Overview of Penalties Under the New Act
Before looking at the waiver provisions, it's helpful to know what penalties exist. The 2025 Act, under Chapter XXI, continues to impose penalties for various defaults, including:
Under-reporting and misreporting of income (Section 439)
Failure to keep, maintain, or retain books of account (Section 441)
Failure to get accounts audited (Section 442)
Failure to deduct TDS (Sections 448 & 449)
Given this extensive list, the power to grant relief remains a crucial aspect of the law.
Section 469: Power to Reduce or Waive Penalty
Section 469 is the primary provision that empowers the Principal Commissioner or Commissioner to reduce or waive penalties. It has two main sub-sections, similar in spirit to the old Section 273A.
Section 469(1): Waiver for Voluntary Disclosure
This sub-section allows the Commissioner to reduce or waive the penalty imposed or imposable under Section 439 (penalty for under-reporting and misreporting).
Who can initiate?
The Commissioner can act on his own motion or upon an application by the taxpayer.
Conditions for Relief
Two cumulative conditions must be satisfied:
Voluntary and good-faith disclosure: The taxpayer must have made a full and true disclosure of income before the Assessing Officer detects any concealment or inaccuracy.
Cooperation and Payment: The taxpayer must have cooperated in any enquiry and must have paid or made satisfactory arrangements to pay the tax and interest payable.
Approval Requirement
If the amount of income in respect of which the penalty is imposed exceeds ₹5,00,000, the Commissioner must obtain prior approval from the Principal Chief Commissioner or Chief Commissioner.
Finality and Limitation
Orders under Section 469 are final and cannot be questioned by any court or authority. Once an order is made in favour of a person, they are not entitled to any further relief under this section for any other tax year.
Section 469(5): Waiver for Genuine Hardship
This sub-section provides the Commissioner with broader discretionary powers, similar to the old Section 273A(4). It allows the waiver or reduction of any penalty or penalties (whether for one or more tax years) and also permits the staying or compounding of recovery proceedings.
Who can initiate?
Relief under this sub-section can only be granted upon an application by the taxpayer.
Conditions for Relief
Two conditions must be satisfied:
Genuine hardship: Not granting the relief would cause genuine hardship to the taxpayer.
Cooperation: The taxpayer has cooperated in any inquiry or recovery proceeding.
Approval and Time Limit
If the aggregate amount of penalties reduced or waived exceeds ₹1,00,000, prior approval of higher authorities is required. The Commissioner must pass an order within 12 months from the end of the month in which the application was received. No rejection order can be passed without giving the taxpayer an opportunity of being heard.
Section 440: Immunity from Imposition of Penalty
Section 440 provides an alternate route for immunity. It allows an assessee to apply directly to the Assessing Officer for immunity from penalty under Section 439 and from prosecution. This is similar to the old Section 270AA.
Key Points
The application is made to the Assessing Officer, not the Commissioner.
The Budget 2026 proposes to extend this immunity to cases of misreporting as well, not just under-reporting.
No immunity is granted if the penalty under Section 439 has been initiated under certain specific circumstances.
Summary : Section 469 vs. Old Section 273A
Key Takeaways
The Income-tax Act, 2025, retains the Commissioner's discretionary power to grant relief from penalties, primarily through Section 469.
Section 469(1) rewards voluntary disclosure made before detection by the Assessing Officer.
Section 469(5) is a hardship-based provision with broader applicability, allowing waiver of any penalty or compounding of recovery.
An alternative route for immunity is available directly from the Assessing Officer under Section 440.
All orders are final and binding, and relief under Section 469(1) bars future relief under the same section.
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