Penalty for under-reporting of income and Section 270AA immunity where Form No.68 remained undecided, immunity directed

Issue concerns liability to penalty for under-reporting of income where a belated return was filed and Form No.68 under Section 270AA was submitted but not adjudicated. The legal basis is that immunity from penalty under Section 270AA arises where statutory conditions are met, including payment of tax and no appeal; failure of the assessing officer to accept or reject the Form No.68 requires grant of immunity. Consequence: immunity from penalty must be granted where the statutory preconditions are satisfied and the AO has not passed the mandatory decision, and the appeal is allowed accordingly.

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Issues: Whether the assessee, having filed Form No.68 for immunity under section 270AA after payment of tax and having the penalty proceedings initiated for under-reporting under section 270A, is entitled to grant of immunity and cancellation of the penalty where the Assessing Officer failed to pass an order under section 270AA(4) within the statutory time.

Analysis: The Tribunal examined whether conditions for immunity under section 270AA were satisfied (payment of tax and interest as per assessment/reassessment, no appeal filed and initiation of penalty for under-reporting) and whether failure of the Assessing Officer to pass an order under section 270AA(4) within the prescribed period prejudiced the assessee. The Tribunal considered the factual matrix that the assessee filed Form No.68 within the statutory period, tax was paid, no appeal was pending and the penalty levied related to under-reporting. The Tribunal followed precedents of the Hon'ble Delhi High Court which held that where the AO fails to act within the statutory timeline and the statutory conditions are met, the assessee acquires a right to immunity; the Tribunal noted that immunity proceedings under section 270AA are distinct and final under subsection (5).

Conclusion: The Assessing Officer failed to pass the statutory order under section 270AA(4); the assessee fulfilled the statutory conditions for immunity; therefore immunity under section 270AA is to be granted and the penalty levied under section 270A is to be cancelled. The appeal is allowed in favour of the assessee.

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