Penalties under Income Tax Act, 1961

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1. ‘PENALTIES’ in the event of Defaults under the Income Tax Act, 1961.

Under Income-tax Act penalties are imposed either by the departmental authorities in certain cases or are imposed by the court for certain Income-tax offences.

The power to impose a penalty is given to Assessing Officer and the Commissioner. The right to impose penalty 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 the course of proceedings going on before them. Penalties are imposable on the assessee by the D.C. (A) in an appeal filed by the authority against the order of Assessee. The Assessing Officer cannot impose a penalty on 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 of penalty 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 :

Penalties under Income Tax Act 1961
Penalties under Income Tax Act 1961

(1). Penalty where Search has been initiated [Section 271AAB(1A)]

The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,—

  1. a sum computed @ 30% of the undisclosed income of the specified previous year, if the assessee—
    1. in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived;
    2. substantiates the manner in which the undisclosed income was derived; and
    3. on or before the specified date—
      1. pays the tax, together with interest, if any, in respect of the undisclosed income; and
      2. furnishes the return of income for the specified previous year declaring such undisclosed income therein;
  2. a sum computed @ 60% of the undisclosed income of the specified previous year, if it is not covered under the provisions of clause (a).

(2) Penalty in respect of certain income [Section 271AAC]

  1. The Assessing Officer may, notwithstanding anything contained in this Act other than the provisions of section 271AAB, direct that, in a case where the income determined includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D for any previous year, the assessee shall pay by way of penalty, in addition to tax payable under section 115BBE, a sum computed at the rate of 10% of the tax payable under section 115BBE(1)(i).

    However, no penalty shall be levied in respect of income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D to the extent such income has been included by the assessee in the return of income furnished under section 139 and the tax in accordance with the provisions of section 115BBE(1)(i) has been paid on or before the end of the relevant previous year.
  2. No penalty under the provisions of section 270A shall be imposed upon the assessee in respect of the income referred to in section 271AAC (1).
  3. The provisions of sections 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section.

(3) Penalty for failure to furnish statements, etc. [Section 271H]

(i) Penalty for failure to furnish TDS/TCS statement or furnishing incorrect information in the statement [Section 271H (1)]:

Without prejudice to the provisions of the Act, a person shall be liable to pay penalty, if, he––

  1. fails to deliver or cause to be delivered a statement within the time prescribed in section 200(3) or the proviso to section 206C (3) relating to TCS; or
  2. furnishes incorrect information in the statement which is required to be delivered or cause to be delivered under section 200(3) or the proviso to section 206C (3).

(ii) Quantum of penalty [Section 271H (2)]:

The penalty referred to in sub-section (1) shall be a sum which shall not be less than Rs. 10,000 but which may extend to Rs.1,00,000.

(iii) No penalty if statement of TDS/TCS filed within one year [Section 271H (3)]:

Notwithstanding anything contained in the foregoing provisions of this section, no penalty shall be levied for the failure to file TDS/TCS statement within the time prescribed, if the person proves that after paying tax deducted or collected along with the fee and interest, if any, to the credit of the Central Government, he had delivered or caused to be delivered the statement referred to in section 200(3) or the proviso to section 206C(3) before the expiry of a period of one year from the time prescribed for delivering or causing to be delivered such statement.

(iv) Penalty applicable only for tax deducted/collected on or after 1.7.2012:

The provisions of this section shall apply to a statement referred to in section 200(3) or the proviso to section 206C(3) which is to be delivered or caused to be delivered for tax deducted at source or tax collected at source, as the case may be, on or after 1.7.2012.

(4) Penalty for failure to comply with provisions of section 269ST [Section 271DA]

If a person receives any sum in contravention of the provisions of section 269ST, he shall be liable to pay, by way of penalty, a sum equal to the amount of such receipt:

However, no penalty shall be imposable if such person proves that there were good and sufficient reasons for the contravention.

Any penalty imposable under section 271DA shall be imposed by the Joint Commissioner.

