Immunity under section 270AA bars penalty under section 270A when the application is not validly rejected.

Penalty under section 270A cannot survive where the assessee has complied with the conditions for immunity under section 270AA by paying the tax and interest, filing Form No. 68 within time, and not appealing against the assessment order. The absence of any valid order rejecting the immunity application, or recorded reasons showing misreporting so as to deny immunity, meant the statutory protection remained available. On those facts, the penalty was held unsustainable and was quashed in favour of the assessee.

---

---

Issues: Whether penalty under section 270A could be sustained when the assessee had filed the prescribed application for immunity under section 270AA after paying the tax and interest, had not filed an appeal against the assessment order, and the Assessing Officer had not passed an order rejecting the application.

Analysis: The assessee complied with the statutory conditions for immunity by paying the tax and interest, filing Form No. 68 within time, and not challenging the assessment order. No order rejecting the immunity application was passed, nor were reasons recorded to show that the case fell within the misreporting category so as to deny the benefit of section 270AA. In the absence of a valid rejection and in view of the statutory mandate governing immunity, the subsequent levy of penalty could not be sustained.

Conclusion: The penalty under section 270A was unsustainable and was quashed in favour of the assessee.

Ratio Decidendi: Where an assessee satisfies the statutory conditions for immunity under section 270AA and the application is not validly rejected, penalty under section 270A cannot be imposed.

---