Important Notes on Penalty under Income Tax Act. 1961.
Tuesday, June 10, 2014
Time limits of commencement and completion of Penalty proceedings (Section 275)
This section prescribes time limits both for commencement and for completion of penalty proceedings. No order imposing a penalty under this chapter shall be passed
(a) In a case where the relevant assessment or order is the subject-matter of an appeal to the Commissioner (Appeals) under Section 246 or an appeal to the Appellate Tribunal under Section 253 after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty been initiated, are completed or six months from the end of the month in which the order of the Commissioner (Appeals) or as the case may he, the Appellate Tribunal is received by the Chief Commissioner or the Commissioner whichever period expires later.
In a case where the relevant assessment or other order is the subject matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A, and the Commissioner. (Appeals) passes the order on or after the 1st day of June 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Commissioner (Appeals) is received by the Chief Commissioner or Commissioner, whichever is later.
Above-mentioned legal language can be expressed simply as below
After the expiry of two years from the date of completion of the proceedings, in the course whereof the penalty proceedings were initiated, or six months from the end of the month in which the order of the Appellate Tribunal is received by the Commissioner, which period expires later no order imposing a penalty can be passed :
(b) in any other case after the expiry of 2 years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed.
While calculating the above periods of limitation the following period shall be excluded
Procedure for imposing Penalty [Section 274]
According to the provisions of section 274, if any penalty of the aforesaid nature is to be imposed, the assessee must be provided with a reasonable opportunity of being heard. If no such opportunity is provided to• the assessee, the penalty order will be invalid.
No order imposing a penalty, can be made without prior approval of Joint commissioner
(a) where penalty exceeds Rs. 10,000 levied by I.T.O.
(b) where penalty exceeds Rs. 20,000 levied by Assistant Commissioner or Deputy Commissioner. [Section 274 (2)].
An Income-tax authority on making an order imposing a penalty, unless he himself is an Assessing Officer, shall forthwith send a copy of such order to the Assessing Officer. [Section 274(3)].
Stay or Compounding proceedings [Section 273 A (4)]
Section 273A (4) empowers the Chief Commissioner or the Commissioner that he may, on an application made by the assessee in this behalf, and of course after recording his reasons br so doing, reduce or waive the amount of any penalty payable by the assessee under this Act or stay or compound any proceedings for the 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 his case.
(ii) the assessee has co-operated in any inquiry relating to the assessment or any proceeding for recovery of any amount due from him.
Section 273 A (5) says that every order made under this section shall be final and shall not be called into question by any court or any other authority.
Regarding waiving or reducing the penalty u/s 273A, the Board of Direct Taxes in one of its circulars has stated the opinion of the Ministry of Law that the discretion to reduce or waive penalty can be exercised only in those cases where the return of the income was duly filed before the last day of the relevant assessment year.
Power to Reduce or Waive Penalty, etc. in certain cases (Section 273 A)
The -tax Act has empowered the Chief or the Commissioner to reduce or waive the etc. in certain cases. Section 273 (1) says that notwithstanding anything contained in this Act, the Chief Commissioner or the Commissioner, may, at his discretion, whether on his own motion or otherwise, reduce or waive the penalty in the following cases
(a) The Chief Commissioner, or the Commissioner may reduce or waive the penalty leviable under Section 271 (1) (iii) for assessee’s failure to disclose all the facts and particulars of hisincome.
(b) The Chief Commissioner, or the Commissioner shall exercise power to reduce or waive thepenalty only if he is satisfied that the assessee has disclosed all the facts of his income, before any detections made by the Officer, voluntarily and in good faith and he has made a true disclosure of all the relevant particulars.
The point to be noted in this is that the assessee must have co-operated in any inquiry relating to the assessment of his income and has either paid or made satisfactory arrangements for the any tax or interest payable in consequence of an order passed under this Act.
Board’s [Section 273 A (2b)]. In the following cases, the Chief Commissioner, or theCommissioner has to seek Board’s permission before any order to reduce or waive the penalty is made by him if of income in respect of which the penalty is imposed or imposable or
where such disclosure relates to more than one assessment year and then the aggregate amount of suchincome of those years, exceeds Rs. 5,00,000.
Types of Penalties imposed under
1. For failure to pay tax [Section 221 (1)]. If the assessee, on whom notice of demand has been served, fails to pay the specified amount of tax, he shall be liable to a penalty which the Officer, may, from time to time, direct, however the total amount of penalty shall not exceed of tax due.
