[Section 273A]: Power to Reduce or Waive Penalty, Etc., In Certain Cases

Here’s a detailed analysis of Section 273A of the Income Tax Act, 1961, which empowers tax authorities to reduce or waive penalties in specific cases to promote voluntary compliance and reduce litigation:

1. Overview of Section 273A

Section 273A grants discretionary powers to the Principal Commissioner/Commissioner of Income Tax to:

• Waive or reduce penaltiesfor under-reporting/misreporting (Section 270A) or concealment (Section 271(1)(c)).
• Stay or compound proceedingsfor penalty recovery in genuine hardship cases.

Objective: Encourage taxpayers to disclose income voluntarily and cooperate with tax authorities.

2. Key Subsections and Conditions

(A) Section 273A(1): Waiver/Reduction of Penalty

• Applicability: Penalties under Section 270A (under-reporting/misreporting) or Section 271(1)(c) (concealment).
• Conditions:

1. 1. Voluntary Disclosure: Taxpayer must disclose concealed income before detection by the AO, in good faith.
   2. Cooperation: Full cooperation during assessments/inquiries.
   3. Tax Payment: Payment or arrangements for tax/interest dues.

• Threshold: Prior approval from higher authorities (e.g., Chief Commissioner) required if concealed income exceeds ₹5 lakh.

(B) Section 273A(4): Hardship Relief

• Scope: Waiver/reduction of any penaltyunder the Act, including stay of recovery.
• Conditions:
  1. Genuine Hardship: Penalty must cause undue hardship (e.g., financial distress).
  2. Cooperation: Taxpayer must cooperate in assessments/recovery proceedings.
• Threshold: Approval needed if penalty exceeds ₹1 lakh.

3. Procedural Aspects

• Application: Taxpayer must apply for relief (except for suo moto actions under Section 273A(1)).
• Time Limit: Orders must be passed within 12 monthsof application.
• Finality: Orders are non-appealable.

4. Limitations

• One-Time Relief: A taxpayer can avail relief only once in their lifetime.
• Exclusions: Misreporting (e.g., fake invoices) may not qualify for waiver .

5. Practical Implications

• Strategic Use: Ideal for taxpayers with bona fide errorsor financial hardships.
• Documentation: Maintain proof of voluntary disclosure (e.g., revised returns).
• Professional Advice: Consult a CA to navigate conditions and thresholds