The Karnataka State Chartered Accountants Association (KSCAA) has requested finance minister (FM) Nirmala Sitharaman to rationalise penalty provisions under Section 270AA of Income-Tax (I-T) Act, 1961. "Since this is the first year of implementation of sections 270A and 270AA, there are instances of the timelines not being followed by the assessing officers (AOs) as well as assessees. The AOs must exercise while handling cases under these sections," the CA body says.
In its latest representation, the KSCAA says, "Section 270AA of the I-T Act being a beneficial provision, as it seeks to provide an immunity from penalty and prosecution and to espouse its true purpose, we with this urge that the time limits required for payment of demand as specified in the demand notice and filing of form 68 can be little relaxed."
"The intent or purpose of this provision will still be met even in cases where there is only a minor delay in the payment of taxes or filing of form 68 and so long as the appeal is not filed against the order. Nevertheless, despite a delay, it is still pertinent to note that such taxes are paid along with additional interest. Therefore, there is no loss of revenue to government if belated immunity applications are accepted," the CA body says.
Section 270A of the I-T Act has been inserted by the Finance Act, 2016, with effect from 1 April 2017, with AY2017-18 being the first year of implementation. Under the said Section, the penalty may be levied under two legs or for under-reporting and misreporting of income.
As per Section 270A (7), the penalty referred to in sub-section (1), due to under-reporting, is a sum equal to 50% of the amount of tax payable on the under-reported income. In contrast to that, under Section 270A (8), if such under-reported income is due to any misreporting thereof, the penalty is equal to 200% of tax payable on such under-reported income.
Finance Act, 2016 has also inserted a benevolent Section 270AA for granting immunity from imposition of penalty under Section 270A and initiation of prosecution proceedings under sections 276C or 276CC of the Act. This is subject to the satisfaction of two cumulative conditions. First, tax and interest have been paid within the period specified in the notice of demand issued under section 156 of the I-T Act, usually 30 days. And second, no appeal against the order issued under Section 270A should have been filed.
As per rule 129, to avail the immunity, an application needs to be filed with the AO in form 68 within one month from the end of the month. The order leading to the initiation of penalty under Section 270A has been received. The AO is required to dispose of such application within one month from the end of the month in which the application is received by either accepting or rejecting such application.
According to KSCAA, the Vivad-Se-Vishwas Scheme (VSVS) also seeks to attain the same objective of an early settlement of cases or collection of taxes, grant of immunity from penalty, and prosecution.
Given the COVID pandemic situation, the due dates for payment of taxes as determined by way of the issue of form 3 have now been extended to 31 August 2021 and 31 October 2021 with an additional sum from the original due date of 31 March 2021.
However, the CA body says no similar corresponding reliefs have been forthcoming regarding provisions of Section 270A read with Section 270AA of the I-T Act when these provisions operate on the same canvas like that of VSVS.
"It may therefore lead to giving an indiscriminate and unfair treatment by tarring same brush to both groups of taxpayers as covered by Section 270A and 270AA vis-a-vis group of taxpayers as covered by VSVS. The brunt of COVID-19 has been suffered by every citizen of this country, there is no one who has escaped unscathed from its fury and it is, therefore, we beseech your good selves to please take cognisance of the COVID-19 situation and provide leniency by conceding minor slippages if there are any on the part of taxpayers in meeting the compliance timelines for paying tax or interest and filing of form 68," the KSCAA says in its letter to the FM.
According to the CA body, even in assessment proceedings for AY2018-19 and AY2017-18 of transfer pricing cases, fulfilling all the conditions and timelines as specified in Sections 270A and 270AA pose a real predicament during current time owing to severe business disruptions caused by the COVID pandemic.
The KSCAA has requested FM Ms Sitharaman to ask AOs to exercise reasonable leniency to allow taxpayers who have paid the tax and interest beyond the time limit specified in the demand notice issued under section 156 to accept the application and grant immunity under Section 270AA.
It says, "A reasonable leniency may be exercised by the AOs to allow taxpayers to file form 68 beyond the time limit of one month from the end of the month in which the order under Section 143(3) or 147 was received by the taxpayer. AOs may be directed to expedite the disposal of applications in form 68 as received and pass orders within the time limit of one month from the end of the month in which such applications are received as the same is stipulated under Section 270AA (4)."
The KSCAA also requested the FM to enunciate an IT-enabled faceless process for the acceptance and disposal of form 68 instead of a manual process being currently followed.