Income Tax Law | Historical Penalty Provision

Section 273 of the Income-tax Act, 1961: False Estimate or Failure to Pay Advance Tax

Section 273 prescribed penalties for knowingly incorrect advance-tax statements or estimates and certain failures to furnish them under the former statutory system. It is a historical provision, not the operative penalty rule for present-day advance-tax defaults.

Important applicability note: Section 273(3) expressly limits this provision to assessments for assessment year 1988-89 or earlier. For later periods, do not apply its historical penalty percentages to current advance-tax obligations.

Meaning and statutory applicability of Section 273

Section 273 of the Income-tax Act, 1961 dealt with the false estimate of, or failure to pay, advance tax through failures connected with statements and estimates required by former sections 209A and 212. An assessee is a person liable under the applicable tax legislation; an Assessing Officer is the tax authority empowered to carry out assessment and related statutory functions. Advance tax is income tax payable during the relevant year before final assessment, subject to applicable thresholds and exceptions.

Sub-section (3), introduced as part of the 1988 legislative transition, restricts Section 273 to assessment year 1988-89 and earlier assessment years. References to related sections must therefore be read in their historical form applicable to the particular year, rather than as present-day requirements.

Acts and omissions historically covered

Section 273(1): Statements under former Section 209A

This subsection addressed (a) furnishing a statement of advance tax that the assessee knew or had reason to believe was untrue, and (b) failure to furnish a statement required under former Section 209A(1)(a).

Section 273(2): Estimates under former Sections 209A and 212

Subsection (2) covered knowingly untrue estimates under the specified subsections of former Sections 209A and 212, including the separate category in clause (aa), and failures to furnish estimates under the former statutory provisions identified in clauses (b) and (c).

These categories depended on the exact legal duties in force in the relevant historical assessment year. A low estimate alone should not automatically be described as a knowingly false estimate without examining the statutory condition and evidence.

Historical penalty range and calculation

For the specified contraventions, Section 273 generally provided a minimum of 10% and a maximum of one and a half times (150%) the relevant statutory shortfall or base amount. The calculation differed between clauses (1)(a), (1)(b), (2)(a), (2)(aa), (2)(b) and (2)(c); it was not a universal percentage of the total tax liability.

Provision	Historical trigger	Broad penalty basis
273(1)(a)	Knowingly untrue statement	Specified advance-tax shortfall measured against the lesser statutory benchmark
273(1)(b)	Failure to furnish required statement	Specified percentage of assessed tax
273(2)(a) and (aa)	Knowingly untrue estimate	Specified shortfall against the relevant benchmark
273(2)(b)	Failure to furnish required estimate	Specified percentage of assessed tax
273(2)(c)	Failure to furnish revised or other required estimate	Difference between applicable statement, estimate or notice amount and statutory assessed-tax benchmark

The historical benchmark was generally 75% of assessed tax, with a substitution of 83 1/3% for companies under the relevant provisos. The former definition of assessed tax in Section 215(5) was used. The provision also contained explanations concerning certain extended payment dates and firm-related calculations. The exact historical statutory text below governs any calculation for an eligible year.

Advance-tax defaults after Section 273

For assessment years beginning with 1989-90, the old Section 273 penalty framework ceased to apply. Under the Income-tax Act, 1961, Sections 234B and 234C provided interest rules for default in payment and deferment of advance tax, respectively, for years governed by that Act.

The Income-tax Act, 2025 came into force on 1 April 2026. Under the new framework, Section 404 deals with liability to pay advance tax and Section 424 concerns interest for default in advance-tax payment. The official tax portal confirms that a shortfall relating to financial year 2025-26 remains governed by Sections 234B and 234C of the 1961 Act, because the underlying obligation arose before the new Act commenced.

Taxpayers should identify the relevant tax year and transitional rules before applying any advance-tax provision. Section 273 is retained here for historical research and older proceedings, not as advice to calculate a present-day penalty under that section.

