Section 279 — Prosecution to be at instance of Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live and pivotal — the gateway to every prosecution: sanction and compounding.
Finance Act, 2026: Not amended by the Finance Act, 2026 (the Finance Act, 2026 amendment to 'section 279' relates to the Income-tax Act, 2025, not the 1961 Act).
Mechanism: No prosecution for the specified offences without the previous sanction of the Principal Commissioner/Commissioner (or specified authority); offences may be compounded by the Pr.CCIT/CCIT/Pr.DGIT/DGIT; a faceless scheme is enabled.
Litigation profile: High — sanction and compounding are the most litigated procedural aspects of Chapter XXII.
A. COMMENTARY
Sanction — a jurisdictional pre-condition
Section 279(1) makes the previous sanction of the Principal Commissioner/Commissioner (or the Joint Commissioner (Appeals)/Commissioner (Appeals) or the appropriate authority) a condition precedent to prosecution for the principal offences — sections 275A, 275B, 276, 276A, 276B, 276BB, 276C, 276CC, 276D, 277, 277A and 278. Sanction is not a formality: the sanctioning authority must apply its mind to the material, including any reasonable-cause defence under section 278AA and the CBDT instructions, before launching prosecution. A sanction granted mechanically, or in disregard of an obvious defence, is liable to be struck down (Srinidhi Karti Chidambaram; Indo Arya). The proviso permits the Pr.CCIT/CCIT (or Pr.DGIT/DGIT) to issue instructions for institution of proceedings.
Section 279(2) permits any offence under the Chapter to be compounded, either before or after institution of proceedings, by the Pr.CCIT/CCIT or Pr.DGIT/DGIT. Compounding is a discretionary, settlement-like mechanism governed by the CBDT's compounding Guidelines. The courts have held that the discretion must be exercised in conformity with CBDT instructions issued under section 119 (Y.P. Chawla); that there is no limitation period for a compounding application and the CBDT cannot reject for delay alone or insist on pre-deposit contrary to the section (Vikram Singh); and that the characterisation of an offence as a 'first offence' turns on its date of commission relative to any show-cause notice (Vinubhai Mohanlal Dobaria).
Section 279(1A) and the saving in 279(3)
Section 279(1A) bars prosecution under sections 276C or 277 for an assessment year where the penalty under section 270A or section 271(1)(iii) has been reduced or waived under section 273A — a statutory immunity flowing from the penalty's fate. Section 279(3) protects the admissibility of statements/documents produced in the belief that penalty would be waived or the offence compounded. Sub-sections (4)-(6) enable a faceless scheme for sanction/compounding with team-based, dynamic-jurisdiction working (no direction to be issued after 31 March 2022).
FA 2026 Amendment (w.e.f. 1 March 2026)
The Finance Act, 2026 does NOT amend section 279 of the Income-tax Act, 1961. (The Finance Act, 2026 separately inserts a new sub-section (3) into 'section 279' of the Income-tax Act, 2025 — a different statute with its own numbering — concerning the 'Assessing Officer' for the purposes of sections 280 and 281 of that Act. That amendment has no bearing on the 1961 Act.) The 1961 section 279 therefore stands as reproduced in Part B.
B. STATUTORY TEXT (verbatim — pre-Finance Act, 2026 text)
Text reproduced verbatim from the bare Act; section 279 of the 1961 Act is not amended by the Finance Act, 2026 (see the amendment note).
Prosecution to be at instance of Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.
Provided that the Principal Chief Commissioner or Chief Commissioner or, as the case may be, Principal Director General or Director General may issue such instructions or directions to the aforesaid income-tax authorities as he may deem fit for institution of proceedings under this sub-section.
Explanation.—For the purposes of this section, "appropriate authority" shall have the same meaning as in clause (c) of section 269UA.
(1A) A person shall not be proceeded against for an offence under section 276C or section 277 in relation to the assessment for an assessment year in respect of which the penalty imposed or imposable on him under section 270A or clause (iii) of sub-section (1) of section 271 has been reduced or waived by an order under section 273A.
