POWER OF PRINCIPAL COMMISSIONER OR COMMISSIONER TO REDUCE OR WAIVE PENALTY

In the Article 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. Table at below article highlights major penalties imposable under the Income-tax Act.

Penalties & Prosecutions Under Income tax Act,1961

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 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 income, the taxpayer voluntarily and in good faith, makes a full and true disclosure of such particulars.

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 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 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 237A(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 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.

Other provisions applicable to the case of waiver under section 273AA

  • The application to the Commissioner for waiver shall not be made after the imposition of penalty after abatement.
  • The Commissioner may, subject to such conditions as he may think fit to impose, grant to the person immunity from the imposition of any penalty under the Income-tax Act.
  • Before granting the waiver, the Commissioner should be satisfied that the taxpayer has, after the abatement, co-operated with the Income-tax authority in the proceedings before him and made a full and true disclosure of his income and the manner in which such income has been derived.
  • The immunity granted under section 273AA shall stand withdrawn, if such person fails to comply with any condition subject to which the immunity was granted and after the withdrawal of the immunity, the provisions of the Act shall apply as if such immunity had not been granted.
  • The immunity granted under section 273AA may, at any time, be withdrawn by the Principal Commissioner or Commissioner, if he is satisfied that such person had, in the course of any proceedings, after abatement, concealed any particulars material to the assessment from the income-tax authority or had given false evidence, and thereupon such person shall become liable to the imposition of any penalty under the Act to which such person would have been liable, had not such immunity been granted.
( Republished with Amendments, Source- Income Tax Act, Rules and http://www.incometaxindia.gov.in/ )

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