Historical text of Section 273 and legislative amendment notes

The following material is preserved from the original webpage for archival completeness. Superscript amendment markers and references to former provisions belong to the historical text and should be interpreted alongside the official legislation for the relevant assessment year.

1,2 (1) If the 3 Assessing Officer, in the course of any proceedings in connection with the regular assessment for any assessment year, is satisfied that any assessee-

(a) has furnished under clause (a) of sub-section (1) of section 209A a statement of the advance tax payable by him which he knew or had reason to believe to be untrue, or

(b) has 4 *** failed to furnish a statement of the advance tax payable by him in accordance with the provisions of clause (a) of sub-section (1) of section 209A,
he may direct that such person shall, in addition to the amount of tax, if any, payable by him, pay by way of penalty a sum-

(i) which, in the case referred to in clause (a), shall not be less than ten per cent but shall not exceed one and a half times the amount by which the tax actually paid during the financial year immediately preceding the assessment year under the provisions of Chapter XVIIC falls short of-

(1) seventy-five per cent. of the assessed tax as defined in sub-section (5) of section 215, or (2) the amount which would have been payable by way of advance tax if the assessee had furnished a correct and complete statement in accordance with the provisions of clause (a) of sub-section (1) of section 209A, whichever is less;

(ii) which, in the case referred to in clause (b), shall not be less than ten per cent. but shall not exceed one and a half times of seventy-five per cent. of the assessed tax as defined in sub-section (5) of section 215:

⁵ Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect as if for the words "seventy-five per cent.", at both the places where they occur, the words "eighty-three and one-third per cent." had been substituted.

⁶ (2) If the 3 Assessing Officer, in the course of any proceedings in connection with the regular assessment for the assessment year commencing on the 1st day of April, 1970, or any subsequent assessment year, is satisfied that any assessee-

⁷ (a) has furnished under sub-section (1) or sub-section (2) or sub-section (3) or sub-section (5) of section 209A, or under sub-section (1) or sub-section (2) of section 212, an estimate of the advance tax payable by him which he knew or had reason to believe to be untrue, or

⁸ (aa) has furnished 9 under sub-section (4) of section 209A or under sub-section (3A) of section 212 an estimate of the advance tax payable by him which he knew or had reason to believe to be untrue, or

(b) has 10 *** failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of 11 clause (b) of sub-section (1) of section 209A, or

(c) has 10 *** failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of 12 sub-section (4) of section 209A or sub-section (3A) of section 212, he may direct that such person shall, in addition to the amount of tax, if any, payable by him, pay by way of penalty a sum-

(i) which, in the case referred to in clause (a), shall not be less than ten per cent. but shall not exceed one and a half times the amount by which the tax actually paid during the financial year immediately preceding the assessment year under the provisions of Chapter XVII-C falls short of-

(1) seventy-five per cent of the assessed tax as defined in sub-section (5) of section 215, or

¹³ (2) where a statement under clause (a) of sub-section (1) of section 209A was furnished by the assessee or where a notice under section 210 was issued to the assessee, the amount payable under such statement or, as the case may be, such notice, whichever is less;

⁸ (ia) which, in the case referred to in clause (aa), shall not be less than ten per cent. but shall not exceed one and a half times the amount by which the tax actually paid during the financial year immediately preceding the assessment year under the provisions of Chapter XVII-C falls short of seventy-five per cent. of the assessed tax as defined in sub-section (5) of section 215;

(ii) which, in the case referred to in clause (b), shall not be less than ten per cent. but shall not exceed one and a half times of seventy-five per cent of the assessed tax as defined in sub-section (5) of section 215; and

¹⁴ (iii) which, in the case referred to in clause (c), shall not be less than ten per cent. but shall not exceed one and a half times the amount by which-

(a) where the assessee has sent a statement under clause (a), or an estimate under clause (b) of sub-section (1) of section 209A, or an estimate in lieu of a statement under sub-section (2) of that section, the tax payable in accordance with such statement or estimate; or

(b) where the assessee was required to pay advance tax in accordance with the notice issued to him under section 210, the tax payable under such notice,

falls short of seventy-five per cent. of the assessed tax as defined in sub-section (5) of section 215:

¹⁵ Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect as if for the words "seventy-five per cent.", wherever they occur, the words "eighty-three and one-third per cent." had been substituted.

