Section 278AB — Power of Principal Commissioner or Commissioner to grant immunity from prosecution
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live but narrow — operative only where a settlement application has abated under section 245HA.
Finance Act, 2026: Not amended by the Finance Act, 2026.
Mechanism: Empowers the Principal Commissioner/Commissioner to grant immunity from prosecution to a person whose settlement application under section 245C abated under section 245HA, on full and true disclosure and co-operation.
Litigation profile: Sparse — no direct reported merits authority; a discretionary immunity provision.
A. COMMENTARY
Immunity tied to abated settlement proceedings
Section 278AB provides a route to immunity from prosecution for a person who had applied for settlement under section 245C but whose settlement proceedings abated under section 245HA. On an application made before institution of prosecution, the Principal Commissioner/Commissioner may grant immunity from prosecution for any offence under the Act, subject to conditions, if satisfied that the applicant has, after the abatement, co-operated with the income-tax authority and made a full and true disclosure of income and the manner of its derivation. For pre-1 June 2007 settlement applications, the immunity could extend to offences under the IPC and other Central Acts.
Conditions, withdrawal and limits
The immunity is conditional: it stands withdrawn if the conditions are breached, and it may be withdrawn if the person concealed material particulars or gave false evidence in the post-abatement proceedings, whereupon he may be tried. The application cannot be made after the prosecution has been instituted following abatement. With the Settlement Commission discontinued and replaced by the Interim Board for Settlement (Finance Act, 2021), section 278AB operates in a residual, transitional space — relevant to legacy settlement applications that abated.
B. STATUTORY TEXT (verbatim — pre-Finance Act, 2026 text)
Text reproduced verbatim from the bare Act; section 278AB is not amended by the Finance Act, 2026.
Power of Principal Commissioner or Commissioner to grant immunity from prosecution.
278AB. (1) A person may make an application to the Principal Commissioner or Commissioner for granting immunity from prosecution, if he has made an application for settlement under section 245C and the proceedings for settlement have abated under section 245HA.
(2) The application to the Principal Commissioner or Commissioner under sub-section (1) shall not be made after institution of the prosecution proceedings 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 prosecution for any offence 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 :
Provided that where the application for settlement under section 245C had been made before the 1st day of June, 2007, the Principal Commissioner or Commissioner may grant immunity from prosecution for any offence under this Act or under the Indian Penal Code (45 of 1860) or under any other Central Act for the time being in force.
(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 may be tried for the offence with respect to which the immunity was granted or for any other offence of which he appears to have been guilty in connection with the proceedings.
C. AUTHORITIES
There is no reported merits decision construing section 278AB (candour rule). Its operation is understood through the settlement-scheme jurisprudence (sections 245C/245HA) and the general immunity principles applied to abated settlement proceedings.
Cognate authority — settlement, disclosure and immunity
Holding Scope and limits of the Settlement Commission's powers, including immunity; full and true disclosure is the touchstone — the foundation on which section 278AB immunity rests.
Ajmera Housing Corporation v. CIT (2010) 326 ITR 642 (SC)
Court/Year Supreme Court, 2010.
Holding 'Full and true disclosure' is a condition precedent in the settlement scheme; a defective disclosure vitiates the proceeding — directly relevant to the disclosure precondition of section 278AB immunity.
CHAPTER XXII — OFFENCES AND PROSECUTIONS
Section 278AB — Power of Principal Commissioner or Commissioner to grant immunity from prosecution
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live but narrow — operative only where a settlement application has abated under section 245HA.
Finance Act, 2026: Not amended by the Finance Act, 2026.
Mechanism: Empowers the Principal Commissioner/Commissioner to grant immunity from prosecution to a person whose settlement application under section 245C abated under section 245HA, on full and true disclosure and co-operation.
Litigation profile: Sparse — no direct reported merits authority; a discretionary immunity provision.
A. COMMENTARY
Immunity tied to abated settlement proceedings
Section 278AB provides a route to immunity from prosecution for a person who had applied for settlement under section 245C but whose settlement proceedings abated under section 245HA. On an application made before institution of prosecution, the Principal Commissioner/Commissioner may grant immunity from prosecution for any offence under the Act, subject to conditions, if satisfied that the applicant has, after the abatement, co-operated with the income-tax authority and made a full and true disclosure of income and the manner of its derivation. For pre-1 June 2007 settlement applications, the immunity could extend to offences under the IPC and other Central Acts.
Conditions, withdrawal and limits
The immunity is conditional: it stands withdrawn if the conditions are breached, and it may be withdrawn if the person concealed material particulars or gave false evidence in the post-abatement proceedings, whereupon he may be tried. The application cannot be made after the prosecution has been instituted following abatement. With the Settlement Commission discontinued and replaced by the Interim Board for Settlement (Finance Act, 2021), section 278AB operates in a residual, transitional space — relevant to legacy settlement applications that abated.
B. STATUTORY TEXT (verbatim — pre-Finance Act, 2026 text)
Text reproduced verbatim from the bare Act; section 278AB is not amended by the Finance Act, 2026.
Power of Principal Commissioner or Commissioner to grant immunity from prosecution.
278AB. (1) A person may make an application to the Principal Commissioner or Commissioner for granting immunity from prosecution, if he has made an application for settlement under section 245C and the proceedings for settlement have abated under section 245HA.
(2) The application to the Principal Commissioner or Commissioner under sub-section (1) shall not be made after institution of the prosecution proceedings 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 prosecution for any offence 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 :
Provided that where the application for settlement under section 245C had been made before the 1st day of June, 2007, the Principal Commissioner or Commissioner may grant immunity from prosecution for any offence under this Act or under the Indian Penal Code (45 of 1860) or under any other Central Act for the time being in force.
(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 may be tried for the offence with respect to which the immunity was granted or for any other offence of which he appears to have been guilty in connection with the proceedings.
C. AUTHORITIES
There is no reported merits decision construing section 278AB (candour rule). Its operation is understood through the settlement-scheme jurisprudence (sections 245C/245HA) and the general immunity principles applied to abated settlement proceedings.
Cognate authority — settlement, disclosure and immunity
CIT v. Anjum M.H. Ghaswala (2001) 252 ITR 1 (SC)
Court/Year Supreme Court (Constitution Bench), 2001.
Holding Scope and limits of the Settlement Commission's powers, including immunity; full and true disclosure is the touchstone — the foundation on which section 278AB immunity rests.
Ajmera Housing Corporation v. CIT (2010) 326 ITR 642 (SC)
Court/Year Supreme Court, 2010.
Holding 'Full and true disclosure' is a condition precedent in the settlement scheme; a defective disclosure vitiates the proceeding — directly relevant to the disclosure precondition of section 278AB immunity.