Shantijanak Estates Private Limited Vs ACIT (Delhi High Court)
Negative Evidence- AO Cannot Demand Proof That No Appeal Was Filed: Delhi HC Quashes Rejection of Section 270AA Immunity Application
Summary: In Shantijanak Estates Private Limited v. Assistant Commissioner of Income Tax, Circle 22(2), Delhi & Another, W.P.(C) 12741/2026, judgment dated 17.09.2026, the Delhi High Court set aside an order rejecting the assessee’s application for immunity from penalty under section 270AA. The Court held that an Assessing Officer cannot require an assessee to produce “negative evidence” proving that no appeal has been filed against the assessment order. At the most, the AO can obtain a declaration from the assessee to that effect.
The petitioner-company was engaged in the business of letting out immovable property. For AY 2024-25, it declared a total income of ₹5,43,52,210 under the head “Profits and Gains of Business or Profession.” The assessment was completed under section 143(3) read with section 144B by an order dated 27.03.2026. The Assessing Officer assessed the rental income under the head “Income from House Property” and determined the total income at ₹6,68,07,690.
While passing the assessment order, the AO initiated penalty proceedings under section 270A on the allegation that the assessee had under-reported its income.
Entire Demand Paid Before Due Date
The assessee paid the entire outstanding demand of ₹37,99,340 on 22.04.2026, whereas the due date for payment was 26.04.2026. Thereafter, on 27.04.2026, it submitted an application in the prescribed Form No. 68 seeking immunity from the penalty proceedings under section 270AA.
Section 270AA provides an important remedy where an assessee accepts the assessment and does not wish to pursue an appeal. Broadly, immunity can be granted where the assessee pays the tax and interest payable under the assessment order within the specified period, does not file an appeal against that order and submits the immunity application within the prescribed time.
According to the petitioner, all these statutory requirements had been fulfilled. The entire demand had been paid before the due date, no appeal had been preferred and Form No. 68 had been filed within time.
Despite the pending immunity application, a notice was issued on 20.05.2026 asking the assessee to explain why penalty under section 270A should not be imposed.
AO Demanded Evidence That No Appeal Had Been Filed
On 28.07.2026, the AO issued another notice asking why the immunity application should not be rejected. The stated objections were that the assessee had failed to establish payment of the tax and interest and had not furnished documentary evidence proving that no appeal had been filed against the assessment order.
The assessee responded on 29.07.2026 and explained that it had fulfilled all the statutory conditions. The reply was duly uploaded and carried Reference ID No. 100117217516. Nevertheless, by an order dated 30.07.2026, the AO rejected the immunity application on the ground that the assessee had not filed any reply.
Before the High Court, the assessee produced the acknowledgement evidencing the filing of the reply. It was also pointed out that the electronic record showed that the AO had viewed the reply on 30.07.2026 itself. Despite this, the rejection order recorded that no reply had been submitted.
The Revenue’s counsel was unable to controvert this factual position.
Negative Evidence Cannot Be Demanded From Assessee
The Delhi High Court expressed its inability to understand how an assessee could be expected to furnish documentary or negative evidence proving that it had not filed an appeal. The absence of an appeal is a negative fact and cannot ordinarily be established through a separate document.
The Court directed the Assessing Officer not to insist upon such negative evidence. The AO could, at the most, obtain a declaration from the assessee stating that no appeal had been filed against the assessment order. The declaration could also provide that if any appeal had been filed, it would be withdrawn or treated as withdrawn.
The Court further noticed that Form No. 68 itself already contained the relevant information and declaration regarding non-filing of an appeal. Therefore, the separate notice issued by the AO demanding proof of the same fact was described by the Court as “an empty formality to say the least.”
Order Passed Without Considering Reply Set Aside
Quite apart from the illegality of demanding negative evidence, the Court found that the assessee had actually submitted a reply to the notice. The rejection order was therefore passed without considering relevant material available on record and on a factually incorrect assumption that no response had been filed.
The High Court accordingly set aside the order dated 30.07.2026 and directed the AO to reconsider the immunity application and pass a fresh order objectively, in accordance with law and after considering the statutory mandate and the material available on record.
The AO was directed to pass the fresh order on or before 15.10.2026.
Penalty Proceedings Stayed Until Immunity Application Is Decided
The Court also protected the assessee from parallel penalty action. It directed that, until the application under section 270AA was decided afresh, the Faceless Assessing Officer should not proceed further pursuant to the notice dated 27.03.2026 proposing the levy of penalty under section 270A.
Thus, the rejection was not merely remanded mechanically. The High Court restrained continuation of the penalty proceedings until a lawful decision was taken on the assessee’s request for immunity.
Author’s Comments
The decision is important because section 270AA creates a statutory route for an assessee who is willing to accept the assessment, pay the demand and forgo the appellate remedy in exchange for immunity from penalty and prosecution. Once the prescribed conditions are fulfilled, the application cannot be rejected on artificial or impossible requirements.
An assessee cannot be expected to obtain a certificate proving that something has not occurred. Moreover, Form No. 68 itself contains the required declaration regarding non-filing of an appeal. Insistence upon additional negative evidence serves no statutory purpose.
