Sub-section (1) bars any order imposing a penalty under Chapter XXI unless the assessee has been heard, or has been given a reasonable opportunity of being heard by way of a show-cause notice to that effect; the show-cause requirement was inserted by Act No. 4 of 2026 with effect from 1 April 2026.
Sub-section (2) requires the prior approval of the Joint Commissioner for a penalty order made by an Income-tax Officer where the penalty exceeds Rs. 10000, and by an Assistant Commissioner or Deputy Commissioner where it exceeds Rs. 20000. Sub-section (3) requires an income-tax authority making a penalty order under the Chapter, unless he is himself the Assessing Officer, to send a copy to the Assessing Officer.
Sub-sections (4) and (5), inserted by Act No. 4 of 2026 with effect from 1 April 2026, apply irrespective of any other provision of the Act where a draft of a proposed order of assessment under section 275, or an assessment under section 270 or reassessment under section 279, is made on or after 1 April 2027. A penalty under section 439, if any, then constitutes part of the draft assessment or is imposed as part of the order of assessment or reassessment, and any reference in the Act to the assessment order or to the section 439 penalty order takes reference to that order. Sub-section (5) deems the Joint Commissioner's approval for passing such an order, taken on or after 1 April 2027, to be the approval for imposing the section 439 penalty forming part of it.
Why it is there
A penalty is a civil consequence imposed by an officer, so the Act supplies its own procedural minimum — a hearing, and supervision by a higher authority once the amount passes a threshold. The 2026 insertions put the form of the hearing beyond argument and merge the section 439 penalty into the assessment for orders from 1 April 2027, so one order carries both and one approval covers both.
Who it applies to
An assessee facing a penalty order under Chapter XXI
An Income-tax Officer imposing a penalty exceeding Rs. 10000
An Assistant Commissioner or Deputy Commissioner imposing a penalty exceeding Rs. 20000
The Joint Commissioner whose prior approval is required, and whose assessment approval is deemed to cover a section 439 penalty from 1 April 2027
An income-tax authority other than the Assessing Officer who makes a penalty order under the Chapter
The figures, and what each one turns on
Read the condition in the same row. A figure quoted without it is a wrong answer with a citation attached.
What
Figure
The condition on it
Where
Threshold above which the Joint Commissioner's prior approval is required
Penalty exceeding Rs. 10000
Where the penalty is imposed by the Income-tax Officer
Sub-section (2)(a)
Threshold above which the Joint Commissioner's prior approval is required
Penalty exceeding Rs. 20000
Where the penalty is imposed by the Assistant Commissioner or Deputy Commissioner
Sub-section (2)(b)
Date from which a section 439 penalty forms part of the assessment order
Drafts or orders made on or after the 1st April, 2027
Applies to a draft of a proposed order of assessment under section 275, or an assessment under section 270 or reassessment under section 279; inserted by Act No. 4 of 2026 w.e.f. 1-4-2026
Sub-section (4)
What this means in practice
Two dates matter and they are different: the amendments were made with effect from 1 April 2026, but sub-sections (4) and (5) operate on their own terms only where the draft, assessment or reassessment order is made on or after 1 April 2027. For such orders the section 439 penalty is no longer a separate order — it forms part of the draft or the assessment, and every reference elsewhere in the Act to the section 439 penalty order is read as a reference to that assessment or reassessment order, which is what carries appeal and limitation consequences. Sub-section (5) removes the need for a second approval. The thresholds in sub-section (2) are tied to the rank of the officer imposing the penalty, each expressed as an amount the penalty must exceed, and sub-section (1) is now explicit that the opportunity must be given by way of a show-cause notice.
An example
Illustrative only, and invented for this page. The figures are chosen to show the rule biting, not taken from any real matter.
An Income-tax Officer proposes a penalty of Rs. 15000 under this Chapter. He must first give a reasonable opportunity of being heard by way of a show-cause notice, and, the penalty exceeding Rs. 10000, obtain the Joint Commissioner's prior approval under clause (a). Were it instead a section 439 penalty forming part of an assessment made on or after 1 April 2027, sub-section (4) would require it to be imposed as part of that order, and the Joint Commissioner's approval of the assessment would stand as the approval for the penalty.
Where you meet this section
You meet this section as the show-cause notice that must precede any penalty order under Chapter XXI, and in the penalty order itself, which above the stated thresholds must record the Joint Commissioner's prior approval. From 1 April 2027 you meet a section 439 penalty inside the assessment or reassessment order rather than as a separate one.
