Penalty u/s 270A can not be levied for only making a claim which gets disallowed

Penalty u/s 270A can not be levied for only making a claim which was disallowed. Filing of Form No. 68 for claiming immunity u/s 270AA is only procedural and directory – ITAT 

In a recent judgment, ITAT Agra deleted penalty u/s 270A holding that no penalty u/s 270A can be levied for only making a claim in the return of income which was disallowed. It was also held that filing of Form No. 68 for claiming immunity u/s 270AA is only as procedural and directory in nature.

ABCAUS Case Law Citation:
4471 (2025) (03) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) NFAC in confirming the levy of penalty under section 270A of the Income Tax Act, 1961 (the Act).

The appellant assessee was engaged in the business of manufacturing at its manufacturing units situated in integrated industrial state. The original return of income for the Assessment Year 2017-18 was filed by the assessee company claiming deduction under section 80IC of the Act for 3 different units.

The AO in the course of quantum assessment proceedings observed that in respect of scrap sale, interest received, exchange difference, business support services, amounts written back and miscellaneous income, the assessee would not be entitled for deduction under section 80IC of the Act as it cannot be construed as profits derived from the eligible unit.  Accordingly, the learned AO disallowed the deduction under section 80IC of the Act as excessively claimed.

Pursuant to the assessment framed, the assessee company did not contest the same by preferring first appeal before the Commissioner (appeals). The assessee paid the due taxes in respect of demand raised by the AO.

Subsequently, the assessee filed Form No. 68 before the AO seeking immunity from penalty in accordance with provisions of section 270AA of the Act. The said from was delayed by 3 days. Since the Form No. 68 was filed belatedly by 3 days, the AO levied penalty under section 270A of the Act on the assessee. 

The Tribunal observed that the Assessee Company had substantially complied with the provisions of section 270 AA of the Act, wherein two of the three conditions prescribed therein had been fully complied with, i.e.  by not preferring any appeal against the assessment order and Assessee Company duly making payment of complete taxes in respect of demand raised by the Learned AO in the Assessment Order. No doubt, Form No. 68 was filed by the assessee company with a minor delay of three days. 

The Tribunal further observed that the bonafide intention of the assessee to settle the disputes by paying due taxes thereon cannot be doubted in the instant case. Substantive provision of not preferring any further appeal and by paying due taxes had been complied with by the Assessee Company. The filing of Form No. 68 within the due date is only to intimate the AO about the compliance of substantive provisions, which is to be construed as directory in nature.

The Tribunal opined that for any violation of directory provisions, no assessee could be invited with penal consequences.  Hence the assessee would be eligible for immunity from levy of penalty in terms of section 270AA of the Act in the facts and circumstances of the case.

On merits, the Tribunal opined that since AO had merely disallowed a particular claim of deduction under section 80IC of the Act on certain items, there cannot be any levy of penalty on disallowance of a claim of deduction in view of the decision of Hon’ble Supreme Court. The Tribunal clarified that the said decision was rendered in the context of penalty under section 271(1)(c) of the Act, the same analogy could be drawn for the penalty under section 270A of the Act also.  

Accordingly, the Tribunal directed AO to cancel the levy of penalty under section 270A of the Act.

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