My application to the Settlement Commission abated. Is there any route to immunity from prosecution left, and how long do I have?
Section 278AB is that route. On the words of the section, a person may make an application to the Commissioner for granting immunity from prosecution if he has made an application for settlement under s.245C and the proceedings for settlement have abated under s.245HA — but the application cannot be made after institution of the prosecution proceedings after abatement.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2008-04-01, reported as Income-tax Act 1961, s.278AB, inserted by the Finance Act 2008 with effect from 1 April 2008. It bears on section 278AB, section 245C, section 245HA, section 278AA of the Income Tax Act 1961, in Prosecution matters.
This is a provision that is almost never invoked and almost always missed, and the reason it is missed is the timing. The immunity application must go in BEFORE the complaint is filed; once the department has launched prosecution, this door is shut, and the only remaining route is compounding under s.279(2). That makes the abatement of a settlement application a moment to act on rather than a moment to absorb. Note carefully what the section is not. It is not a general immunity for anyone who co-operates; the condition precedent is a settlement application under s.245C that has abated under s.245HA. It is also not s.278AA, which is a different thing entirely — s.278AA is a defence of reasonable cause available at trial, and only for failures under s.276A, s.276AB and s.276B, so it does not reach s.276C or s.277 at all. Nor is it s.273A, which concerns waiver or reduction of penalty by the Principal Commissioner. A reader who has been told that s.278AB follows from a s.273A order should treat that as wrong: the bare section, read for this entry, does not mention s.273A anywhere.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Not a decided case. Section 278AB was inserted in Chapter XXII of the Income-tax Act 1961 by the Finance Act 2008 with effect from 1 April 2008, under the marginal heading 'Power of Commissioner to grant immunity from prosecution'. Sub-section (1) makes the condition precedent for an application an application for settlement under s.245C in respect of which the proceedings for settlement have abated under s.245HA. Sub-section (2) fixes the outer limit by reference to the institution of the prosecution proceedings after abatement, and not by any period of months or years. Sub-section (3) empowers the Commissioner, subject to such conditions as he may impose, to grant immunity from prosecution for any offence under the Act if satisfied that the person has, after the abatement, co-operated with the income-tax authority and made a full and true disclosure of his income and the manner in which it was derived; by the proviso, where the s.245C application was made before 1 June 2007 the immunity may extend to offences under the Indian Penal Code or any other Central Act. Sub-section (4) withdraws the immunity automatically on breach of any condition. Sub-section (5) allows the Commissioner to withdraw it at any time where the person concealed material particulars or gave false evidence in proceedings after abatement, whereupon he may be tried for the offence. Section 278AA, which is a different provision and is commonly confused with this one, is by its own words confined to failures under s.276A, s.276AB and s.276B, so the reasonable-cause defence it gives does not extend to s.276C or s.277 — nor to s.276BB.
Statutory position. Section 278AB permits a person to apply to the Commissioner for immunity from prosecution where he has made an application for settlement under s.245C and the proceedings have abated under s.245HA; the application may not be made after institution of the prosecution proceedings after abatement.
Not applicable — this is the statutory position, not a reasoned decision. The practical structure the section reveals is that s.278AB is a pre-prosecution remedy triggered by a specific procedural event (abatement of a settlement application under s.245HA), which distinguishes it from s.278AA, a defence available at trial on proof of reasonable cause and limited to three sections, and from compounding under s.279(2), which is available even after prosecution has been launched.
A person may make an application to the 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 Commissioner under sub-section (1) shall not be made after institution of the prosecution proceedings after abatement.
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Handle my notice → Ask a CA on WhatsAppSection 278AB is that route. On the words of the section, a person may make an application to the Commissioner for granting immunity from prosecution if he has made an application for settlement under s.245C and the proceedings for settlement have abated under s.245HA — but the application cannot be made after institution of the prosecution proceedings after abatement. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 278AB, section 245C, section 245HA, section 278AA of the Income Tax Act 1961. It is reported as Income-tax Act 1961, s.278AB, inserted by the Finance Act 2008 with effect from 1 April 2008. This is a provision that is almost never invoked and almost always missed, and the reason it is missed is the timing. The immunity application must go in BEFORE the complaint is filed; once the department has launched prosecution, this door is shut, and the only remaining route is compounding under s.279(2). That makes the abatement of a settlement application a moment to act on rather than a moment to absorb. Note carefully what the section is not. It is not a general immunity for anyone who co-operates; the condition precedent is a settlement application under s.245C that has abated under s.245HA. It is also not s.278AA, which is a different thing entirely — s.278AA is a defence of reasonable cause available at trial, and only for failures under s.276A, s.276AB and s.276B, so it does not reach s.276C or s.277 at all. Nor is it s.273A, which concerns waiver or reduction of penalty by the Principal Commissioner. A reader who has been told that s.278AB follows from a s.273A order should treat that as wrong: the bare section, read for this entry, does not mention s.273A anywhere. If it applies to you, the first step is this: Establish the two facts the section turns on: that an application was made under s.245C, and that the proceeding abated under s.245HA. Keep the abatement intimation.