2. For failure to pay tax on self-assessment [Section 234A and B]. If the assessee fails to paythe amount of tax on the basis of self-assessment he will he liable to a penalty to be imposed @ 1% of the tax due on self-assessment of each month of default.
In both the cases above, the assessee must be given a reasonable opportunity of being heard.
3. For non-compliance with notice under section 115 WD(2) or 11SWE(2) or 142 (1) or 143 (2) [Section 271(1 )(b)]. If the A.O., D.C. (A) or (Appeals), in of any proceedings under this Act, is satisfied that any person has without any reasonable cause failed to comply with a notice u/s I 15WD(2) or 115 WE(2) or 142 (1) or 143 (2) or fails to comply with the directions issued u/s 142 (2A) (auditing of accounts by ) the above mentioned authorities may direct that such person shall pay by way of penalty equal to a sum which shall not be less than Rs. 1,000 of each failure but which shall not exceed Rs. 10,000 for each failure. Such penalty shall be in addition to any tax payable by him in this regard.
4. For concealment of income [Section 271 (1)]. Where any person has concealed the particulars of his income or has furnished i4naccurate particulars of such income, he will be liable to apenalty. The minimum penalty leviable for concealment has been fixed at not less than 100% but not exceeding 300% of the amount of tax sought to be evaded by reason of concealment of income. Such penalty shall be in addition to tax if any payable.
The Assessing Officer cannot impose a penalty in respect of the additional concealed income discovered by the Commissioner (Appeals) in the course of an appeal against the assessment.
In case unexplained cash are added to the assessee’s income, no penalty can be imposed for concealment in respect of such income unless such cash credits constitute income in the relevant year.
5. For concealment of particulars of Fringe Benefits [Section 27l(1)]. In case an employer has concealed the particulars relating to fringe benefits or has furnished inaccurate particulars of such fringe benefits; a penalty of minimum of 100% and maximum of 300% of tax sought to be evaded by such employer shall be levied.
6. Registered firm [Section 271 (2)]. In case penalty is levied on a firm or unregistered firm assessed as registered firm u/s 183 (1), then the penalty imposable u/s 271(1) shall he equal to the same amount as would be imposable as if that firm was an unregistered firm.
7. For wrong distribution of profit by registered firms [Section 271 (4)]. If the profits of aregistered firm are distributed in such way that the share of a partner is shown below the real amount and if such a partner returns his incoiile below the real amount, he shall in addition to tax if any payable by him, be liable to pay a penity of 150% of the difference between tax on partner’s income assessed and tax on income as retuIned. In such a case no refund or other adjustment shall be claimable by any other partner by reason of such direction.
8. For failure to keep, maintain or retain books of account, documents, etc. [Section 271 A].If any person fails to keep and maintain books or documents as required by Section 44 AA, he will be liable to a peialty which may be equal to a sum which shall not be less than Rs. 25,000.
9. Failure to maintain information or documents about international transaction [Section271AA]. Where any person fails to keep and maintain any document or information regardinginternational transaction as covered u/s 92E, the Assessing Officer or Commissioner [Appeals] may ask such person to pay a penalty of 2% of the value of each international transaction.
10. Penalty where search has been initiated [Sec. 27 1AAA]. The Assessing Officer may direct• that where search has been initiated u/s 132 on or after 1-6-2007, the assessee shall pay by way of penalty in addition to tax. The penalty levied shall be 10% of the undisclosed income of the specified previous year.
In the course of , if the assessee u/s 132(4) admits the undisclosed income and specifies the manner in which such income has been derived and substantiates the manner in which the undisclosed income was derived and pay the tax, together with interest, if any, in respect of the ‘undisclosed income, no penalty shall be imposed.
11. Failure to get accounts audited [Section 271 B]. If any person fails to get his accounts audited in respect of any previous year or years or furnish the said report along with the return of his income filed u/s 139 (1) or 142 (1) (i), the Assessing Officer may direct that such person shall pay a penalty equal to one-half (1/2) per cent of the total sales, turnover of gross receipts in business or of the gross receipts in profession or a sum of Rs. 1,00,000, whichever is less.
12. Failure to furnish report u/s 92E [Section 271 BA]. In case a person fails to furnish a report as required u/s 92E, he may be asked to pay a penalty of Rs. 1,00,000.
