Interpretation of Sec.273A(4). - Income Tax - 1693/CBDT

INSTRUCTION NO. 1693/CBDT Dated: February 13, 1986 Enclosed copy of the Law Ministry's advice dated the 24th September, 1985 on the above mentioned subject for your information and guidance. [Copy of the Law Ministry's Advice dt 24-9-1985.] Extracts of Law Ministry's Advice Recorded on page 10-11 (N/S) of Board's File No. 281/33/85-I.T (Investigation-III) Notes in the Ministry of Law Justice Department of Legal Affairs Advice (B) Section. The question involved in this case is about the interpretation of section 273A (4) of the Income-tax Act. The said provision reads as follows :- (4) Without prejudice to the powers conferred on him by any other provision of this Act, the Commissioner may, on an application made in this behalf by an assessee, and after recording his reasons for so doing, reduce or waive the amount of any penalty payable by the assessee under this Act or stay or compound any proceeding for the recovery of any such amount, if he is satisfied that- (i) to do otherwise would cause genuine hardship to the assessee, having regard to the circumstances of the case, and (ii) the assessee has co-operated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him'. 2. From the reading of the above, it would be clear that the Commissioner can exercise the powers under the said provision if an application is made by the assessee for stay or compound any proceedings for the recovery of any such amount. Under section 271 and 273 of the Income-tax Act, the ITO or the Appellate Assistant Commissioner (under section 271) have power to levy penalty for failure to furnish returns, comply with notices, concealment of income, false estimate or failure to pay advance tax etc. The provisions of sub-section (4) of section 273-A provide for reduction or waiver of amount of penalty payable by the assessee which means penalty levied under section 271 and 273 of the Act. Apart from that, the words 'recovery of any such amount' found in the section mean that penalty must have been naturally imposed by the concerned authorities. Only if a penalty is imposed, there can be recovery. Therefore, without levy of penalty, there cannot be any stay or compound of any proceedings for the recovery. In fact, the term 'recovery' has been defined by the New Webster's Dictionary of English Language (page 801) as follows:- ' The act or power of regaining/obtaining the right to something by a verdict or judgment of a court'. The said term has been defined in Black's Law Dictionary, Revised 4th Edition (page 440) as follows:- 'In its most extensive sense the restoration or vindication of the right existing in a person, by the formal judgment or decree of a competent court, at the instance and suit, or the obtaining by such judgement, of some right or property which has been taken or withheld from him'. 3. We are, therefore, of the view that unless a penalty is levied, there cannot be any proceedings under sub-section (4) of the section 273A of the Act. The assessee will file application only when there is order for levy of penalty. Advised accordingly.