In a recent case, the Delhi High Court set aside the penalty imposed under the Income Tax Act, 1961 without providing a hearing. The penalty was imposed on the act of wrongful claim of 200% income Tax deduction instead of 100%.
Mr Karanjot Singh with Mr S. Vasudevan appeared for the petitioner and Mr Vipul Agrawal appeared on behalf of the respondents/revenue.
The petitioner, Allied Engineering Works Private Limited challenged the penalty order dated 23.06.2023, as well as the consequential demand notice of even date, i.e., 23.06.2023. The impugned penalty order came to be passed because the petitioner had claimed excess deduction under Section 35(2AB) of the Income Tax Act, 1961 [“the Act”], vis-a-vis expenditure incurred on research and development.
The petitioner was allowed to claim a deduction at the rate of 100% of the expenditure incurred. However, it ended up claiming a deduction at the rate of 200%. According to the petitioner, this was a mistake which occurred because the law was amended after AY 2017-18. It is also averred by the petitioner that between 2018-19 and 2019-20, the cap for deduction was pegged at 150%.
It was argued that the impugned penalty order was passed without according personal hearing to the petitioner’s authorized representative. In support of the plea the petitioner sought a personal hearing.
A division bench comprising Justice Rajiv Shakdher and Justice Girish Kathpalia observed that “since personal hearing was not granted, we are inclined to set aside the impugned order and the consequential notice.”
The Assessing Officer (AO) was granted liberty to pass a fresh order after according personal hearing to the authorized representative of the petitioner. Further added that “the AO will pass a speaking order which will deal with all contentions of the petitioner, including the contention that this was not a case of misreporting.”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
