Penalty immunity under section 270A must be examined on merits before sustaining penalty; matter remitted for fresh consideration.

Penalty under section 270A could not be sustained without considering the assessee's immunity application on merits. Because the request for immunity was not examined by the Assessing Officer or the appellate authority, the proper course was to remit the matter for fresh consideration. The Assessing Officer was directed to decide the immunity application anew, with all contentions kept open.

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Issues: Whether the penalty levied under section 270A of the Income-tax Act, 1961 could be sustained without examining the assessee's application for immunity, and whether the matter required restoration to the Assessing Officer for consideration on merits.

Analysis: The assessment was completed under section 143(3) read with section 144B of the Income-tax Act, 1961 and penalty proceedings were initiated under section 270A. The assessee sought immunity from penalty, but the request was not examined on merits by the Assessing Officer or the appellate authority. In these circumstances, the proper course was to have the immunity application considered afresh by the Assessing Officer, with all contentions kept open.

Conclusion: The penalty matter was remitted to the Assessing Officer for fresh consideration of the immunity application on merits.

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