¹⁶ Explanation 17 1.-For the purposes of clause (ia), the amount paid by the assessee on or before the date extended by the 18 19 Principal Chief Commissioner or Chief Commissioner or 20 Principal Commissioner or Commissioner under the 21 22 first proviso to sub-section (4) of section 209A or, as the case may be, 22 first proviso to sub-section (3A) of section 212 shall, where the date so extended falls beyond the financial year immediately preceding the assessment year, also be regarded as tax actually paid during that financial year.

²³ Explanation 2.-When the person liable to penalty is a registered firm or an unregistered firm which has been assessed under clause (b) of section 183, then, notwithstanding anything contained in the other provisions of this Act, the penalty imposable under this section shall be the same amount as would be imposable on that firm if that firm were an unregistered firm.

²⁴ (3) The provisions of this section shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year.
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1. Subs. by Act 14 of 1969, s. 22, for section 273 (w.e.f. 1-4-1970).
2. Ins. by Act 19 of 1978, s. 31 (w.e.f. 1-6-1978).
3. Subs. by Act 4 of 1988, s. 2, for "Income-tax Officer" (w.e.f. 1-4-1988).
4. The words ", without reasonable cause," omitted by Act 46 of 1986, s. 25 (w.e.f. 10-9-1986).
5. Ins. by Act 44 of 1980, s. 33 (w.e.f. 1-9-1980).
6. Section 273 renumbered as sub-section (2) thereof by Act 19 of 1978, s. 31 (w.e.f. 1-6-1978).
7. Subs. by Act 19 of 1978, s. 31, for clause (a) (w.e.f. 1-6-1978).
8. Ins. by Act 29 of 1977, s. 27 (w.e.f. 1-9-1977).
9. Ins. by Act 19 of 1978, s. 31 (w.e.f. 1-6-1978).
10. The words ", without reasonable cause," omitted by Act 46 of 1986, s. 25 (w.e.f. 10-9-1986).
11. Subs. by Act 19 of 1978, s. 31, for "sub-section (3) of section 212" (w.e.f. 1-6-1978).
12. Subs. by s. 31, ibid., for "sub-section (3A) of section 212" (w.e.f. 1-6-1978).
13. Subs. by s. 31, ibid., for sub-clause (2) (w.e.f. 1-6-1978),
14. Subs. by Act 19 of 1978, s. 31, for clause (iii) (w.e.f. 1-6-1978).
15. Ins. by Act 44 of 1980, s. 33 (w.e.f. 1-9-1980).
16. Ins. by Act 29 of 1977, s. 27 (w.e.f. 1-9-1977).
17. The Explanation numbered as Explanation 1 by Act 67 of 1984, s. 49 (w.e.f. 1-4-1985).
18. Subs. by Act 4 of 1988, s. 2, for "Commissioner" (w.e.f. 1-4-1988).
19. Subs. by Act 25 of 2014, s. 4, for "Chief Commissioner" (w.e.f. 1-6-2013).
20. Subs. by s. 4, ibid., for "Commissioner" (w.e.f. 1-6-2013).
21. Subs. by Act 19 of 1978, s. 31, for "proviso to sub-section (3A) of section 212" (w.e.f. 1-6-1978).
22. Subs. by Act 16 of 1981, s. 25, for "proviso" (w.e.f. 1-4-1981).
23. Ins. by Act 67 of 1984, s. 49 (w.e.f. 1-4-1985).
24. Ins. by Act 4 of 1988, s. 112 (w.e.f. 1-4-1989).

Official legislation and explanatory references

Editorial update: 28 October 2026. This article provides general statutory information; the applicable law depends on the tax year and facts of each case.