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Penalty us/ 271 (1) (c)

ADVOCATE and TAX CONSULTANT

hai

can one help me! the ao had issued a hearing notice u/s 271 (1) (c) why it should not be imposed? can any one tell the latest judgements on it.

 
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Asst. MGR Taxation


it is a penalty for concealment of income. penalty is excess of tax payable.

it may be maximum 3 times of tax avaded.

 
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But penalty is levied on what matter ? may i know somewhat subject matter in addition.....

 
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KPMG-Senior Consultant-International Tax

WHEN EVER ASSESSING OFFICER FEELS FROM YOUR RETURN YOU SUBMITTED OR BALANCE SHEET OR ANY OTHER DOCUMENTS YOU SUBMITTED OR AO HAS THE ACCESS TO SOME INFORMATION FROM THIRD PARTIES THAT THE INCOME YOU HAVE MENTIONED IS NOT CORRECT AND YOU HAVE DELIBERATLY CONCELAED THE INCOME THAT IS YOU HAVE MENS REA IN YOUR MIND. THEN HE CAN SLASH A PENALTY UNDER 271 1 C THE AMOUNT OF PENALTY WILL BE 100 TO 300% OF TAX ON THE INCOME YOU HAVE CONCEALED. IN REPLY OF YOUR S FOR THE INTIMATION YOU RECCIVED YOU HAVE TO PROVE TO A O THAT YOU DINT HAD ANY MENS REA BEHIND CONCELAING THE INCOME. THEN YOU CAN ESCAPE THE PENALTY HERE

 
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@ Nimit - Ther is nothing called "AO FELLS" ....in Income tax act. The sec reads as follows:-

"If  AO /CIT(A)/CIT in the course of his proceedings under the act, is SATISFIED that anyperson -

Clause c - has concelaed the particulars of his income or furnished inaccurate particulars of such income"

thn he may direct by way of penalty which shal not exceed 3 times the amount of tax sought to be evaded by the reason mentioned in clause c above "

Caeses tocbe referred are  DILIP N SHROFF V/S CIT (2007)161 TAXMANN 221,

UOI V/S DHARMENDRA TETILE PROCESSORS (2008) 306 ITR277/174 TAXMANN 571

UOI V/S RAJASTHAN SPNG WVING MILLS (2009)180 TAXMANN 609


Total thanks : 2 times

 
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Originally posted by : NIMIT MEHTA

WHEN EVER ASSESSING OFFICER FEELS FROM YOUR RETURN YOU SUBMITTED OR BALANCE SHEET OR ANY OTHER DOCUMENTS YOU SUBMITTED OR AO HAS THE ACCESS TO SOME INFORMATION FROM THIRD PARTIES THAT THE INCOME YOU HAVE MENTIONED IS NOT CORRECT AND YOU HAVE DELIBERATLY CONCELAED THE INCOME THAT IS YOU HAVE MENS REA IN YOUR MIND. THEN HE CAN SLASH A PENALTY UNDER 271 1 C THE AMOUNT OF PENALTY WILL BE 100 TO 300% OF TAX ON THE INCOME YOU HAVE CONCEALED. IN REPLY OF YOUR S FOR THE INTIMATION YOU RECCIVED YOU HAVE TO PROVE TO A O THAT YOU DINT HAD ANY MENS REA BEHIND CONCELAING THE INCOME. THEN YOU CAN ESCAPE THE PENALTY HERE

 

@ Nimit - Ther is nothing called "AO FELLS" ....in Income tax act. The sec reads as follows:-

"If  AO /CIT(A)/CIT in the course of his proceedings under the act, isSATISFIED that anyperson -

Clause c - has concelaed the particulars of his income or furnished inaccurate particulars of such income"

thn he may direct by way of penalty which shal not exceed 3 times the amount of tax sought to be evaded by the reason mentioned in clause c above "

Caeses tocbe referred are  DILIP N SHROFF V/S CIT (2007)161 TAXMANN 221,

UOI V/S DHARMENDRA TETILE PROCESSORS (2008) 306 ITR277/174 TAXMANN 571

UOI V/S RAJASTHAN SPNG WVING MILLS (2009)180 TAXMANN 609


 
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KPMG-Senior Consultant-International Tax

yes sorry loosly used words tushar is correct

 
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Research Associate


Agree with the above reply.

However, a recent Supreme Court Ruling in Case of CIT, AHMD VS RELIANCE PETROPRODUCTS LTD (2010) said that penalty u/s 271(1)(c) cant be automatic i.e with every addition to the returned income, penalty is leviable. So the law laid down by judgements like Dharmendra Textile might still hold good however, this very SC ruling is a break through.

Hope this helps !!


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Chartered Accountants


 

This one comes from me to dispel doubts about "mens rea".There is no need to prove mens rea in a penalty u/s.271(1)(c) for the department and a penalty can be imposed for cocealing or furnishing inacurrate particulars of income.The citation in Anwar Ali's case in respect of mens rea is no longer a good law after the amendment in S.271(1)(c) long back.It does not hold ground in taxation though in a criminal case it may be fit to state so.Penalty proceedings are quasi criminal proceedings-Hindustan Steel Ltd.V.State of Orissa-1972-83ITR26(SC).The burden is on the assessee to prove his bonafide once a notice for imposition is issued to him.

Mr.Smpath/Asraf are right stating the current scenario with Reliance Petro Products decided by SC ruling the roost and the Dilip N Shroff and DharmendraTextile (A judgment in Excise case under penalty S.11AC imported into S.271(1)(c)-and in my view there is no parallel both have different naunces-but it is with respect so derived by the honourable SC)-the later case of Dharamendra is distinguished by the Rajasthan Spinning case that comes to the rescue of the assessee by drawing the correct position of law and interpretation of penalty proceedings u/s.271(1)(c).

There are many cases on different aspect and one may, if has the stamina, can write a book replete with many case laws covering different aspects.The penaty can be levied if it satisfies the conditions laid down in the sections and not  automatic.All disallowances can not result in penalty.The act of the assessee must be such as to conceal and not disclose full particulars of his income.The sections needs to be read with explanations and each case stands on different facts and footing. Therefore, disclosure is always better while claiming some deduction by furnishing accurate particulars.Contumacious act of the assessee may get no respite.   


Total thanks : 2 times

 
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Thank You Vijay sir for discussing in depth.

 
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