Income Tax Act | AO Can't Demand 'Negative Evidence' Of No Appeal For Immunity From Penalty: Delhi High Court

The Delhi High Court has held that an Assessing Officer (AO) cannot require an assessee to furnish “negative evidence” to establish that no appeal has been filed against an assessment order while considering an application for immunity from penalty under Section 270AA of the Income Tax Act, 1961.

The Division Bench of Justices Dinesh Mehta and Rajneesh Kumar Gupta made the observation while setting aside an order passed by the AO rejecting an application filed by Petitioner seeking immunity from penalty proceedings.

Petitioner-company, which is engaged in the business of letting out immovable property, had declared a total income of ₹5.43 crore for the assessment year 2024-25 under the head “Profits and Gains of Business and Profession”.

The assessment was subsequently completed under Sections 143(3) and 144B of the Income Tax Act, with the income assessed under the head “income from house property” at ₹6.68 crore. The AO also initiated penalty proceedings under Section 270A, alleging under-reporting of income.

Petitioner paid the entire demand of ₹37.99 lakh on April 22, 2026, before the prescribed due date. It thereafter filed an application in Form 68 under Section 270AA(2), seeking immunity from penalty proceedings.

AO subsequently issued a notice asking Petitioner why its application for immunity should not be rejected, stating that it had failed to establish payment of tax and interest and had not furnished documentary evidence showing that no appeal had been filed against the assessment order.

Petitioner replied to the notice the following day. However, the AO rejected its application, recording that Petitioner had not filed any reply.

Before the High Court, Petitioner pointed out that the reply had in fact been filed and that the acknowledgement was available on record. It also submitted that the entire outstanding demand had been paid, no appeal had been filed and the application for immunity had been made within the prescribed period.

The High Court noted that the AO had required the Petitioner to establish that it had not filed an appeal.

“We fail to comprehend as to how the assessee could file or furnish negative evidence that he had not filed an appeal,” the Court observed.

It directed the AO “not to ask for negative evidence” in this regard. It said,

“The AO can at the best take a declaration from the assessee that it has not filed any appeal against the assessment order and also that in case any appeal has been preferred, the same would be withdrawn or shall be deemed to have been withdrawn.”

The Court further noted that Form 68 filed by the Petitioner already contained such a declaration.

“Therefore, the notice issued by the Assessing Officer was an empty formality to say the least,” it said.

The Court also found that Petitioner had actually filed a reply to the AO's notice, but the impugned order had been passed without considering it.

As such, the Court set aside the impugned order rejecting Petitioner's application and directed the AO to pass a fresh order with objectivity.

For Petitioner: Advocates Rajeev Ahuja, Deepika, Harshit Ahuja & Shikhar Bansal,

For Respondents: Ruchir Bhatia, SSC with Anant Mann, JSC & Pratyuksh Gupta,