Power of Commissioner to Reduce or Waive Income Tax Penalty
There are various knowledge sharing materials which are provided by the Income Tax Department for the update of the member. It acts as a guide to the taxpayers, tax professional & tax authorities in making the due compliances. One such knowledge sharing content is with regard to the power of the Commissioner to Reduce or Waive Income Tax Penalty
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In the tutorial on “Penalties Under the Income-tax Act”, we discussed various penalties imposable under the Income-tax Act in respect of various defaults. Apart from enacting penalty provisions, the Income-tax Act also designed provisions empowering the Principal Commissioner of Income-tax or Commissioner of Income-tax to grant relief from penalty to taxpayers in genuine cases. Such power is granted under section 273A and section 273AA. In this part you can gain knowledge about the provisions of section 273A and section 273AA.
Overview of major penalties under the Income-tax Act
Before understanding the provisions of section 273A and 273AA it is better to take an overview of the penal provisions under the Income-tax Act. The following table highlights major penalties imposable under the Income-tax Act.
| Nature of default/failure | Sections | Penalty |
| Default in payment of any tax due | Section 221(1) | Such an amount as the Assessing Officer may impose but not exceeding the amount of tax. |
| Determination of undisclosed income of block period | Section 158BFA(2) | Minimum : 100 per cent of tax leviable in respect of undisclosed income
Maximum : 300 per cent of tax leviable in respect of undisclosed income. |
| Under-reporting and misreporting of income | Section 270A(1) | A sum equal to 50% of the amount of tax payable on under-reported income.
However, if under-reported income is in consequence of any misreporting thereof by any person, the penalty shall be equal to 200% of the amount of tax payable on under-reported income |
| Failure to comply with notice issued under section 142(1) or section 143(2) and direction for audit under section 142(2A). | Section 271(1)(b) | Rs. 10,000 for each failure.
This section shall not apply to and in relation to any assessment for the A.Y commencing on or after the 1st day of April, 2017. |
| Concealment of income or furnishing inaccurate particulars of income | Section 271(1)(c) | 100% to 300% of the tax evaded.
This section shall not apply to and in relation to any assessment for the A.Y commencing on or after the 1st day of April, 2017. |
| Distribution of profits by registered firm otherwise than in accordance with partnership deed and as a result of which partner has returned income below the real income | Section 271(4) | Not exceeding 150 per cent of difference between tax on partner’s income assessed and tax on income returned, in addition to tax payable
This section shall not apply to and in relation to any assessment for the A.Y commencing on or after the 1st day of April, 2017. |
| Failure to keep, maintain or retain books of account, documents, etc., as are required under section 44AA | Section 271A | Rs. 25,000 |
| Failure to keep and maintain information and documents required in respect of international transaction or specified domestic transaction, failure to report such transaction, etc. | Section 271AA | 2% of the value of each international transaction or specified domestic transaction entered into by the taxpayer. |
| Failure to furnish information and document as required under Section 92D(4) | Section 271AA(2) | Rs. 5,00,000/- |
| Penalty in case of search (Search is initiated on or after July 1, 2012 but before December 15, 2016) | Section 271AAB | 10%, 20% and 60% of the undisclosed income, as the case may be. |
| Penalty in case of search (if search is initiated on or after December 15, 2016) | Section 271AAB | 30% or 60% of undisclosed income, as the case may be |
| Penalty where income includes any income referred to in Section 68, Section 69, Section 69A, Section 69B, Section 69C or Section 69D. | Section 271AAC | 10% of tax payable on undisclosed income |
| ‘False Entry’in the books of account or an entry omitted to evade tax liability | Section 271AAD | An amount equal to the aggregate amount of false entries or omitted entry |
| Failure to get accounts audited or furnish a report of audit as required under section 44AB | Section 271B | One-half per cent of total sales, turnover or gross receipts, etc., or Rs. 1,50,000, whichever is less |
| Failure to furnish a report from an accountant as required by section 92E | Section 271BA | Rs. 1,00,000 |
| Failure to deduct tax at source, wholly or partly or failure to pay wholly or partly tax under section 115-O(2) | Section 271C | An amount equal to tax not deducted (in case of TDS) or tax not paid (in case of dividend distribution tax) |
| Failure to collect tax at source | Section 271CA | An amount equal to tax not collected. |
| Taking or accepting certain loans or deposits or specified sum* in contravention of provisions of section 269SS
*“Specified sum”means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place. |
