Power of Principal Commissioner or Commissioner to reduce or waive penalty, etc. in certain cases as per the provisions of Section 273A of the Income Tax Act, 1961

Section 273A empowers the Principal Commissioner or Commissioner to waive or reduce  penalty levied under the Income-tax Act as well as to stay or compound any proceeding for the recovery of penalty. Section 273A was substituted by the Taxation Laws (Amendment) Act, 1975, with effect from 01.10.1975. Mainly there are two provisions under section 273A which provides power to the Principal Commissioner or Commissioner to reduce or waive penalty i.e. sub-sections (1) and (4). Both are independent of each other.

Text of Section 273A

POWER TO REDUCE OR WAIVE PENALTY, etc., IN CERTAIN CASES.

273A. (1) Notwithstanding anything contained in this Act, the Principal Commissioner or Commissioner may, in his discretion, whether on his own motion or otherwise,—

  (i) [Omitted  by the Direct Tax Laws (Amendment) Act, 1989, with effect from 01.04.1989]

 (ii) reduce or waive the amount of penalty imposed or imposable on a person under section 270A or clause (iii) of sub-section (1) of section 271; or

(iii) [Omitted  by the Direct Tax Laws (Amendment) Act, 1989, with effect from 01.04.1989]

   if he is satisfied that such person—

 (a) [Omitted  by the Direct Tax Laws (Amendment) Act, 1989, with effect from 01.04.1989]

 (b) in the case referred to in clause (ii), has, prior to the detection by the Assessing Officer, of the concealment of particulars of income or of the inaccuracy of particulars furnished in respect of such income, voluntarily and in good faith, made full and true disclosure of such particulars,

 (c) [Omitted  by the Direct Tax Laws (Amendment) Act, 1989, with effect from 01.04.1989]

and also has, in the case referred to in clause (b), co-operated in any enquiry relating to the assessment of his income and has either paid or made satisfactory arrangements for the payment of any tax or interest payable in consequence of an order passed under this Act in respect of the relevant assessment year.

Explanation .—For the purposes of this sub-section, a person shall be deemed to have made full and true disclosure of his income or of the particulars relating thereto in any case where the excess of income assessed over the income returned is of such a nature as not to attract the provisions of section 270A or clause (c) of sub-section (1) of section 271.

(2) Notwithstanding anything contained in sub-section (1),—

 (a) [Omitted  by the Direct Tax Laws (Amendment) Act, 1989, with effect from 01.04.1989]

 (b) if in a case falling under section 270A or clause (c) of sub-section (1) of section 271, the amount of income in respect of which the penalty is imposed or imposable for the relevant assessment year, or, where such disclosure relates to more than one assessment year, the aggregate amount of such income for those years, exceeds a sum of five hundred thousand rupees,

no order reducing or waiving the penalty under sub-section (1) shall be made by the Principal Commissioner or Commissioner except with the previous approval of the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General, as the case may be.

(3) Where an order has been made under sub-section (1) in favour of any person, whether such order relates to one or more assessment years, he shall not be entitled to any relief under this section in relation to any other assessment year at any time after the making of such order :

Provided that where an order has been made in favour of any person under sub-section (1) on or before the 24th day of July, 1991, such person shall be entitled to further relief only once in relation to other assessment year or years if he makes an application to the income-tax authority referred to in sub-section (4) at any time before the 1st day of April, 1992.

(4) Without prejudice to the powers conferred on him by any other provision of this Act, the Principal Commissioner or Commissioner may, on an application made in this behalf by an assessee, and after recording his reasons for so doing, reduce or waive the amount of any penalty payable by the assessee under this Act or stay or compound any proceeding for the recovery of any such amount, if he is satisfied that—

  (i) to do otherwise would cause genuine hardship to the assessee, having regard to the circumstances of the case; and

 (ii) the assessee has co-operated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him:

Provided that where the amount of any penalty payable under this Act or, where such application relates to more than one penalty, the aggregate amount of such penalties exceeds one hundred thousand rupees, no order reducing or waiving the amount or compounding any proceeding for its recovery under this sub-section shall be made by the Principal Commissioner or Commissioner except with the previous approval of the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General, as the case may be.