The words themselves
unless the assessee has been heard, or has been given a reasonable opportunity of being heard by way of a show-cause notice to that effect
Section 471(1), as amended by Act No. 4 of 2026 w.e.f. 1-4-2026, Income-tax Act, 2025.
penalty under section 439, if any, shall constitute part of such draft assessment or shall be imposed as a part of such order of assessment or reassessment
Section 471(4)(a), Income-tax Act, 2025.
What people get wrong
Reading sub-sections (4) and (5) as operating from 1 April 2026. The insertion takes effect then, but the sub-sections apply where the draft or the assessment or reassessment order is made on or after 1 April 2027.
Expecting a separate section 439 penalty order for such assessments. Sub-section (4)(a) makes the penalty part of the draft or of the assessment or reassessment order.
Seeking a second approval for that penalty. Sub-section (5) deems the assessment approval to cover it.
Applying the approval thresholds to every officer. Sub-section (2) sets Rs. 10000 for the Income-tax Officer and Rs. 20000 for the Assistant or Deputy Commissioner.
Treating an oral opportunity as sufficient. Sub-section (1) now requires it by way of a show-cause notice.
Overlooking sub-section (3), which requires an authority who is not the Assessing Officer to send him a copy of the penalty order.
What this replaced
The correspondence is the Income Tax Department’s own, from its comparison utility for the 1961 and 2025 Acts. A renumbering is the easy half; whether the words changed is the half that decides cases.
272A - Penalty for failure to answer questions, sign statements, furnish information, returns or statements, allow inspections, etc.
272AA - Penalty for failure to comply with the provisions of section 133B
272B - Penalty for failure to comply with the provisions of section 139A
272BB - Penalty for failure to comply with the provisions of section 203A
A circular binds the department, not you and not a court. Every one below was written under the 1961 Act; it reaches this section because the department’s own concordance carries the provision it names to this one.
Circular No. 6/2006 — TAX Deduction at Source - Issue of TDS Certificate under section 203 of the Income-tax Act - Cases of Truck/goods-carriage Operato 2006-06-23
Circular No. 529 — Clarification regarding discontinuance of Form No. 16B 1989-02-13
Read this before you rely on it. Every decision below was decided under the Income-tax Act, 1961. It appears here because it is tagged to a 1961 provision that the department’s own mapping carries to section 471. That is an inference we have drawn, not a holding on the new section: where the words changed in the move, the reasoning may not survive. Treat this as the place to start looking, not as authority on the 2025 Act.
CIT v SSA's Emerald MeadowsSupreme CourtHelps taxpayertagged s.274 The penalty notice does not say whether I concealed income or filed inaccurate particulars. Does that matter?
Dilip N. Shroff v JCITSupreme CourtHelps taxpayertagged s.274 Is a valuation you put on an asset 'inaccurate particulars' if the officer disagrees with it?
K.P. Madhusudhanan v CITSupreme CourtHelps departmenttagged s.274 Must the officer say in the notice that he is invoking Explanation 1?
MAK Data P Ltd v CITSupreme CourtHelps departmenttagged s.274 You surrendered the amount to buy peace and avoid litigation. Does that stop the penalty?
CIT v KaushalyaHigh CourtCuts both waystagged s.274 Is a defective s.274 notice always fatal?
CIT v Mohair Investment & Trading CoHigh CourtHelps departmenttagged s.274 The CIT(A) order came two years ago but the appeal is still in the Tribunal. Is the penalty already time-barred?
JCIT v Ganesh AgarwalHigh CourtCuts both waystagged s.274 The Assessing Officer referred my section 269ST case to the Joint Commissioner months ago and the show cause notice has only just come. When does the…
Mantra Industries Ltd v NFACHigh CourtHelps taxpayertagged s.274 The faceless order says I filed no reply when I did, and my hearing request was ignored. Is it valid?
Sundaram Finance Ltd v ACITHigh CourtHelps departmenttagged s.274 The notice did not specify the default, but you clearly understood it. Does the defect still help you?
Rashmi Jalan v ACITITATHelps taxpayertagged s.274 The 271AAB notice does not say which clause or what rate. Can the penalty survive?
Sushil Kumar Paul v ACITITATHelps taxpayertagged s.274 Search penalty under s.271AAB, but the notice used the ordinary s.271(1)(c) printed form. Is that valid?
What this page does not tell you. It does not reproduce the section. Everything above was written from the section’s own text as the Income Tax Department publishes it — the text is here, and nothing here is advice on your facts. Where a figure matters, read the sub-section it comes from.