In a significant ruling, the Cuttack Bench of the Income Tax Appellate Tribunal (ITAT) has denied an assessee’s plea for immunity from penalty under Section 270AA of the Income Tax Act, 1961, on procedural grounds. The tribunal clarified that merely paying the assessed tax and submitting a general letter is not sufficient to claim protection from penalty—the application must strictly adhere to the prescribed format and timeline under the law.

Background of the Case

The case involved Sri Ganesh Chit Fund, a partnership firm that came under scrutiny during assessment proceedings. The assessment was completed under Section 143(3) of the Income Tax Act, resulting in a disallowance of expenses related to salary and interest paid to the partners.

Following the assessment order dated 16th December 2019, the assessee promptly paid the tax demand of ₹3,06,290, which included applicable interest, by 3rd January 2020—within the statutory 30-day limit.

Request for Penalty Waiver

Hoping to avoid penalty proceedings under Section 270A, the assessee submitted a letter to the Assessing Officer (AO) on 14th January 2020, requesting the dropping of penalty proceedings. The firm argued that it had complied with the conditions necessary for immunity:

  • Payment of taxes within the prescribed period

  • No appeal filed against the assessment order

However, the AO proceeded to levy a penalty under Section 270A, which was subsequently confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)].

Arguments Before the ITAT

The assessee’s authorized representative argued that they fulfilled the substantive conditions for immunity under Section 270AA. It was contended that even though a formal application was not filed in the prescribed form, the essence of the request was communicated through the letter dated 14.01.2020.

On the other hand, the departmental representative strongly opposed this argument, emphasizing that:

  • No formal application under Section 270AA was ever filed.

  • The prescribed format and time limit are mandatory requirements under the law.

Tribunal’s Observations and Findings

The ITAT bench, comprising Shri George Mathan (Judicial Member) and Shri Rajesh Kumar (Accountant Member), took a strict view of the procedural lapse.

Referring to Section 270AA(1) and 270AA(2), the tribunal clarified the key requirements:

  • The assessee must file an application in the prescribed format.

  • The application must be filed within one month from the end of the month in which the assessment order is received.

  • The application must also clearly confirm that no appeal against the assessment order has been filed.

In this case, although the assessee did pay the demanded tax and did not file an appeal, the required application form was never submitted. The mere submission of a general letter was not considered valid compliance.

Key Takeaway from the Judgment

The ITAT dismissed the appeal, upholding the CIT(A)’s decision to confirm the penalty under Section 270A. The ruling sends a clear message that procedural compliance is not optional—even genuine cases can be denied relief if the process is not followed correctly.

This case highlights the importance of adhering strictly to the prescribed legal formats and timelines when seeking statutory relief or immunity under tax laws. Simply meeting the spirit of the law is not enough; the form and procedure hold equal significance.

Conclusion

This decision by the ITAT is a reminder to taxpayers, professionals, and advisors that in matters of income tax, particularly when dealing with penalty provisions and immunity claims:

  • Filing the right form in the right format

  • Within the specified timeframe

  • And including all necessary declarations
    is absolutely critical.

Failing to do so—even inadvertently—can lead to penalties and the denial of immunity, no matter how compliant or honest the taxpayer’s intent may be.

To avoid such pitfalls, taxpayers are advised to consult a qualified tax professional and ensure all procedural formalities are correctly fulfilled when claiming any benefits or exemptions under the Income Tax Act.