penalty 3.4

7/27/2019 penalty 3.4

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Levy of Penalties,Heads of

Income & Aggregation of

Income under Income Tax Act

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INTRODUCTION Increase in tax payers call for more reliance on

voluntary compliance of tax laws by assessees

Appropriate penal provisions needed to impelcompliance by imposing additional tax burden incase of non compliance

Penalties to be within reasonable limits to be moreeffective

Object should be to bend and not to break the tax

payer

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Penalties in briefSection Nature of default Minimum

penalty

Maximum

penalty

140A(3)

Failure to paywhole or any part

of income-tax or

interest or both in

accordance with

the provisions of

section 140A(1)

Such amountas the

Assessing

Officer may

impose [Sec.

221(1)]

Tax in arrears

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Penalties in brief

Section Nature of default Minimum

penalty

Maximum

penalty

221(1) Default in making

payment of tax

within prescribedtime

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Such amount

as the

AssessingOfficer may

impose

Tax in arrears

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Penalties in brief


penalty

Maximum

penalty

271(1)

(b)

Failure to comply

with a notice

under section142(1) or 143(2)

or with a direction

issued under

section 142(2A)

Rs. 10,000

(Rs. 1,000

up to May31, 2001) for

each failure

Rs. 10,000

(25,000 up to

May 31,2001) for

each failure

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Penalties in brief


penalty

Maximum

penalty

271(1)

(c)

Concealment of

the particulars of

income orfurnishing

inaccurate

particulars of

income

100% of tax

sought to be

evaded

300% of tax

sought to be

evaded

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penalty

Maximum

penalty

271(4) Distribution of profit by registered firm

otherwise than in

accordance with

partnership deed and asa result of which

partner has returned

income below the real

income

Up to 150%of difference

between tax

on partner’s

incomeassessed and

tax on

returned

income

----

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penalty

Maximum

penalty

271A Failure to keep ormaintain books of

account, documents,

etc., as required under

section 44AA

Rs. 25,000(Rs. 2,000 up

to May 31,

2001)

Rs. 25,000(Rs.

1,00,000

up to May

31, 2001)

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penalty

Maximum

penalty

271AA Failure to keep andmaintain information

and documents in

respect of international

transaction (applicablefrom the assessment

year 2002-03)

2% of valueof each

international

transaction

---

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penalty

Maximum

penalty

271B Failure to get accountsaudited under section

44AB or furnish such

report as is required

under section 44AB2

½% of thetotal sales,

turnover, or

gross receipts

Rs.100000

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penalty

Maximum

penalty

271BA Failure to submit report

under section 92E

(applicable from the

assessment year 2002-03)

Rs. 1,00,000 -----

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Penalties in brief


penalty

Maximu

m penalty

271C Failure to deduct the wholeor any part of tax as required

under sections 192 to 195 or

(with effect from June 1,

1997) failure to pay thewhole or any part of tax as

required under section

115-O(2) or second proviso

to section 194B

Amountof tax

such

person

has failedto deduct

or pay

-----

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Penalties in brief


penalty

Maximum

penalty

271D Taking or accepting anyloan or deposit in

contravention of the

provisions of section 269SS

Amountof loan/

deposit so

taken or

accepted

-----

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Penalties in brief


penalty

Maximu

m penalty

271E Repaying any deposit or(with effect from June 1,

2003) loan referred to in

section 269T otherwise than

in accordance with the provisions of section 269T

Amountof deposit

so repaid

-----

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Penalties in brief


penalty

Maximu

m penalty

271F Failure to furnish return ofincome as required by

section 139(1) before the

end of relevant assessment

year

Rs. 5,000(Rs. 1,000

up to May

31, 2001)

-----

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Penalties in brief


penalty

Maximu

m penalty

271F Failure to furnish return ofincome as required by

proviso to section 139 (1) on

or before the due date†

Rs. 5,000(Rs. 1,000

up to May

31, 2001)

-----

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Penalties in brief


penalty

Maximu

m penalty

271G Failure to furnishinformation or documents

under section 92D applicable

from the assessment year

2002-03

2% ofvalue of

the

internatio

naltransactio

n for each

failure

-----

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Penalties in brief


penalty

Maximu

m penalty

272A(1)(a)

Failure to answer anyquestion put to a person

(who is legally bound to

state the truth of any matter

touching the subject to hisassessment) by an income-

tax authority

Rs.10,000

(Rs. 500

up to May

31, 2001)for each

default

Rs.10,000

for each

default

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Penalties in brief


penalty

Maximu

m penalty

272A(1)(b)

Failure to sign any statementmade by a person in course

of income-tax proceeding

Rs.10,000

(Rs. 500

up to May

31, 2001)for each

default

Rs.10,000

for each

default

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Penalties in brief


penalty

Maximu

m penalty

272A(1)(c)