13. For failure to subscribe to the eligible issue of capital [Section 271 BB]. In case any mutual fund or U.T.I. fail to subscribe any amount of subscriptions to the units issued under any scheme referred to in section 88 A of the Act, to the eligible issue within the period of 6 months, it may be directed by Deputy Commissioner of Income-tax to pay, by way of penalty, a sum equal to 20% of such amount.
14. Penalty for failure to deduct tax at source [Section 271 C]. If any person fails to deduct the whole or any part of the tax as required by or under the provisions of the Act, or fails to pay whole or any part of at source ; he shall be liable to pay a penalty which shall be a sum equal to the amount of the tax which he failed to deduct or pay as required.
15. Penalty for failure to collect tax at source [Sec. 271CA].
(1) If any person fails to collect the whole or any part of the tax as require by or under the provision of this act, then, such person shall be liable to pay, by way of penalty, a sum equal to the amount of tax which such person failed to collect as aforesaid.
(2) Any penalty imposable under this section shall be imposed by the Joint Commissioner.
16. Penalty for failure to comply with the provisions regarding accepting of loans etc. [Sec. 271 D]. If a person takes or accepts any loan or deposit exceeding Rs. 20,000 except through crossed payee’s cheque or draft, he shall be liable to pay penalty which shall be a sum eqial to the amount of the loan or deposit so taken or accepted. /
17. Penalty for failure to comply with the provisions of Sec. 269 T [Section 271 E]. If a person repays any deposit exceeding Rs. 20,000 otherwise than by crossed cheque or draft, he shall be liable to pay penalty which shall be a sum equal to the amount of the deposit so repaid.
Any penalty to be levied u/s 271 C, 271 D and 271 E shall be levied only by Joint Commissioner.
18. Penalty for non filing of return [Section 271 F]. In case a person whose is required to furnish a return of his income u/s 139(1) or by the provisions of that sub-section on or before the end of the relevant assessment year, he shall be liable to a penalty of Rs. 5,000.
19. Penalty for failure to furnish annual information return [Section 271 FA]. If a person required to furnish an annual information return, as required under sub-section (1) of section 285BA, fails to furnish such return within the time prescribed under that sub-section, the Income-tax authority prescribed under the said-section may direct that such person shall pay, by way of penalty, a sum of one hundred rupees for every day during which the failure continues”.
20. For Failure of furnish return of fringe benefits [Section 271FB1. If an employer who is required to file a return of fringe benefits u/s 11 5WD(1), but fails to file such return within prescribed time the assessing officer shall levy a penalty of 100 rupees for every day of default.
21. Failure to furnish information or documents about international transaction [Section 271G].If a person who has entered into an international transaction, fails to furnish information or documents as required u/s 92D, the Assessing Officer or Commissioner [Appeals] may ask such person to pay a penalty of Rs. 2% of the value of such transaction.
22. Penalty on failure to answer questions, or sign statements, etc. [Section 272 A (1)1. In case an assessee is found guilty of any of the following offences, he shall pay, by way of penalty of Rs. 10,000 for each such default:
(a) A person who is legally bound to state the truth regarding subject to his assessment, refuses to answer any question put to him by an income-tax authority ; or
(b) A person who is legally required to sign any statement made by him, refuses to sign;
( c )A person to whom summons are issued to produce books of account or other evidence or to attend personally to give evidence, at certain place and time, fails to do so
23. Failure to comply with certain notices or to furnish certain returns, statements or to allow inspections [Section 272A(2)]. In case a person fails—
(a) to comply with notice issued u/s 94 (6) of the Act regarding information about securities held by assessee
(b) to give a notice of discontinuance of business required u/s 176 (3)
( c ) to furnish in due time following returns, or statements
(i) u/s 133—statement regarding information called for by assessing Officer
(ii) u/s 206—return regarding tax deducted at source
(iii) u/s 206 C—return regarding deduction of tax at source in case of profits from alcoholic liquor etc.
(iv) u/s 285 B—statements by producers of films.
(d) to allow inspection of any register or to allow copy being taken of any of these registers
(e) to furnish a return of income by a trust u/s 139 (4A) or u/s 139(4C)
(f) to deliver in due time a copy of the declaration received from assessee for not deducting the tax at source, u/s 197A
(g) to furnish a cerifitas required u/s 203 regarding tax deducted at source ; or
(h) to deduct and ay tax as required u/s 226 (2)
he shall pay, by way of penalty of Rs. 100 for every day of default.
