Court holds Section 270AA immunity unavailable where under-reporting of income is a consequence of misreporting under Section 270A(9)
Jodhpur: The Rajasthan High Court has dismissed a writ petition filed by Spunwell Syntex Private Limited, refusing to grant the company immunity from an income-tax penalty merely because it had paid the tax demand raised by the department.
A Division Bench comprising Justice Dr. Pushpendra Singh Bhati and Justice Praveer Bhatnagar held that the benefit of immunity under Section 270AA of the Income Tax Act is not available where the under-reporting of income is a consequence of misreporting under Section 270A(9).
The dispute began with the company’s income tax return for the 2018-19 assessment year. On February 24, 2021, the Assessing Officer disallowed deductions claimed by Spunwell Syntex under Section 80 of the Income Tax Act and raised a tax demand. The company paid the demand instead of filing an appeal, following which the department-initiated penalty proceedings under Section 270A.
Spunwell Syntex then sought immunity from the penalty under Section 270AA. The department rejected the application on January 13, 2022, and subsequently passed a penalty order on February 3, 2022.
Challenging the action, the company argued that the penalty notice did not clearly explain the alleged misreporting and that it was not given an opportunity of hearing before its immunity plea was rejected.
The Division Bench rejected the arguments and noted that the assessment order had already recorded the company’s failure to produce accounting records relating to income from its solar plant, making the basis of the penalty proceedings clear.
The Bench also held that Section 270AA provides immunity for under-reporting, but excludes cases where the under-reporting is a consequence of misreporting under Section 270A(9). Since the company’s case fell within this exclusion, it was not entitled to immunity.
The Court also rejected the argument concerning the delay in deciding the immunity application, holding that the statutory timeline could not help the company when immunity itself was unavailable in its case.
Finding no illegality warranting interference, the Bench observed that it was “not persuaded that the show-cause notice and the impugned order are fraught with illegality warranting judicial quashing.” The writ petition was accordingly dismissed.