Assessee seeking immunity u/s 270AA shall not preclude from contesting the same issue in earlier assessment year
Penal provision has undergone a sea change in the last 3 years. From discretionary nature of penalty, it is turning out to mandatory sort of thing. Immunity is subject to conditions in favor of revenue. New assessee preferring an appeal against an assessment order may not be at par with the assessee accepting the assessment order. The applicability of earlier penal provision under section 271(1)(c) is there till 31.03.2016 whereas from FY 2016-17 i.e., Financial year commencing from 01.04.2017, section 270A is at disposal of income tax department in lieu of section 271(1)(c). Section 270A provides for levy of penalty for misreporting or under reporting of income. AO has been empowered to grant immunity from levy of penalty u/s 270AA. However, it is subject to riders. Unlike power to grant immunity u/s 271(1)(c), immunity from section 270A is subject to the rider not enumerated in erstwhile penal provision. Earlier, there was of appeal and discretionary power to levy penalty were co-existing. Now, immunity is subject to the condition that
- 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
- no appeal against the order referred to in clause (a) has been filed
It means that assessee preferring an appeal cannot get an immunity from AO U/s 270AA. Time has come when penalty is turning out to be more costlier than the tax itself.
However, there is a beneficial circular No. 5/2018 which grants certain relief to assessee for years prior to section 270A penal provision. It is reproduced hereunder:
Government of India
Ministry of Finance
Department of Revenue
(Central Board of Direct Taxes)
Circular No 5/2018
Dated 16th August, 2018
Clarification on the immunity provided u/s 270AA of the Income-tax Act, 1961
Section 270AA of the Income-tax Act, 1961 (the Act) inter alia provides that w.e.f. 1 st April, 2017, the Assessing Officer, on an application made by an assessee, may grant immunity from imposition of penalty under section 270A (not being penalty for misreporting) and initiation of proceedings under section 276C or section 276CC, subject to the conditions specified therein.
- Apprehensions have been raised that where an assessee makes an application seeking immunity under section 270AA of the Act, and in the earlier year(s) penalty under section 271(1)(c) of the Act has been initiated on the same issue, the Income-tax Authority may contend that the assessee has acquiesced on the issue in such earlier year (s), by seeking immunity under section 270AA of the Act and therefore, take an adverse view in the proceedings for penalty under section 271(1)(c) of the Act.
- In this matter, it is hereby clarified that where an assessee makes an application seeking immunity under section 270AA of the Act, it shall not preclude such assessee from contesting the same issue in any earlier assessment year. Further, the Income-tax Authority, shall not take an adverse view in the proceedings for penalty under section 271(1)(c) of the Act in earlier assessment years merely on the ground that the assessee has acquiesced on the issue in any later assessment year by preferring an immunity on such issue under section 270AA of the Act.