(5) Penalty for furnishing incorrect information in reports or certificates [Section 271J]

Without prejudice to the provisions of this Act, where the Assessing Officer or the Commissioner (Appeals), in the course of any proceedings under this Act, finds that:

— an ‘accountant’ means an accountant referred to in the Explanation below section 288(2); or

— a ‘merchant banker’ banker” means Category I merchant banker registered with the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992; or

— a ‘registered valuer’ means a person defined in section 2(oaa) of the Wealth-tax Act, 1957.

has furnished incorrect information in any report or certificate furnished under any provision of this Act or the rules made thereunder, the Assessing Officer or the Commissioner (Appeals) may direct that such accountant or merchant banker or registered valuer, as the case may be, shall pay, by way of penalty, a sum of Rs. 10,000 for each such report or certificate.

2. Types of Penalties imposed under Income Tax Act. 1961

Nature of default/failureSectionsPenalty
Default in payment of any tax dueSection 221(1)Such an amount as the Assessing Officer may impose but not exceeding the amount of tax.
Determination of undisclosed income of block periodSection 158BFA (2)Minimum: 100 per cent of tax leviable in respect of  undisclosed income Maximum : 300 per cent of tax leviable in respect of undisclosed income.
Under-reporting and misreporting of incomeSection 270A(1)A sum equal to 50% of the amount of tax payable on under-reported income.
However, if under-reported income is in consequence of any misreporting thereof by any person, the penalty shall be equal to 200% of the amount of tax payable on under-reported income
Failure to comply with notice issued under section 142(1) or section 143(2) and direction for audit under section 142(2A).Section 271(1)(b)Rs. 10,000 for each failure. This section shall not apply to and in relation to any assessment for the A.Y commencing on or after the 1st day of April, 2017.
Concealment of income or furnishing inaccurate particulars of incomeSection 271(1)(c)100% to 300% of the tax evaded. This section shall not apply to and in relation to any assessment for the A.Y commencing on or after the 1st day of April, 2017.
Distribution of profits by registered firm otherwise than in accordance with partnership deed and as a result of which partner has returned income below the real incomeSection 271(4)Not exceeding 150 per cent of difference between tax on partner’s income assessed and tax on income returned, in addition to tax payable This section shall not apply to and in relation to any assessment for the A.Y commencing on or after the 1st day of April, 2017.
Failure to keep, maintain or retain books of account, documents, etc., as are required under section 44AASection 271ARs. 25,000
Failure to keep and maintain information and documents required in respect of international transaction or specified domestic transaction, failure to report such transaction, etc.Section 271AA2% of the value of each international transaction or specified domestic transaction entered into by the taxpayer.
Failure to furnish information and document as required under Section 92D (4)Section 271AA (2)Rs. 5,00,000/-
Penalty in case of search (Search is initiated on or after July 1, 2012 but before December 15, 2016)Section 271AAB10%, 20% and 60% of the undisclosed income, as the case may be.
Penalty in case of search (if search is initiated on or after December 15, 2016)Section 271AAB30% or 60% of undisclosed income, as the case may be
Penalty where income includes any income referred to in Section 68, Section 69, Section 69A, Section 69B, Section 69C or Section 69D.Section 271AAC10% of tax payable on undisclosed income
Failure to get accounts audited or furnish a report of audit as required under section 44ABSection 271BOne-half per cent of total sales turnover or gross receipts, etc., or Rs. 1,50,000, whichever is less
Failure to furnish a report from an accountant as required by section 92ESection 271BARs. 1,00,000
Failure to deduct tax at source, wholly or partly or failure to pay wholly or partly tax under section 115- O(2)Section 271CAn amount equal to tax not deducted (in case of TDS) or tax not paid (in case of dividend distribution tax)
Failure to collect tax at sourceSection 271CAAn amount equal to tax not collected.
