ELIGIBILITY OF IMMUNITY UNDER SECTION 270 AA (3) OF INCOME TAX ACT, 1961

Penalty for under-reporting

Section 270A (1) of the Income Tax Act, 1961 (‘Act’ for short) provides penalty for under-reporting of income in the return of income.  The said section provides that the Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner (Appeals) or the Principal Commissioner or Commissioner may, during the course of any proceedings under this Act, direct that any person who has under-reported his income shall be liable to pay a penalty in addition to tax, if any, on the under-reported income.

The penalty shall be a sum equal to 50% of the tax payable on the under reported income. 

Immunity from imposition of penalty

Section 270AA of the Act provides immunity to an assessee from the imposition of penalty.   The procedure of getting immunity from penalty is as detailed below-

•  An assessee may make an application to the Assessing Officer to grant immunity from imposition of penalty under section 270A and initiation of proceedings under section 276C or section 276CC, if he fulfils the following conditions, -the tax and interest payable as per the order of assessment or reassessment under sub-section (3) of section 143 or section 147, as the case may be, has been paid within the period specified in such notice of demand; and
•  No appeal against the order referred to above has been filed.

• An application for this purpose shall be made within one month from the end of the month in which the order has been received and shall be made in Form 68 and verified in such manner as may be prescribed.
• The Assessing Officer shall, subject to fulfilment of the conditions and after the expiry of the period of filing the appeal grant immunity from imposition of penalty under section 270A and initiation of proceedings under section 276C or section 276CC, where the proceedings for penalty under section 270A has not been initiated under the circumstances referred to in sub-section (9) of the said section 270A.
• The Assessing Officer shall, within a period of 3 months from the end of the month in which the application is received, pass an order accepting or rejecting such application.
• The application may be rejected after giving the applicant a reasonable opportunity of being heard.
• The said order is final and not appeal lies against such order.

Case law

In Meghal Rajeshkumar Thakor Versus The Income Tax Officer, Ward-6 (1) (1), Ahmedabad - 2026 (2) TMI 1187 - ITAT AHMEDABAD, the appellant assessee did not file his income tax return for the year 2018 – 19.  Her case was selected for scrutiny.  The Department found that during the year 2018-19 sold an immovable property, along with 18 other co-owners for Rs.10.55 crores.  The share of the appellant in the sale is Rs.43.96 lakhs.  A notice was issued by the Department to the appellant on 28.03.2022.  The appellant filed her income tax return, in response to the notice, on 26.04.2022, declaring his income as Rs.42.04 lakhs.

The Assessing Officer initiated penalty proceedings under Section 270A read with Section 274 of the Act for under reporting of her income.  The Assessing Officer declared that the under reporting of income is Rs.42,03,780/- and computed the tax payable is Rs.8,14,478/-.  A penalty of Rs.4,07,239/- (50% of the tax payable on under reporting income).  The said order was passed on 29.09.2023.

The appellant, being aggrieved against the said order, filed an appeal before the Commissioner of Income Tax (Appeals).  The Commissioner of Income Tax (Appeals) dismissed the appeal on 21.10.2025.

The appellant filed the present appeal before the Income Tax Appellate Tribunal (‘ITAT’ for short) against the order of Commissioner of Income Tax (Appeals).  The following are the grounds of appeal by the appellant-

• The Commissioner of Income Tax (Appeals), has erred in confirming the action of the Assessing Officer in passing an order u/s. 270A of the I.T. Act, 1961 levying penalty of Rs. 4,07,239/- which is illegal and bad in law hence the same should be cancelled.
•  The Commissioner of Income Tax (Appeals), has erred in confirming the action of the Assessing Officer in passing an order u/s. 270A of the I.T. Act, 1961 levying penalty without considering the fact that the appellant has filed Form 68 and paid the tax and interest as per the demand notice issued with the assessment order.

The appellant submitted the following before the ITAT-

• The demand of tax made by the Assessing Officer did not consider the tax credits that shall be adjusted against the income tax.
• The appellant filed a rectification application under Section 154 of the Act on 20.02.23.
• The appellant also filed an application in Form 68 for the immunity of penalty under Section 270AA of the Act on 05.09.2023.
• The Faceless Assessing Officer (‘FAO’ for short), in response to immunity application called for certain documents.
• The appellant uploaded reply to the above said notice on the portal but in vain.
• The appellant communicated to the FAO with the application under section 270AA (2) that the application for immunity for penalty under section 270AA was submitted in Form 68 before ITO-Ward 6(1)(1) Ahmedabad i.e. JAO which was duly verified.
• No order under section 270AA (4) had been served upon the appellant.
•  There was a technical glitch while submitting the application and therefore the window for uploading immunity application was not available to the appellant.
•  Not only rectification application requesting credit for taxes paid was filed with the JAO but also the application for immunity u/s. 270AA came to be filed manually.
• Without taking cognisance of the above, the Commissioner of Income Tax (Appeals) completely misled himself in drawing the conclusion that appeal has been filed against the assessment order which has disentitled for immunity u/s. 270A of the Act.
• The appellant did not file any against the assessment order but only against the penalty imposed on her.
• Since all the conditions have been duly satisfied, the immunity for imposition of penalty u/s. 270AA of the Act should have been granted to the appellant.

The Department submitted the following before the ITAT-

• The appellant has not given any details about the filing of Form 68 along with manual application at any stage either before the Assessing Officer as well as before the Commissioner of Income Tax (Appeals) despite many requests.
• Since the appellant did not give any details in respect of granting immunity under Section 270AA to the appellant.
• Therefore, the Assessing Officer has rightly imposed the penalty and the Commissioner of Income Tax has rightly confirmed the penalty.

The ITAT heard the submissions made by both the parties and also perused the documents on record.  The ITAT observed that the appellant is very well aware that the appellant has under reported her income and has asked for immunity but while going through records it can be seen that the appellant during the penalty proceedings under section 270A has not produced any application before the Assessing Officer related to the immunity application in Form 68 under Section 270AA (3) of the Act.  The technical glitch as alleged by the appellant has not been proved.  The documents produced by the appellant did not contain Form 68 for immunity from penalty proceedings.  Thus, the ITAT held that the appellant has under reported her income and therefore liable for penalty.  The ITAT dismissed the appeal holding that there was justification in imposing penalty on the appellant.