Section 297: certain interests and penalties not to be levied or imposed

Introduction

The exclusion is limited to interest under sections 423, 424 and 425 and penalty under section 439 on undisclosed income assessed or reassessed for the block period.

Key takeaways

What the section says

Interest under section 423, 424 or 425, or penalty under section 439, shall not be levied or imposed upon the assessee for the undisclosed income assessed or reassessed for the block period.

Scope and practical relevance

Match both the income and the levy to the section. The income must be undisclosed income assessed or reassessed for the block period. The excluded levies are interest under Sections 423, 424 or 425 and penalty under Section 439.

A demand review should identify each component by its statutory source. Descriptions such as “interest” or “penalty” without a provision number are not enough to determine whether Section 297 applies.

Limits and separate requirements

The exclusion does not cancel the underlying tax on the block-period undisclosed income. Section 192 separately provides the tax rule for the amount determined under Section 294.

Section 298 contains its own provisions for interest and penalty in certain block-assessment cases. Section 297 should not be read as an exemption from that entire separate provision. Its conditions and safeguards must be checked on their own terms.

Step-by-step assessment review

1. Confirm which amount is undisclosed income assessed or reassessed for the block period.

2. List each interest and penalty component in the computation with its cited section.

3. Compare those components with the four excluded provisions in Section 297.

4. For any different provision, including Section 298, check its own conditions and avoid assuming either automatic exemption or automatic liability.

Hypothetical assessment example

Hypothetical illustration: a block-assessment working lists interest under Section 424 on the assessed block-period undisclosed income and also contains a separate proposed Section 298 component. Section 297 addresses the first named levy. The Section 298 component requires its own statutory review; the exclusion of Section 424 interest does not by itself decide that separate component.

Documents and reconciliation checklist

The block assessment or reassessment order and income computation.

A breakdown of tax, interest and penalty showing the provision used for each.

The separate factual and procedural basis for any Section 298 component.

Official amended Act source

• Income-tax Act, 2025 as amended by Finance Act, 2026: Section 297 and connected provisions

Step-by-step flow for applying Section 297

1. 1

   Is the amount undisclosed income assessed or reassessed for the block period?

   • No: Section 297 does not apply to that amount; the ordinary provisions govern it.
   • Yes: Go to the next step.
2. 2

   Which levy is proposed on that undisclosed income?

   Section 297 names only interest under Section 423, 424 or 425 and penalty under Section 439.

   • Another levy (for example interest or penalty under Section 298): Section 297 does not bar it; test it under its own provision.
   • Interest under Section 423, 424 or 425, or penalty under Section 439: Go to the next step.
3. 3

   Apply the bar

   That interest or penalty shall not be levied or imposed on the assessee for the block-period undisclosed income.

4. 4

   Check the rest of the demand

   Section 297 does not remove the tax on the undisclosed income itself. Review each remaining component of the demand under the provision that charges it.

Practical checklist

Glossary

Named-levy exclusion

A restriction confined to the particular interest and penalty provisions identified in Section 297.

Demand component

An individual tax, interest, penalty or other amount within the overall computation.

Frequently asked questions