Section 274 of ITA, 1961 : Section 274: Procedure

Explanation using Example

Imagine Mr. Sharma, a businessman, files his income tax return but omits some income from his rental property. The Income Tax Department conducts an assessment and determines that he should have paid more tax. They decide to impose a penalty for the underreported income. According to Section 274 of the Income-tax Act, 1961:

1. Before finalizing the penalty, the tax authorities must give Mr. Sharma a chance to present his case. This means they have to notify him about the penalty proceedings and allow him to be heard, thus respecting his right to due process.
2. If the penalty amount is supposed to exceed ten thousand rupees, the Income-tax Officer cannot unilaterally decide to impose the penalty. It must be approved by a higher authority if it is above the specified limits.
3. Once the penalty is imposed by an authority other than Mr. Sharma's Assessing Officer, a copy of the penalty order must be sent to his Assessing Officer promptly to ensure all records are updated and consistent.

This section ensures that the penalty process is fair and involves oversight, especially for larger penalty amounts.