Section 271D | An amount equal to loan or deposit or specified sum so taken or accepted |
| Accepting cash of Rs. 2,00,000 or more in contravention to Section 269ST | Section 271DA | An amount equivalent to cash receipt |
| Failure to provide facility for accepting payment through prescribed electronic modes of payment | Section 271DB | Rs. 5,000 rupees every day for which the default continues. |
| Repaying loans or deposits or specified advance* in contravention of provisions of section 269T
*“Specified advance”means any sum of money in the nature of advance, by whatever name called, in relation to transfer of an immovable property, whether or not transfer takes place |
Section 271E | An amount equal to loan or deposit or specified advance so repaid |
| Failure to furnish the return of income before the end of the assessment year | Section 271F | Rs. 5,000 [Not applicable for any AY commencing on or after 1st April, 2018] |
| Failure to furnish statement of financial transaction or reportable account (previously called as Annual Information Return) as required under section 285BA(1) | Section 271FA | Rs. 500 or Rs. 1,000, as the case may be, per day of default |
| Failure to furnish an accurate statement of financial transaction or reportable account | Section 271FAA | Rs. 50,000 |
| Failure to furnish statement or information or document [as required under Section 9A(5)] by an eligible investment fund within the prescribed time-limit. | Section 271FAB | An amount equal to Rs. 5,00,000 |
| Failure to furnish any information or document as required by section 92D(3) | Section 271G | 2% of the value of the international transaction or specified domestic transaction for each such failure |
| Failure to furnish information or document under section 285A* by an Indian concern.
*Section 285A provides that where any share or interest of foreign company derives its value substantially from assets located in India, and such company holds such assets in India through Indian Concern then such Indian concern shall furnish the prescribed information to the income-tax authority. |
Section 271GA | A sum equal to 2% of the value of the transaction in respect of which such failure has taken place, if such transaction had the effect of directly or indirectly transferring the right of management or control in relation to the Indian concern;
An amount equal to Rs. 5,00,000 in any other case |
| Failure to furnish report under section 286(2) | Section 271GB(1) | Rs. 5,000 per day up to 30 days and Rs. 15,000 per day beyond 30 days |
| Failure to produce the information and documents within the period allowed under section 271GB(6) | Section 271GB(2) | Rs. 5,000 for every day during which the failure continues. |
| Failure to furnish report or failure to produce information/documents under section 286 even after serving order under section 271GB(1) or 271GB(2) | Section 271GB(3) | Rs. 50,000 for every day for which such failure continues beginning from the date of serving such order. |
| Failure to inform about inaccuracy in report furnish under section 286(2) Or furnishing of inaccurate information or document in response to notice issued under section 286(6). | Section 271GB(4) | Rs. 5,00,000 |
| Failure to file the TDS/TCS return | Section 271H | Not less than Rs.10,000 and upto Rs. 1,00,000 |
| Failure to furnish information or furnishing of inaccurate information under Section 195(6) in respect of payment made to non-residents. | Section 271-I | An amount equal to Rs. 1,00,000 |
| Penalty for failure to furnish statements, etc. | Section 271K | Rs. 10,000 to Rs. 1 lakh if assessee fails to furnish the statement or fails to furnish a certificate under section 35 or section 80G |
| Furnishing of Incorrect information by an Chartered Accountant or a merchant banker or a registered valuer in a report or certificate | Section 271J | Rs. 10,000 for each such report or certificate |
| Failure to co-operate with the tax authorities, (i.e., not answering any question, not signing statements, etc.) or failure to comply with notice issued under section 142(1)/143(2) or failure to comply with direction issued under section 142(2A). | Section 272A(1) | Rs. 10,000 for each failure/default |
| Penalty under section 272A(2) | Section 272A(2) | Rs. 100 per day for every day during which the default continues. |
| Failure to comply with section 133B | Section 272AA(1) | An amount not exceeding Rs. 1,000 |
| Failure to comply with provisions relating to Permanent Account Number (PAN) or Aadhar | Section 272B | Rs. 10,000 for each default |
| Failure to comply with provisions relating to Tax Deduction Account Number or Tax Collection Account Number | Section 272BB(1) | Rs. 10,000 |
| Failure to comply with the provisions relating to Tax Collection Account Number | Section 272BBB | Rs. 10,000 |
Power of Principal Commissioner or Commissioner to reduce or waive penalty under sections 273A(1), 273A(4) and 273AA
> Waiver or reduction of penalty under section 273A(1)
Section 273A(1) empowers the Principal Commissioner or Commissioner to grant waiver or reduction from penalty imposed or imposable 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).
