Scope and applicability of new section 273A of Income tax Act, 1961. - Income Tax - 963/CBDT

INSTRUCTION NO. 963/CBDT Dated : June 26, 1976 Section(s) Referred: 18B(4) ,139(8) ,215 ,217 ,271(4A) ,273A(4) Statute: Income - Tax Act, 1961 The Board have received a number of references from Commissioners of Incometax seeking clarification about the scope and applicability of the new section 273A of the Incometax Act, 1961 and new section 18B of the Wealth Tax Act, 1957. The points raised in these references are clarified hereunder. 2. The provisions of section 273A(1) and (4) of the Incometax Act, 1961 would apply to all cases where an application for relief under the said provisions is made by the assessee on or after 1st October 1975. In cases falling under section 273A(1), the Commissioner may also grant relief suo motu on or after that date. Relief under the provisions of section 273A can be allowed by the Commissioner irrespective of the assessment year to which the penalty or interest relate or the date on which the relevant assessment or penalty order was passed. 3. Where an application is made by the assessee under section 271(4A) prior to 1-10-1975 for reduction or waiver of penalty imposable under section 271, the assessee may make a further application under section 273A for the reduction of interest chargeable under sections 139(8), 215 and 217 or penalty imposable under section 273 of the Act. In such cases, the Commissioner will have to pass two orders one in respect of the application under section 271(4A) and the other in respect of the application under section 273A(1). Where an order in respect of an assessment year has already been passed by the Commissioner under section 271(4A) the assessee may make a separate application for grant of further relief under section 273A(1) in respect of interest chargeable or charged under section 139(8) or 215 or 217 and penalty imposable or imposed under section 273. 4. It may be noted that the prohibition under section 273A(3) will apply only in respect of orders passed under section 273A(1) and not orders made under section 271(4A) of the Act. 5. The Board have considered the scope of the powers vested in the Commissioners under section 273A(4) of the Act and the meaning of the term "genuine hardship" occuring in the said provision. The Board are advised that "genuine hardship" means real hardness of fate or circumstance or real, severe suffering or privation. The determination of the question whether there is a case of real hardness of the fate or circumstance or that of severe suffering or privation is to be made on the basis of the facts and circumstances of each case. Factors like the nature of the default or lapse and the financial condition of the assessee, etc., are germane to the determination of such a question. A few illustrative cases which may constitute "genuine hardship" warranting relief under section 273A(4) of the Incometax Act, 1961, or 18B(4) of the Wealth tax Act 1957 are given below:- a) Where, having regard to the quantum of penalty and the financial condition of the assessee, the recovery of the penalty imposed would spell ruination to the business of the assessee. b) Where on account of any calamity befalling the assessee, his business or venture has run into huge losses and the assessee is not possessed of any other property/assets wherefrom the recovery can be made. c) A case in which the assessee has been suffering from a serious ailment, like, cancer, tuberculosis etc. and was unable to pay the tax or file the return on account of diversion thereof towards his treatment, may well be a case of genuine hardship. d) Another case of genuine hardship could be where on account of inaction on the part of the Department, the cases of the assessee in respect of several assessment years were not finalised and the assessee is suddenly confronted with huge demands which are wholly disproportionate to his paying capacity. Such a case may well justify invoking the discretionary powers of the Commissioner either for staying the recovery of penalty or for reducing the quantum thereof. e) A case in which the assessee had been committing default for a number of years on account of bonafide belief that his assets do not call for filing a return under the Wealth Tax Act or where the default occurs on account of bonafide belief regarding the character of the property wherefrom income is derived may also be a case of genuine hardship. Relief could be given to an assessee where a disproportionately heavy penalty has been imposed under the provisions of the Incometax Act or the Wealth tax Act as they stood prior to the amendments made by the Taxation Laws (Amendment) Act, 1975, if the conditions laid down in the relevant sections are otherwise fulfilled. 6. It may be noted that although there is no statutory restriction against considering an application under sections 273A(4) or 18B(4) in cases where appeals etc. are pending, the proper course would be to keep the application under the aforesaid provisions pending till the assessee has waived his right of appeal, etc., or has exhausted the appellate and revisionary remedies. 7. The Board desire that a quarterly statement showing the disposal of applications under section 273A(4) of the Incometax Act, 1961 and 18B(4) of the Wealth Tax Act, 1957, in the enclosed proforma may be furnished by 15th of the month immediately following the quarter. The first report should be for the quarter ending 30th September, 1976.