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June 10, 2022

POWER OF PRINCIPAL COMMISSIONER OR COMMISSIONER TO REDUCE OR WAIVE PENALTY

by CA Shivam Jaiswal in Income Tax

POWER OF PRINCIPAL COMMISSIONER OR COMMISSIONER TO REDUCE OR WAIVE PENALTY

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/failureSectionsPenalty
Default in payment of any tax dueSection 221(1)Such an amount as the Assessing Officer may impose but not exceeding the amount of tax.
Determination    of undisclosed income of block periodSection 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 incomeSection 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 keep, maintain or retain books of account, documents, etc., as are required under section 44AASection 271ARs. 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 271AA2% 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 271AAB10%, 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 271AAB30% or 60% of undisclosed income, as the case may be
Penalty where income includes  any income referred to in Section 68,Section 271AAC10% of tax payable on undisclosed income
Section   69, Section 69A, Section 69B, Section 69C or Section 69D.(if such income is not included by the assesse in his return of income or tax in accordance with section 115BBE has not been paid)  
‘False Entry’ in the books of account or an entry omitted to evade tax liabilitySection 271AADAn amount equal to the aggregate amount of false entries or omitted entry
  Passing            unreasonable benefits to trustee or specified person  Section 271AAEFor the first violation: to the extent of income applied by the institution for such benefit. For any violation in subsequent years: twice the amount of such income so applied.
Failure to get accounts audited or furnish a report of audit as required under section 44ABSection 271BOne-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 92ESection 271BA1,00,000
Failure   to    deduct   tax    at source, wholly or partly or failure to pay wholly or partly tax under section 115- O(2)Section 271CAn amount equal to tax not deducted in (case of TDS)tax    not    paid    (in    case dividend distribution tax)
Failure to collect tax at sourceSection 271CAAn 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 271DAn 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 269STSection 271DAAn amount equivalent to cash
receipt
Failure to provide facility for accepting payment through prescribed electronic modes of paymentSection 271DBRs. 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 placeSection 271EAn amount equal to loan or deposit or specified advance so repaid
Failure to furnish statement of   financial transaction or reportable  account
(previously called as Annual Information Return) as required under section 285BA(1)
Section 271FARs. 500 or Rs. 1,000, as the case may be, per day of default
Failure to furnish accurate statement financial transaction reportable accountSection 271FAARs. 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 271FABAn          amount 5,00,000
Failure to furnish information or document as required by section 92D(3)Section 271G2% 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 271GAA 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) 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)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).271GB(4)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 1,00,000
 
Penalty for failure to furnish statements, etc.Section 271KRs. 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 certificateSection 271JRs. 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 failure/default
Penalty under section 272A(2)Section 272A(2)Rs. 500 per day for every day during which the default continues.
Failure     to     comply                with section 133BSection 272AA(1)An amount not exceeding Rs. 1,000
Failure    to    comply     with provisions        relating        to Permanent Account Number (PAN) or AadharSection 272BRs. 10,000 for each default
Failure   to   comply    with provisions relating to Tax Deduction Account Number or Tax Collection Account NumberSection 272BB(1)Rs. 10,000
Failure to comply with the provisions relating to Tax Collection Account NumberSection 272BBBRs. 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)(iii) (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 :

  • 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 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 270A or under section 271(1)(iii).

  • The taxpayer should have co-operated in any enquiry relating to the assessment.
  • 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 :

  • Levy of penalty will cause genuine hardship on the taxpayer.
  • 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)(iii) (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.

MCQ ON POWER OF COMMISSIONER TO REDUCE OR WAIVE PENALTY

Q1.Principal Commissioner or Commissioner of Income-tax is empowered to grant relief from penalty to taxpayers in genuine cases. Such power is granted under section 273A and section        _.

(a) 274                                                                         (b) 273AA

(c) 273B                                                                      (d) 273AB

Correct answer : (b) Justification of correct answer

Apart from enacting penalty provisions, the Income-tax Act also designed provisions

empowering the Principal Commissioner 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.

Thus, option (b) is the correct option.

Q2.Section 273A(1) empowers the Principal Commissioner or Commissioner to grant waiver or reduction from penalty imposed or imposable under section 271F i.e. penalty for failure to file the return of income.

(a) True                                                                        (b) False

Correct answer : (b) Justification of correct answer

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). The relief is subject to conditions specified in this regard.

Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q3.Section 273A(4) empowers the Principal Commissioner or Commissioner to waive or reduce any penalty levied under the Income-tax Act as well as to stay or compound any proceeding for the recovery of penalty.

(a) True                                                                        (b) False

Correct answer : (a) Justification of correct answer

Section 273A(4) empowers the Principal Commissioner or Commissioner to waive or

reduce any penalty levied under the Income-tax Act as well as to stay or compound any proceeding for the recovery of penalty. The relief is subject to conditions specified in this regard.

Thus, the statement given in the question is true and hence, option (a) is the correct option.

Q4.Section 273AA empowers the Principal Commissioner or Commissioner to waive off penalty in a case where the taxpayer has made an application for settlement under section 245C and the proceedings for settlement have been completed and penalty proceedings are initiated under the Income-tax Act.

(a) True                                                                        (b) False

Correct answer : (b) Justification of correct answer

Section 273AA empowers the Principal Commissioner or Commissioner to waive off

penalty 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.

Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q5.The waiver or reduction under section 273A(1) can be granted by the Principal Commissioner or Commissioner on his own motion   but not on an application made by the taxpayer.

(a) True                                                                        (b) False

Correct answer : (b) Justification of correct answer

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.

Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q6. If the amount of income in respect of which the penalty is imposed or imposable for the relevant year(s) exceeds Rs.                                                , then 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.

(a) 1,00,000                                                                 (b) 5,00,000

(c) 10,00,000                                                               (d) 20,00,000

Correct answer : (b) Justification of correct answer

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.

Thus, option (b) is the correct option.

Q7.Every order made under section 273A shall be final and shall not be called into question by any Court or any other authority.

(a) True                                                                        (b) False

Correct answer : (a) Justification of correct answer

Every order made under section 273A shall be final and shall not be called into question

by any Court or any other authority.

Thus, the statement given in the question is true and hence, option (a) is the correct option.

Q8. 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.

(a) True                                                                        (b) False

Correct answer : (a) Justification of correct answer

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.

Thus, the statement given in the question is true and hence, option (a) is the correct option.

Q9.Relief under section 273A(4) is granted if levy of penalty will cause genuine hardship on the taxpayer.

(a) True                                                                        (b) False

Correct answer : (b) Justification of correct answer

Relief under section 273A(4) is granted if following conditions are satisfied :

  • Levy of penalty will cause genuine hardship on the taxpayer.
  • The taxpayer has co-operated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him.

Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q10.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

(a) True                                                                        (b) False

Correct answer : (a) Justification of correct answer

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.

Thus, the statement given in the question is true and hence, option (a) is the correct option.

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