Penalty Relief Provisions Under the Income Tax Act: Understanding Sections 273A and 273AA

The Income Tax Act, 1961 is not merely a framework for imposing obligations — it also embeds within itself a structured mechanism for providing relief to assessees who face penalty proceedings in genuine circumstances. Alongside the wide array of penalty provisions, the legislature has specifically empowered the Principal Commissioner of Income-tax or Commissioner of Income-tax to reduce, waive, or grant immunity from penalties in deserving situations. This authority flows principally from Section 273A and Section 273AA of the Income Tax Act, 1961.

This article presents a comprehensive breakdown of these relief provisions, including the conditions for eligibility, procedural requirements, monetary thresholds, and restrictions on repeated claims.

Overview: Major Penalties Under the Income Tax Act, 1961

Before examining the relief framework, it is useful to understand the landscape of penalties that may attract the attention of the Principal Commissioner or Commissioner. The Income Tax Act, 1961 prescribes penalties for a broad spectrum of defaults. The following table summarizes the key penalty provisions:

Nature of Default Applicable Section Quantum of Penalty
Default in payment of tax due Section 221(1) Up to the amount of tax in default, as the Assessing Officer may direct
Undisclosed income of block period Section 158BFA(2) 50% of tax leviable on undisclosed income
Under-reporting and misreporting of income Section 270A(1) 50% of tax on under-reported income; 200% in cases of misreporting
Failure to maintain books of account under Section 44AA Section 271A Rs. 25,000
Failure to maintain documents for international/specified domestic transactions Section 271AA 2% of the value of each transaction
Failure to furnish information under Section 92D(4) Section 271AA(2) Rs. 5,00,000
Search cases (initiated on or after July 1, 2012 but before December 15, 2016) Section 271AAB 10%, 20%, or 60% of undisclosed income
Search cases (initiated on or after December 15, 2016 but before September 01, 2024) Section 271AAB 30% or 60% of undisclosed income
Income covered under Sections 68, 69, 69A, 69B, 69C, or 69D not returned or tax under Section 115BBE unpaid Section 271AAC 10% of tax on undisclosed income
False entry or omission in books of account to evade tax Section 271AAD Amount equal to the aggregate of false/omitted entries
Unreasonable benefit passed to trustee or specified person Section 271AAE First violation: income applied for such benefit; subsequent violations: twice such income
Failure to get accounts audited or furnish audit report under Section 44AB Section 271B Half percent of total sales/turnover/receipts, or Rs. 1,50,000 — whichever is less
Failure to furnish accountant's report under Section 92E Section 271BA Rs. 1,00,000
Failure to deduct tax at source or failure to pay tax under Section 115-O(2) Section 271C Amount equal to tax not deducted or not paid
Failure to collect tax at source Section 271CA Amount equal to tax not collected
Accepting loans/deposits/specified sums in violation of Section 269SS Section 271D Amount equal to the loan, deposit, or specified sum accepted
Accepting cash of Rs. 2,00,000 or more in contravention of Section 269ST Section 271DA Amount equivalent to cash receipt
Failure to provide facility for prescribed electronic payment modes Section 271DB Rs. 5,000 per day during which default continues
Repaying loans/deposits/specified advances in violation of Section 269T Section 271E Amount equal to loan, deposit, or specified advance repaid
Failure to furnish statement of financial transaction under Section 285BA(1) Section 271FA Rs. 500 or Rs. 1,000 per day of default, as applicable
Furnishing inaccurate statement of financial transaction or reportable account Section 271FAA(1) Rs. 50,000
Inaccuracy due to false information submitted by holder of reportable account Section 271FAA(2) Rs. 5,000 per inaccurate reportable account
Failure to furnish statement by eligible investment fund under Section 9A(5) Section 271FAB Rs. 5,00,000
Failure to furnish information or documents under Section 92D(3) Section 271G 2% of the value of each international or specified domestic transaction
Failure by Indian concern to furnish information under Section 285A Section 271GA 2% of transaction value (if management/control transfer involved) or Rs. 5,00,000 in other cases
Failure to report under Section 286(2) Section 271GB(1) Rs. 5,000/day (up to one month); Rs. 15,000/day thereafter
Failure to produce information under Section 271GB(6) Section 271GB(2) Rs. 5,000 per day
Continued non-compliance after order under Section 271GB(1) or (2) Section 271GB(3) Rs. 50,000 per day from the date of order
Furnishing inaccurate information under Section 286 or failure to report inaccuracy Section 271GB(4) Rs. 5,00,000
Failure to submit statement under Section 285 Section 271GC Rs. 1,000/day (up to three months); Rs. 1,00,000 in other cases
Failure to file TDS/TCS return Section 271H Rs. 10,000 to Rs. 1,00,000
Failure to furnish information or inaccurate information under Section 195(6) Section 271-I Rs. 1,00,000
Failure to furnish statement or certificate under Section 35 or Section 80G Section 271K Rs. 10,000 to Rs. 1,00,000
Incorrect information by Chartered Accountant, merchant banker, or registered valuer Section 271J Rs.