Immunity from penalty cannot be denied due to default on the part of the Revenue

In the Nirman Overseas Private Limited Vs National Faceless Assessment Centre case, the Petitioner (Nirman Overseas Private Limited) filed a writ petition in Delhi high court. The petition challenged the order of the AO dated 16th March 2022, denying the immunity under Section 270AA of the Income Tax Act from penalty and prosecution.

Section 270AA of the Income Tax Act empowers an AO to grant immunity from imposition of penalty (Section 270A) as well as initiation of prosecution proceedings (Section 276C and 276CC) for underreporting of income on specific terms and conditions.

The assessing officer denied immunity under Section 270AA since the jurisdictional Assessing Officer had not passed an order within the given timelines. So, it may be treated as no order had been passed, granting immunity to the assessee. Also, while denying the statutory immunity to the Petitioner, the assessing officer failed to appreciate that once the conditions specified in the said section are satisfied, the AO was bound to grant immunity to the Petitioner.

Court’s Judgement

Court states that only in cases where penalty proceedings have been initiated for alleged misreporting of income the assessee is not allowed to apply and avail the benefit of immunity from penalty and prosecution under Section 270AA.

The Court highlights that the assessee is eligible for immunity under Section 270AA on satisfying three fundamental conditions: payment of tax and interest demand, and non-filing of appeal against the demand order. Moreover, the assessing officer initiated a penalty for underreporting income and not for misreporting income. 

The Court also stated that the Petitioner could not be prejudiced due to failure of the assessing officer to pass an order under Section 270AA of the Act within the statutory timelines. As it is settled law that no prejudice can be caused to an assessee for delay/default on the part of the Revenue.

Consequently, the Petitioner acquired a right to be granted immunity under Section 270AA of the Act.

For any clarifications/feedback on the topic, please contact the writer at namita.shah@cleartax.in