In case of :
(i) an offence falling under (f) above, the penalty may be levied by the Chief Commissioner or the Commissioner
(ii) in all other offences it will not be levied by any authority below the.rank of Joint Commissioner or Joint Director [Section 272A (3)].
(i) to furnish a statement of perks given to employees as required u/s 192C :
(j) to deliver or cause to be delivered in due time a copy of the declaration referred to in sub-section (1A) of section 206C
(k) to deliver or cause to be delivered a copy of the statement within the time specified in section 200(3) or under section 206(3)
(1) to deliver or cause to be delivered the quarterly return as required u/s 206A within prescribed time.
Provided that the amount of penalty for failures in relation to returns under sections 206 and 206 C and statements under section 200(3) or the proviso to section 206C(3) shall not exceed the amount of tax deductible or collectible as the case may be.
24. For failure to comply with the provisions of Section 133 B. The new Section 272 AA provides for penalty for failure to comply with the provisions of Section 133 B regarding entry of income-tax authorities in any building etc. The penalty for noncompliance may extend upto Rs. 1,000. Before levying any penalty the assessee must be given an opportunity of being heard.
25. Failure to comply with the provisions of section 139A i.e., PAN [Section 272B]
(a) In case a person fails to comply with the provisions of section 139A i.e., to obtain PAN, the Assessing Officer may direct him to pay a penalty of Rs. 10,000.
(b) In case assessee quotes a false or incorrect permanent account number on any document and which he knows that it is false or incorrect, the Assessing Officer may direct Jum to pay a penalty of Rs. 10,000. Such penalty can be levied only after the person has been given an opportunity of being heard.
26. For failure to comply with provisions of Section 203 A (Section 272 BB). If a person fails to comply with the provision of Section 203 A i.e. to apply for Tax deducted at Source Account number, the Assessing Officer shall impose a penalty which may be equal to Rs. 10,000 ; after giving the assessee an opportunity of being heard.
27. Failure to comply with the provisions of section 206CA i.e., Tax collection account number [Section 272BBB1. In case a person fails to comply with the provisions of section 206CA i.e., to obtain Tax Collection Account Number, the Assessing Officer may direct him to pay a penalty of Rs. 10,000. Such penalty can be levied only after the person has been given an opportunity of being heard.
28. Failure to quote tax deduction or collection number [Section 272BB IA]. A person who is required to quote his “tax deduction account number”, “tax collection account number”, “tax deduction and collection account number” in the challans, or certificates or statements or other documents quotes a number which is false and which he either knows or believes to be false or does not believe to be true, the Assessing officer may direct that such. Person shall pay a penalty of Rs. 10,000.
Under Income-tax Act penalties are imposed either by the departmental in certain cases or are imposed by the court for certain Income-tax offences.
The power to impose a is given to Officer and the . The right to imposepenalty by I.T.O. does not come to an end when an appeal in filed against the assessment made by him although in certain cases he has to obtain the prior approval of the Deputy Commissioner. The above-mentioned income-tax authorities are empowered to impose penalties for default in of going on before them. Penalties are imposable on the assessee by the D.C. (A) in an appeal filed by the uthoriz against the order of Assessing The Assessing Officer cannot impose a penaltyon the concealed income detected by D.C. (A) in the course of appeal against the assessment completed by the Assessing Officer
Penalty refers to monetary punishment for violation of law
It is also possible that the Commissioner (A) may allow an appeal of the assessee against the orders ofpenalty of Assessing Officer, and may himself impose a fresh penalty
The Income-tax Act, 1961 prescribes various types of penalties in the even of defaults under the Act. These are :
|[B] Power to Reduce or Waive Penalty, etc. in certain cases (Section 273 A)|
|[C] Stay or Compounding proceedings [Section 273 A (4)]|
|[D] Procedure for imposing Penalty [Section 274]|
|[E] Time limits of commencement and completion of Penalty proceedings (Section 275)|
|[F] Power of Commissioner to Grant Immunity from Penalty [Section 273AA]|
|[G] Summary Of Provisions Relating To Penalties|
|[H] Important Notes on Penalty under Income Tax Act. 1961.|
[H] Summary Of Relating To Penalties