Section 273AA — Power of Principal Commissioner or Commissioner to Grant Immunity from Penalty (Pending Settlement-Type Cases)
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live. The Commissioner may, on application, grant immunity from penalty where the applicant has made an application for settlement which has abated, or in connection with proceedings, provided the applicant cooperated and made full and true disclosure; immunity may be withdrawn on breach of conditions or concealment.
Finance Act, 2026: No amendment by the Finance Act, 2026.
Mechanism: An applicant (typically where a settlement application has abated) applies to the Commissioner for immunity from penalty → the Commissioner may grant it on satisfaction of cooperation and full-and-true disclosure → immunity may be withdrawn if conditions are breached or material was concealed.
Litigation profile: Lightly litigated; the provision interlocks with the (now wound-down) settlement machinery and is invoked in abatement situations.
A. COMMENTARY
Immunity in the settlement-abatement context
Section 273AA empowers the Commissioner to grant immunity from penalty to an applicant who had approached the settlement mechanism (now the Interim Board for Settlement, the Settlement Commission having been discontinued) where that application has abated, provided the applicant cooperated and made a full and true disclosure. It is the penalty-immunity counterpart, outside the settlement order itself, for cases that fall out of the settlement track.
Conditions and withdrawal
The immunity is conditional on cooperation and full-and-true disclosure, and may be withdrawn if the person fails to comply with the conditions or is found to have concealed particulars or given false evidence — mirroring the withdrawal regime applicable to settlement immunities.
B. STATUTORY TEXT (verbatim)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025; Finance Act, 2026 changes are noted above.
Power of Principal Commissioner or Commissioner to grant immunity from penalty.
273AA. (1) A person may make an application to the Principal Commissioner or Commissioner for granting
immunity from penalty, if—
(a) he has made an application for settlement under section 245C and the proceedings for settlement
(b) the penalty proceedings have been initiated under this Act.
(2) The application to the Principal Commissioner or Commissioner under sub-section (1) shall not be made
after the imposition of penalty after abatement.
(3) The Principal Commissioner or Commissioner may, subject to such conditions as he may think fit to
impose, grant to the person immunity from the imposition of any penalty under this Act, if he is satisfied that
the person has, after the abatement, co-operated with the income-tax authority in the proceedings before
him and has made a full and true disclosure of his income and the manner in which such income has been
derived.
(3A) The order under sub-section (3), either accepting or rejecting the application in full or in part, shall be
passed within a period of twelve months from the end of the month in which the application under the said
sub-section is received by the Principal Commissioner or the Commissioner:
Provided that no order rejecting the application, either in full or in part, shall be passed unless the assessee
has been given an opportunity of being heard:
Provided further that where any application is pending as on the 1st day of June, 2016, the order shall be
passed on or before the 31st day of May, 2017.
(4) The immunity granted to a person under sub-section (3) shall stand withdrawn, if such person fails to
comply with any condition subject to which the immunity was granted and thereupon the provisions of this
Act shall apply as if such immunity had not been granted.
(5) The immunity granted to a person under sub-section (3) may, at any time, be withdrawn by the Principal
Commissioner or Commissioner, if he is satisfied that such person had, in the course of any proceedings,
after abatement, concealed any particulars material to the assessment from the income-tax authority or had
given false evidence, and thereupon such person shall become liable to the imposition of any penalty under
this Act to which such person would have been liable, had not such immunity been granted.
C. AUTHORITIES
Direct authority is limited; the candour rule applies. The provision is governed by its statutory conditions and the cognate settlement-immunity jurisprudence.
1. Conditional immunity and withdrawal
Principle — cooperation and full-and-true disclosure
Proposition Immunity under section 273AA requires cooperation and a full and true disclosure; it is discretionary and may be withdrawn on breach of conditions or on discovery of concealment/false evidence.
Use Frames the conditions for, and vulnerability of, a 273AA immunity.
Prepared for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced from the official Act; case-law holdings are the author’s summaries for professional use.