Initiation to be taken by Principal Commissioner or Commissioner or the taxpayer
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 for granting relief
Relief under section 273A(1) is granted if following conditions are satisfied :
(1) 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, the taxpayer voluntarily and in good faith, makes a full and true disclosure of such
For the purpose 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 penalty under section 270A or under section 271(1)(c).
(2) The taxpayer should have co-operated in any enquiry relating to the assessment.
(3) The taxpayer either should have paid or made satisfactory arrangements for paying any tax or interest payable in consequence of an order passed under the Act in respect of the relevant year.
Previous approval of Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General
If the amount of income in respect of which the penalty is imposed or imposable for the relevant year or, where such disclosure relates to more than one year, the aggregate amount of such income for those years exceeds a sum of Rs. 5,00,000, no order reducing or waiving the penalty under section 273A(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.
Finality of the order
Every order made under section 273A shall be final and shall not be called into question by any Court or any other authority.
No relief if waiver claimed earlier
As per 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 years, he shall not be entitled to any relief under section 273A in relation to any other year at any time after the making of such order.
Thus, if a person has claimed relief under section 273A(1) at any time, then he cannot claim relief under section 273A [i.e., 273A(1) as well as section 273A(4)] thereafter.
> Waiver or reduction of penalty under section 273A(4)
Section 273A(4) empowers the Principal Commissioner or Commissioner to waive or reduce any penalty imposable under the Income-tax Act as well as to stay or compound any proceeding for the recovery of penalty.
Initiation to be taken by the taxpayer
For obtaining waiver or reduction or stay or compound any proceeding for the recovery of penalty, the taxpayer has to make an application to the Principal Commissioner or Commissioner.
Conditions for granting relief
Relief under section 273A(4) is granted if following conditions are satisfied :
(1) Levy of penalty will cause genuine hardship on the taxpayer.
(2) 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 Chief Commissioner or Director General
If the amount of any penalty or, where such application relates to more than one penalty, the aggregate amount of such penalties exceeds Rs. 1,00,000, no order of reducing or waiving the amount or compounding any proceeding for its recovery under section 273A(4) shall be made by the Principal Commissioner of 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.
Time-limit for passing order under section 273A(4)
The Principal Commissioner or Commissioner, as the case may be, shall pass order, either accepting or rejecting assessee’s application to reduce or waive penalty, within a period of 12 months from the end of the month in which application is received. However, order shall be passed on or before May 31, 2017 in case of application pending as on June 1, 2016.
Further, no order rejecting the application shall be passed unless the assessee has been given an opportunity of being heard.
Finality of the order
Every order made under section 273A shall be final and shall not be called into question by any Court or any other authority.
No relief if waiver claimed earlier
Section 273A(1) empowers the Principal Commissioner or Commissioner to grant waiver or reduction from penalty levied 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).
As per 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 years, he shall not be entitled to any relief under section 273A in relation to any other year at any time after the making of such order.
Thus, if a person has claimed relief under section 273A(1) at any time, then he cannot claim relief under section 273A [i.e., section 273A(1) as well as section 273A(4)] thereafter.
Waiver of penalty under section 273AA
Section 273AA empowers the Principal Commissioner or Commissioner to grant immunity from imposition of any penalty under the Income-tax Act in a case where the taxpayer has made an application for settlement under section 245C and the proceedings for settlement have been abated under section 245HA and penalty proceedings are initiated under the Income-tax Act.
Initiation to be taken by the taxpayer
For obtaining waiver, the taxpayer has to make an application to the Commissioner.
Time-limit for passing order under section 273AA
The Principal Commissioner or Commissioner, as the case may be, shall pass order, either accepting or rejecting assessee’s application to reduce or waive penalty, within a period of 12 months from the end of the month in which application is received. However, order shall be passed on or before May 31, 2017 in case of application pending as on June 1, 2016.
Further, no order rejecting the application shall be passed unless the assessee has been given an opportunity of being heard.
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