AO Must Give Reasons While Rejecting Immunity Plea u/s 270AA of Income Tax: Calcutta HC Sets Aside Order [Read Order]

In a recent decision, the Calcutta High Court held that an Assessing Officer must clearly explain the reasons while rejecting an application seeking immunity from penalty under Section 270AA of the Income Tax Act, 1961.

Amalgam Steel Private Limited challenged the rejection order which requested for immunity from penalty. The company had filed its income tax return declaring Nil income. The return was processed under Section 143(1) and later selected for scrutiny.

On 28 March 2025, the Assessing Officer passed an assessment order under Section 143(3) raising a tax demand of more than Rs. 10 crore. On the same day, the officer also issued a notice proposing to levy penalty under Section 270A for under-reporting of income.

After receiving the assessment order, the company filed an application for rectification under Section 154 of the Act. While this rectification application was pending, the company filed an application in Form 68 on 9 April 2025 under Section 270AA, requesting immunity from penalty proceedings. The company stated that it had fulfilled all conditions under the law and that once rectification was allowed, no tax demand would remain.

On 1 May 2025, the Assessing Officer allowed the rectification application and reduced the final tax demand to Nil. Even after this, the Assessing Officer rejected the company’s immunity application on 27 May 2025. The rejection order stated that the conditions under Section 270AA were not fulfilled but did not explain which condition was violated.

The company challenged this rejection before the appellate authority, but the appeal was dismissed as not maintainable. The company then approached the Calcutta High Court.

Before the High Court, the company’s lawyer argued that the rejection order was passed without proper thinking and without giving any reasons. It was argued that the officer did not explain why the immunity application was rejected, even though the tax demand had already been reduced to Nil and the penalty proceedings had also been dropped.

The Income Tax Department argued that the company’s application was not available on record and that the legal conditions for immunity were not satisfied.

Justice Om Narayan Rai observed that the rejection order itself mentioned that the company had filed an application in Form 68. The court observed that the application was also placed before the Court and the department could not deny that it was filed. The Court also observed that the rectification had already been allowed and the final tax demand was Nil.

The court observed that Section 270AA clearly states that once the conditions are fulfilled, the Assessing Officer must grant immunity. The court explained that any order rejecting such an application must give clear reasons. It pointed out that an order without reasons cannot stand under law.

The court held that the Assessing Officer failed to apply his mind and did not properly consider the company’s request. The rejection order was found to be invalid.

The court set aside the order rejecting the immunity application and directed the Assessing Officer to reconsider the matter after giving the company an opportunity to be heard. The writ petition was disposed of.

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