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All about penalties under Income Tax Act

Siddharth Goel 
on 20 June 2018

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Penalties! Penalties! Penalties!

The Income Tax Department levies a lot of hefty penalties for defaults under various provisions of the Income Tax Act, 1961. It is this part of their jobs which the IT officials enjoy the most! But at the same time, this is the most worrisome issue for the taxpayers which they definitely do not enjoy a bit!

So, one must have an understanding of the major penalties laid down in the IT Act, 1961 so as to avoid such defaults and offences.

It is pertinent to remember the fact that the penalty to be levied on an assessee is based upon the law as it stood at the time the default was committed and not the law as it stands in the financial year for which the assessment is made.

So, a few major penalties levied are enlisted below:


Section

Default

Penalty leviable

234F

Default in furnishing return of income within time prescribed in section 139(1)

Rs. 200 for every day during which failure continues but not exceeding tax deductible/collectible

 a)  Rs. 5000 if return is furnished on or before 31 December of assessment year.

 b)  Rs. 10,000 in any other case

Note: if total income of the person does not exceeds Rs. 5 lakh then fee payable shall be Rs. 1000

270A

Under Reporting of Income

50% of tax payable on under reported income

270A

Where under-reporting of income results from misreporting of income

200% of tax payable on such under-reported income

271A

Failure to keep or maintain or retain books of account, document etc. as required u/s 44A

Rs. 25,000

271AA

Failure to keep, maintain and report any information and document  as required under sub- section (1) or (2) of section 92D;

2% of the value of each international transaction or specified domestic transaction entered into.

271AAB(1)

In case of search initiated            under section 132 on or after 1.7.2012 but before 15.12.2016

(a)

If undisclosed income is admitted during the course of search and the assessee explains the manner in which such income was derived, pays the tax, together with interest if any, and furnishes the return of income for the specified previous year declaring such undisclosed income on or before the specified date (i.e., the due date of filing return of income  or the date on which the period specified in the notice issued under section 153A expires)

10% of undisclosed income

(b)

If undisclosed income relating to the specified previous year is not admitted during the course of search but the same is disclosed in the return of income filed after the date of search and the tax along with the interest, if any, is paid before the specified date.

20% of undisclosed income

(c)

In all other cases

60% of undisclosed income

271AAB (1A)

In case of search initiated under section 132 on or after 15.12.2016:

If undisclosed income is admitted during the course of search and the assessee explains the manner in which  such income was derived, pays the  tax, together with interest if any and furnishes the return of income for the specified previous year declaring such undisclosed income on or before the specified date (i.e., the due date of filing return of income or the date on which the period specified in the notice issued under section 153A expires)

30% of undisclosed income

In any other case

60% of the undisclosed Income

271AAC

In a case where income determined includes any income referred to in sections 68, 69, 69A to 69D for any previous year.

Penalty@10% of tax payable under section 115BBE.

However no such penalty to the extent the same has been included by the assessee in return of income furnished u/s 139 and tax paid before end of previous year.

271B

Failure to get accounts audited or obtain audit report under section 44AB or to furnish the report of such auditor with return of income

½% of total sales, turnover or gross receipts of business/gross receipts of profession or ` 1,50,000, whichever is less

271C

Failure to deduct tax at source as per chapter XVII-B or to pay any part of the tax as required by - (i) Section 115-O(2) or (ii) the proviso to section 194B.

A sum equal to the amount of tax which he failed to deduct or pay, which shall be imposed by Joint Commissioner

271CA

Failure to collect the whole or any part  of the tax as required by or under the provisions of Chapter XVII-BB

A sum equal to the amount of tax which he failed to collect, which shall be imposed by Joint Commissioner

271D

Failure to comply with the provisions of section 269SS

Penalty of a fixed sum equal to amount of loan or deposit or specified sum taken or accepted otherwise than by way of account payee cheque/ bank draft or use of ECS through a bank A/c, which shall be imposed by Joint Commissioner

271DA

Failure to comply with the provisions of section 269ST

Penalty of sum received in contravention of the provisions of section 269ST i.e., sum of Rs. 2,00,000 or more received in aggregate from a person in a day or in respect of a single transaction or in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque/ bank draft or use of ECS through a bank A/c, , which shall be imposed by Joint Commissioner

271E

Failure to comply with the provisions of section 269T

A sum equal to the amount of loan or deposit or specified advance repaid otherwise than by an account payee cheque/bank draft or use of ECS through a bank A/c, which shall be imposed by Joint Commissioner

271H

Failure to furnish TDS/TCS statements within the prescribed time.

Rs. 10,000 to Rs. 1,00,000. However No penalty would be leviable if the person proves that after paying tax deducted or collected along with the fee under section 234E and interest, if any, to the credit of the Central Government, he had delivered or caused to be delivered the TDS/TCS statements before the expiry of one year from the time prescribed for delivering or causing to be delivered such statements.

Furnishing incorrect information in the said statements in respect of tax deducted or collected on or after 1.7.2012

Rs. 10,000 to Rs. 1,00,000

271J

Furnishing of incorrect information     in

Reports or certificates furnished by an accountant, merchant banker or a registered valuer

Rs. 10,000 for each such report or certificate

272A(1)

Refusal to answer questions put by income tax authority,

- Refusal to sign statements made in the course of income tax proceedings.

- Non-compliance with summons issued under section 131(1) to give evidence or produce books of accounts.

Failure to comply with a notice issued under section 142(1) or section 143(2) or failure to  comply with a direction issued under section 142(2A)

Rs. 10,000 for each such default or failure

272B

Failure to comply with Rs. 10,000 the provisions of section 139A.

Failure to quote/intimate PAN u/s 139A(5A) or 139A(5C) or quoting/ intimating false PAN.

Rs. 10,000


Some relief has been provided in the form of the power to waive or reduce the penalty by the Principal Commissioner or Commissioner in some cases. Also, the authority concerned has been given the discretion to levy or not to levy a penalty. But if a penalty is levied, it cannot be less than the prescribed minimum nor can it exceed the maximum amount prescribed by the Act. The quantum of penalty levied by a lower authority can be modified by a higher authority on appeal.

Therefore, looking at these huge penalties, taxpayer must ensure that the affairs related to Income Tax are managed carefully and thereby saving themselves from any confrontation with the Income Tax officials!


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