Statutory immunity for tax prosecution is confined to section 279(1A) offences and depends on section 273A preconditions.

Immunity from prosecution under section 279(1A) of the Income-tax Act, 1961, depends on satisfaction of the statutory preconditions for reduction or waiver of penalty under section 273A. Where the assessee made a disclosure within fifteen days of search and seizure and the complaint concerned only the disclosed transaction, the court treated the disclosure as a full and true disclosure prior to detection and quashed proceedings for offences under sections 276C and 277. The immunity did not extend to offences outside that provision, so no relief was available for section 278 of the Income-tax Act or for offences under sections 120B and 420 of the Indian Penal Code.

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Issues: (i) Whether the assessee was entitled to immunity from prosecution under section 279(1A) of the Income-tax Act, 1961, in respect of offences under sections 276C and 277 after making disclosure within fifteen days of search and seizure. (ii) Whether the prosecution could be quashed in respect of offences under section 278 of the Income-tax Act, 1961, and sections 120B and 420 of the Indian Penal Code, 1860.

Issue (i): Whether the assessee was entitled to immunity from prosecution under section 279(1A) of the Income-tax Act, 1961, in respect of offences under sections 276C and 277 after making disclosure within fifteen days of search and seizure.

Analysis: Explanation 2 to section 273A, as then in force, deemed a full and true disclosure to have been made prior to detection where disclosure was made within fifteen days of seizure. The assessee had confessed to receipt of on-money and intimated the Commissioner within that period. The statutory scheme linked immunity from prosecution for sections 276C and 277 to an order reducing or waiving penalty under section 273A, and section 279(1A) barred prosecution only in relation to the assessment year for which such penalty had been reduced or waived. On the facts, the complaint itself related only to the disclosed transaction, so the Commissioner ought to have granted relief under section 273A.

Conclusion: The assessee was entitled to immunity from prosecution for offences under sections 276C and 277 of the Income-tax Act, 1961, and the proceedings were quashed to that extent.

Issue (ii): Whether the prosecution could be quashed in respect of offences under section 278 of the Income-tax Act, 1961, and sections 120B and 420 of the Indian Penal Code, 1860.

Analysis: The statutory immunity under section 279(1A) extended only to offences under sections 276C and 277. The Commissioner had not passed any order under section 273A granting reduction or waiver of penalty, and in any event the complaint included offences outside the scope of section 279(1A). No statutory basis for immunity was available in respect of section 278 of the Income-tax Act, 1961, or the offences under the Indian Penal Code, 1860.

Conclusion: The prosecution was not quashed for offences under section 278 of the Income-tax Act, 1961, or sections 120B and 420 of the Indian Penal Code, 1860.

Final Conclusion: The proceedings were quashed only to the extent of the income-tax offences covered by the statutory immunity, while the remaining criminal proceedings were left undisturbed.

Ratio Decidendi: Immunity from prosecution under section 279(1A) arises only when the statutory preconditions for reduction or waiver of penalty under section 273A are satisfied, and it is confined to the offences expressly covered by that provision.

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