Section 273A of the Income-tax Act, 1961: Power to Reduce or Waive Penalty
Section 273A empowers the Principal Commissioner or Commissioner to reduce or waive specified income-tax penalties in cases of voluntary disclosure or genuine hardship, subject to statutory conditions, approval requirements and the applicable assessment year.
What does Section 273A mean?
Section 273A is a discretionary relief provision, not an automatic cancellation of penalty. It gives the Principal Commissioner or Commissioner power to reduce or waive a qualifying penalty when the requirements prescribed by the section are fulfilled. Relief must be considered in the context of the relevant assessment year, the nature of the penalty, the taxpayer's conduct and any required prior approval.
Penalty imposed or imposable means a penalty already levied or one that may legally be levied. Good faith disclosure means a voluntary, full and true disclosure made before detection by the Assessing Officer for the purposes of subsection (1). Genuine hardship is a case-specific ground assessed under subsection (4), rather than a general entitlement.
Section 273A(1): Reduction or waiver following voluntary disclosure
Under subsection (1), the Principal Commissioner or Commissioner may, on their own motion or otherwise, reduce or waive penalty under section 270A or section 271(1)(iii), subject to the statutory conditions. Section 270A concerns under-reporting and misreporting of income; section 271(1)(iii) relates to the penalty under the earlier concealment regime.
- The disclosure must be voluntary, in good faith, full and true, and made before the Assessing Officer detects the relevant concealment or inaccuracy.
- The taxpayer must cooperate in assessment enquiries.
- Tax and interest payable following the assessment must be paid or satisfactory payment arrangements made.
- The deeming explanation, approval requirements and restriction on repeat relief must be considered.
Under subsection (2), where the relevant income exceeds Rs. 5,00,000, prior approval from the prescribed superior authority is required before an order reducing or waiving penalty under subsection (1). Under subsection (3), an order granting relief under subsection (1) generally prevents further relief under this section for another assessment year, subject to the historical exception in the proviso.
Section 273A(4): Genuine hardship and cooperation
On an application by the assessee, the Principal Commissioner or Commissioner may, for recorded reasons, reduce or waive a penalty payable under the Act or stay or compound proceedings for recovery of that penalty, if satisfied that enforcing the penalty would cause genuine hardship and that the assessee has cooperated in assessment or recovery proceedings.
Where a penalty or the aggregate penalties covered by the application exceed Rs. 1,00,000, the previous approval prescribed in the proviso is required for reduction, waiver or compounding. The authority must examine the evidence of hardship and cooperation; filing an application alone does not suspend recovery or guarantee relief.
Application procedure, decision deadline and finality
- Identify the penalty order, assessment year, statutory basis and amount payable.
- Prepare a written application to the competent Principal Commissioner or Commissioner, explaining the applicable subsection and enclosing relevant evidence.
- For subsection (1), document voluntary disclosure, timing, cooperation and tax or interest payments or arrangements.
- For subsection (4), provide evidence of genuine hardship and cooperation in the assessment or recovery process.
- Address any prior relief under section 273A and whether prior approval is required.
Under subsection (4A), an order on a subsection (4) application must ordinarily be passed within twelve months from the end of the month of receipt. A full or partial rejection requires an opportunity of being heard. Subsection (5) states that an order under this section is final, although the effect of a statutory finality clause is subject to applicable constitutional law.
Historical assessments
Subsections (6) and (7) preserve specified earlier versions of section 273A for assessment year 1988-89 and earlier years. Those cases require checking the version of the provision applicable to the particular assessment year.
Section 273A: Statutory text and historical amendment notes
The following source material is retained from the original webpage, including its historical footnote numbering and omitted-provision markers. For authoritative wording and subsequent amendments, consult the official legislation linked below.