CHAPTER XXI — PENALTIES IMPOSABLE
Section 273AA — Power of Principal Commissioner or Commissioner to Grant Immunity from Penalty (Pending Settlement-Type Cases)
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live. The Commissioner may, on application, grant immunity from penalty where the applicant has made an application for settlement which has abated, or in connection with proceedings, provided the applicant cooperated and made full and true disclosure; immunity may be withdrawn on breach of conditions or concealment.
Finance Act, 2026: No amendment by the Finance Act, 2026.
Mechanism: An applicant (typically where a settlement application has abated) applies to the Commissioner for immunity from penalty → the Commissioner may grant it on satisfaction of cooperation and full-and-true disclosure → immunity may be withdrawn if conditions are breached or material was concealed.
Litigation profile: Lightly litigated; the provision interlocks with the (now wound-down) settlement machinery and is invoked in abatement situations.
A. COMMENTARY
Immunity in the settlement-abatement context
Section 273AA empowers the Commissioner to grant immunity from penalty to an applicant who had approached the settlement mechanism (now the Interim Board for Settlement, the Settlement Commission having been discontinued) where that application has abated, provided the applicant cooperated and made a full and true disclosure. It is the penalty-immunity counterpart, outside the settlement order itself, for cases that fall out of the settlement track.
Conditions and withdrawal
The immunity is conditional on cooperation and full-and-true disclosure, and may be withdrawn if the person fails to comply with the conditions or is found to have concealed particulars or given false evidence — mirroring the withdrawal regime applicable to settlement immunities.
B. STATUTORY TEXT (verbatim)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025; Finance Act, 2026 changes are noted above.
Power of Principal Commissioner or Commissioner to grant immunity from penalty.
273AA. (1) A person may make an application to the Principal Commissioner or Commissioner for granting
immunity from penalty, if—
(a) he has made an application for settlement under section 245C and the proceedings for settlement
have abated under section 245HA; and
(b) the penalty proceedings have been initiated under this Act.
(2) The application to the Principal Commissioner or Commissioner under sub-section (1) shall not be made
after the imposition of penalty after abatement.
(3) The Principal Commissioner or Commissioner may, subject to such conditions as he may think fit to
impose, grant to the person immunity from the imposition of any penalty under this Act, if he is satisfied that
the person has, after the abatement, co-operated with the income-tax authority in the proceedings before
him and has made a full and true disclosure of his income and the manner in which such income has been
derived.
(3A) The order under sub-section (3), either accepting or rejecting the application in full or in part, shall be
passed within a period of twelve months from the end of the month in which the application under the said
sub-section is received by the Principal Commissioner or the Commissioner:
Provided that no order rejecting the application, either in full or in part, shall be passed unless the assessee
has been given an opportunity of being heard:
Provided further that where any application is pending as on the 1st day of June, 2016, the order shall be
passed on or before the 31st day of May, 2017.
(4) The immunity granted to a person under sub-section (3) shall stand withdrawn, if such person fails to
comply with any condition subject to which the immunity was granted and thereupon the provisions of this
Act shall apply as if such immunity had not been granted.
(5) The immunity granted to a person under sub-section (3) may, at any time, be withdrawn by the Principal
Commissioner or Commissioner, if he is satisfied that such person had, in the course of any proceedings,
after abatement, concealed any particulars material to the assessment from the income-tax authority or had
given false evidence, and thereupon such person shall become liable to the imposition of any penalty under
this Act to which such person would have been liable, had not such immunity been granted.
C. AUTHORITIES
Direct authority is limited; the candour rule applies. The provision is governed by its statutory conditions and the cognate settlement-immunity jurisprudence.
1. Conditional immunity and withdrawal
Principle — cooperation and full-and-true disclosure
Proposition Immunity under section 273AA requires cooperation and a full and true disclosure; it is discretionary and may be withdrawn on breach of conditions or on discovery of concealment/false evidence.
Use Frames the conditions for, and vulnerability of, a 273AA immunity.
Prepared for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced from the official Act; case-law holdings are the author’s summaries for professional use.