Section 270AA Immunity Rejection Invalid Without Penalty Decision

Case Details: IBS Software (P.) Ltd. vs. Union of India - [2026] 185 taxmann.com 351 (Kerala)

Judiciary and Counsel Details

Devan Ramachandran & Basant Balaji, JJ.
Raja Kannan, Joson Manavalan, K. John Mathai, Kuryan Thomas, M. Gopikrishnan Nambiar, Paulose C. Abraham, Advs. & E.K. Nandakumar, Sr. Adv. for the Petitioner.
P.G. Jayashankar, G. Keerthivas, Advs. & Navaneeth N. Nath, CGC for the Respondent.

Facts of the Case

The assessee filed an application seeking immunity from the penalty proceedings under section 270A. However, the Assistant Commissioner of Income Tax (ACIT) rejected the application on the grounds that the assessee’s misreporting of income has been proved.

The matter reached the Kerala High Court.

High Court Held

The High Court held that the ACIT had issued a notice under section 270A, against which the assessee filed objections. The assessee contended that it had committed no error or wrongdoing, including misrepresentation, misreporting, or underreporting of income.

Admittedly, the assessee’s objections had not been considered yet. However, the ACIT issued a notice declining to grant immunity from the penalty proceedings. The Court held that the ACIT had acted prematurely in considering the application in question. It is only after the Competent Authority decides to impose the penalty that the decision on immunity from it can be considered.

If the Authority, after considering the objections, decides not to impose a penalty, it would not be necessary to issue an order on the application seeking immunity from the penalty. The Authority concerned had not yet decided to impose the penalty, and such a decision would depend on the consideration of the assessee’s objections.

Accordingly, the High Court set aside the order and directed the ACIT to consider the objections in its proper perspective, after affording necessary opportunities to the assessee.