Taking or accepting certain loans or deposits or specified sum* in contravention of provisions of section 269SS “Specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.Section 271DAn amount equal to loan or deposit or specified sum so taken or accepted.
Accepting cash of Rs. 2,00,000 or more in contravention to SectionSection 271DAAn amount equivalent to cash receipt
Repaying loans or deposits or specified advance* in contravention of provisions of section 269T “Specified advance” means any sum of money in the nature of  advance, by whatever name called, in relation to transfer of an immovable property, whether or not transfer takes placeSection 271EAn amount equal to loan or deposit or specified advance so repaid.
Failure to furnish the return of income before the end of the assessment yearSection 271FRs. 5,000 [Not applicable for any AY commencing on or after 1st April, 2018]
Failure to furnish statement of financial transaction or reportable account (previously called as Annual Information Return) as required under section 285BA (1)Section 271FARs. 500 or Rs. 1,000, as the case may be, per day of default
Failure to furnish an accurate statement of financial transaction or reportable accountSection 271FAARs. 50,000
Failure to furnish statement or information or document [as required under Section 9A (5)] by an eligible investment fund within the prescribed time-limit.Section 271FABAn amount equal to Rs. 5,00,000
Failure to furnish any information or document as required by section 92D(3)Section 271G2% of the value of the international transaction or specified domestic transaction for each such failure
Failure to furnish information or document under section 285A* by an Indian concern. *Section 285A provides that where any share or interest of foreign company derives its value substantially from assets located in India, and such company holds such assets in India through Indian Concern then such Indian concern shall furnish the prescribed information to the income-tax authority.Section 271GAA sum equal to 2% of the value of the transaction in respect of which such failure has taken place, if such transaction had the effect of directly or indirectly transferring the right of management or control in relation to the Indian concern; An amount equal to Rs. 5,00,000 in any other case  
Failure to furnish report under section 286(2)Section 271GB (1)Rs. 5,000 per day up to 30 days and Rs. 15,000 per day beyond 30 days
Failure to produce the information and documents within the period allowed under section 271GB (6)Section 271GB (2)Rs. 5,000 for every day during which the failure continues.
Failure to furnish report or failure to produce information/documents under section 286 even after serving order under section 271GB (1) or 271GB(2)Section 271GB (3)Rs. 50,000 for every day for which such failure continues beginning from the date of serving such order.
Failure to inform about inaccuracy in report furnish under section 286(2) Or furnishing of inaccurate information or document in response to notice issued under section 286(6).Section 271GB (4)Rs. 5,00,000
Failure to file the TDS/TCS returnSection 271HNot less than Rs.10,000 and upto Rs. 1,00,000
Failure to furnish information or furnishing of inaccurate information under Section 195(6) in respect of payment made to non-residents.Section 271-IAn amount equal to Rs. 1,00,000
Furnishing of Incorrect information by a Chartered Accountant or a merchant banker or a registered valuer in a report or certificateSection 271JRs. 10,000 for each such report or certificate
Failure to co-operate with the tax authorities, (i.e., not answering any question, not signing statements, etc.) or failure to comply with notice issued under section 142(1)/143(2) or failure to comply with direction issued under section 142(2A).Section 272A (1)Rs. 10,000 for each failure/default
Penalty under section 272A (2)Section 272A (2)Rs. 100 per day for every day during which the default continues.
Failure to comply with section 133BSection 272AA (1)An amount not exceeding Rs.  1,000
Failure to comply with provisions relating to Permanent Account Number (PAN)Section 272BRs. 10,000
Failure to comply with provisions relating to Tax Deduction Account Number or Tax Collection Account NumberSection 272BB (1)Rs. 10,000
Failure to comply with the provisions relating to Tax Collection Account NumberSection 272BBBRs. 10,000

