Section 440: applying for waiver of penalty and immunity from prosecution

Introduction

Section 440 offers a time-limited application to the Assessing Officer for waiver of a section 439 penalty and immunity from starting proceedings under sections 478 or 479. The 2026 amendment adds distinct additional-tax conditions where the penalty arose from specified misreporting circumstances.

Key takeaways

Payment and no-appeal conditions

The tax and interest payable under the Section 270(10) assessment or Section 279 reassessment order must be paid within the period specified in the notice of demand.

Where a Section 439 penalty was levied for circumstances under Section 439(11)(a) to (f), additional income-tax equal to 100% of the tax payable on under-reported income must be paid within that demand period in lieu of the penalty. For Section 439(11)(g), the required additional income-tax is 120%.

No appeal may have been filed against the relevant assessment or reassessment and penalty levy orders.

Application and decision timetable

The application must be made within one month from the end of the month in which the relevant order is received, in the prescribed form and verification manner. If the conditions are met, the Assessing Officer grants waiver and immunity after the appeal-filing period under Section 358(3)(a) expires.

The Assessing Officer must accept or reject the application within three months from the end of the month of receipt, and cannot reject it without giving the assessee an opportunity of being heard. No waiver or immunity is granted if a Chapter XXII proceeding has already been initiated. An accepted application also restricts appeal or revision against the underlying order as specified in Section 440(8).

When this provision applies

Map the proposed application to the assessment or reassessment order, Section 439 penalty order and notice of demand. Identify the exact misreporting category before calculating any additional income-tax.

Keep three timelines separate: payment within the demand period, application within the statutory receipt-based period, and the Assessing Officer’s decision period after receiving the application. One compliant date does not establish the others.

Limits and procedural safeguards

The 100% or 120% amount is calculated on the tax payable on under-reported income under the applicable clause, not on the gross under-reported income itself. The ordinary tax and interest payment condition remains separate.

No waiver or immunity is available under subsection (3) if any Chapter XXII proceeding has already been initiated. The requested immunity concerns initiation under Sections 478 or 479; it is not a blanket protection from every offence.

Acceptance bars the specified appeal and revision routes against the underlying assessment or reassessment order under subsection (8). If the application is rejected, Section 358(4) excludes the application-to-service interval when computing the stated appeal period; do not assume rejection creates an unrestricted new appeal window.

Step-by-step review

1. Gather all relevant orders, receipt dates, demand notices and payment records.

2. Classify the Section 439 circumstances and calculate applicable additional income-tax on the correct tax base.

3. Confirm payment timing, no-appeal conditions and the absence of initiated Chapter XXII proceedings before submitting the prescribed application.

4. Track the decision and hearing process; review acceptance consequences or the precise appeal-time calculation following rejection.

Hypothetical example

Hypothetical: tax payable on under-reported income is ₹40,000 in a case within Section 439(11)(g). The additional-income-tax component under Section 440(1)(c) is ₹48,000, being 120% of ₹40,000. This component does not replace the separate requirement to pay the assessment or reassessment tax and interest within the demand period, or the remaining eligibility conditions.

Records to prepare

Prepare an order-by-order timeline and payment reconciliation, including the category and base for additional income-tax.

Retain the application acknowledgement, hearing material and served decision; separately record any appeal or Chapter XXII proceeding status.

Official amended Act source

• Income-tax Act, 2025 as amended by Finance Act, 2026: Section 440 and related provisions

Step-by-step flow for waiver and immunity under Section 440

1. 1

   Has penalty been levied under section 439 in connection with an assessment under section 270(10) or reassessment under section 279?

   • No: Section 440 does not apply.
   • Yes: Go to the next step.
2. 2

   Have the payment and no-appeal conditions been met?

   (a) Tax and interest under the order paid within the period in the notice of demand. (b) For cases in section 439(11)(a) to (f): additional income-tax of 100% of the tax payable on under-reported income paid within that period, in lieu of the penalty. (c) For cases in section 439(11)(g): additional income-tax of 120% of that tax paid within that period. (d) No appeal filed against the order and the penalty levy.

   • No: The conditions for waiver and immunity are not fulfilled.
   • Yes: Go to the next step.
3. 3

   Is the application made within one month from the end of the month in which the order was received?

   It must be in the prescribed form and verified in the prescribed manner (Section 440(2)).

   • No: The application is outside the time in Section 440(2).
   • Yes: Go to the next step.
4. 4

   Has any proceeding been initiated under Chapter XXII?

   • Yes: No waiver or immunity can be granted (Section 440(4)).
   • No: Go to the next step.
5. 5

   Assessing Officer's order

   He passes an order accepting or rejecting the application within three months from the end of the month of receipt, and cannot reject it without giving a hearing. On fulfilment of the conditions, and after the appeal period in section 358(3)(a) expires, he grants waiver of the section 439 penalty and immunity from proceedings under section 478 or 479. The order is final; once accepted, no appeal under section 356 or 357 or revision under section 378 lies against the assessment order.

Practical checklist

Glossary

Waiver

Relief from the section 439 penalty granted on a successful section 440 application.

Immunity

Protection against initiation of the specified section 478 or 479 prosecution proceedings under section 440.

Additional income-tax base

For the relevant Section 440 clause, the tax payable on under-reported income to which the specified percentage is applied.

Application receipt month

The month when the Assessing Officer receives the application, used for the subsection (5) decision period.

Frequently asked questions