Delhi High Court Sets Aside Order Rejecting Section 270AA Immunity Application For Failure To Consider Assessee’s Reply

The Case

SHANTIJANAK ESTATES PRIVATE LIMITED Vs THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 22(2), DELHI & ANR.
Case No.: W.P.(C)/12741/2026
Decided on: 09/17/2026
CNR: DLHC010412662026 ·
High Court of Delhi

The Legal Issue

The petitioner challenged the order dated 30.07.2026 passed by the respondent no.1 – the Assessing Officer under Section 270AA of the Income Tax Act, 1961, rejecting the petitioner's application under Section 270AA(2) seeking immunity from penalty proceedings. The Court considered whether the Assessing Officer erred in rejecting the application by recording that the petitioner did not file any reply, when the record showed that a reply dated 29.07.2026 had been filed. The Court also examined whether the Assessing Officer could require the petitioner to furnish negative evidence that no appeal had been preferred against the assessment order.

Facts of the Case

The petitioner company is engaged in the business of letting out immovable property and filed its return of income for assessment year 2024-25, declaring total income of Rs. 5,43,52,210/- under the head Profits and Gains of Business and Profession. Assessment was done under Section 143(3) read with Section 144B by order dated 27.03.2026, assessing income under the head income from house property at Rs. 6,68,07,690/-. While passing the assessment order, the Assessing Officer initiated penalty proceedings under Section 270A alleging under-reporting of income. The petitioner paid the entire demand of Rs. 37,99,340/- on 22.04.2026 before the due date of 26.04.2026 and on 27.04.2026 moved an application in Form No. 68 under Section 270AA(2) seeking immunity from penalty proceedings. On 20.05.2026, respondent no.2 issued a notice seeking response as to why penalty under Section 270A be not imposed. The Assessing Officer issued a notice dated 28.07.2026 asking why the immunity request should not be rejected as the petitioner had failed to establish payment of tax and interest and had not given documentary evidence that no appeal had been preferred. The petitioner filed a reply dated 29.07.2026, but the Assessing Officer rejected the application vide order dated 30.07.2026, inter alia recording that the petitioner did not file any reply.

Summary of the Decision

The Court set aside the impugned order dated 30.07.2026 (Annexure P-1) and directed the respondent-Assessing Officer to pass a fresh order in accordance with law and with objectivity, considering the mandate of law and material available on record. The Court observed that the Assessing Officer had required the petitioner to satisfy that he had not filed any appeal, and failed to comprehend how the assessee could file or furnish negative evidence that he had not filed an appeal. The Court directed the Assessing Officer not to ask for negative evidence and stated that the AO can at best take a declaration from the assessee that it has not filed any appeal against the assessment order and that in case any appeal has been preferred, the same would be withdrawn or shall be deemed to have been withdrawn. The Court noted that Form 68 filed by the petitioner already contained such detail and declaration, and therefore the notice issued by the Assessing Officer was an empty formality to say the least. Since the petitioner had filed a reply and the impugned order was passed without consideration of the reply, the Court set aside the order and directed a fresh order. The writ petition was allowed in aforesaid terms and all interlocutory applications were disposed of accordingly. The Assessing Officer was directed to pass a fresh order in accordance with law on or before 15.10.2026. Until the petitioner's application under Section 270AA is decided, the Faceless Assessing Officer shall not proceed in furtherance of notice dated 27.03.2026 proposing to levy penalty under Section 270A of the Act of 1961.

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