3. Penalty for Under-Reporting and Mis-Reporting of Income (Section 270A)

Section 270A has been inserted from the assessment year 2017-18. Under this section, the Assessing Officer, CIT (Appeals) or Principal CIT or CIT may, during the course of any proceedings under the Act, levy penalty if a person has under-reported his income.

(1). Cases of Under-Reported Income –

A person shall be considered to have under-reported his income if, ––

  1. the income assessed is greater than the maximum amount not chargeable to tax, where no return of income is filed;
  2. the assessed income is greater than the income determined upon processing under section 143(1)(a), where return is filed;
  3. the income assessed is greater than the income assessed or reassessed immediately before such reassessment;
  4. the income assessed or reassessed has the effect of reducing the loss or converting such loss into income;
  5. the amount of deemed total income assessed or reassessed under section 115JB/115JC is greater than the deemed total income determined in the return processed under section 143(1)(a);
  6. the amount of deemed total income assessed as per the provisions of section 115JB/115JC is greater than the maximum amount not chargeable to tax, where no return of income has been filed;
  7. the amount of deemed total income reassessed as per the provisions of section 115JB/115JC is greater than the deemed total income assessed or reassessed immediately before such reassessment.

(2). Cases of Mis-Reporting of Income [Sec. 270A (9)] –

Cases of misreporting of income shall be the following –

  1. misrepresentation or suppression of facts;
  2. failure to record investments in the books of account;
  3. claim of expenditure not substantiated by any evidence;
  4. recording of any false entry in the books of account;
  5. failure to record any receipt in the books of account having a bearing on total income; and
  6. failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply.

(3). Quantum of Under-Reported Income –

The amount of under-reported income shall be determined as follows –

Different situationsQuantum Of Under-Reported Income
Return has been furnished and income has been assessed for the first timeThe difference between the amount of income assessed and the income determined under section 143(1)(a)
Return has not been furnished and income has been assessed for the first timeIn the case of company / firm/ local authority – Income assessed

In any other case – The difference between the amount of income assessed and the maximum amount not chargeable to tax
Where income is not assessed for the first timeThe difference between the amount of income assessed/reassessed/recomputed and the amount of income assessed/reassessed/recomputed in a preceding order
Where an assessment / reassessment has the effect of reducing the loss declared in the return or converting that loss into incomeThe difference between the loss claimed and the income (or loss) as assessed / reassessed
Where under-reported income arises out of determination of deemed income in accordance with the provisions of section 115JB/115JC(A – B) + (C – D)

A = The total income assessed as per the provisions other than the provisions contained in section 115JB or section 115JC (herein called general provisions).

B = The total income that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of under-reported income.

C = The total income assessed as per the provisions contained in section 115JB or section 115JC.

D = The total income that would have been chargeable had the total income assessed as per the provisions contained in section 115JB or section 115JC been reduced by the amount of underreported income.

(4). (Negative list) – Under-Reported income shall not include the following –

  1. where the assessee offers an explanation and the income-tax authority is satisfied that the explanation is bona fide and all the material facts have been disclosed;
  2. where such under-reported income is determined on the basis of an estimate, if the accounts are correct and complete but the method employed is such that the income cannot properly be deducted therefrom;
  3. where the assessee has, on his own, estimated a lower amount of addition or disallowance on the issue and has included such amount in the computation of his income and disclosed all the facts material to the addition or disallowance;
  4. where the assessee had maintained information and documents as prescribed under section 92D, declared the international transaction and disclosed all the material facts relating to the transaction;
  5. where the undisclosed income is on account of a search operation and penalty is leviable under section 271AAB.

(5). Rate of Penalty –

The rate of penalty shall be 50% of the tax payable on under-reported income.

However, in cases of under-reported income falling under misreporting of income, penalty shall be 200% of the tax payable on such misreporting of income.

(6). How to Calculate Tax on Under-Reported Income –

The tax payable on under-reported income shall be calculated as follows –

Different SituationsMode of Computation of Tax on Under-Reported Income
Case 1 – Where no return has been furnished and the income has been assessed for the first timeAmount of tax computed on (under-reported income + exemption limit)
Case 2 – Where total income determined as under section 143(1)(a) or assessed / reassessed / recomputed in a preceding order is a lossAmount of tax computed on under-reported income, as if it were total income
Case 3 – In any other caseTax on under-reported income is (x – y) x = Amount of tax computed on [under-reported income + total income determined under section 143(1)(a) or total income assessed/reassessed/recomputed in a preceding order] y = Amount of tax computed on total income determined under section 143(1)(a) or total income assessed/reassessed/recomputed in a preceding order

(7) Determination of under-reported income and its computation thereof [Section 270A (2) and (3)]

When a person shall be considered to have under-reported his income [Section 270A (2)]The amount of under-reported income [Section 270A (3)]
(a) the income assessed is greater than the income determined in the return processed under section 143(1)(a)The difference between the amount of income assessed and the amount of income determined under section 143(1)(a);
(b) where no return of income has been furnished and the income assessed is greater than the maximum amount not chargeable to tax;(A) the amount of income assessed, in the case of a company, firm or local authority; and

(B) the difference between the amount of income assessed and the maximum amount not chargeable to tax, in a case of an assessee other than a company, firm or local authority;
(c) the income reassessed is greater than the income assessed or reassessed immediately before such reassessment;The difference between the amount of income reassessed or recomputed and the amount of income assessed, reassessed or recomputed in a preceding order:

