Seminar On Direct Taxation Sirc of Icai, 18 February2017: Index

18 February 2017
SEMINAR ON DIRECT TAXATION

SIRC OF ICAI,
18 February2017.
B.RAMANA KUMAR ,
ADVOCATE, Chennai.
Index
Introduction
Penalties under the Income Tax Act

ADV B. Ramana Kumar 1
18 February 2017
Introduction
Penalties and Prosecutions
Failure to comply with provisions of the Income-tax Act will attract penalty and
in prosecutions.
Some of the penalties are mandatory and a few are at the discretion of the tax
authorities.
New Additions
Delay in Filing Returns Section 234F:
For the AY: 2018-19 onwards, filing Income Tax Returns after the due date will
attract a fee of up to Rs.10,000/-
In the case of small taxpayers or where total income does not exceed
Rs.5,00,000/-, it is proposed that the fee amount shall not exceed Rs.1,000/-
Two Levels of Penalty:
Penalty of Rs.5,000/- if return if filed late but on or before 31st December of the
Assessment Year.
Penalty of Rs.10,000/- in any other case.

18 February 2017
New Additions
Consequence of Section 234F:
Amendments are to be made in Sec. 140A
Amendment shall be made to Sec. 143(1)
Amendments are to be made in Sec. 271F.
This amendment will take effect from 1st April, 2018 and is applicable
from AY 2018-19.
New Additions
New proposal:
A proposal has been made for the insertion of a new section 271DA in the Act.
The goal is to make provisions so that if a person receives any sum in

contravention of the provisions of section 269ST, that person shall be liable to
pay the penalty of a sum equal to the amount of such receipt.
The Penalty cannot be imposed if there is proof of sufficient reason for the
contravention.

18 February 2017
New Additions
New proposal:
It has been proposed to amend the provisions of section 206C to omit the
provision relating to tax collection at source at the rate of 1% of sale
consideration on cash sale of jewellery exceeding Rs.5,00,000/-
However the provision of section 206C would still apply on cash sale of
jewellery exceeding Rs.2,00,000/- as it would be otherwise covered by the term
any other goods.
New Additions
New proposal:
A new section 271J has been inserted.
It makes provisions in cases where an accountant or a merchant banker or a

registered valuer, furnishes incorrect information in a report or certificate
under any provisions of the Act or the rules made thereunder.
In such cases, the Assessing Officer or the Commissioner of Income Tax

(Appeals) may direct him to pay a sum of Rs. 10,000/- for each such report or
certificate.

18 February 2017
New Additions
Consequence of Section 271J:
An amendment shall be made to Sec. 273B, such that penalty cannot be

imposed if reasonable cause for failure is proved with respect to Section 271J.
This amendment will take effect from 1st April, 2017.
IMPACT TO
PROFESSIONALS
Status for AY: 2017-18

Section 140A(3):
Failure to pay wholly or in part the self-assessment tax, fringe benefit tax, or
Interest or all under section 140A(1).
Penalty amount as imposed by the Officer but cannot exceed tax in arrears.
Section 158BFA(2):
Determination of undisclosed income of block period.
Minimum Penalty of 100% of tax leviable in respect to undisclosed income.
Maximum Penalty of 300% of tax leviable in respect to undisclosed income
10

18 February 2017
Status for AY: 2017-18....conti

Section 221(1):
Default in making payment of Tax.
Penalty amount as imposed by the Officer but cannot exceed tax in arrears.
Section 234E:
Failure to file statement within time as prescribed u/s 200(3) or u/s 206C(3) .
Chargeable at Rs.200 per day of default until date of filing.
Penalty amount cannot exceed amount of tax in arrears.
11

Section 270A(1):
Under-reporting and misreporting of income.
Penalty is 50% of the amount of tax payable on under-reported income.
If under-reported income is in consequence of any misreporting thereof by any

person, the penalty shall be 200% of the amount of tax payable on under-
reported income.
12

