Immunity from Penalty and Prosecution in Income Tax Law : Clause 440 of the Income Tax Bill, 2025 Vs. Section 270AA of the Income-tax Act, 1961

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....e Finance Act, 2023 and 2025. The procedural framework for making applications u/s 270AA is provided by Rule 129 of the Income-tax Rules, 1962, which prescribes the relevant form and manner. The emergence of Clause 440 reflects a legislative intent to streamline and perhaps recalibrate the process of granting immunity in the context of evolving tax administration and compliance norms. The clause, while largely mirroring the structure of Section 270AA, introduces certain modifications in terminology, cross-references, and possibly in the scope of its operation. This commentary provides an in-depth analysis of Clause 440, its objectives, the mechanisms it establishes, and its practical implications. It further undertakes a comparative analy....

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.... (u/s 478 or 479), if two cumulative conditions are satisfied: * The tax and interest payable as per the assessment or reassessment order u/s 270(10) or section 279 has been paid within the time specified in the notice of demand. * No appeal against the said order has been filed. This formulation closely tracks the language of Section 270AA(1), albeit with updated references to the corresponding provisions in the new Bill. The rationale is to restrict immunity to those who accept the assessment and do not seek to litigate. Sub-section (2): Time Limit and Manner of Application The application must be made within one month from the end of the month in which the assessment order is received, in such form and manner as prescribed. This i....

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....it for Disposal The AO is required to pass an order accepting or rejecting the application within three months from the end of the month of receipt. This is a significant procedural safeguard, ensuring timely disposal and certainty for the assessee. The corresponding provision in Section 270AA(4) also prescribes a three-month period (amended from the earlier one month by the Finance Act, 2025). Sub-section (6): Opportunity of Being Heard No order of rejection can be made without giving the assessee an opportunity of being heard. This is a reiteration of the principles of natural justice and is identical to the proviso in Section 270AA(4). Sub-section (7): Finality of Order The order made under sub-section (5) is final, precluding furth....

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....action regarding compliance with the conditions and the absence of aggravating circumstances (e.g., misreporting). Comparative Analysis with Section 270AA of the Income-tax Act, 1961 1. Structural and Substantive Parity Clause 440 is, in essence, a successor provision to Section 270AA, with the following points of parity: * Both require payment of tax and interest as per assessment/reassessment and bar appeal as preconditions. * Both stipulate a one-month period from receipt of order for making the application. * Both prohibit immunity in cases involving aggravated defaults (misreporting or similar circumstances). * Both require the AO to pass a reasoned order within a specified period and provide an opportunity of being heard be....

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.... 1962, prescribes Form No. 68 for applications u/s 270AA. While Clause 440 refers to the application being made "in such form and such manner as prescribed," the actual form and procedure will be notified in the new rules under the 2025 Bill. The underlying principle of standardized application and verification is expected to continue. 4. Policy Continuity and Shifts The move from Section 270AA to Clause 440 demonstrates policy continuity in promoting voluntary compliance and early closure of tax disputes. However, the shift in cross-references and possible expansion or narrowing of scope (depending on the content of the referenced sections) may signal subtle changes in eligibility or coverage. The three-month disposal period, as amended....