Section 491
Section 491: prosecution needs prior sanction, and offences can be compounded
Section 491 puts guardrails around when a tax prosecution can actually start. For a defined list of offences, a person cannot be prosecuted without the prior sanction of a senior tax authority, prosecution is barred in certain cases where a related penalty has already been reduced or waived, and any offence under this Chapter can be compounded (settled) by senior officers.
This explanation is AI-assisted and pending review by our CA/CS team. It is general information, not professional advice - always cross-check against the bare law text above or talk to our tax team for guidance specific to your situation.
Sanction required before prosecution
"A person shall not be proceeded against for an offence under section 473, 474, 475, 476, 477, 478, 479, 480, 481, 482, 483 or 484 except with the previous sanction of the Principal Commissioner or Commissioner or Commissioner (Appeals) or Joint Commissioner (Appeals)."
The Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General may issue instructions or directions to income-tax authorities on instituting such proceedings.
No prosecution where a related penalty has been reduced or waived
A person cannot be proceeded against for an offence under section 478 or 482, in relation to the assessment for a tax year, if the penalty imposed or imposable on him under section 439 for that year has been reduced or waived by an order under section 469.
Compounding of offences
"Any offence under this Chapter may be compounded, either before or after the institution of proceedings, by the Principal Chief Commissioner or Chief Commissioner or a Principal Director General or Director General."
Admissibility of statements made during such proceedings
Where a proceeding has been taken against a person under sub-section (1), any statement made or account or document produced by that person before an income-tax authority specified in section 236(a) to (k) is not inadmissible as evidence merely because:
- the statement was made, or the document produced, in the belief that the penalty imposable would be reduced or waived under section 469; or
- the offence for which the proceeding was taken would be compounded.
Board's power over compounding
The Board's general power to issue orders, instructions or directions under the Act includes the power to issue instructions or directions (including requiring prior approval of the Board) to other income-tax authorities for the proper composition of offences under this section.
Frequently asked questions
Can prosecution under sections 473 to 484 start without any approval?
No - for offences under sections 473, 474, 475, 476, 477, 478, 479, 480, 481, 482, 483 or 484, prior sanction of the Principal Commissioner or Commissioner or Commissioner (Appeals) or Joint Commissioner (Appeals) is required before a person can be proceeded against.
Can offences under this Chapter be settled instead of prosecuted?
Yes - Section 491(4) allows any offence under Chapter XXII to be compounded, either before or after proceedings are instituted, by the Principal Chief Commissioner or Chief Commissioner or a Principal Director General or Director General.
If my penalty under section 439 was waived, can I still be prosecuted?
Not for offences under section 478 or 482 relating to that same tax year - Section 491(3) bars prosecution for those offences once the related section 439 penalty has been reduced or waived under section 469.
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Talk to our tax team about a prosecution sanctionLast updated 9 September 2026