(2) Any offence under this Chapter may, either before or after the institution of proceedings, be compounded by the Principal Chief Commissioner or Chief Commissioner or a Principal Director General or Director General.
(3) Where any proceeding has been taken against any person under sub-section (1), any statement made or account or other document produced by such person before any of the income-tax authorities specified in clauses (a) to (g) of section 116 shall not be inadmissible as evidence for the purpose of such proceedings merely on the ground that such statement was made or such account or other document was produced in the belief that the penalty imposable would be reduced or waived, under section 273A or that the offence in respect of which such proceeding was taken would be compounded.
(4) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of granting sanction under sub-section (1) or compounding under sub-section (2), so as to impart greater efficiency, transparency and accountability by—
(a) eliminating the interface between the income-tax authority and the assessee or any other person to the extent technologically feasible;
(b) optimising utilisation of the resources through economies of scale and functional specialisation;
(c) introducing a team-based sanction to proceed against, or for compounding of, an offence, with dynamic jurisdiction.
(5) The Central Government may, for the purpose of giving effect to the scheme made under sub-section (4), by notification in the Official Gazette, direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification:
Provided that no direction shall be issued after the 31st day of March, 2022.
(6) Every notification issued under sub-section (4) and sub-section (5) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.
Explanation.—For the removal of doubts, it is hereby declared that the power of the Board to issue orders, instructions or directions under this Act shall include and shall be deemed always to have included the power to issue instructions or directions (including instructions or directions to obtain the previous approval of the Board) to other income-tax authorities for the proper composition of offences under this section.
C. AUTHORITIES
The authorities are grouped by the sanction requirement, the conduct of compounding, and the penalty/Tribunal-finding linkage that disciplines the launch of prosecution.
Cluster 1 — Sanction must reflect application of mind
Srinidhi Karti Chidambaram v. PCIT (2021) 437 ITR 206 (Mad)
Facts Prosecution under sections 276C/277/278 founded largely on third-party material; the section 279 sanction was challenged as mechanical.
Held / ratio The sanction under section 279 must reflect application of mind to the material; where the evidence of evasion did not emanate from the assessee and the sanction was granted without due consideration, both the complaint and the sanction are liable to be quashed.
Significance The leading recent High Court authority on sanction validity.
Indo Arya Central Transport Ltd. v. CIT (TDS) (2018) 405 ITR 64 (Del)
Facts Section 276B prosecution where the sanction did not record consideration of the reasonable-cause defence.
Held / ratio Principles of a valid sanction under section 279(1): the sanctioning authority must consider the reasonable-cause defence (section 278AA) and the CBDT instructions; a sanction lacking application of mind is unsustainable.
Significance Sets out the sanction-validity checklist in TDS prosecutions.
P. Jayappan v. S.K. Perumal (1984) 149 ITR 696 (SC)
Citation (1984) 149 ITR 696 (SC).
Facts / holding A sanctioned prosecution may be launched notwithstanding pendency of assessment; sanction is the gateway, and the criminal court thereafter proceeds independently.
Cluster 2 — Compounding must conform to CBDT guidelines; no limitation
Y.P. Chawla v. M.P. Tiwari (1992) 195 ITR 607 (SC)
Facts Challenge concerning the Commissioner's power to compound and the role of CBDT instructions under the Explanation to section 279(2).
Held / ratio The Explanation to section 279(2) is in the nature of a proviso; the compounding discretion must conform to CBDT instructions issued under section 119, and the CBDT is empowered to issue binding compounding guidelines.
Significance The foundational authority on the CBDT's role in compounding.
Vikram Singh v. Union of India (2017) 394 ITR 746 (Del)
Citation (2017) 394 ITR 746 (Delhi).
Facts Challenge to the rejection of a compounding application and to aspects of the CBDT compounding Guidelines.
