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Income-tax Act, 1961 · Chapter XIX: A · Settlement of cases

Section 245H: Power of Settlement Commission to grant immunity from prosecution and penalty

The Income-tax Act, 1961 was repealed by the Income-tax Act, 2025 from 1 April 2026. The text is kept here because the judgments below apply it.

In plain words

The Settlement Commission can grant immunity from prosecution and penalties if an applicant cooperates and fully discloses income. This protection applies to offences under the Income-tax Act, Indian Penal Code, or other Central Acts, subject to specific conditions and dates. Immunity is lost if the person fails to pay the settlement amount, breaches conditions, or is found to have concealed facts or given false evidence during proceedings.

  • Immunity requires the Commission to be satisfied that the applicant cooperated and made a full and true disclosure of income and its derivation.
  • The Commission may impose conditions and must record reasons for granting immunity in writing.
  • Immunity covers offences under this Act, the Indian Penal Code (45 of 1860), or other Central Acts, and penalties under this Act.
  • No immunity is granted if prosecution proceedings were instituted before the date of receipt of the application under section 245C.
  • Applications made on or after the 1st day of June, 2007, do not qualify for immunity from offences under the Indian Penal Code or other Central Acts except the Wealth-tax Act, 1957 (27 of 1957).
  • Immunity is withdrawn if the person fails to pay the sum specified in the settlement order within the allowed time or fails to comply with other conditions.
  • Immunity may be withdrawn at any time if the person concealed material particulars or gave false evidence during settlement proceedings.

Example: If a person applies for settlement and fully discloses their income, the Commission may grant immunity from prosecution for tax evasion. However, if they later fail to pay the settlement amount on time, the immunity is withdrawn, and they can be prosecuted as if the immunity had never been granted.

A simplified explanation, prepared with AI assistance from the official text below and checked automatically against it for numbers and cross-references. The official text is the law and prevails over this summary. Not legal advice.

Official text

(1) The Settlement Commission may, if it is satisfied that any person who made the application for settlement under section 245C has co-operated with the Settlement Commission in the proceedings before it and has made a full and true disclosure of his income and the manner in which such income has been derived, grant to such person, subject to such conditions as it may think fit to impose [for the reasons to be recorded in writing], immunity from prosecution for any offence under this Act or under the Indian Penal Code (45 of 1860) or under any other Central Act for the time being in force [and also (either wholly or in part) from the imposition of any penalty] under this Act, with respect to the case covered by the settlement: [Provided that no such immunity shall be granted by the Settlement Commission in cases where the proceedings for the prosecution for any such offence have been instituted before the date of receipt of the application under section 245C:] [Provided further that the Settlement Commission shall not grant immunity from prosecution for any offence under the Indian Penal Code (45 of 1860) or under any Central Act other than this Act and the Wealth-tax Act, 1957 (27 of 1957) to a person who makes an application under section 245C on or after the 1st day of June, 2007.] [(1A) An immunity granted to a person under sub-section (1) shall stand withdrawnif such person fails to pay any sum specified in the order of settlement passed under sub-section (4) of section 245D within the time specified in such order or within such further time as may be allowed by the Settlement Commission, or fails to comply with any other condition subject to which the immunity was granted and thereupon the provisions of this Act shall apply as if such immunity had not been granted.]

(2) An immunity granted to a person under sub-section (1) may, at any time, be withdrawn by the Settlement Commission, if it is satisfied that such person *** had, in the course of the settlement proceedings, concealed any particulars material to the settlement or had given false evidence, and thereupon such person may be tried for the offence with respect to which the immunity was granted or for any other offence of which he appears to have been guilty in connection with the settlement and shall also become liable to the imposition of any penalty under this Act to which such person would have been liable, had not such immunity been granted.

Source: India Code (Legislative Department), the text of the Act as it stood before its repeal. Words in square brackets [ ] were inserted or substituted by later amending Acts, and *** marks words omitted by an amendment. The amendment footnotes are not reproduced here. Official text on India Code.

Supreme Court judgments citing the section 245H