Rule 198 — Power to reduce or waive penalty imposable or grant immunity from prosecution or both under section 379. Made under s.379 of the Income-tax Act, 2025.
Rule 198 gives effect to Section 379 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
Sub-rule (1) empowers the Dispute Resolution Committee, on receipt of an intimation as per paragraph 4(1)(xix) of the e-Dispute Resolution Scheme, 2022, for reasons to be recorded in writing and subject to such conditions as it thinks fit to impose, to grant the person who made the application for dispute resolution under section 379 a reduction or waiver of penalty imposable, or immunity from prosecution, or both, in respect of the order which is the subject matter of resolution. It may do so only if it is satisfied that the person has paid the tax due on the returned income in full and has co-operated with the Committee in the proceedings before it.
Sub-rule (2) bars any grant of immunity where proceedings for the prosecution for an offence have been initiated before the date of receipt of the application referred to in paragraph 4(1)(i) of the e-Dispute Resolution Scheme, 2022.
Sub-rule (3) provides that an immunity or a reduction or waiver of penalty granted under sub-rule (1) shall stand withdrawn if the person fails to comply with any of the conditions subject to which it was granted, and that on withdrawal the provisions of the Act apply as if it had never been granted.
Section 379 gives the Dispute Resolution Committee power to reduce or waive a penalty and to grant immunity from prosecution, but a power of that kind needs a price, a cut-off and a sanction. The rule sets all three: the price is full payment of the tax due on the returned income and co-operation with the Committee; the cut-off is that immunity is not available once prosecution has already been launched before the application was received; and the sanction is automatic withdrawal, with the Act applying as if the relief had never been given, if the conditions imposed are broken.
Two conditions precede any grant and both must be satisfied — payment in full of the tax due on the returned income, and co-operation in the proceedings before the Committee. Relief is discretionary even then: the Committee grants it for reasons recorded in writing and may attach conditions of its own. The bar in sub-rule (2) is on immunity from prosecution and is fixed by a date, being the date of receipt of the application under paragraph 4(1)(i) of the e-Dispute Resolution Scheme, 2022 — prosecution initiated before that date shuts immunity out altogether, and nothing done afterwards reopens it. Withdrawal under sub-rule (3) is retrospective in effect: the Act applies as if the immunity, reduction or waiver had never been granted, so the penalty or prosecution position reverts entirely.
A firm applies for dispute resolution under section 379, pays in full the tax due on its returned income and attends every hearing before the Dispute Resolution Committee. The Committee records its reasons and waives the penalty imposable, subject to a condition. No prosecution had been initiated before the date its application was received, so immunity from prosecution is also open to it. If the firm later breaks the condition, sub-rule (3) withdraws the relief and the Act applies as if it had never been granted.
A reader meets this rule in the proceedings before the Dispute Resolution Committee under the e-Dispute Resolution Scheme, 2022 and in the Committee's order granting or refusing reduction, waiver or immunity, and again in any order withdrawing that relief.
No immunity shall be granted by the Dispute Resolution Committee in a case where the proceedings for the prosecution for an offence have been initiated before the date of receipt of the application
shall stand withdrawn, if such person fails to comply with any of the conditions subject to which the immunity or reduction or waiver of penalty was granted and thereupon the provisions of the Act shall apply as if such immunity or reduction or waiver of penalty had never been granted