Held / ratio There is no limitation period for filing a compounding application under section 279(2); the CBDT cannot reject merely for delay nor impose conditions/pre-deposit contrary to the section. The vires and proportionality of the compounding framework were examined.
Significance Defines the limits of the compounding discretion in the assessee's favour.
Vinubhai Mohanlal Dobaria v. Chief CIT (2025 INSC 155) (SC)
Citation 2025 INSC 155 / (2025) 473 ITR 394 (SC).
Facts / holding Whether an offence is a 'first offence' for compounding turns on its date of commission relative to any show-cause notice; a default committed before such notice qualifies as a first offence under the Guidelines.
Cluster 3 — Penalty / Tribunal-finding linkage disciplines the launch
Sanction cannot revive a prosecution whose foundation has been removed by a conclusive appellate or Settlement-Commission finding; the linkage operates as a control on the section 279 power.
K.C. Builders v. ACIT (2004) 265 ITR 562 (SC)
Citation (2004) 265 ITR 562 (SC).
Facts / holding Where penalty is cancelled on a finding of no concealment, the section 276C/277 prosecution — sanctioned or not — cannot continue; reinforces the section 279(1A) policy linking prosecution to the penalty's fate.
Vijay Krishnaswami v. Dy. Director of Income Tax (Inv.) (2025 INSC 1048) (SC)
Citation 2025 INSC 1048 (SC).
Facts / holding Prosecution launched in disregard of binding CBDT prosecution circulars and the conclusive findings of the Settlement Commission is an abuse of process; the department was held bound by its own circulars and visited with costs — a discipline on the exercise of the sanction power.
CHAPTER XXII — OFFENCES AND PROSECUTIONS
Section 279 — Prosecution to be at instance of Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live and pivotal — the gateway to every prosecution: sanction and compounding.
Finance Act, 2026: Not amended by the Finance Act, 2026 (the Finance Act, 2026 amendment to 'section 279' relates to the Income-tax Act, 2025, not the 1961 Act).
Mechanism: No prosecution for the specified offences without the previous sanction of the Principal Commissioner/Commissioner (or specified authority); offences may be compounded by the Pr.CCIT/CCIT/Pr.DGIT/DGIT; a faceless scheme is enabled.
Litigation profile: High — sanction and compounding are the most litigated procedural aspects of Chapter XXII.
A. COMMENTARY
Sanction — a jurisdictional pre-condition
Section 279(1) makes the previous sanction of the Principal Commissioner/Commissioner (or the Joint Commissioner (Appeals)/Commissioner (Appeals) or the appropriate authority) a condition precedent to prosecution for the principal offences — sections 275A, 275B, 276, 276A, 276B, 276BB, 276C, 276CC, 276D, 277, 277A and 278. Sanction is not a formality: the sanctioning authority must apply its mind to the material, including any reasonable-cause defence under section 278AA and the CBDT instructions, before launching prosecution. A sanction granted mechanically, or in disregard of an obvious defence, is liable to be struck down (Srinidhi Karti Chidambaram; Indo Arya). The proviso permits the Pr.CCIT/CCIT (or Pr.DGIT/DGIT) to issue instructions for institution of proceedings.
Compounding under section 279(2)
Section 279(2) permits any offence under the Chapter to be compounded, either before or after institution of proceedings, by the Pr.CCIT/CCIT or Pr.DGIT/DGIT. Compounding is a discretionary, settlement-like mechanism governed by the CBDT's compounding Guidelines. The courts have held that the discretion must be exercised in conformity with CBDT instructions issued under section 119 (Y.P. Chawla); that there is no limitation period for a compounding application and the CBDT cannot reject for delay alone or insist on pre-deposit contrary to the section (Vikram Singh); and that the characterisation of an offence as a 'first offence' turns on its date of commission relative to any show-cause notice (Vinubhai Mohanlal Dobaria).