(4A) The order under sub-section (4), either accepting or rejecting the application in full or in part, shall be passed within a period of twelve months from the end of the month in which the application under the said sub-section is received by the Principal Commissioner or the Commissioner:

Provided that no order rejecting the application, either in full or in part, shall be passed unless the assessee has been given an opportunity of being heard:

Provided further that where any application is pending as on the 1st day of June, 2016, the order shall be passed on or before the 31st day of May, 2017.

(5) Every order made under this section shall be final and shall not be called into question by any court or any other authority.

(6) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1989 shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year.

(7) Notwithstanding anything contained in sub-section (6), the provisions of sub-section (1), sub-section (2), or, as the case may be, sub-section (4) as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1989 (3 of 1989), shall apply in the case of reduction or waiver of penalty or interest in relation to any assessment for the assessment year commencing on the 1st day of April, 1988 or any earlier assessment year, with the modifications that the power under the said sub-section (1) shall be exercisable only by the Principal Commissioner or Commissioner and instead of the previous approval of the Board, the Principal Commissioner or Commissioner shall obtain the previous approval of the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General, as the case may be, while dealing with such case.

Principal Commissioner or Commissioner may reduce/waive penalty [Section 273A(1)]

Section 273A(1) empowers the Principal Commissioner or Commissioner to reduce or waive the amount of penalty imposed or imposable on a person under section 270A (i.e., penalty for under-reporting and misreporting of income) or under section 271(1 )(c) (i.e., penalty for concealment of particulars of income or furnishing inaccurate particulars of income).

The power under this section 273A() can be exercised either before or after levy of penalty, as the section uses the term ‘imposed’ or ‘imposable’.

Waiver may be suo moto or otherwise [Section 273A(1)]

The waiver or reduction under section 273A(1) can be granted by the Principal Commissioner or Commissioner either on his own motion or otherwise, i.e., on an application made by the taxpayer.

Conditions necessary to be satisfied for the waiver or reduction of penalty under section 273A(1)

The power to reduce or waiver the penalty under section 271(1)(c) or 270A can be excercised by the Principal Commissioner or Commissioner on his own motion or on an application made by the assessee, if the Principal Commissioner or Commissioner id satisfied that the assessee has :

(i)    prior to the detection by the Assessing Officer, of the concealment of particulars of income or of the inaccuracy of particulars furnished in respect of such income, voluntarily  and in good faith, made full and true disclosure of such particulars;

(ii)   co-operated in any enquiry relating to the assessment of his income; and

(iii)  has either paid or made satisfactory arrangements for the payment of any tax or interest payable in consequence of an order passed under the Income-tax Act, 1961 in respect of the relevant assessment. ie the assessment year(s) for which application is made under section 273A.

       If the assessee satisfied all the above three conditions, then the Principal Commissioner or Commissioner shall ( ie he is duty bound) waive the penalty and in that case there is no discretion.

Deemed case of true disclosure [Explanation to Section 273A(1)]

For the purposes of section 273A(1), a person shall be deemed to have made full and true disclosure of his income or of the particulars relating thereto in any case where the excess of income assessed over the income returned is of such a nature as not to attract the provisions of section 270A or section 271(1)(c).

Prior approval of Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General necessary where aggregate concealed income exceeds Rs. 5,00,000 [Section 273A(2)]

According to section 273A(2), no order under section 273A(1) for reducing or waiving the penalty shall be made by the Principal Commissioner or Commissioner except with the prior approval of the Chief Commissioner/Director General, as the case may be, in a case falling under section 270A or 271(1)(c) where the amount of income in respect of which the penalty is imposed or imposable for the relevant assessment year, or, where such disclosure relates to more than one assessment year, the aggregate amount of such income for those years, exceeds a sum of Rs. 5,00,000.

Relief available only once in life time where an order has been made under section 273A(1) [Section 273A(3)]

According to section 273A(3), where an order has been made under section 273A(1) in favour of any person, whether such order relates to one or more assessment years, he shall not be entitled to any relief under section 273A(1) in relation to any other assessment year at any time after the making of such order.

Power to reduce or waive any penalty {Section 273A(4)]

Section 273A(4) empowers the Principal Commissioner or Commissioner to waive or reduce any penalty imposable under the Income-tax Act, 1961 as well as to stay or compound any proceeding for the recovery of any  such amount provided certain conditions are satisfied.

Waiver only when application is made by the assessee [Section 273A(4)]

The waiver or reduction of penalty under section 273A(4) is possible only when an application for the same is made by the assessee. It cannot be done suo moto by the Principal Commissioner or Commissioner.