Explanation: “Preceding order” means an order immediately preceding the order during the course of which the penalty under section 270A (1) has been initiated
(d) the amount of deemed total income assessed or reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income determined in the return processed under section 143(1)(a); (e) where no return of income has been furnished and the amount of deemed total income assessed as per the provisions of section 115JB or section 115JC is greater than the maximum amount not chargeable to tax; (f) the amount of deemed total income reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income assessed or reassessed immediately before such reassessment;Where under-reported income arises out of determination of deemed total income in accordance with the provisions of section 115JB or section 115JC, the amount of total underreported income shall be determined in accordance with the following formula—

(A – B) + (C – D)

where…,

A = the total income assessed as per the provisions other than the provisions contained in section 115JB or section 115JC (herein called general provisions);

B = the total income that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of under-reported income;

C = the total income assessed as per the provisions contained in section 115JB or section 115JC;

D = the total income that would have been chargeable had the total income assessed as per the provisions contained in section 115JB or section 115JC been reduced by the amount of under-reported income:

Provided further that where the amount of under-reported income on any issue is considered both under the provisions contained in section 115JB or section 115JC and under general provisions, such amount shall not be reduced from total income assessed while determining the amount under item D.
(g) the income assessed or reassessed has the effect of reducing the loss or converting such loss into income.The amount of under-reported income shall be the difference between the loss claimed and the income or loss, as the case may be, assessed or reassessed.

(8) Tax payable in respect of the under-reported income [Section 270A (10)]

The tax payable in respect of the under-reported income shall be—

  1. where no return of income has been furnished and the income has been assessed for the first time, the amount of tax calculated on the under-reported income as increased by the maximum amount not chargeable to tax as if it were the total income;
  2. where the total income determined under section 143(1)(a) or assessed, reassessed or recomputed in a preceding order is a loss, the amount of tax calculated on the under-reported income as if it were the total income;
  3. in any other case, determined in accordance with the formula—

(X – Y)

where …,

X – the amount of tax calculated on the under-reported income as increased by the total income determined under section 143(1)(a) or total income assessed, reassessed or recomputed in a preceding order as if it were the total income; and

Y – the amount of tax calculated on the total income determined under section 143(1)(a) or total income assessed, reassessed or recomputed in a preceding order.

In other words, it will be tax on total income inclusive of under-reported income – Tax on total income determined under section 143(1)(a) or 143(3) or 147, as the case may be.

4. Power to Reduce or Waive Penalty in certain Cases (Section 273A)

(A) [Section 273A(1)] : Power to Reduce or Waive Penalty imposed or imposable for default under section 270A or section 271(1)(c)

(i) Principal Commissioner/Commissioner may reduce/waive penalty:

Notwithstanding anything contained in the Income-tax Act, the Principal Commissioner/ Commissioner may, in his discretion, reduce or waive the amount of penalty imposed or imposable on a person under section 270A or section 271(1)(iii) for concealment of income, etc. as per section 270A or section 271(1)(c) if certain conditions and satisfied.

(ii) Conditions to be satisfied for waiver/reduction:

Such power shall be exercised by the Principal Commissioner or Commissioner if he is satisfied that the assessee has:

  1. prior to the detection by the Assessing Officer, of the concealment of particulars of income or of the inaccuracy of particulars furnished in respect of such income, voluntarily and in good faith, made full and true disclosure of such particulars; and
  2. co-operated in any enquiry relating to the assessment of his income; and
  3. has either paid or made satisfactory arrangements for the payment of any tax or interest payable in consequence of an order passed under the Income-tax Act in respect of the relevant assessment year. i.e. the assessment year(s) for which application is made under section 273A.

If the assessee satisfies all the above 3 conditions, then the Principal Commissioner or Commissioner shall (i.e. he is duty bound) waive the penalty and in that case, there is no discretion.

(iii) Waiver may be Suo moto or otherwise:

Such power to reduce or waive the penalty can be exercised by the Commissioner on his own motion or on an application made by the assessee.

(iv) Deemed case of true disclosure [Explanation to section 273A (1)]:

For the purpose of section 273A(1), a person shall be deemed to have made full and true disclosure of his income or of the particulars relating thereto in any case where the excess of income assessed over the income returned is of such a nature as not to attract the provisions of section 270A or section 271(1)(c).