1(1) Notwithstanding anything contained in this Act, the 2 3 ***4 Principal Commissioner or Commissioner may, in his discretion, whether on his own motion or otherwise,-
5 * * * * *
(ii) reduce or waive the amount of penalty imposed or imposable on a person under 6 section 270A or clause (iii) of sub-section (1) of section 271; or
7 * * * * *
if he is satisfied that such person-
8 * * * * *
(b) in the case referred to in clause (ii), has, prior to the detection by the 9
Assessing Officer, of the concealment of particulars of income or of the
inaccuracy of particulars furnished in respect of such income, voluntarily and
in good faith, made full and true disclosure of such particulars,
10 * * * *
and also has, 11in the case referred to in clause (b), co-operated in any
enquiry relating to the assessment of his income and has either paid or made
satisfactory arrangements for the payment of any tax or interest payable in
consequence of an order passed under this Act in respect of the relevant
assessment year.
Explanation. 12***-For the purposes of this sub-section, a person shall be deemed to have made full and true disclosure of his income or of the particulars relating thereto in any case where the excess of income assessed over the income returned is of such a nature as not to attract the provisions of 6 section 270A or clause (c) of sub-section (1) of section 271.
12* * * * *
(2) Notwithstanding anything contained in sub-section (1),-
13* * * * *
(b) if in a case falling under 6 section 270A or clause (c) of sub-section
(1) of section 271, the amount of income in respect of which the penalty is
imposed or imposable for the relevant assessment year, or, where such disclosure
relates to more than one assessment year, the aggregate amount of such income
for those years, exceeds a sum of five hundred thousand rupees, no order
reducing or waiving the penalty under sub-section (1) shall be made by 14 the 15
Principal Commissioner or Commissioner except with the previous approval of the
16 Principal Chief Commissioner or Chief Commissioner or 17 Principal Director
General or Director General, as the case may be.
(3) Where an order has been made under sub-section (1) in favour of any person,
whether such order relates to one or more assessment years, he shall not be
entitled to any relief under this section in relation to any other assessment
year at any time after the making of such order:
18 Provided that where an order has been made in favour of any person under sub-section (1) on or before the 24th day of July, 1991, such person shall be entitled to further relief only once in relation to other assessment year or years if he makes an application to the income-tax authority referred to in subsection (4) at any time before the 1st day of April, 1992.
(4) Without prejudice to the powers conferred on him by any other provision
of this Act, the 19 20 *** 15 Principal Commissioner or 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:
21 Provided that where the amount of any penalty payable under this Act or, where such application relates to more than one penalty, the aggregate amount of such penalties exceeds one hundred thousand rupees, no order reducing or waiving the amount or compounding any proceeding for its recovery under this sub-section shall be made by 14 the 15 Principal Commissioner or Commissioner except with the previous approval of the 16 Principal Chief Commissioner or Chief Commissioner or 17 Principal Director General or Director General, as the case may be.
22 (4A) The order under sub-section (4), either accepting or rejecting the application in full or in part, shall be passed within a period of twelve months from the end of the month in which the application under the said sub-section is received by the Principal Commissioner or the Commissioner:
Provided that no order rejecting the application, either in full or in part, shall be passed unless the assessee has been given an opportunity of being heard:
Provided further that where any application is pending as on the 1st day of June, 2016, the order shall be passed on or before the 31st day of May, 2017.
(5) Every order made under this section shall be final and shall not be called into question by any court or any other authority.
23 (6) The provisions of this section 24 as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1989 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.
25 (7) Notwithstanding anything contained in sub-section (6), the provisions
of sub-section (1), subsection (2), or, as the case may be, sub-section (4) as
they stood immediately before their amendment by the Direct Tax Laws (Amendment)
Act, 1989 (3 of 1989), shall apply in the case of reduction or waiver of penalty
or interest in relation to any assessment for the assessment year commencing on
the 1st day of April, 1988 or any earlier assessment year, with the
modifications that the power under the said subsection (1) shall be exercisable
only by the 26 Principal Commissioner or Commissioner and instead of the
previous approval of the Board, the 26 Principal Commissioner or Commissioner
shall obtain the previous approval of the 27 Principal Chief Commissioner or
Chief Commissioner or 28 Principal Director General or Director General, as the
case may be, while dealing with such case.
