Section 273AA of the Income Tax Act, 1961, empowers the Principal Commissioner or Commissioner to grant immunity from penalties in specific cases, particularly where settlement proceedings before the Income Tax Settlement Commission (ITSC) have abated. Below is a detailed breakdown of its provisions, conditions, and procedural aspects:
1. Eligibility for Immunity [Section 273AA(1)]
A taxpayer can apply for immunity if:
- Settlement Application Abated:
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- The taxpayer had filed an application before the Income Tax Settlement Commission (ITSC) under Section 245C, but the proceedings were abated under Section 245HA(e.g., due to non-prosecution or non-compliance).
- Penalty Proceedings Initiated:
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- The Income Tax Department has initiated penalty proceedingsafter the abatement.
Example:
- Sharma filed a settlement application but failed to submit required documents, leading to abatement. The department then initiated penalty proceedings for non-disclosure. He applies for immunity under Section 273AA.
2. Conditions for Granting Immunity [Section 273AA(3)]
The Commissioner may grant immunity subject to conditions, if satisfied that the taxpayer:
- Cooperated Fully: Assisted tax authorities post-abatement.
- Made Full & True Disclosure: Provided complete details of previously undisclosed income and its sources.
Key Notes:
- Immunity is discretionaryand may include conditions (e.g., payment of taxes in installments).
- No immunity if: Penalty has already been imposed post-abatement [Section 273AA(2)].
3. Application Process & Time Limits
- Application Submission: Taxpayer must file a request to the Commissioner before penalty imposition.
- Decision Timeline:
- The Commissioner must pass an order within 12 monthsof receiving the application.
- No rejection without hearing: The taxpayer must be given an opportunity to present their case.
4. Withdrawal of Immunity [Section 273AA(4)-(5)]
Immunity can be withdrawn if:
- Conditions Violated: Taxpayer fails to comply with imposed terms.
- Concealment/False Evidence: If the taxpayer later hides material facts or submits false evidence.
Effect of Withdrawal:
- Penalties become enforceable as if immunity was never granted.
5. Comparison with Other Relief Provisions
| ASPECT | SECTION 273AA | SECTION 273A (WAIVER) |
| Applicability | Post-abatement of settlement cases | General penalty relief (e.g., under-reporting) |
| Initiation | Taxpayer must apply | Can be suo moto or taxpayer-initiated |
| Conditions | Cooperation + full disclosure | Voluntary disclosure + tax payment |
| Lifetime Limit | No explicit limit | One-time only |