Failure to comply withsummons issued under

section 131(1) to attend

office to give evidence and

produce books of account orother documents

Rs.10,000

(Rs. 500

up to May

31, 2001)for each

default

Rs.10,000

for each

default

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Penalties in brief


penalty

Maximu

m penalty

272A(1)(d )£

Failure to comply with the provisions of section 139A

(upto 31.5.2002)

Rs.10,000

(Rs. 500

up to May

31, 2001)for each

default

Rs.10,000

for each

default

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Penalties in briefSec Nature of default Min penalty Max penalty

272A

(2)

Failure

to comply with a

notice issued under

section 94 ;

to give notice of

discontinuance of

business/professionunder section 176(3);

Rs. 100 for

every day

during

which

default

continues

Rs. 100 for every

day during which

default continues

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Penalties in briefSec Nature of default Min

penalty

Max penalty

272A

(2)

Failure

to furnish

returns/statementmentioned in section 133,

206, 206C or 285B ;

to allow inspection of

register referred in section134 (or of any entry in

such register or to allow

copies of such register to

be taken) ;

Rs. 100

for every

dayduring

which

default

continues

Rs. 100 for every

day during which

default continues(the amount of

penalty under

sections 206 and

206C shall not

exceed theamount of tax

deductible or

collectible)

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penalty

Max penalty

272A

(2)

Failure

to furnish return of

income under section139(4A) [or section 139

(4C) from April 1, 2003] or

to deliver in due time a

declaration mentioned insection 197A ;

Rs. 100

for every

day

during

which

defaultcontinues

Rs. 100 for every

day during which

default continues(the amount of

penalty in relation

to declaration

under section197Ashall not

exceed the

amount of tax

deductible or

collectible)

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penalty

Max penalty

272A

(2)

Failure

to furnish a

certificate as requiredin section 203 or

206C ;

to deduct and pay tax

under section 226;

(from April 1, 2002)

to furnish a statement

as required by section

192(2C)

Rs. 100

for every

dayduring

which

default

continues

Rs. 100 for every day

during which default

continues (the amount

of penalty in relation

to certificate in Form

No. 16/16A as required

under section 203 and

the amount of penaltyunder section 206C

shall not exceed the

amount of tax

deductible orcollectible

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272AA Failure to comply

with the provision of

section 133B

Any amount

up to Rs.

1,000

Rs. 1,000

272B Failure to comply

with the provisions of

section 139A (ap-

plicable from June 1,

2002)

Rs. 10,000 -----

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272BB Failure to comply

with the provisions

of section 203A

Up to Rs.

10,000 (Rs.

5,000 up to

May 31, 2001)

Rs. 10,000

(Rs. 5,000 up

to May 31,

2001)

272BB

B

Failure to comply

with the provisions

of section 206CA

(applicable from

June 1, 2002)

Rs. 10,000 -----

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WHEN PENALTY IS NOT

LEVIABLE Penalty is not leviable under section 271(1)(b),

271A, 271AA† , 271B, 271BA† , 271BB, 271C,

271D, 271E, 271F, 271G† , 272A(1)(c)/(d ),

272A(2), 272AA(1), 272B‡ , 272BB(1) or

272BBB(1)‡ or 273(1), (2)(b)/(c), if the assessee

proves that there was reasonable cause for failure

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Time limit for completion of penalty

proceedings Time limit for making an order imposing a penalty is :

a. within the financial year in which penaltyproceedings are started ; or

b. within 6 months from the end of month in whichaction for imposition of penalty is initiated or within 6months from the end of month in which order ofappeal of Commissioner (Appeals) under section 246

or 246A or Tribunal under section 253 is received byCommissioner,

whichever is later.

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Time limit for completion of penalty

proceedingsHowever, in case the relevant assessment or other

order is the subject-matter of revision under

section 263 (or with effect from June 1, 2003,

section 264), then the time-limit for imposing

penalty is six months from the end of the month in

which such order for revision is passed

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Heads of income (Section 14) 1. Salaries

2. Income from house property

3. Profits and gains of business or profession

4. Capital gains

5. Income from other sources.

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Heads of income (Section 14) The several heads into which income is divided

under the Act do not make different kinds of taxes.

Tax is always one; but it may arise under differentheads to which the different rules of computation

have to be applied. These heads are in a sense

exclusive to one another and income which falls

within one head cannot be assigned to or taxedunder another head — Karanpura Development Co.

Ltd. v. CIT [1962] 44 ITR 362 (SC).

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Heads of income (Section 14) Income has to be brought under one of the

heads under section 14 and can be charged to

tax only if it is chargeable under the computingsection corresponding to that head —

Nalinikant Ambalal Mody v. CIT (supra) .

n

The method of book-keeping followed byan assessee cannot decide under which heada particular income should go — Nalinikant

Ambalal Mody v. CIT (supra

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Section 68 [I.T. Act, 1961]

Cash Credits.

Where any sum is found credited in the books of

an assessee maintained for any previous year, and

assessee offers no explanation about the nature andsource thereof or the explanation offered by him is

not, in the opinion of the Assessing officer,

satisfactory, the sum so credited may be charged toincome-tax as the income of the assessee of that

previous year.

