Section 273A of ITA, 1961 : Section 273A: Power To Reduce Or Waive Penalty, Etc, In Certain Cases

Explanation using Example

Imagine a small business owner, Mr. Sharma, who has inadvertently failed to report some income on his tax return due to an accounting error. Upon realizing the mistake, Mr. Sharma voluntarily approaches the tax authorities, before any investigation has begun, to disclose the unreported income. He also cooperates fully with the authorities, provides all the necessary documentation, and arranges to pay the additional tax and interest owed.

In this scenario, under Section 273A of the Income-tax Act, 1961, the Principal Commissioner or Commissioner of Income Tax has the discretion to reduce or waive any penalty that could be imposed on Mr. Sharma for underreporting his income. This leniency is possible because Mr. Sharma acted in good faith by voluntarily disclosing the error and cooperating with the tax department.

However, if the undisclosed income exceeds five hundred thousand rupees, the tax officer would need prior approval from a higher tax authority before reducing or waiving the penalty. This provision ensures that significant cases of underreporting are scrutinized at a higher level.

It is important to note that once Mr. Sharma receives relief for a particular assessment year under this section, he cannot seek relief under the same section for any other assessment year following the order. The relief under Section 273A is intended as a one-time measure to encourage voluntary compliance and is not meant to be used repeatedly.