(v) Prior approval of Principal Chief Commissioner or Chief Commissioner/Principal Director General or Director General necessary where aggregate concealed income exceeds Rs. 5,00,000 [Section 273A (2)]:

According to section 273A(2), no order under section 273A(1) for reducing or waiving the penalty shall be made by the Principal Commissioner or Commissioner except with the prior approval of the Principal Chief Commissioner or Chief Commissioner/Principal Director General or Director General, as the case may be, in a case falling under section 270A or section 271(1)(c) where the amount of income in respect of which the penalty is imposed or imposable for the relevant assessment year, or, where such disclosure relates to more than one assessment year, the aggregate amount of such income for those years, exceeds a sum of Rs. 5,00,000.

(iv) Relief available only once in life time [Section 273A (3)]:

According to section 273A(3) Where an order has been made under section 273A(1) in favour of any person, whether such order relates to one or more assessment years, he shall not be entitled to any relief under this section in relation to any other assessment year at any time after the making of such order.

(B) [Section 273A (4)]: Power to Reduce or Waive any Penalty

(i) Principal Commissioner or Commissioner can waive any penalty including levied under section 271(1)(iii):

Without prejudice to the powers conferred on him by any other provision of this Act [including section 273(1)], the Principal Commissioner or Commissioner may, 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 proceeding for the recovery of any such amount provided certain conditions are satisfied.

(ii) Waiver only when application is made by the assessee:

The waiver or reduction of penalty under section 273A(4) is possible only when an application for the same is made by the assessee. It cannot be done suo moto by the Principal Commissioner or Commissioner.

(iii) Conditions to be satisfied for waiver or reduction:

Such power shall be exercised by the Principal Commissioner or Commissioner if he is satisfied that:

  1. to do otherwise would cause genuine hardship to the assessee, having regard to the circumstances of the case; and
  2. the assessee has co-operated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him.

(iv) Prior approval of Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General necessary where penalty or aggregate amount of such penalties exceeds Rs.1,00,000:

No order reducing or waiving the amount or compounding any proceeding for its recovery under this sub-section shall be made by the Principal Commissioner or Commissioner except with the previous approval of the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General, as the case may be, where the amount of any penalty payable under the Income-tax Act or, where such application relates to more than one penalty, the aggregate amount of such penalties exceeds Rs.1,00,000.

It has been 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.

(v) Time limit for passing an order under section 273A(4) for accepting or rejecting the application for reduction or waiver of penalty [Section 273A(4A)]

The order under section 273A (4), either accepting or rejecting the application in full or in part, shall be passed within a period of 12 months from the end of the month in which the application under section 273A (4) is received by the Principal Commissioner or the Commissioner.

However, no order rejecting the application, either in full or in part, shall be passed unless the assessee has been given an opportunity of being heard.

Further, where any application is pending as on 1.6.2016, the order shall be passed on or before 31.5.2017.

5. Power of Commissioner to Grant Immunity from Penalty [Section 273AA]

(1) When can application be made for grant of immunity? [Section 273AA (1)]:

A person may make an application to the Principal Commissioner or Commissioner for granting immunity from penalty, if—

  1. he has made an application for settlement under section 245C and the proceedings for settlement have abated under section 245HA; and
  2. the penalty proceedings have been initiated under this Act.

(2) Application cannot be made after imposition of penalty after abatement [Section 273AA (2)]:

The application to the Principal Commissioner or Commissioner under section 273AA (1) shall not be made after the imposition of penalty after abatement.

(3) Principal Commissioner or Commissioner may grant immunity subject to certain conditions [Section 273AA (3)]:

The Principal Commissioner or Commissioner may, subject to such conditions as he may think fit to impose, grant to the person immunity from the imposition of any penalty under this Act, if he is satisfied that the person has, after the abatement, co-operated with the income-tax authority in the proceedings before him and has made a full and true disclosure of his income and the manner in which such income has been derived.

(4) Time limit for passing order under section 273AA (3) [Section 273AA(3A]:

The order under section 273AA (3), either accepting or rejecting the application in full or in part, shall be passed within a period of 12 months from the end of the month in which the application under section 273AA (3) is received by the Principal Commissioner or the Commissioner.

However, no order rejecting the application, either in full or in part, shall be passed unless the assessee has been given an opportunity of being heard:

Further, where any application is pending as on 1.6.2016, the order shall be passed on or before 31.5.2017.