Section 279(1A) and the saving in 279(3)
Section 279(1A) bars prosecution under sections 276C or 277 for an assessment year where the penalty under section 270A or section 271(1)(iii) has been reduced or waived under section 273A — a statutory immunity flowing from the penalty's fate. Section 279(3) protects the admissibility of statements/documents produced in the belief that penalty would be waived or the offence compounded. Sub-sections (4)-(6) enable a faceless scheme for sanction/compounding with team-based, dynamic-jurisdiction working (no direction to be issued after 31 March 2022).
FA 2026 Amendment (w.e.f. 1 March 2026)
The Finance Act, 2026 does NOT amend section 279 of the Income-tax Act, 1961. (The Finance Act, 2026 separately inserts a new sub-section (3) into 'section 279' of the Income-tax Act, 2025 — a different statute with its own numbering — concerning the 'Assessing Officer' for the purposes of sections 280 and 281 of that Act. That amendment has no bearing on the 1961 Act.) The 1961 section 279 therefore stands as reproduced in Part B.
B. STATUTORY TEXT (verbatim — pre-Finance Act, 2026 text)
Text reproduced verbatim from the bare Act; section 279 of the 1961 Act is not amended by the Finance Act, 2026 (see the amendment note).
Prosecution to be at instance of Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.
279. (1) A person shall not be proceeded against for an offence under section 275A, section 275B, section 276, section 276A, section 276B, section 276BB, section 276C, section 276CC, section 276D, section 277, section 277A or section 278 except with the previous sanction of the Principal Commissioner or Commissioner or Joint Commissioner (Appeals) or Commissioner (Appeals) or the appropriate authority:
Provided that the Principal Chief Commissioner or Chief Commissioner or, as the case may be, Principal Director General or Director General may issue such instructions or directions to the aforesaid income-tax authorities as he may deem fit for institution of proceedings under this sub-section.
Explanation.—For the purposes of this section, "appropriate authority" shall have the same meaning as in clause (c) of section 269UA.
(1A) A person shall not be proceeded against for an offence under section 276C or section 277 in relation to the assessment for an assessment year in respect of which the penalty imposed or imposable on him under section 270A or clause (iii) of sub-section (1) of section 271 has been reduced or waived by an order under section 273A.
(2) Any offence under this Chapter may, either before or after the institution of proceedings, be compounded by the Principal Chief Commissioner or Chief Commissioner or a Principal Director General or Director General.
(3) Where any proceeding has been taken against any person under sub-section (1), any statement made or account or other document produced by such person before any of the income-tax authorities specified in clauses (a) to (g) of section 116 shall not be inadmissible as evidence for the purpose of such proceedings merely on the ground that such statement was made or such account or other document was produced in the belief that the penalty imposable would be reduced or waived, under section 273A or that the offence in respect of which such proceeding was taken would be compounded.
(4) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of granting sanction under sub-section (1) or compounding under sub-section (2), so as to impart greater efficiency, transparency and accountability by—
(a) eliminating the interface between the income-tax authority and the assessee or any other person to the extent technologically feasible;
(b) optimising utilisation of the resources through economies of scale and functional specialisation;
(c) introducing a team-based sanction to proceed against, or for compounding of, an offence, with dynamic jurisdiction.
(5) The Central Government may, for the purpose of giving effect to the scheme made under sub-section (4), by notification in the Official Gazette, direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification:
Provided that no direction shall be issued after the 31st day of March, 2022.
(6) Every notification issued under sub-section (4) and sub-section (5) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.
Explanation.—For the removal of doubts, it is hereby declared that the power of the Board to issue orders, instructions or directions under this Act shall include and shall be deemed always to have included the power to issue instructions or directions (including instructions or directions to obtain the previous approval of the Board) to other income-tax authorities for the proper composition of offences under this section.
C. AUTHORITIES
The authorities are grouped by the sanction requirement, the conduct of compounding, and the penalty/Tribunal-finding linkage that disciplines the launch of prosecution.
