Section 273AA of the Income Tax Act, 1961, provides taxpayers with a significant opportunity to avoid prosecution for certain offenses under the Act. This provision empowers tax authorities to grant immunity from prosecution if the taxpayer meets specified conditions. Below is a detailed explanation of Section 273AA, its conditions, procedures, and benefits.

---

1. Overview of Section 273AA

Section 273AA allows the Principal Commissioner or Commissioner of Income Tax to grant immunity from prosecution for offenses under the following sections:

• Section 276C: Willful attempt to evade tax.
• Section 276CC: Failure to file returns of income.
• Section 277: False statements in verification or delivery of false accounts.

This provision incentivizes taxpayers to accept their tax liabilities and comply with payment obligations without facing criminal proceedings.

---

2. Conditions for Granting Immunity

Taxpayers seeking immunity under Section 273AA must fulfill the following conditions:

a) Application for Immunity:

• The taxpayer must file an application for immunity after the penalty proceedings have been completed.

b) Payment of Tax and Penalties:

• All taxes, penalties, and interest determined under the penalty proceedings must be paid in full.

c) No Appeal Pending:

• The taxpayer must not have filed any appeal against the penalty order under Sections 246A or 253.

d) Cooperation With Authorities:

• The taxpayer must have cooperated fully with tax authorities during the proceedings.

---

3. Procedure for Seeking Immunity Under Section 273AA

1. Filing an Application:
   • Submit a formal application to the Principal Commissioner or Commissioner of Income Tax in the prescribed format.
2. Evaluation of Application:
   • The tax authority evaluates whether the conditions for granting immunity have been satisfied.
3. Issuance of Order:
   • If satisfied, the authority issues an order granting immunity.
   • If immunity is denied, the order must state the reasons for such denial.
4. Timeframe:
   • The application must be processed within a reasonable time to ensure timely resolution.

---

4. Benefits of Immunity Under Section 273AA

• Avoidance of Prosecution:
  • Taxpayers are shielded from criminal proceedings under Sections 276C, 276CC, and 277.
• Simplified Resolution:
  • Provides an opportunity to resolve disputes without prolonged litigation or criminal charges.
• Encourages Compliance:
  • Motivates taxpayers to fulfill their tax obligations and cooperate with authorities.

---

5. Limitations of Section 273AA

• Discretionary Power:
  • Granting immunity is at the discretion of the Principal Commissioner or Commissioner and is not guaranteed.
• No Immunity for Severe Cases:
  • Immunity may not be granted in cases involving fraud or deliberate falsification of documents.
• Finality of Decision:
  • The decision of the tax authority is final and cannot be appealed.

---

6. Judicial Precedents and Examples

a) CIT v. Bhaskar Picture Palace (1973):

• Highlighted the importance of full cooperation and prompt payment of taxes for granting immunity.

b) Example of Immunity Application:

• A taxpayer faces prosecution under Section 276C for attempting to evade ₹10,00,000 in taxes.
• The taxpayer accepts the penalty order, pays all dues, and applies for immunity under Section 273AA.
• The Principal Commissioner, satisfied with the taxpayer’s compliance, grants immunity from prosecution.

---

7. Comparison Between Section 273AA and Section 270AA

Aspect	Section 273AA	Section 270AA
Relief Type	Immunity from prosecution.	Immunity from penalties and prosecution.
Applicability	Post-penalty proceedings for offenses under Sections 276C, 276CC, and 277.	For under-reported or misreported income.
Conditions	Payment of tax and penalties with no appeals filed.	Timely payment of taxes and no appeal filed.

---

8. Importance of Section 273AA

Section 273AA plays a vital role in:

• Reducing litigation by offering an alternative resolution mechanism.
• Encouraging voluntary compliance and prompt payment of taxes.
• Maintaining taxpayer confidence by offering relief for genuine efforts to rectify errors.

---

Conclusion

Section 273AA empowers tax authorities to grant immunity from prosecution, promoting a fair and cooperative tax environment. Taxpayers can use this provision to avoid criminal proceedings by fulfilling their tax obligations and demonstrating genuine compliance. Understanding and leveraging this section effectively can help resolve disputes amicably and avoid further legal complications.

For more information and related blogs, click here.

---

Additional Resources

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

Want to consult a professional? Contact us: 09463224996

For more information and related blogs, click here.