(5) Immunity shall stand withdrawn, if there is a failure to satisfy the conditions [Section 273AA (4)]:

The immunity granted to a person under section 273AA (3) shall stand withdrawn, if such person fails to comply with any condition subject to which the immunity was granted and thereupon the provisions of this Act shall apply as if such immunity had not been granted.

(6) Immunity to be withdrawn if there is concealment of particulars or any false evidence [Section 273AA (5)]:

The immunity granted to a person under section 273AA(3) may, at any time, be withdrawn by the Principal Commissioner or Commissioner, if he is satisfied that such person had, in the course of any proceedings, after abatement, concealed any particulars material to the assessment from the income-tax authority or had given false evidence, and thereupon such person shall become liable to the imposition of any penalty under this Act to which such person would have been liable, had not such immunity been granted.

6. [Section 270AA]: Immunity from Imposition of Penalty and Initiation of Proceedings under Section 276C or 276CC

(1) Conditions to be fulfilled for making an application for grant of immunity from imposition of penalty under section 270A and initiation of proceedings under section 276C or 276CC [Section 270AA (1)]

An assessee may make an application to the Assessing Officer to grant immunity from imposition of penalty under section 270A and initiation of proceedings under section 276C or 276CC, if he fulfils the following conditions, namely: —

  1. the tax and interest payable as per the order of assessment or reassessment under section 143(3) or section 147, as the case may be, has been paid within the period specified in such notice of demand; and
  2. no appeal against the order of assessment or reassessment under section 143(3) or section 147 has been filed.

(2) Time period for making an application [Section 270AA (2)]

An application referred to in section 270AA (1) shall be made within one month from the end of the month in which the order referred to in section 270AA(1)(a) has been received and shall be made in Form No. 68 and verified in such manner as may be prescribed.

(3) The Assessing Officer shall grant immunity from imposition of penalty or initiation of proceedings under section 276C or 276CC except in case of misreporting of income [Section 270AA (3)]

The Assessing Officer shall—

— subject to fulfilment of the conditions specified in section 270AA (1) and

— after the expiry of the period of filing the appeal as specified in section 249(2)(b),

grant immunity from imposition of penalty under section 270A and initiation of proceedings under section 276C or 276CC, where the proceedings for penalty under section 270A has not been initiated under the circumstances referred to in section 270A (9) (relating to misreporting of income). (See para 23.3(3) above).

(4) Assessing Officer to pass an order within one month accepting or rejecting the application referred to in section 270AA (1) [Section 270AA (4)]

The Assessing Officer shall, within a period of one month from the end of the month in which the application under section 270AA (1) is received, pass an order accepting or rejecting such application:

However, no order rejecting the application shall be passed unless the assessee has been given an opportunity of being heard.

(5) Order passed under section 270AA (4) to be final [Section 270AA (5)]

The order made under section 270AA (4) shall be final.

(6) Assessment/reassessment order passed after accepting the application under section 270AA (4) is not appealable or subject to revision [Section 270AA (6)]

No appeal under section 246A or an application for revision under section 264 shall be admissible against the order of assessment or reassessment, referred to in section 270AA(1)(a), in a case where an order under section 270AA (4) has been made accepting the application.

7. Penalty for default in making payment of Self-Assessment Tax [Section 221(1)]

As per section 140A (1) any tax due (after allowing credit for TDS, advance tax, etc.) along with interest under section 234A, 234B and 234C (if any) should be paid before filing the return of income. Tax paid as per section 140A (1) is called ‘self-assessment tax’.

As per section 140A (3), if a person fails to pay either wholly or partly self-assessment tax or interest, then he will be treated as assessee in default in respect of unpaid amount. As per section 221(1), if a taxpayer is treated as an assessee in default, then he shall be held liable to pay penalty of such amount as the Assessing Officer may impose and in the case of a continuing default, such further amount or amounts as the assessing officer may, from time to time, direct. However, the total amount of penalty cannot exceed the amount of tax in arrears.

Before charging penalty under section 221(1), the tax authority shall give the taxpayer a reasonable opportunity of being heard. No penalty is levied if the taxpayer proves to the satisfaction of the tax authorities that the default was for good and sufficient reason.

Note: An assessee shall not cease to be liable to any penalty under section 221(1) merely by reason of the fact that he paid the tax before the levy of such penalty.

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