Income Tax--Current Issues

Practice Update

V.K. Subramani

IMMUNITY FROM PENALTY IS NOT AVAILABLE IN THE CASE OF MISREPORTING OF INCOME

When the assessment is completed under section 143(3) or reassessment is made under section 147, the assessee can make an application to the Assessing Officer to grant immunity from imposition of penalty under section 270A and initiation of prosecution proceedings under section 276C or section 276CC of the Act. However, the caveat is that the assessee must give up his right of appeal against the order of assessment/reassessment.

The assessee must make an application in Form No. 68 within 1 month from the end of the month in which the order of assessment/reassessment has been received by him. The Assessing Officer is also to allow the application i.e. grant immunity from imposition of penalty under section 270A or initiation of prosecution proceedings under section 276C or section 276CC. The time limit for passing the order of waiver/immunity from penalty is 1 month from the end of the month in which the application is received by him.

No order rejecting the application for waiver/immunity from penalty/prosecution could be passed unless the assessee is given an opportunity of being heard.

Section 270A(3) says that the waiver or immunity from penalty will not arise where the proceedings for imposition of penalty has been initiated under section 270A(9) of the Act. Reference to section 270A(9) would show the list of instances to treat the addition to the returned income as misreporting of income.

The following fall under the term 'misreporting of income': (i) Misrepresentation or suppression of facts; (ii) Failure to record investments in the books of account; (iii) Claim of expenditure not substantiated by any evidence; (iv) Any false entry in the books of account; (v) Failure to record any receipt in the books of account which has a bearing on total income; and (vi) Failure to report any international transaction or deemed international transaction or any specified domestic transaction to which the provisions of Chapter X apply.

Thus when the addition is made to the returned income as misreporting of income the penalty leviable at 200% of the tax sought to be evaded would be levied as section 270AA does not cover such situation. However, the general immunity provided for in section 273A could be used by the taxpayers which empowers the Principal Commissioner/Commissioner to reduce or waive the amount of penalty imposable under section 270A of the Act.