Scope of Sec.273A(4). - Income Tax - 1849/1990

INSTRUCTION NO. 1849/1990 Dated: June 25, 1990 Sub-section (4) of Section 273A of the Income-tax Act, 1961 empowers the CIT to reduce or waive the amount of any penalty payable by the assessee under the Income-tax 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 cooperated in any inquiry relating to the assessment or in any proceeding for the recovery of any amount due from him. 2. The advice of the Ministry of law stating that unless a penalty is levied, there cannot be any proceedings under sub-section(4) of section 273A was communicated vide Board's instruction No. 1693 dated 13.2.1986 from F.No. 281/33/85-IT(Inv.III). 3. The matter pertaining to the interpretation of sub-section 4 of section 273 A of the I.T.Act with regard to purport of expression payable used in that section has been re-examined by the board in consultation with the Ministry of Law. The board is of the view that the interpretation made earlier is in order and requires no change. It is therefore re-iterated that the provisions of sec.273A(4) can be invoked only in cases where penalty has been actually imposed and has become payable by the assessee. 4. Further the question of genuine hardship to the assessee in making payment would arise only in cases where penalty has not been paid. If the penalty has been partly or fully paid, there can be no case of any genuine financial hardship in respect of the payments already made. The question of waiver or reduction should, therefore, be considered only in respect of the amount which remains payable by the assessee. 5. However there may be cases where after application for waiver or reduction u/s.273(4) has been filed before the CIT action for recovery of demand in respect of the penalty is initiated during the pendency of such application. In such cases, CIT may subsequently find that circumstances indicating genuine financial hardship existed, but he may not be able to reduce or waive the penalty as in the meantime recovery of the demand may have been effected through coercive measures. Such a situation is likely to further aggravate the hardship of the assessee. It has, therefore been decided by the board that though steps should always be taken to safeguard the interests of revenue actual recovery in such cases may not be affected till the application u/s.273A(4) is disposed of by the CIT. The CsIT should, therefore, dispose of all applications u/s.273A(4) expeditiously. 6. The above instructions of the board may be brought to the notice of all concerned.