Once assessee satisfies conditions u/s 270AA, AO is bound to grant immunity

Once assessee satisfies conditions mentioned in section 270AA, the Assessing Officer would be bound to grant immunity

In a recent judgment, Hon’ble Calcutta High Court set aside penalty order under section 270AA of the Income Tax Act holding that once assessee satisfies conditions mentioned in the section, the Assessing Officer would be bound to grant immunity to such assessee. 

ABCAUS Case Law Citation:
4983 (2026) (01) abcaus.in HC

In the instant case, the assessee/Petitioner had challenge order passed under Section 270AA of the Income Tax Act, 1961 (the Act) rejecting the petitioner application seeking immunity under Section 270A of the Act.

The petitioner filed its Return of Income under Section 139 of the Act declaring a total income of rupees NIL.  The same was processed under section 143 and intimation under Section 143(1) of the Act was issued.

The petitioner’s case was subjected to scrutiny assessment and an order of assessment under Section 143 (3) of the Act was passed raising a huge demand. The petitioner then filed an application for rectification under Section 154 of the Act seeking rectification of the scrutiny assessment order.

While the petitioner’s application for rectification was pending, a notice under Section 270A was issued calling upon the petitioner to show cause as tow why an order imposing penalty shall not be passed against it for “Under-reporting of income”.

Upon receipt of the said notice, the petitioner filed an application under Section 270AA of the Act in the prescribed Form No. 68 seeking immunity from imposition of penalty under Section 270A. In the said application, the petitioner, inter alia, highlighted that the petitioner had sought for rectification of the scrutiny assessment order and that the petitioner reasonably believed that upon rectification of the said order, no demand would be subsisting inasmuch as the petitioner did not have taxable income. 

While the petitioner’s said application for immunity was pending, the petitioner’s application for rectification was allowed thereby determining the final tax demand as “NIL‟.  Subsequently, the petitioner’s application seeking immunity under the Section 270AA of the Act was rejected by the Assessing Officer observing that no compliance was made by the assessee in response to the notice.

The petitioner filed an appeal before the Commissioner of Income Tax (Appeals). The said appeal was rejected holding that the appeal was not maintainable.

The Hon’ble High Court observed that the petitioner demonstrated that it had satisfied all the four conditions prescribed under section 270AA for grant of immunity i.e. (i) demand determined in the order was being duly paid, (ii) no Appeal was filed against the order, (iii) application in Form 68 is filed within one month from the end of the month in which the order has been received and (iv) proceedings for penalty under section 270A had not been initiated under the circumstances referred to in subsection (9) of the said section 270A.

The Hon’ble High Court opined that the application appeared to have been filed within the time specified in Section 270AA of the Act. The same therefore ought to have been considered by the Assessing Officer in the right earnest while passing an order under Section 270AA of the Act.

The Hon’ble High Court observed that Sub-section 3 of Section 270AA reads in mandatory terms. A meaningful reading thereof makes it clear that once an assessee satisfies the conditions mentioned in the earlier limbs of the said section, the Assessing Officer would be bound to grant immunity to such assesse. 

The Hon’ble High Court opined that order impugned could not have been passed without disclosing the basis for the conclusion as to why was (is) the petitioner not entitled to immunity and which of the conditions mentioned in Section 270AA the petitioner had failed to fulfil.

As a result, the order impugned passed under Section 270AA of the Act was set aside. The Assessing Officer was directed to revisit the petitioner’s application for grant of immunity, strictly in accordance with law and to pass appropriate order upon affording an opportunity of hearing to the petitioner.

Download Full Judgment Click Here >>

• Object of assessment proceedings is not to find empirically correct solution on every fact issue – HC
• Penalty u/s 270A deleted as assessee filed revised computation during scrutiny
• Penalty u/s 271B for unfilled column 40 in Tax Audit Report Form 3CD deleted by ITAT
• Merely ex-parte rectifying computation without amending assessment order not make it nullity- ITAT
• Once assessee discharges primary onus, it shifts to AO to bring evidence to contrary – ITAT