Circular No. 784

1294. Whether "genuine hardship" should be existing at time of assessment or levy of penalty or at time of making of application under section 273A(4)

What this is

Circular No. 784 was issued by the Central Board of Direct Taxes on 22 November 1999. Its subject is 1294. Whether "genuine hardship" should be existing at time of assessment or levy of penalty or at time of making of application under section 273A(4).

What it does

Fixes the point of time at which 'genuine hardship' has to exist for a waiver or reduction of penalty under section 273A(4). Two readings were in the field: that the hardship must be shown as at the assessment or the levy of penalty, or that it must be shown when the assessee applies to the Commissioner. The Board takes the second, and goes one step further: the hardship must exist when the application under section 273A(4) is made, and must still exist when the Commissioner passes his order on it.

Why it was issued

Representations had been received asking at which point of time the hardship had to be present for the assessee to get relief under the sub-section.

Who it reaches

Assessees applying to the Commissioner for waiver or reduction of penalty
Commissioners deciding applications under section 273A(4)
Assessees whose recovery proceedings are sought to be stayed or compounded

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.273A	s.469

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

1294. Whether "genuine hardship" should be existing at time of assessment or levy of penalty or at time of making of application under section 273A(4)
1. Section 273A(4) of the Income-tax Act, 1961 provides that the Commissioner of Income-tax may, on an application by an assessee, and after recording his reasons for so doing, reduce or waive the amount of any penalty payable by the assessee under the Income-tax Act or stay or compound any proceedings for 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.
2. Representations have been received with regard to the point of time at which the existence of "genuine hardship" would entitle the assessee to relief under the above sub-section i.e., whether the "genuine hardship" should be existing at the time of assessment or levy of penalty or at the time of making of application under section 273A(4).
3. In this regard, it is hereby clarified that the "genuine hardship" referred to in the provisions of section 273A(4) should exist at the time at which the application under section 273A(4) is made by the assessee before the Commissioner and should so exist even at the time of passing of order under section 273A(4) by the Commissioner.

Circular : No. 784, dated 22-11-1999

What to watch

Hardship shown only as at the date of the assessment or the penalty order is not enough; it must be there at the date of the application.
It must also survive till the order is passed, so a change in the assessee's circumstances while the application is pending can defeat the claim.
Hardship is only one of the two conditions in the sub-section; co-operation in the inquiry or recovery proceeding still has to be established.
The circular fixes the timing alone and says nothing about what makes hardship genuine.

Where you meet it

In a petition to the Commissioner under section 273A(4) for waiver of penalty, and in the order rejecting it for want of hardship.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Circular No. 423 — Clarifications on issues relating to effect of filing higher estimates of income for advance tax purposes on assessment 26 June 1985

← Circular No. 785 · Circular No. 783 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.