Income Tax 2025

Appearance

Immunity from imposition of penalty, etc. ​

440(1) ​

An assessee may make an application to the Assessing Officer for granting immunity from penalty under section 439 and initiation of proceedings under section 478 or section 479, if––

  • (a) the tax and interest payable as per the order of assessment or reassessment under section 270(10) or section 279, has been paid within the period specified in the notice of demand; and
  • (b) no appeal against the order referred to in clause (a) has been filed.

440(2) ​

An application referred to in sub-section (1) shall be made within one month from the end of the month in which the order referred to in clause (a) of the said sub-section has been received in such form and such manner as prescribed.

440(3) ​

The Assessing Officer, on fulfilment of the conditions as specified in sub section (1), and after the expiry of the period of filing appeal as specified in section 358(3)(a), shall grant immunity from penalty under section 439 and initiation of proceedings under section 478 or 479.

440(4) ​

No immunity under sub-section (3) shall be granted if penalty has been initiated under circumstances referred to in sub-section 439(11).

440(5) ​

The Assessing Officer, shall pass an order accepting or rejecting the application as referred to in sub-section (1) within three months from the end of the month of its receipt.

440(6) ​

No order of rejection under sub-section (5) shall be made without giving the assessee an opportunity of being heard.

440(7) ​

The order made under sub-section (5) shall be final.

440(8) ​

No appeal under section 356 or 357 or an application for revision under section 378 shall be admissible against the order referred to in sub-section (1)(a), if an order under sub-section (5) has been made accepting the application.

Explanation

Section Summary: ​

Section 440 of the new income tax law provides a mechanism for taxpayers (assessees) to apply for immunity from penalties and certain proceedings if they meet specific conditions. This section aims to encourage compliance by offering relief to taxpayers who pay their dues on time and do not contest the assessment order through an appeal.

Key Changes: ​

  1. Introduction of Immunity Application: This is a new provision that allows taxpayers to seek immunity from penalties and proceedings under specific sections (439, 478, and 479) if they comply with the assessment order and pay their tax and interest on time.
  2. Time-Bound Process: The application must be made within one month from the end of the month in which the assessment order is received, and the Assessing Officer must decide within three months of receiving the application.
  3. Finality of Order: Once the Assessing Officer grants immunity, the decision is final, and no further appeals or revisions are allowed against the original assessment order.

Practical Implications: ​

  1. For Taxpayers:
    • Taxpayers who comply with assessment orders and pay their dues on time can avoid penalties and certain proceedings.
    • This provision incentivizes timely payment and reduces litigation.
  2. For Assessing Officers:
    • They must process immunity applications within a strict timeline and provide the taxpayer an opportunity to be heard before rejecting the application.
  3. For Compliance:
    • Taxpayers must ensure they meet the conditions (timely payment and no appeal) to qualify for immunity.
    • Failure to apply within the one-month window or non-compliance with the conditions will result in penalties and proceedings.

Critical Concepts: ​

  1. Immunity from Penalty: This means the taxpayer will not face penalties under Section 439 or proceedings under Sections 478 or 479 if they meet the specified conditions.
  2. Assessment Order: This is the final decision by the tax authorities determining the taxpayer’s tax liability.
  3. No Appeal Filed: The taxpayer must not have filed an appeal against the assessment order to qualify for immunity.
  4. Finality of Order: Once immunity is granted, the taxpayer cannot challenge the original assessment order through appeals or revisions.

Compliance Steps: ​

  1. Pay Tax and Interest: Ensure that the tax and interest payable as per the assessment order are paid within the time specified in the demand notice.
  2. Do Not File an Appeal: Avoid filing an appeal against the assessment order.
  3. Submit Application: File the immunity application in the prescribed form and manner within one month from the end of the month in which the assessment order is received.
  4. Respond to Notices: If the Assessing Officer seeks clarification or a hearing, respond promptly to avoid rejection of the application.

Examples: ​

  1. Scenario 1:

    • Mr. A receives an assessment order on March 15, 2024, demanding tax and interest of ₹1,00,000, payable by April 30, 2024. He pays the amount by April 30 and does not file an appeal. He applies for immunity on May 10, 2024 (within one month from the end of March). The Assessing Officer grants immunity, and Mr. A avoids penalties and proceedings.

  2. Scenario 2:

    • Ms. B receives an assessment order on June 20, 2024, and pays the tax and interest by the due date of July 31, 2024. However, she files an appeal against the order on August 5, 2024. She is not eligible for immunity under Section 440 because she filed an appeal.

This section simplifies compliance for taxpayers who act promptly and responsibly, while also reducing the burden on tax authorities by minimizing disputes.