Conditions to be satisfied for waiver or reduction of penalty under section 273(4)

Such power shell be excercised by the Principal Commissioner or Commissioner if he is satisfied that

(i)    to do otherwise levy of penalty would cause genuine hardship to the assessee, having regard to the circumstances of the case; and

(ii)   the taxpayer has co-operated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him.

Previous approval of Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General where amount of such penalties exceeds Rs. 1,00,000 [Proviso to Section 273A(4)]

Where the amount of any penalty payable under the Income-tax Act, 1961 or, where such application relates to more than one penalty, the aggregate amount of such penalties exceeds Rs. 1,00,000, no order reducing or waiving the amount or compounding any proceeding for its recovery under section 273A(4) shall be made by the Principal Commissioner or Commissioner except with the previous approval of the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General, as the case may be.

Opportunity of being heard [First Proviso to Section 273A(4A)]

No order rejecting the application, either in full or in part, shall be passed unless the assessee has been given an opportunity of being heard.

Time-limit for passing order under section 273A(4) [Section 273A(4A)]

The Principal Commissioner or Commissioner, as the case may be, shall pass order, either accepting or rejecting assessee’s application in full or in part, shall bepassed within a period of 12 months from the end of the month in which application under section 273A(4)  is received by the Principal Commissioner or Commissioner, as the case may be. However, order shall be passed on or before May 31, 2017 in case of application pending as on June 1, 2016.

Interest under section 234A, 234B and 234C can not be waived or reduced by the Principal Commissioner or Commissioner

Interest under section 234A, 234B and 234C can not be waived or reduced by the Principal Commissioner or Commissioner under section 273B.

Difference between the waiver of penalty under section 273A(1) and section 273A(4)

Besides the conditions to be satisfied, following are the differences between under section 272A(1) and 273A(4) :

S. No.	Section 273A(1)	Section 273A(4)
(i)	Under section 273A(1), the Principal Commissioner or Commissioner can reduce or waiver the penalty imposed under section  271(1)(c) or under section 270A.	Under section 273A(4), the Principal Commissioner or Commissioner can reduce or waiver any penalty imposed.
(ii)	Once in a life time in case of section 273A(1) waiver is possible.	Any number of times in case of section 273A(4) waiver is possible
(iii)	In case of section 273A(1), the Principal Commissioner or Commissioner can reduce or waive the penalty either suo moto or on an application made by the assessee.	In case of section 273A(4), the Principal Commissioner or Commissioner can reduce or waive the penalty only on an application made by the assessee and suo moto is not permissible.
(iv)	Prior approval of Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General is required under section 273A(1) if the concealed income exceeds Rs. 5,00,000.	Prior approval of Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General is required under section 273A(4) if any penalty exceeds Rs. 1,00,000.
(v)	The Principal Commissioner or Commissioner has no power under section  273A(1) to stay or compound the proceeding for recovery.	Whereas it is possible under section 273A(4).

Finality of the order [Section 273A(5)]

Every order made under section 273A shall be final and shall not be called into question by any Court or any other authority

Order under section 273A is not appealable

Every order made under section 273A shall be final and shall not be called into question by any court or any other authority. However, the assessee can file a writ with the High Court under Article 226 of the Constitution and thereafter a special leave petition to the Supreme Court.

The whole concept under section 273A is that the assessee admits his liability to the penalty but relies upon certain mitigating circumstances specified in the section for the purpose of getting the interest or penalty waived or reduced. Under section 273A the Commissioner is given the discretion, when the requisite conditions envisaged by section 273A are satisfied, that he may waive or reduce the penalty or interest imposable under the various sections of the Act. However, such discretion must be exercised judiciously by taking into consideration all the relevant facts and not arbitrarily or capriciously. - [K.S.N. Murthy v Chairman, CBDT (2001) 252 ITR 269 (AP)]

The Principal Commissioner or commissioner must give his reasons while passing an order on waiver of 18 penalty under section 273A: The power under section 273A is a quasi-judicial power and, therefore, it is desirable for the Commissioner to reason his decision in every case. In this case the Commissioner while reducing the penalty by 50% did not give any reason for his action. The order was therefore quashed. - [Shri Ganesh Trading Co. v CIT (2004) 134 Taxman 441 (P&H)]