ITAT Grants Relief in Penalty Dispute, Sets Aside Order Over Undecided Immunity Plea

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has provided partial relief to Sankyu India Logistics & Engineering Pvt. Ltd. in two tax appeals related to assessment years 2017-18 and 2018-19.

Background of the case

For the 2017-18 case, the dispute centred around a penalty imposed under Section 270A of the Income Tax Act. The company argued that it had already applied for immunity from penalty by filing Form 68 in January 2020. However, the tax department did not decide on this application and instead went ahead and imposed the penalty. Being aggrieved by the penalty, the assessee approached CIT(A). However, CIT(A) dismissed the appeal.

The assessee then further approached the Tribunal. The tribunal agreed with the company’s argument. It noted that the tax authorities should have first decided the immunity application before imposing any penalty.

As a result, the ITAT set aside the penalty order and directed the Assessing Officer to first decide the immunity request. If immunity is granted, no penalty will apply; if rejected, the department can restart penalty proceedings.

For the 2018-19 case, the situation was clearer. The company had already been granted immunity under Section 270AA. Despite this, the tax officer still issued a penalty order.

The tribunal held that once immunity is granted, no penalty can be imposed. Therefore, it completely cancelled the penalty as well as the related order of the CIT(A).

As a result, the company’s appeal for 2017-18 was partly allowed, while the appeal for 2018-19 was fully allowed, with penalties quashed.