Delhi High Court Quashes Income Tax Penalty Order Passed During Pendency Of ITAT Appeal

The Delhi High Court has quashed an income tax penalty order passed against a private company under Section 270A of the Income Tax Act, 1961, during the pendency of the company's appeal before the Income Tax Appellate Tribunal (ITAT).

The Division Bench of Justices Dinesh Mehta and Aditi Choudhary held that Section 275(1)(a) of the Income Tax Act mandates that penalty proceedings remain in abeyance when an appeal against the relevant assessment order is pending before the ITAT.

The Court allowed the company's writ petition challenging the penalty order dated March 24, 2023, passed by the Assessing Officer.

The dispute arose from an assessment order dated July 28, 2022, for the assessment year 2018–19. On the same day, the Assessing Officer initiated penalty proceedings under Section 270A of the Act and issued a penalty notice.

The company submitted its reply to the notice on August 17, 2022, and subsequently filed an appeal against the assessment order before the ITAT on August 29, 2022. It also informed the Assessing Officer about the filing of the appeal.

The company challenged the penalty order before the High Court, arguing that it had been passed during the pendency of the ITAT appeal, contrary to Section 275(1)(a) of the Act.

Opposing the plea, the Revenue submitted that the assessment order recorded that the assessee was in the process of filing an appeal.

The High Court, however, observed that the relevant entry in the penalty order appeared to have been taken from the company's initial reply dated August 17, 2022.

The Bench further noted that there was no dispute that the company had filed the appeal on August 29, 2022, and had intimated the Assessing Officer about it.

“Whether intimation was given or not, is immaterial,” the Court observed, holding that Section 275(1)(a) clearly provides that penalty proceedings must be kept in abeyance when an appeal under Section 253 of the Act is pending before the ITAT.

As such, the Court allowed the petition and quashed the penalty order with liberty to the Assessing Officer to take up the penalty proceedings afresh if the Tribunal decides the appeal against the assessee.

For Petitioner: Advocates Ankul Goyal, Tanvi Aggarwal, 

For Respondents: Anurag Ojha, SSC with Hemlata Rawat & VK Saxena, JSCs.