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1. Ins. by Act 41 of 1975, s. 64 (w.e.f. 1-10-1975).
2. Subs. by Act 4 of 1988, s. 2, for "Commissioner" (w.e.f. 1-4-1988).
3. The words "Chief Commissioner or" omitted by Act 38 of 1993, s. 36 (w.e.f.
1-6-1993).
4. Subs. by Act 25 of 2014, s. 4, for "Commissioner" (w.r.e.f. 1-6-2013).
5. Clause (i) omitted by Act 3 of 1989, s. 51 (w.e.f. 1-4-1989).
6. Ins. by Act 28 of 2016, s. 106 (w.e.f. 1-4-2017).
7. Clause (iii) omitted by Act 3 of 1989, s. 51 (w.e.f. 1-4-1989).
8. Clause (a) omitted by s. 51, ibid. (w.e.f. 1-4-1989).
9. Subs. by Act 4 of 1988, s. 2, for "Income-tax Officer" (w.e.f. (1-4-1988).
10. Clause (c) omitted by Act 3 of 1989, s. 51 (w.e.f. 1-4-1989).
11. Subs. by s. 51, ibid., for "in all the cases referred to in clauses (a), (b)
and (c)" (w.e.f. 1-4-1989).
12. Explanation 2 omitted by Act 32 of 1985, s. 34 (w.e.f. 24-5-1985). . Earlier
"1" and Explanation 2 was ins. by Act 67 of 1984, s. 50 (w.e.f. 1-10-1984).
13. Clause (a) omitted by Act 3 of 1989, s. 51 (w.e.f. 1-4-1989). Earlier clause
(a) was amended by Act 67 of 1984, s. 50 (w.e.f. 1-10-1984).
14. Subs. by Act 38 of 1993, s. 36, for "the Chief Commissioner or Commissioner
except with the previous approval of the Board" (w.e.f. 1-6-1993). Earlier the
words "Chief Commissioner or Commissioner" were substituted by Act 4 of 1988, s.
, for "Commissioner" (w.e.f. 1-4-1988).
15. Subs. by Act 25 of 2014, s. 4, for "Commissioner" (w.r.e.f. 1-6-2013).
16. Subs. by s. 4, ibid., for "Chief Commissioner" (w.r.e.f. 1-6-2013).
17. Subs. by s. 4, ibid., for "Director General" (w.r.e.f. 1-6-2013).
18. Ins. by Act 49 of 1991, s. 69 (w.e.f. 27-9-1991).
19. Subs. by Act 4 of 1988, s. 2, for "Commissioner" (w.e.f. 1-4-1988).
20. The words "Chief Commissioner or" omitted by Act 38 of 1993, s. 36 (w.e.f.
1-6-1993).
21. The proviso added by Act 67 of 1984, s. 50 (w.e.f. 1-10-1984).
22. Ins. by Act 28 of 2016, s. 106 (w.e.f. 1-6-2016).
23. Ins. by Act 4 of 1988, s. 113 (w.e.f. 1-4-1989).
24. Ins. by Act 3 of 1989, s. 51 (w.e.f. 1-4-1989).
25. Ins. by Act 32 of 1994, s. 48 (w.e.f. -6-1994).
26. Subs. by Act 25 of 2014, s. 4, for "Commissioner" (w.r.e.f. 1-6-2013).
27. Subs. by s. 4, ibid., for "Chief Commissioner" (w.r.e.f. 1-6-2013).
28. Subs. by s. 4, ibid., for "Director General" (w.r.e.f. 1-6-2013).
Official legislation and further reading
- Income Tax Department: Section 273A (1961 Act)
- Income Tax Department: Penalty waiver and reduction guide
- Income-tax Act, 2025, including section 536
- Income Tax Department: Transition to the 2025 Act
This article provides general legal information. Eligibility for relief depends on the applicable statute, relevant year and facts of the case.