Section 440 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 440 lets an assessee apply to the Assessing Officer for a waiver of the penalty levied under section 439 and for immunity from proceedings under section 478 or 479. The conditions are payment of the assessed tax and interest on time, payment of additional income-tax in lieu of penalty where penalty was levied for misreporting or on income of a particular kind, and no appeal. This article follows the text as per the Income-tax Act, 2025 as amended by the Finance Act, 2026; sub-sections (1) to (4) were substituted by the Finance Act, 2026 (section 99 of that Act), with effect from 1 April 2026. If a penalty order has been passed on you, our legal dispute resolution team can advise.
An assessee may apply for waiver of the section 439 penalty and immunity from proceedings under section 478 or 479 if the tax and interest in the assessment or reassessment order have been paid within the notice of demand period, any additional income-tax in lieu of penalty has been paid (hundred per cent of the tax on under-reported income in the misreporting cases, 120% in the case of income referred to in section 195(1)(b)), and no appeal has been filed. The application is due within one month and the order within three months from the end of the month of receipt.
The conditions (section 440(1))
An assessee may make an application to the Assessing Officer to grant waiver of penalty levied under section 439 and immunity from initiation of proceedings under section 478 or 479, on fulfilment of all of these conditions:
| Clause | Condition |
|---|---|
| (a) | The tax and interest payable as per the order of assessment under section 270(10) or reassessment under section 279 has been paid within the period specified in the notice of demand |
| (b) | Where penalty has been levied in the circumstances referred to in section 439(11)(a) to (f), additional income-tax amounting to hundred per cent of the amount of tax payable on the under-reported income has been paid within the period specified in the notice of demand, in lieu of such penalty |
| (c) | Where penalty has been levied in the circumstances referred to in section 439(11)(g), additional income-tax amounting to 120% of the amount of tax payable on the under-reported income has been paid within the period specified in the notice of demand, in lieu of such penalty |
| (d) | No appeal has been filed against the order of assessment or reassessment and levy of penalty referred to in clauses (a), (b) and (c) |
The word "and" joins clauses (c) and (d). Clauses (b) and (c) are alternatives in practice, since they apply to different circumstances: clause (b) to the cases of misreporting in section 439(11)(a) to (f) (misrepresentation or suppression of facts, failure to record investments or receipts, unsubstantiated expenditure, a false entry in the books, and failure to report an international or specified domestic transaction), and clause (c) to income referred to in section 195(1)(b), the case in section 439(11)(g). For the penalty itself see our post on section 439.
Example (amounts assumed). Ketan Pharma's income is reassessed under section 279 and the tax on its under-reported income is Rs. 1,00,000. Penalty is levied under section 439 for misrepresentation of facts (a case within section 439(11)(a) to (f)). To qualify under clause (b), Ketan pays, within the period in the notice of demand, the tax and interest as per the order, plus additional income-tax of hundred per cent of Rs. 1,00,000, that is Rs. 1,00,000, in lieu of the penalty. If instead the penalty had been levied on income referred to in section 195(1)(b), the additional income-tax under clause (c) would be 120% of Rs. 1,00,000 = Rs. 1,20,000. In both cases it must also have filed no appeal.
The application (section 440(2))
The application under sub-section (1) must be made within one month from the end of the month in which the order referred to in sub-section (1) is received by the assessee, in such form and verified in such manner as may be prescribed. The form and verification are left to the Income-tax Rules, 2026; see our rule-wise guides.
For example, if the order is received on 12 June, the application must be made by 31 July.
Grant of waiver and immunity (section 440(3) and (4))
Sub-section (3): the Assessing Officer shall, on fulfilment of the conditions in sub-section (1), and after the expiry of the period of filing appeal as specified in section 358(3)(a), grant waiver of penalty under section 439 and immunity from initiation of proceedings under section 478 or 479. The grant therefore waits until the appeal period has run out, which is consistent with the no-appeal condition in clause (d). For appeal time limits see our post on section 358.
Sub-section (4): no waiver or immunity under sub-section (3) shall be granted if any proceeding has been initiated under Chapter XXII. That Chapter covers offences and prosecution; see our posts on section 478 and section 479 for the provisions named in sub-section (1).
The order (section 440(5) to (8))
| Sub-section | Rule |
|---|---|
| (5) | The Assessing Officer shall pass an order accepting or rejecting the application within three months from the end of the month of its receipt |
| (6) | No order of rejection shall be made without giving the assessee an opportunity of being heard |
| (7) | The order made under sub-section (5) shall be final |
| (8) | No appeal under section 356 or 357 or application for revision under section 378 shall be admissible against the order referred to in sub-section (1)(a), if an order under sub-section (5) has been made accepting the application |
Sub-section (7) makes the order on the application final. Sub-section (8) closes appeals and revision against the assessment or reassessment order if the application has been accepted; it does not apply where the application has been rejected.
Example (dates assumed). Ketan Pharma receives the order on 12 June and applies on 20 July, within one month from the end of June. The Assessing Officer receives the application in July, so the order is due within three months from the end of July, that is by 31 October. If he proposes to reject, he must hear Ketan first. If he accepts, Ketan cannot appeal against the assessment order.
Checking the sequence
- Assessment order under section 270(10), or reassessment under section 279, and penalty order under section 439.
- Payment of tax and interest, and of additional income-tax where required, within the period in the notice of demand.
- Application within one month from the end of the month of receipt.
- No appeal; the appeal period runs out.
- Assessing Officer grants waiver and immunity, subject to there being no Chapter XXII proceeding.
- Order within three months from the end of the month of receipt of the application; final.
Need help with a penalty order?
The decision between paying additional income-tax and waiving appeal rights, or appealing, depends on the facts and dates. Our legal dispute resolution team reads the order, computes the additional income-tax and prepares the application within the time allowed.
Key takeaways
- Section 440 allows a waiver of the section 439 penalty and immunity from proceedings under section 478 or 479, on four conditions.
- Where the penalty was for misreporting, additional income-tax of hundred per cent of tax on under-reported income is paid in lieu; for income referred to in section 195(1)(b) it is 120%.
- No appeal must be filed against the assessment or reassessment order and the penalty.
- Apply within one month from the end of the month of receipt of the order; the order on the application is due within three months from the end of the month of receipt.
- No waiver or immunity if a proceeding under Chapter XXII has been initiated.
- Sub-sections (1) to (4) were substituted by the Finance Act, 2026.
Read next
- Section 439: penalty for under-reporting and misreporting
- Sections 441, 442, 444 and 445: penalties for books of account, transfer pricing documents, false entries and benefits to related persons
- Sections 437 and 438: interest on refunds and set off or withholding of refunds
- Section 470: the reasonable cause defence
- Section 479: prosecution for not filing a return
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.