Calcutta High Court on Section 270AA immunity: AO must record clear reasons for rejection

The Calcutta High Court in Amalgam Steel Private Limited & Anr. Vs ACIT & Ors. examined whether an order refusing immunity from penalty under Section 270AA of the Income Tax Act 1961 could survive when it did not disclose any reasons or deal with the assessee’s specific contentions. The Court ultimately set aside the rejection order and directed a fresh consideration in accordance with law.

Since this is a judicial decision, what follows is a structured summary of the key facts, legal provisions, arguments, reasoning, and outcome.

Background facts and assessment chronology

Return filing and scrutiny assessment

  • Petitioner no.1 (referred to in the judgment as “the petitioner”) filed its return of income under Section 139 on 26 October 2023, declaring nil income for Assessment Year 2023–24.
  • The return was initially processed under Section 143(1) and an intimation was issued on **29 November 2023`.
  • Thereafter, the case was selected for scrutiny.
  • An assessment order under Section 143(3) dated 28 March 2025 was passed, raising a tax demand of **Rs. 10,49,79,418/-`.

Rectification proceedings under Section 154

  • The assessee challenged the scrutiny assessment by filing an application for rectification under Section 154, asserting that, upon proper rectification, there would be no taxable income and no resultant tax demand.
  • This rectification application was pending when penalty proceedings were initiated.

Initiation of penalty under Section 270A and application under Section 270AA

  • On 28 March 2025, a notice under Section 270A was issued to the assessee, calling upon it to show cause why penalty for “under-reporting of income” should not be imposed.
  • In response, the assessee invoked the immunity mechanism under Section 270AA.
  • On 9 April 2025, the assessee filed Form 68 seeking immunity from:
    • imposition of penalty under Section 270A, and
    • initiation of proceedings under Section 276C or Section 276CC (as contemplated in Section 270AA).

In its application, the assessee highlighted:

  1. Rectification under Section 154 had been sought against the Section 143(3) assessment order.
  2. Once rectification was granted, the assessee believed no income would remain taxable, leading to a nil demand.
  3. No appeal would be filed against the assessment order.
  4. The application in Form 68 was within the limitation prescribed in Section 270AA(2).
  5. The case did not fall within the situations described in Section 270A(9) (where immunity is barred).

Rectification allowed – demand reduced to nil

  • While the Section 270AA application was still pending, the Section 154 rectification application was allowed by order dated 1 May 2025.
  • As a result, the tax demand was determined as “NIL”.

Rejection of Section 270AA immunity

Despite the rectification order:

  • On 27 May 2025, the Assessing Officer passed an order under Section 270AA rejecting the immunity application.
  • The order recorded, in substance, the following points:
    • The assessee had applied for immunity under Section 270AA in Form 68 on 09/04/2025.
    • A notice under Section 270AA dated 08.05.2025 was issued, calling upon the assessee to appear on 13.05.2025 or file a reply with supporting evidence.
    • The assessee allegedly did not comply with that notice.
    • The Assessing Officer concluded, without elaboration, that the conditions in Section 270AA were not fulfilled, and therefore the request for immunity was “not maintainable”.

On that basis, the Assessing Officer rejected the assessee’s prayer for immunity from penalty under Section 270A for A.Y. 2023–24.

Appeal and writ petition

  • The assessee preferred an appeal against the rejection of immunity before the Commissioner of Income Tax (Appeals).
  • By order dated 3 October 2025, the appeal was dismissed as not maintainable.
  • Following that, the assessee moved the Calcutta High Court by way of writ petition challenging the order dated 27 May 2025 passed under Section 270AA.

Assessee’s submissions before the High Court

Lack of reasons and non-consideration of the application

Counsel for the assessee contended: