Section270A, where the proceedings for penalty under Section 270A hasnot been initiated under the circumstances, referred to in sub-Section (9) of Section 270A of the Act and under the provisions ofsub-Section (4), it has been provided that no order rejectingapplication shall be passed unless the assessee has been given anopportunity of being heard. 17.Admittedly, the petitioner in its application under Section270AA of the Act had sought personal hearing and the authoritywas bound to provide such personal hearing, however, admittedlyno opportunity of hearing was provided to the petitioner. Theapplication came to be rejected by the Deputy Commissioner byobserving as under: “7. Under the facts and circumstances of the case,as the assessee has fulfilled all the conditions laid downunder the Section 270AA (1) of the Act except thecondition envisaged under sub-section 3 of the Section270AA of the Act which is as under:- The Assessing Officer shall, subject to fulfilment ofthe conditions specified in sub-section (1) and after theexpiry of the period of filing the appeal as specified inclause (b) of sub-section (2) of section 249, grantimmunity from imposition of penalty under section 270Aand initiation of proceedings under section 276C or section286CC, where the proceedings for penalty under section270A has not been initiated under the circumstancesreferred to in sub-section (9) of the said section 270A. 8. In view of above facts and circumstances of thecase, application of the assessee company in respect ofimmunity from imposition of penalty under Section 270AAof the Act is perused but not found tenable as the penaltyu/s 270A of the Act for the AY 2018-19 has been initiated under the circumstances referred to in sub-section (9) ofthe said Section 270A of the Act and is hereby rejected.” 18.A perusal of above order would reveal that the authority hadpassed a wholly non-speaking order by only reiterating theprovisions of sub-Section (3) of Section 270AA and indicated thatthe application was not found tenable, as penalty under Section270AA of the Act has been initiated under the circumstances,referred to in sub-Section (9) of Section 270A of the Act. 8. In view of above facts and circumstances of thecase, application of the assessee company in respect ofimmunity from imposition of penalty under Section 270AAof the Act is perused but not found tenable as the penaltyu/s 270A of the Act for the AY 2018-19 has been initiated under the circumstances referred to in sub-section (9) ofthe said Section 270A of the Act and is hereby rejected.” 18.A perusal of above order would reveal that the authority hadpassed a wholly non-speaking order by only reiterating theprovisions of sub-Section (3) of Section 270AA and indicated thatthe application was not found tenable, as penalty under Section270AA of the Act has been initiated under the circumstances,referred to in sub-Section (9) of Section 270A of the Act. 19.Neither in the order dated 19.04.2021 (Annex.6) nor in theorder impugned (Annex.9) anything has been indicated as tounder which sub-clause of Section 270A (9), the case of thepetitioner falls and only mechanical observations have been madeto justify the imposition of penalty. 20.The revisional authority, in its order dated 13.03.2023(Annex.14), cursorily observed that the case is observed to bewithin the ambit of Clause (a) and (c) of Section 270A (9) of theAct, therefore, 270AA (c) may apply to petitioner’s case. Therevisional authority apparently did not consider the fact that thepetitioner was not afforded opportunity of hearing in violation ofprovisions of proviso to Section 270AA (4) and that the orderimpugned before it was wholly non-speaking and attempted tojustify imposition of penalty under Section 270A (9) (a) and (c).The very fact that the indications were made that the matter fallwithin (a) and (c), necessarily means that even the revisionalauthority was not sure whether it was a case of misrepresentationor suppression of facts or claim of expense, not substantiated byany evidence. 21.The Delhi High Court in Schneider Electric South East Asia(HQ) PTE Ltd. (supra), inter-alia, observed and directed as under: “6. Having perused the impugned order dated 09March, 2022, this Court is of the view that theRespondents’ action of denying the benefit of immunity onthe ground that the penalty was initiated under Section270A of the Act for misreporting of income is not onlyerroneous but also arbitrary and bereft of any reason as inthe penalty notice the Respondents have failed to specifythe limb – "under reporting" or "misreporting" of income,under which the penalty proceedings had been initiated. 7. This Court also finds that there is not even awhisper as to which limb of Section 270A of the Act isattracted and how the ingredient of sub-section (9) ofSection 270A is satisfied. In the absence of suchparticulars, the mere reference to the word "misreporting"by the Respondents in the assessment order to denyimmunity from imposition of penalty and prosecutionmakes the impugned order manifestly arbitrary 8. This Court is of the opinion that the entire edificeof the assessment order framed by Respondent No.1 wasactually voluntary computation of income filed by thePetitioner to buy peace and avoid litigation, which fact hasbeen duly noted and accepted in the assessment order aswell and consequently, there is no question of anymisreporting 9. This Court is further of the view that theimpugned action of Respondent No.1 is contrary to theavowed Legislative intent of Section 270AA of the Act toencourage/incentivize a taxpayer to (i) fast-tracksettlement of issue, (ii) recover tax demand; and (iii)reduce protracted litigation. 10. Consequently, the impugned order dated 09thMarch, 2022 passed by Respondent No.1 under Section270AA (4) of the Act is set aside and Respondent No.1 isdirected to grant immunity under Section 270AA of the Actto the Petitioner. 11.With the aforesaid directions, the present writpetition along with pending applications stand disposed of.” 22.The finding recorded by the revisional authority is apparently 9. This Court is further of the view that theimpugned action of Respondent No.1 is contrary to theavowed Legislative intent of Section 270AA of the Act toencourage/incentivize a taxpayer to (i) fast-tracksettlement of issue, (ii) recover tax demand; and (iii)reduce protracted litigation. 10. Consequently, the impugned order dated 09thMarch, 2022 passed by Respondent No.1 under Section270AA (4) of the Act is set aside and Respondent No.1 isdirected to grant immunity under Section 270AA of the Actto the Petitioner. 11.With the aforesaid directions, the present writpetition along with pending applications stand disposed of.” 22.The finding recorded by the revisional authority is apparently contrary to the facts and essentially based on assumptions only onaccount of the fact that the petitioner on its own disclosed theincome in question. As noticed hereinbefore, though severalnotices were issued under Section 142 of the Act, during thecourse of scrutiny proceedings and as many as ten issues wereraised, on which the authority could not make any additions, theaspect of merging GST Input Credit with expenses was not pointedout/detected and the same was only pointed out voluntarily by the petitioner and, therefore, apparently sub-Clauses (a) and (c) ofSection 270A (9) of the Act are not attracted.23.In view of above, it is apparent that the DeputyCommissioner violated the provisions of proviso to Section 270AA(4) of the Act by not providing any opportunity of hearing, theorder passed was wholly laconic, the same did not indicate as tounder which part of Section 270A (9), the case of the petitionerwas covered and the revisional authority without giving anycogent reasons, has in a wholly cursory manner indicated the caseof the petitioner, was within the ambit of Clause (a) and (c) ofSection 270A (9) of the Act and, therefore, the order passed bythe assessing authority rejecting application under Section 270AAand the order passed by the revisional authority rejecting revisionpetition, cannot be sustained. 24.Consequently, the writ petition is allowed. The ordersimpugned dated 27.07.2021 (Annex.9) passed by the DeputyCommissioner and 13.03.2023 (Annex.14) passed by therevisional authority are quashed and set aside. The respondentsare directed to grant immunity under Section 270AA of the Act tothe petitioner. (SHUBHA MEHTA),J(ARUN BHANSALI),J(R) DJ/-