Here’s a detailed analysis of Immunity under Section 270AA of the Income Tax Act, 1961, which protects taxpayers from penalties and prosecution for under-reported income:
1. Overview of Section 270AA
Section 270AA grants immunity from:
- Penalty under Section 270A(50% penalty for under-reporting income).
- Prosecution under Sections 276C(wilful tax evasion) and 276CC (failure to file returns).
Objective: To encourage voluntary compliance and reduce litigation by offering a settlement path for disputes involving under-reported income (not misreported income).
2. Eligibility Conditions
To avail immunity, taxpayers must:
- Pay Tax + Interest: Clear dues as per the assessment/reassessment order within the demand notice period (typically 30 days).
- No Appeal Filed: Refrain from appealing the assessment order.
- Application Submission: File Form 68within 1 month from the end of the month the assessment order is received.
Exceptions:
- Immunity is not availablefor misreporting (e.g., fake invoices, suppression of facts), which attracts a 200% penalty.
- Loss cases with nil tax liabilitymay still qualify if other conditions are met (judicial precedents support this).
3. Process Timeline
| STEP | ACTION | DEADLINE |
| 1 | Pay tax + interest | Within demand notice period (usually 30 days) |
| 2 | Submit Form 68 | 1 month from the end of the month of receiving the order |
| 3 | AO’s order (accept/reject) | 1 month from the end of the month of receiving Form 68 |
Key Notes:
- The AO must hear the taxpayerbefore rejecting the application.
- If the AO misses the deadline, immunity is deemed granted(per Delhi HC rulings).
4. Judicial Interpretations
- Ambiguous Penalty Notices: If the AO doesn’t specify whether the case involves “under-reporting” or “misreporting,” courts may favor immunity.
- Loss Cases: Immunity applies even if assessed income results in a loss (no tax payable).
- Retrospective Impact: Availing immunity does not affectdisputes in prior years (CBDT Circular No. 05/2018).