The more disturbing feature was that the order stated that no reply had been filed even though the portal acknowledgement established its filing and the electronic record apparently showed that it had been viewed by the AO. An order affecting substantive rights must reflect proper application of mind to the portal record and the assessee’s response. The judgment therefore reinforces that even in faceless proceedings, digital availability of a reply cannot be ignored and non-consideration of such reply renders the order vulnerable for breach of natural justice.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. By way of present writ petition, the petitioner has challenged the order dated 30.07.2026 passed by the respondent no.1- the Assessing Officer under Section 270AA of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act of 1961’) vide which petitioner’s application under Section 270AA(2) of the act of 1961 seeking immunity from the penalty proceedings has been rejected.
2. The petitioner company is engaged in the business of letting out immovable property and has been filing its return of income. During the assessment year 2024-25, the petitioner declared a total income of Rs. 5,43,52,210/- under the head Profits and Gains of Business and Profession and filed its return.
3. Petitioner’s assessment was done under Section 143(3) of the Act of 1961 read with Section 144B of the Act of 1961 by way of order dated 27.03.2026 and the income as declared by the petitioner was assessed under the head income from house property at Rs.6,68,07,690/-.
4. While passing the assessment order, the Assessing Officer initiated penalty proceedings under Section 270A of the Act of 1961 alleging that the petitioner has done under reporting of the income.
5. The petitioner paid the entire demand of Rs 37,99,340/- on 22.04.2026 before the due date (26.04.2026) and on 27.04.2026, moved an application seeking immunity in the prescribed form no.68 as provided under Section 270AA(2) of the Act of 1961 and requested respondent no.1 to grant him the immunity from the penalty proceedings.
6. On 20.05.2026, the respondent no.2 issued a notice to the petitioner seeking its response as to why penalty under Section 270A of the Act of 1961 be not imposed.
7. The Assessing Officer issued a notice dated 28.07.2026 asking the petitioner as to why his request of immunity should not be rejected, as the petitioner had failed to establish payment of tax and interest payable and he had not given any documentary evidence to establish that no appeal had been preferred against the assessment order.
8. In response to the above-referred notice dated 28.07.2026, the petitioner filed a reply dated 29.07.2026 and submitted that he is entitled for immunity from the penalty proceedings, as he fulfilled all the conditions. The respondent-Assessing Officer however, rejected petitioner’s application vide order dated 30.07.2026, inter alia, recording that the petitioner did not file any reply.
9. Learned counsel for the petitioner pointed out that it is clear from record that the petitioner had filed a reply to the notice dated 28.07.2026 issued by the AO on 29.07.2026 (Annexure P-12) and contended that the petitioner has placed the acknowledgement of such reply which showed that the same was filed on 29.07.2026 vide its Reference ID: 100117217516, yet the AO has arbitrarily rejected petitioner’s application citing that the reply had not been filed by the petitioner.
10. Invitng Court’s attention towards annexure P-16, learned counsel for the petitioner pointed out that on 30.07.2026, the respondent had seen the petitioner’s reply and in spite of the same he had written that no reply had been filed by the petitioner, while passing the impugned order on 30.07.2026. He argued that the AO deserves to be reprimanded and the impugned order deserves to be set aside.
11. Without prejudice to above argument, learned counsel submitted that filing of reply and not filing the reply is inconsequential so far as grant of immunity under Section 270AA of the Act of 1961 is concerned, inasmuch as the petitioner fulfils all the requisite conditions of getting immunity from penalty proceedings. He submitted that entire outstanding demand arising out of the assessment order had been deposited and no appeal had been preferred and the application was filed within time.
12. Mr. Bhatia, learned Senior Standing Counsel for the respondents was in no position to contradict the factual position laid down by the petitioner.
13. Heard learned counsel for the parties.
14. On perusal of the record, including notice issued by the Assessing Officer, we find that the Assessing Officer had required the petitioner to satisfy that he had not filed any appeal. We fail to comprehend as to how the assessee could file or furnish negative evidence that he had not filed an appeal.
15. While observing so, we hereby direct the Assessing Officer not to ask for negative evidence. The AO can at the best take a declaration from the assessee that it has not filed any appeal against the assessment order and also that in case any appeal has been preferred, the same would be withdrawn or shall be deemed to have been withdrawn.
16. That apart, the form 68 which the petitioner had filed already contained such detail and declaration. Therefore, the notice issued by the Assessing Officer was an empty formality to say the least.
17. Be that as it may. Since the petitioner had filed a reply and the order impugned has been passed without consideration of the reply, we set aside the impugned order dated 30.07.2026 (Annexure P-1) and direct the respondent-Assessing Officer to pass fresh order in accordance with law and with objectivity, considering the mandate of law and material available on record.
18. The writ petition stands allowed in aforesaid terms.
19. All interlocutory applications are disposed of accordingly.
20. The Assessing Officer shall pass fresh order in accordance with law on or before 15.10.2026. Until the petitioner’s application under Section 270AA is decided, the Faceless Assessing Officer shall not proceed in furtherance of notice dated 27.03.2026 proposing to levy penalty under Section 270A of the Act of 1961.