Not a decided case. Section 278AB was inserted in Chapter XXII of the Income-tax Act 1961 by the Finance Act 2008 with effect from 1 April 2008, under the marginal heading 'Power of Commissioner to grant immunity from prosecution'. Sub-section (1) makes the condition precedent for an application an application for settlement under s.245C in respect of which the proceedings for settlement have abated under s.245HA. Sub-section (2) fixes the outer limit by reference to the institution of the prosecution proceedings after abatement, and not by any period of months or years. Sub-section (3) empowers the Commissioner, subject to such conditions as he may impose, to grant immunity from prosecution for any offence under the Act if satisfied that the person has, after the abatement, co-operated with the income-tax authority and made a full and true disclosure of his income and the manner in which it was derived; by the proviso, where the s.245C application was made before 1 June 2007 the immunity may extend to offences under the Indian Penal Code or any other Central Act. Sub-section (4) withdraws the immunity automatically on breach of any condition. Sub-section (5) allows the Commissioner to withdraw it at any time where the person concealed material particulars or gave false evidence in proceedings after abatement, whereupon he may be tried for the offence. Section 278AA, which is a different provision and is commonly confused with this one, is by its own words confined to failures under s.276A, s.276AB and s.276B, so the reasonable-cause defence it gives does not extend to s.276C or s.277 — nor to s.276BB. The matter was decided on 2008-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Statutory position. Section 278AB permits a person to apply to the Commissioner for immunity from prosecution where he has made an application for settlement under s.245C and the proceedings have abated under s.245HA; the application may not be made after institution of the prosecution proceedings after abatement.
Not applicable — this is the statutory position, not a reasoned decision. The practical structure the section reveals is that s.278AB is a pre-prosecution remedy triggered by a specific procedural event (abatement of a settlement application under s.245HA), which distinguishes it from s.278AA, a defence available at trial on proof of reasonable cause and limited to three sections, and from compounding under s.279(2), which is available even after prosecution has been launched. In the words reproduced by the source cited on this page: "A person may make an application to the 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 Commissioner under sub-section (1) shall not be made after institution of the prosecution proceedings after abatement."
It was decided by the CBDT Circulars & Instructions on 2008-04-01 and is reported as Income-tax Act 1961, s.278AB, inserted by the Finance Act 2008 with effect from 1 April 2008. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 278AB, section 245C, section 245HA, section 278AA, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Statutory position. Section 278AB permits a person to apply to the Commissioner for immunity from prosecution where he has made an application for settlement under s.245C and the proceedings have abated under s.245HA; the application may not be made after institution of the prosecution proceedings after abatement. It arises in Prosecution matters, on section 278AB, section 245C, section 245HA, section 278AA of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. File the immunity application to the Commissioner immediately on abatement, and in any event before any prosecution complaint is filed — after institution of the prosecution proceedings after abatement the application cannot be made. The section says 'the Commissioner'; do not assume from other provisions that it may go to the Principal Commissioner. Read sub-sections (3) to (5) as well as (1) and (2) before filing: immunity is granted subject to such conditions as the Commissioner may impose and only where he is satisfied that the person co-operated with the income-tax authority after the abatement and made a full and true disclosure of his income and the manner in which it was derived; it is withdrawn automatically on breach of a condition, and may be withdrawn where material particulars were concealed or false evidence given in proceedings after abatement. Check whether your case falls within the abated-settlement window at all. The Settlement Commission has been discontinued and settlement work moved to an Interim Board; I have not verified how s.278AB operates in relation to that regime, and you must. If prosecution has already been launched, do not spend time on s.278AB — move to a compounding application under s.279(2), which under the guidelines dated 17 October 2024 may be filed even after prosecution has been launched. Do not confuse this with s.278AA (reasonable cause, and only for s.276A, s.276AB and s.276B) or with s.273A (waiver of penalty). Note also that s.278AA does not reach s.276BB either: a prosecution for failure to pay tax collected at source has no statutory reasonable-cause defence under that section.
Searched for later treatment; none was found. That is not the same as a source affirming it. No amendment to s.278AB has been traced. The section stands as inserted by the Finance Act, 2008, with effect from 1 April 2008, and carries no amendment footnote other than that one. Nothing in its text refers to an Interim Board for Settlement, so on the text available the section continues to be worked through s.245C and abatement under s.245HA. Whether anything was altered when the Settlement Commission was discontinued and its pending work transferred to an Interim Board has not been established here; nothing traced suggests that it was, but a reader should satisfy himself on the point before advising on an application made after 1 February 2021. This states the law under the 1961 Act, which governs up to AY 2026-27 and the disputes arising out of those years. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This entry is written from the bare text of s.278AB as printed on the Department's own section page. The section was inserted by the Finance Act, 2008, with effect from 1 April 2008, per the amendment footnote; decided_on records that commencement date and is not the date of any decision. No judicial decision applying s.278AB has been located, and this library carries no other entry on the section. The scope of s.278AA stated in this entry is taken from the text of that section: 'Notwithstanding anything contained in the provisions of section 276A, section 276AB, or section 276B, no person shall be punishable for any failure referred to in the said provisions if he proves that there was reasonable cause for such failure.' An earlier draft of this entry gave that scope as 's.276A, s.276B and s.276BB', which was wrong in the direction that harms a reader — it would have told a person prosecuted under s.276BB that he has a statutory reasonable-cause defence he does not have — and it has been corrected in all three places. The single open question this entry cannot answer is how s.278AB operates after the discontinuance of the Settlement Commission and the transfer of pending work to an Interim Board — that has not been verified here and a reader must check it. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Statutory position. Section 278AB permits a person to apply to the Commissioner for immunity from prosecution where he has made an application for settlement under s.245C and the proceedings have abated under s.245HA; the application may not be made after institution of the prosecution proceedings after abatement.
TaxSphere, “Statutory position — s.278AB immunity from prosecution where a settlement application has abated”, https://taxnotice.vittsphere.com/caselaw/case/cbdt-278ab-immunity-after-abated-settlement-application/ (validity last checked 2026-09-07)
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