AO Must Record Reasons to Reject Section 270AA Immunity: Calcutta HC

Amalgam Steel Private Limited & Anr. Vs ACIT & Ors. (Calcutta High Court)

The Calcutta High Court examined the validity of an order passed under Section 270AA of the Income Tax Act, 1961 rejecting an assessee’s application for immunity from penalty under Section 270A. The petitioner had filed its return of income for Assessment Year 2023–24 declaring nil income, which was initially processed under Section 143(1). Subsequently, a scrutiny assessment under Section 143(3) raised a tax demand of ₹10.49 crore.

The petitioner filed an application for rectification under Section 154, contending that there was no taxable income. While this rectification application was pending, the Assessing Officer issued a show cause notice under Section 270A proposing penalty for under-reporting of income. In response, the petitioner filed an application in Form 68 under Section 270AA seeking immunity from penalty, stating that the demand would not survive once rectification was granted, that no appeal would be filed against the assessment order, and that the application was filed within the prescribed time.

The rectification application was allowed on May 1, 2025, resulting in a nil tax demand. Despite this, the Assessing Officer rejected the immunity application on May 27, 2025, stating that the assessee had not complied with a notice issued during the immunity proceedings and that the statutory conditions under Section 270AA were not fulfilled, without explaining which conditions were unmet. An appeal against this rejection was dismissed as not maintainable, prompting the writ petition.