Section 270AA of the Income Tax Act, 1961, offers taxpayers an opportunity to seek immunity from penalties for under-reported income, as well as protection from prosecution under certain conditions. This provision encourages taxpayers to accept their tax liabilities and pay dues promptly, fostering voluntary compliance. Below is a comprehensive explanation of the conditions, application procedure, and benefits of immunity under Section 270AA.

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1. Overview of Section 270AA

Section 270AA allows taxpayers to apply for immunity from:

• Penalty under Section 270A for under-reporting or misreporting of income.
• Prosecution under Section 276C for willful evasion of taxes.

This section incentivizes taxpayers to resolve disputes amicably by admitting their tax liabilities without prolonged litigation.

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2. Key Conditions for Immunity

To qualify for immunity under Section 270AA, the following conditions must be met:

a) Tax Assessment Under Specified Sections:

• The assessment or reassessment order must have been passed under:
  • Section 143(3) (regular assessment).
  • Section 147 (income escaping assessment).

b) Payment of Tax and Interest:

• The taxpayer must have paid the tax demanded and the applicable interest under the assessment order within the specified time.

c) No Appeal Filed:

• The taxpayer must not have filed an appeal against the assessment order with the Commissioner (Appeals) or other higher authorities.

d) Application Within Time Limit:

• The taxpayer must file the application for immunity within 30 days from the receipt of the assessment order.

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3. Procedure for Seeking Immunity Under Section 270AA

1. Filing an Application:
   • Submit Form No. 68 to the Assessing Officer (AO) within 30 days of receiving the assessment order.
2. Evaluation by Assessing Officer:
   • The AO examines whether the taxpayer satisfies all conditions for immunity.
3. Issuance of Order:
   • If the conditions are met, the AO passes an order granting immunity within one month from the date of application.
   • If immunity is denied, the AO must provide reasons in writing.

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4. Benefits of Immunity Under Section 270AA

• Avoidance of Penalties:
  • Immunity from penalties imposed under Section 270A for under-reported or misreported income.
• Protection From Prosecution:
  • Immunity from criminal prosecution under Section 276C.
• Simplified Resolution:
  • Resolves tax disputes without prolonged litigation.

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5. Limitations of Section 270AA

• Immunity is not available for misreporting cases involving deliberate fraud or false documentation.
• Immunity is denied if the taxpayer fails to meet the conditions, such as timely payment of dues or filing an appeal.

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6. Judicial Precedents and Examples

1. CIT v. Suresh Chandra Mittal (2001):
   • Highlighted the importance of voluntary compliance for penalty waiver or immunity.
2. Example of Immunity Application:
   • Taxpayer’s assessed income under Section 143(3) shows under-reported income of ₹5,00,000.
   • Tax demand (including interest): ₹1,50,000.
   • Taxpayer pays ₹1,50,000 and applies for immunity within 30 days.
   • AO grants immunity, waiving penalty and prosecution.

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7. Comparison Between Section 270AA and Other Relief Provisions

Aspect	Section 270AA	Section 273A
Relief Type	Immunity from penalties and prosecution.	Waiver or reduction of penalties.
Applicability	For under-reported/misreported income.	For various defaults, including non-payment of taxes.
Conditions	Timely payment of taxes and no appeal filed.	Voluntary disclosure and cooperation.

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8. Importance of Section 270AA

Section 270AA promotes voluntary compliance by offering immunity to taxpayers who accept their tax liabilities. It reduces litigation, enhances efficiency in tax administration, and provides relief to taxpayers willing to rectify errors without further disputes.

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Conclusion

Section 270AA offers a fair and efficient way for taxpayers to avoid penalties and prosecution by admitting their tax liabilities and paying dues promptly. By meeting the conditions and following the prescribed procedure, taxpayers can resolve disputes amicably and focus on compliance. This provision is a step toward fostering trust between taxpayers and the tax authorities.

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Additional Resources

Learn more about Tax Provisions on the official Income Tax India website.

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