Circular No. 5/2018

Clarification on the immunity provided u/s 270AA of the income tax act 1961

What this is

Circular No. 5/2018 was issued by the Central Board of Direct Taxes on 16 August 2018. Its subject is Clarification on the immunity provided u/s 270AA of the income tax act 1961.

This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.

What it does

Removes the fear that applying for immunity in one year damages the assessee's position in an earlier year. Section 270AA lets the Assessing Officer, on the assessee's application, grant immunity from penalty under section 270A other than for misreporting, and from initiation of proceedings under section 276C or section 276CC, subject to the conditions in that section, with effect from 1 April 2017. The Board clarifies that making such an application does not preclude the assessee from contesting the same issue in any earlier assessment year, and that an income-tax authority shall not take an adverse view in penalty proceedings under clause (c) of sub-section (1) of section 271 for an earlier year merely because the assessee sought immunity on that issue in a later year.

Why it was issued

Apprehensions had been raised that seeking immunity under section 270AA would be treated as acquiescence on the issue, and used against the assessee in section 271(1)(c) penalty proceedings for earlier years.

Who it reaches

Assessees applying for immunity under section 270AA for assessment year 2017-18 onwards
Assessees facing a penalty under clause (c) of sub-section (1) of section 271 for earlier years on the same issue
Assessees continuing to contest the same issue in appeal for earlier years
Assessing Officers and appellate authorities dealing with those penalties

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.270A	s.439
s.270AA	s.440
s.271	s.462
s.276C	s.478
s.276CC	s.479

The instrument, as the Board published it

The department publishes this one only as a PDF, so the words below were read out of that PDF by machine. That reading can carry its own mistakes — a misread number, a broken line. Check the signed document before you rely on a figure in it.

Circular No. 5/2018
F. No. 370149/155/2018-TPL
Government of India
Ministry of Finance
Department of Revenue
(Central Board of Direct Taxes)
New Delhi, Dated 16th August, 2018
Clarification on the immunity provided u/s 270AA of the Income-tax Act, 1961

Section 270AA of the Income-tax Act, 1961 (the Act) inter alia provides that w.e.f. 1st April, 2017, the Assessing Officer, on an application made by an assessee, may grant immunity from imposition of penalty under section 270A (not being penalty for misreporting) and initiation of proceedings under section 276C or section 276CC, subject to the conditions specified therein.

2. Apprehensions have been raised that where an assessee makes an application seeking immunity under section 270AA of the Act, and in the earlier year(s) penalty under section 271(1)(c) of the Act has been initiated on the same issue, the Income-tax Authority may contend that the assessee has acquiesced on the issue in such earlier year (s), by seeking immunity under section 270AA of the Act and therefore, take an adverse view in the proceedings for penalty under section 271(1)(c) of the Act.

3. In this matter, it is hereby clarified that where an assessee makes an application seeking immunity under section 270AA of the Act, it shall not preclude such assessee from contesting the same issue in any earlier assessment year. Further, the Income-tax Authority, shall not take an adverse view in the proceedings for penalty under section 271(1)(c) of the Act in earlier assessment years merely on the ground that the assessee has acquiesced on the issue in any later assessment year by preferring an immunity on such issue under section 270AA of the Act.

(Sanyam Suresh Joshi)
DCIT (OSD) (TPL)-III

Copy to:-
1. PS to FM/ OSD to FM/ OSD to MoS(R).
2. PS to Secretary (Revenue).
3. The Chairperson, Members and all other officers in CBDT of the rank of Under Secretary and above.
4. All Pro Chief Commissioners/ Pr. Director General of Income-tax - with a request to circulate amongst all officers in their regions/ charges.
5. Pr. DGIT (Systems)/ Pr. DGIT (Vigilance)/ Pr. DGIT (Admn.)/ Pr. DG (NADT)/ Pro DGIT (L&R).
6. CIT (M&TP), CBDT.
7. Web manager for posting on the departmental website

What to watch

The protection is against the acquiescence argument only; the conditions in section 270AA itself, including payment of tax and interest and not filing an appeal for that year, still have to be met.
Immunity under section 270AA never extends to penalty for misreporting.
The circular speaks of earlier assessment years - it does not address what happens in a later year.
Immunity is granted by the Assessing Officer on application; it does not arise on its own.

Where you meet it

In a penalty proceeding under clause (c) of sub-section (1) of section 271 for an earlier year, where the department points to an immunity application filed under section 270AA for a later year.

What it names

It mentions. Circular No. 5/2018

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Notification No. 90 /2016/F.No.370142/26/2016-TPL / SO 3150(E) — Ministry of Finance 5 October 2016
Circular No. 32/2019 — Clarifications in respect of prescribed electronic modes under section 269SU of the income tax act 1961 30 December 2019

← Circular No. 6/2018 · Circular No. 4/2018 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.