If a person co-operates with tax department in disclosure of income, the assessing officer normally grants immunity as permitted under the Income Tax Act. However, the final decision on whether to grant or not rests with the concerned tax authority where the appeal lies. Here are the immunities available from penalties and prosecution under the said Act.
1. Under Section 270AA - Immunity from penalty u/s. 270A, prosecution u/s. 276C AND 276CC
In order to get immunity from the harsh penalty u/s. 270A and from prosecution proceedings u/s. 276C and 276CC, the concerned assessee has to agree with the income assessed by the assessing officer under section 143(3) or 147 as the case may be. The concerned assessee has to pay the tax and interest on it within the time prescribed in the notice of demand received u/s. 156.
The Assessing officer will pass an order accepting the application if the concerned assessee complied with all the conditions as mentioned above. The Order will be passed within one month from the end of the month in which he or she receives the application seeking immunity and he or she will be immune from the penalty and prosecution proceedings.
However, the Assessing officer will deny the immunity if any of the above conditions are not complied or where the penalty initiated u/s. 270A is levied @200% (in case of mis reporting of income)
2. Section 273A - Waiver from any penalty
Even if section 270AA does not provide immunity from penalty of 200% levied u/s. 270A, but still the Commissioner of Income Tax (CIT) has the power to reduce or waive whole penalty of 200%, if he or she unaccounted income and pay the taxes and interest payable on such income before the Assessing Officer detects such income. A full and true disclosure by the concerned assessee is required along with cooperation.
However, this waiver can be obtained only once in a life time. The Commissioner has power to reduce or waive any other penalty levied on assessee would cause genuine hardship. Again the final decision of granting immunity lies with the Commissioner only.
3. Section 245C to Section 245L - Apply to Income Tax Settlement Commission
An alternative available to an assessee is the Settlement Commission. The concerned assessee can apply to the Settlement Commission for settlement of his case after disclosing his or her true and fair income in the application and after depositing the requisite tax and interest thereon. However, the Settlement Commission will accept applications only, if tax payable exceeds Rs. 10 Lakhs.
The Settlement Commission has power to grant immunity from all the penalty and prosecution proceedings initiated against an assessee.
4. Section 273AA - Immunity from all penalties
If Settlement Commission has rejected an assessee’s application or settlement proceedings are abated and the penalty proceedings under Income Tax Act have been started, then the assessee can make an application to the concerned Commissioner of Income Tax seeking immunity from penalty before any order for imposing penalty is issued.
The Immunity granted by the Commissioner of Income Tax would be withdrawn if it is found that the assessee have not complied with any of the conditions which were a prerequisite for granting immunity to an assessee or where it is found that the assessee have taken immunity by suppressing some material facts and providing false information.
5. Section 273B - Penalties not to be imposed if reasonable cause of failure
An assessee may be avoid all the various penalties which may be impose on him or her under the Income Tax Act, except under section 270A, where an assessee is able to prove that the failure (e.g. not filing the Return, not getting tax audit, etc.) under respective sections of the Act was due to a reasonable cause
The Assessing officer will grant immunity only if he is convinced that the reason for the failure made by an assessee was due to a reasonable cause.
Reference
- Taxmann’s Income Tax Act, as amended by Finance Act, 2016, 60th Edition
- A N Aiyar’s Indian Tax Laws - 2016, as amended by Finance Act, 2016, 53rd Edition
- Direct Taxes - Laws & Practice by Dr. Girish Ahuja & Dr. Ravi Gupta, as amended by Finance Act, 2016, 7th Edition
- Kanga & Palkhivala’s - The Law and Practice of Income Tax - Volume I & II, Tenth Edition
The author is a Tax Law Professional who may be contacted at sritaxandcorporate@gmail.com
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