Immunity under section 270AA requires timely AO decision and hearing; failure supports penalty cancellation under section 270A.

The note addresses immunity under section 270AA and the requirement that the assessing officer must pass a recorded acceptance or rejection of an immunity application within the statutory time and after affording hearing; failure to do so precludes valid rejection. It highlights that immunity eligibility requires payment of tax and interest and no pending appeal, and that penalty under section 270A cannot be sustained where the penalty order fails to identify which limb of misreporting is invoked and the addition arises from underreporting rather than the specified misreporting limbs; consequence noted is cancellation of the penalty on these grounds.

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Issues: Whether the Assessing Officer was obliged to grant immunity under section 270AA of the Income-tax Act, 1961 to the assessee and consequently whether the penalty imposed under section 270A of the Income-tax Act, 1961 should be cancelled, where the assessee had paid tax and interest, had not filed appeal against the assessment order, had applied for immunity in time, no separate order on the immunity application was passed within statutory time, and the assessment/penalty orders did not specify the limb of misreporting under section 270A(9).

Analysis: The Tribunal examined the statutory scheme of section 270AA which requires the Assessing Officer to pass an order accepting or rejecting an immunity application within one month from the end of the month in which the application is received and mandates that no order rejecting the application be passed without giving the assessee an opportunity of being heard. The assessee had complied with the eligibility conditions: tax and interest were paid and no appeal against the assessment order was filed, and the application for immunity was filed within the prescribed period. The Assessing Officer did not pass the required order on the immunity application within the statutory period and the penalty order did not specify which limb of section 270A(9) was attracted to treat the addition as misreporting. On the facts, the addition arose from amounts belonging to a proprietorship being charged to the company (an underreporting issue) and not from misreporting under the specific limbs of section 270A(9). The Tribunal relied on applicable precedent addressing the effect of non-compliance with the procedural requirements of section 270AA and the failure to demonstrate misreporting as required under section 270A(9).

Conclusion: The Assessing Officer should have granted immunity under section 270AA; the penalty imposed under section 270A is not sustainable and is cancelled. The appeal is allowed and the penalty is set aside.

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