No Immunity u/s 270AA in case of specific finding on underreporting income by misrepresenting facts [Read Order]

The Kerala High Court in the matter of IBS SOFTWARE PRIVATE LIMITED Vs. THE UNION OF INDIA has held that No Immunity u/s 270AA in case of a specific finding on underreporting income by misrepresenting facts.

The present writ petition has been filed impugning the order in Ext.P11, whereby the petitioner’s application in Ext.P3 filed under Section 270AA of the Income Tax Act, 1961 [“Act”, for short] seeking immunity from imposition of penalty in pursuance to the assessment order in Ext.P1 has been rejected, on the ground that the case is not eligible to be considered for grant of immunity from imposition of penalty as the facts of the case are covered under sub-Section (9) of Section 270A of the Act.

In paragraph No.3.10 of the assessment order dated 24.9.2022 in Ext.P1, the assessing authority has specifically recorded that while computing the income of the assessee and its return of income, it was not just under-reported the income, but also misrepresented the facts claiming deduction of expenses, which were already self disallowed, and therefore, it was a fit case for penalty proceedings under Section 270A of the Act. It was also stated that penalty proceedings should be initiated separately under sub-Section (9) of Section 270A of the Act. Paragraph No.3.10 of the assessment order dated 24.9.2022 in Ext.P1 is reproduced hereunder:

“3.10 Accordingly, the facts and representation of the assessee in the computation of income and its Return of income is not just under-reporting of income, but under-reporting of income on account of specific misrepresentation of facts and claiming the deduction of expenses which are already self-disallowed, is a fit case for initiation of Penalty proceedings u/s 270A of the I.T. Act for mis-reporting of income under sub-section (9) of section 270A of the Income Tax Act, 1961. Thus, penalty proceedings under subsection (9) of Section 270A are initiated separately.”

The assessing authority while examining the application under Section 270AA of the Act cannot sit in appeal against its own assessment order to record a different finding than what was recorded in the assessment order. The assessing officer cannot examine the correctness or otherwise of the assessment order while examining the application under Section 270AA of the Act seeking immunity from imposition/payment of penalty, etc. If there is a specific finding recorded in the assessment order that the assessee had underreported the income by misrepresenting the facts in the return of its income, then the application under Section 270AA of the Act would not be maintainable, in view of the express bar under Section 270A of the Act.

Do not find that the impugned order, Ext.P11, rejecting the application of the petitioner under Section 270AA of the Act suffers from any illegality on facts or law. Therefore, the present writ petition is hereby dismissed. Pending interlocutory application, if any, in the writ petition stands dismissed.

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