Reduction or waiver of penalty [Section 273A] :
Section 273A authorises the Principal Commissioner or Commissioner of Income-tax to reduce or waive the amount of penalty payable by an assessee. The exercise of this power by the Principal Commissioner or Commissioner is purely at his discretion and may be done either on his own motion or otherwise, that is on receipt of an application from the assessee.
The Principal Commissioner or Commissioner would be entitled to reduce or waive the penalty payable by any person only if the following conditions are satisfied: –
(i) In cases where penalty is levied or leviable on an assessee for concealment of income, the reduction or waiver by the Principal Commissioner or Commissioner would be permissible only, if, prior to the detection of the concealment by the Assessing Officer, the assessee has made a full and true disclosure of all the particulars in respect of his income and, that, too voluntarily and in good faith.
(ii) Further, it is essential that the assessee must have co- operated with the department in any enquiry relating to the assessment of his income and he must also have either paid or made satisfactory arrangements for the payment of any tax or interest, which may become payable in consequence of any order passed under the Income-tax Act, 1961 in respect of the assessment year.
(iii) For purposes of waiver of the penalty, a person must be deemed to have made a full and true disclosure of his income or of all 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 imposition of any penalty under section 271(1)(c). In other words in every case where there is the scope for levying penalty on an assessee for having concealed his income liable to tax or for having furnished false or inaccurate particulars of such income, the assessee would not be deemed to have made a full and true disclosure of his income.
(iv) However, the Principal Commissioner or Commissioner of Income-tax would be entitled to exercise his power only after getting the previous approval of the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General in the following case:
In a case falling under section 271(1)(c) 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 Rs 5,00,000.
(v) While exercising the powers of reduction or waiver of penalty the Principal Commissioner or Commissioner is required to pass an order in writing and also to record his reasons for so doing. These powers could be exercised by the Principal Commissioner or Commissioner either on his own motion or on receipt of an application from the assessee or from anyone else, he is also entitled to stay or compound any proceedings for the recovery of any penalty which might have been levied on the assessee in cases where he satisfied that:
(i) to do otherwise would cause genuine hardship to the assessee having due regard to all the facts and circumstances of the case; and
(ii) the assessee has co-operated in any enquiry relating to the assessment or any proceeding for the recovery of any amount due from him.
The Principal Commissioner or Commissioner’s order for reduction or waiver of penalty is final and cannot be challenged in any court or before any authority.