Cluster 1 — Sanction must reflect application of mind
Srinidhi Karti Chidambaram v. PCIT (2021) 437 ITR 206 (Mad)
Citation (2021) 437 ITR 206 / 282 Taxman 112 (Madras).
Facts Prosecution under sections 276C/277/278 founded largely on third-party material; the section 279 sanction was challenged as mechanical.
Held / ratio The sanction under section 279 must reflect application of mind to the material; where the evidence of evasion did not emanate from the assessee and the sanction was granted without due consideration, both the complaint and the sanction are liable to be quashed.
Significance The leading recent High Court authority on sanction validity.
Indo Arya Central Transport Ltd. v. CIT (TDS) (2018) 405 ITR 64 (Del)
Citation (2018) 405 ITR 64 / 255 Taxman 50 (Delhi).
Facts Section 276B prosecution where the sanction did not record consideration of the reasonable-cause defence.
Held / ratio Principles of a valid sanction under section 279(1): the sanctioning authority must consider the reasonable-cause defence (section 278AA) and the CBDT instructions; a sanction lacking application of mind is unsustainable.
Significance Sets out the sanction-validity checklist in TDS prosecutions.
P. Jayappan v. S.K. Perumal (1984) 149 ITR 696 (SC)
Citation (1984) 149 ITR 696 (SC).
Facts / holding A sanctioned prosecution may be launched notwithstanding pendency of assessment; sanction is the gateway, and the criminal court thereafter proceeds independently.
Cluster 2 — Compounding must conform to CBDT guidelines; no limitation
Y.P. Chawla v. M.P. Tiwari (1992) 195 ITR 607 (SC)
Citation (1992) 195 ITR 607 / AIR 1992 SC 1360 / (1992) 2 SCC 672 (SC).
Facts Challenge concerning the Commissioner's power to compound and the role of CBDT instructions under the Explanation to section 279(2).
Held / ratio The Explanation to section 279(2) is in the nature of a proviso; the compounding discretion must conform to CBDT instructions issued under section 119, and the CBDT is empowered to issue binding compounding guidelines.
Significance The foundational authority on the CBDT's role in compounding.
Vikram Singh v. Union of India (2017) 394 ITR 746 (Del)
Citation (2017) 394 ITR 746 (Delhi).
Facts Challenge to the rejection of a compounding application and to aspects of the CBDT compounding Guidelines.
Held / ratio There is no limitation period for filing a compounding application under section 279(2); the CBDT cannot reject merely for delay nor impose conditions/pre-deposit contrary to the section. The vires and proportionality of the compounding framework were examined.
Significance Defines the limits of the compounding discretion in the assessee's favour.
Vinubhai Mohanlal Dobaria v. Chief CIT (2025 INSC 155) (SC)
Citation 2025 INSC 155 / (2025) 473 ITR 394 (SC).
Facts / holding Whether an offence is a 'first offence' for compounding turns on its date of commission relative to any show-cause notice; a default committed before such notice qualifies as a first offence under the Guidelines.
Cluster 3 — Penalty / Tribunal-finding linkage disciplines the launch
Sanction cannot revive a prosecution whose foundation has been removed by a conclusive appellate or Settlement-Commission finding; the linkage operates as a control on the section 279 power.
K.C. Builders v. ACIT (2004) 265 ITR 562 (SC)
Citation (2004) 265 ITR 562 (SC).
Facts / holding Where penalty is cancelled on a finding of no concealment, the section 276C/277 prosecution — sanctioned or not — cannot continue; reinforces the section 279(1A) policy linking prosecution to the penalty's fate.
Vijay Krishnaswami v. Dy. Director of Income Tax (Inv.) (2025 INSC 1048) (SC)
Citation 2025 INSC 1048 (SC).
Facts / holding Prosecution launched in disregard of binding CBDT prosecution circulars and the conclusive findings of the Settlement Commission is an abuse of process; the department was held bound by its own circulars and visited with costs — a discipline on the exercise of the sanction power.