2026 (1) TMI 695 - HC - Income Tax

Claim for penalty immunity u/s270AA based on Form 68 submission; order set aside, AO to reconsider

Dominant issue: Whether the AO lawfully declined immunity from penalty under s.270AA where the assessee had applied and claimed to satisfy statutory ... Immunity from penalty u/s 270AA - petitioner’s request for grant of immunity been declined - As per revenue petitioner’s application seeking immunity is neither available with the physical records of the respondents/ revenue authorities nor available on the portal HELD THAT:- Petitioner had indeed applied for immunity from penalty under Section 270AA in Form 68 on April 9, 2025. Such application along with the print out of Form 68 forms Annexure ‘P-6’ to the writ petition. In such view of the matter, it cannot be said that no application was filed by the petitioner seeking immunity. In the said application the petitioner has, in support of its contention that it has satisfied the conditions required for grant of immunity in terms of Section 270AA Sub-section 3 of Section 270AA reads in mandatory terms. A meaningful reading thereof makes it clear that once an assessee satisfies the conditions mentioned in the earlier limbs of the said section, the AO would be bound to grant immunity to such assessee. The order impugned could not have been passed without disclosing the basis for the conclusion as to why was (is) the petitioner not entitled to immunity and which of the conditions mentioned in Section 270AA of the said Act of 1961 the petitioner has failed to fulfil. There is no indication in the order impugned as to how have the petitioner’s contention in its application for immunity been dealt with. It is now well settled that reasons are live links between the narrative and the directive and that an order without reasons can also be treated as a nullity. Since the order impugned dated May 27, 2025 does not evince any application of mind to the matter by the Assessing Officer concerned and it does not cite any reason on the basis of whereof the ultimate conclusion has been arrived at, therefore, the same cannot withstand judicial scrutiny. In fact Schneider Electric South East Asia (HQ) Pte. Ltd. [2022 (3) TMI 1295 - DELHI HIGH COURT] cited by the petitioners also emphasises on reasons being provided in the order declining immunity. The order impugned passed under Section 270AA (pertaining to assessment year 2023-24) is set aside. AO concerned shall revisit the petitioners’ application for grant of immunity, strictly in accordance with law and pass appropriate order. Issues: Whether the order rejecting an application for immunity under Section 270AA of the Income-tax Act, 1961 was legally sustainable where the application had been filed within time, rectification had rendered the demand nil, and no reasons were given for rejection.Analysis: Section 270AA sets out conditions and mandates that, upon fulfilment of prescribed conditions and after expiry of the appeal period, immunity from penalty under Section 270A shall be granted; sub-section (4) requires that no order rejecting an application be passed without giving the assessee an opportunity of being heard. The available material showed that an application in the prescribed form had been filed within time and that rectification had resulted in nil demand. The impugned order rejecting the application did not state which statutory condition was unmet, did not disclose application of mind to the petitioner’s submissions, and did not give reasons explaining the basis for rejection; the absence of reasons and any indication that an opportunity of hearing was provided rendered the impugned order legally deficient.Conclusion: The order rejecting the application for immunity under Section 270AA is set aside and the matter is remitted for fresh consideration in accordance with law, with an opportunity of hearing to be afforded to the applicant.