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Cash Credits.

Section 68 enacts deeming provisions : - Sectionessentially contains a deeming provision, which

applies when the assessee’s explanation about acash credit found in his books is rejected. There isno distinction to be drawn between incomeresulting from application of section 68 and

income accruing from any other of the headsindicated in section 14. [CIT v GanpatraiGajanand, (1977) 108 ITR 403] (Orissa

Section 68 [I T Act 1961]

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Cash Credits.

Section 68 hits also entries in own capital account: -

Although the marginal note to section 68 refers to “Cash

credits”, the provisions of section 68 can be invoked inrelation to an entry in assessee’s capital account. In fact,

an entry on the credit side of the capital account shows

that the credit entries in that account are larger than the

debit entries. The fact some of these credits relate to costsof assets can make no difference. [Dharmavat Provision

Stores v CIT (1983) 139 ITR 700 (Bom)]

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Unexplained Investments Under section 69 the value of investments made

by the assessee in a financial year immediately

preceding the assessment year may be deemed to be the income of the assessee of such financial

year if –

i. Such investments are not recorded in the booksof account, if any, maintained by him for any

source of income; and

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Unexplained Investments ii. (a) the assessee offers no explanation about the nature

and source of the investments, or

(b) the explanation offered by him is, in the opinion ofthe assessing officer not satisfactory

In cases where the assessee is able to satisfy the assessing

officer about the nature and source of only a part of the

investment, the other unexplained portion may be added

as his income (Jatindra Nath Sarmah v ITO (1978) 113

ITR 898 (Guahati).

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Section 69A [I.T. Act, 1961]

Unexplained Money, Etc Where in any financial year the assessee is found to be the

owner of any money, bullion, jewellery or other valuable

article and such money, bullion, jewellery or valuablearticle is not recorded in the books of account, if any,maintained by him for any source of income, and theassessee offers no explanation about the nature and sourceof acquisition of the money, bullion, jewellery or othervaluable article, or the explanation offered by him is not,in the opinion of the Assessing Officer satisfactory, themoney and the value of the bullion, jewellery or othervaluable article may be deemed to be the income of the

assessee of such financial year.

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Section 69B [I.T. Act, 1961]

Amount Of Investments, Etc., Not FullyDisclosed In Books Of Account. Where in any financial year the assessee has made investments

or is found to be the owner of any bullion, jewellery, or othervaluable article, and the Assessing Officer finds that theamount expended on making such investments or in acquiringsuch bullion, jewellery or other valuable article exceeds theamount recorded in this behalf in the books of accountmaintained by the assessee for any source of income, and the

assessee offers no explanation about such excess amount or theexplanation offered by him is not, in the opinion of theAssessing Officer, satisfactory, the excess amount may bedeemed to be the income of the assessee for such financialyear.

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http://localhost/var/www/apps/conversion/Micro_serverGJX2000HTMITA_FOOT-8222.HTM

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Section 69C [I.T. Act, 1961]

Unexplained Expenditure, Etc . Where in any financial year an assessee has incurred any

expenditure and he offers no explanation about the source ofsuch expenditure or part thereof, or the explanation, if any,offered by him is not, in the opinion of the Assessing Officer,satisfactory, the amount covered by such expenditure or partthereof, as the case may be, may be deemed to be the incomeof the assessee for such financial year;

Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which isdeemed to be the income of the assessee shall not be allowedas a deduction under any head of income.

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Unexplained Expenditure, Etc . The provisions of section 69C are merely

clarificatory and embody a rule of evidence, which

is otherwise quite clear. This is so because evenotherwise an addition could be made in respect of

the amount of expenditure, which the assessee is

found to have actually incurred but notsatisfactorily explained (Yadu Hari Dalmia v CIT

(1980) 126 ITR 48 (Delhi).

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Unexplained Expenditure, Etc .marriage expenses

It is necessary to establish whether the assessee

himself has incurred the expenditure wholly

Custom in India for maternal and paternal relations

of the bride and bridegroom to contribute for

marriage expensesOnly unexplained of expenditure incurred by

assessee to be brought to tax

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Section 69D [I.T. Act, 1961]

Amount Borrowed Or Repaid OnHundi.

Where any amount is borrowed on a hundi from,

or any amount due thereon is repaid to, any person

otherwise than through an account payee chequedrawn on a bank, the amount so borrowed or

repaid shall be deemed to be the income of the

person borrowing or repaying the amount aforesaidfor the previous year in which the amount was

borrowed or repaid, as the case may be :

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Section 69D [I.T. Act, 1961]

Amount Borrowed Or Repaid On Hundi.

Provided that, if in any case amount borrowed on

hundi has been deemed under the provisions of thissection to be the income of any person, such

person shall not be liable to be assessed again in

respect of such amount under the provisions of thissection on repayment of such amount.

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