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Showing contexts for: Freebies in Vijaya Ranga Shanmuga Gengavan ... vs Ito, Ncc-10(1), Chennai on 5 May, 2026Matching Fragments
2. The brief facts of the case emanating from the records are that the assessee is an individual engaged in the business of fuel retailing, lorry transport and related services. For the year under consideration, the assessee filed the return of income admitting a total income of Rs.28,58,240/-. The case was selected scrutiny and assessment was completed u/s.143(3) r.w.s 144B of the Act on 04.03.2025 determining total income at Rs.48,13,340/- after making disallowances of Rs.6,82,388/- towards freebies and Rs.12,72,710/- relating to hiring and earth-filling expenses and R&D expenses u/s.40(a)(ia) of the Act.
4. Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the ld.CIT(A). The ld.CIT(A) vide order dated 17.11.2025 sustained penalty levied on freebies and deleted the penalty levied on disallowance u/s.40(a)(ia) of the Act.
:-3-: ITA. No.:3842/Chny/2025
5. Before the ld.CIT(A), the assessee submitted that penalty u/s.270A of the Act is not automatic and that as per the assessment order, the demand was nil. Subsequently, by way of revision order u/s.154 of the Act, a revised demand notice was issued upon the assessee which was discharged by paying the demand raised in the revised demand notice. The assessee also submitted that the immunity u/s.270AA was rejected solely on procedural defect, being the delay in filing Form 68. In making these submissions, the assessee requested the ld.CIT(A) to delete the penalty levied. The ld.CIT(A), deleted the penalty in respect of disallowance u/s.40(i)(ia) of the Act while stating that the genuineness of the expenses is not under dispute. However, the penalty in respect of the freebies was sustained for the reason that the assessee was unable provide relevant details to prove the genuineness of expenditure and that the assessee had not proved that the expenditure has been incurred wholly and exclusively for the purpose of assessee's business. Accordingly, a giving effect order was passed on 12.12.2025 and the penalty recomputed for freebies stood at Rs.1,06,990/-.
8. Per contra, the ld.DR argued that the assessee has failed to substantiate the expenditure claimed on account of freebies given to the tune of Rs.6,82,388/-, proving that the claim is nothing but bogus. The ld.DR also :-4-: ITA. No.:3842/Chny/2025 reiterated that the assessee has not preferred any appeal against the said addition and thus submitted that the penalty was rightly levied.
9. We have heard rival submissions, perused the materials on record and gone through the orders of the authorities along with the judicial precedents relied on. It is trite law that procedures are subservient to substantive law. We note that in this case, the assessee has already paid the demand within 30 days from date of assessment order (Tax paid on 25.03.2025). It was only form 68 that was filed with a delay on 22.05.2025, instead of 03.04.2025. The only ground on which the application for immunity u/s.270AA of the Act was rejected is a procedural lapse, namely, delay in filing Form No.68. However, there is plethora of cases holding that penalty cannot be levied, if an assessee has already paid the demand raised in the assessment within 30 days of the order and Form No.68 has been filed by the assessee, albeit belatedly. In Punam Kanwar Bhati (supra), the Jodhpur Bench of the Tribunal held that:
"Considering the nature of addition/disallowance are not in the nature of misreporting or misreporting income of the assessee and the assessee has paid the demand within 30 days and filed the required Form No.68 since that form being procedural nature we condone that aspect of the matter and direct the ld.AO to delete the penalty levied u/s.270A of the Act"
10. In the present facts and circumstances of the case and by respectfully following the above decision, we hold that the penalty levied u/s.270A of the Act, as sustained by the ld. CIT(A) in respect of freebies, amounting to Rs.1,06,990/-, is to be deleted. The other grounds are rendered academic in nature and hence not being adjudicated upon.