The Orissa High Court (HC)held that the order u/s 270 passed under Income Tax Act, 1961 by Assessing Officer (AO) based on a wrong assumption is not valid when the assessee preferred for appeal.
Acharya Harihar Regional Centre, the Petitioner challenged the assessment order dated 23rd April 2021 of the Assessing Officer (AO) making addition of Rs.22,92,14,167/-, the Petitioner filed an appeal on 20th March 2022, belatedly on account of Covid-19 pandemic which is still pending.
The AO directed the initiation of separate penalty proceeding under Section 270A of the Act and issued show-cause notices to the Petitioner on 26th July 2021 and 8th October 2021. A final showcase notice was issued on 21st February 2022 and the case was referred to the Designated Verification Unit (DVU) which then served notice on the Petitioner.
The Petitioner informed the Department that it had preferred an appeal against the assessment order. The AO proceeded to levy a penalty of 200% of the tax allegedly evaded, thereby calculating the penalty as Rs.16,24,58,324/-.
Mr Jagabandhu Sahoo, Senior Counsel appeared for the Petitioner and point out that in the impugned order dated 1st April 2022, the NFAC has observed that Section 270A(2)(b) considers a person to have underreported his income if the income assessed is greater than the maximum amount not chargeable to tax, where no return of income has been furnished.
Justice M S Raman observed that it was wrongly noted that the Assessee has not filed any return of income, when in fact Assessee had filed its return. It was further wrongly noted that the Assessee “has not preferred appeal against the assessment order” when in fact the Petitioner had filed the aforementioned appeal.
The Court viewed that the impugned order dated 1st April 2022 is unsustainable in law since the appeal against the original assessment order is still pending. The Court set aside the order and held that “depending on the outcome of the appeal, it may be open to the Department to revive the proceedings under Section 270A of the Act.”
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