18 February 2017
Section 271(1)(b):
Failure to comply with a notice under section 115WD(2)/115WE(2)/142(1) or

section 143(2) or failure to comply with a direction under section 142(2A)
Penalty at Rs.10,000/- for each failure.
However penalty shall not be levied to and in relation to any assessment

for the A.Y commencing on or after the 1st day of April, 2017.
13

Section 271(1)(c):
Concealment of particulars of income or fringe benefits or furnishing of

inaccurate particulars of income or fringe benefits.
Minimum Penalty of 100% of tax sought to be evaded.
Maximum Penalty of 300% of tax sought to be evaded.
However, the above penalty shall not be levied to and in relation to any
assessment for the A.Y commencing on or after the 1st day of April, 2017.
14

18 February 2017

Section 271(4):
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 income.
Not exceeding 150 per cent of difference between tax on partner's income
assessed and tax on income returned, in addition to tax payable.
The above penalty shall not be levied to and in relation to any assessment
for the A.Y commencing on or after the 1st day of April, 2017.
DROPPED
FROM 2017
15

Section 271(A):
Failure to keep, maintain, or retain books of account, documents, etc., as

required under section 44AA
Penalty at Rs.25,000/-
16

18 February 2017
Section 271AA(1):
Failure to keep and maintain information and documents required by section

92D(1) or 92D(2).
Failure to report such transaction.
Maintaining or furnishing incorrect information or document.
Penalty of 2% of value of each international transaction/or specified domestic

transaction entered into.
17
Section 271AA(2):
Failure to furnish information and document as required under Section 92D(4)
Penalty at Rs.5,00,000/-
Section 271AAA:
Where search has been initiated before 1-7-2012 and undisclosed income
found.
Penalty at 10% of undisclosed income.
18

18 February 2017
Section 271AAB
Where search has been initiated on or after 1-7-2012 and undisclosed income
found.
Penalty of 10% of undisclosed income
If the assessee admits the undisclosed income, substantiates the manner in

which it was derived and on or before the specified date pays the tax, together
with interest thereon and furnishes the return of income for the specified
previous year declaring such undisclosed income.
19
If the assessee does not admit the undisclosed income, and on or before the
specified date declares such income in the return of income furnished for the
specified previous year and pays the tax, together with interest thereon.
In cases where the previous two options are not applicable.
20

18 February 2017
Section 271B:
Failure to get accounts audited or furnish a report of audit as required under

section 44AB.
One-half per cent of total sales, turnover or gross receipts, etc., or Rs. 1,50,000,
which-ever is less.
Section 271BA:
Failure to furnish a report from an accountant as required by section 92E
21
Section 271BB:
Failure to subscribe any amount to units issued under scheme referred to in

section 88A(1).
Penalty at 20% of such amount.
Section 271C:
Failure to deduct tax at source, wholly or partly, under sections 192 to 196D
(Chapter XVII-B) or failure to pay wholly or partly tax u/s 115-O(2) or second
proviso to section 194B.
Penalty is deducted at an amount equal to tax not deducted or paid.
22

18 February 2017
Section 271CA:
Failure to collect tax at source as required under Chapter XVII-BB.
Penalty is deducted at an amount equal to tax not collected.
Section 271D:
Taking or accepting any loan or deposit or specified sum in contravention of the

provisions of Section 269SS.
Amount equal to loan or deposit or specified sum so taken or accepted
23
Section 271E:
Repayment of any loan or deposit or specified advance otherwise than in

accordance with provision of Section 269T.
Amount equal to loan or deposit or specified advance so repaid
Section 271F:
Failure to furnish return as required by section 139(1) or by its provisos before

the end of the relevant assessment year
24

18 February 2017
Section 271FA:
Failure to furnish an annual information return as required under section

285BA(1)2
Penalty at Rs.100/- per day of default.
Failure to furnish annual information return within the period specified in

notice u/s 285BA(5)
25
Section 271FBA:
Section 9A provides that fund management activity carried out by an eligible

offshore investment fund through an eligible fund manager acting on behalf of
such fund shall not constitute business connection in India (subject to certain
conditions).
The provision requires that eligible investment fund shall furnish within 90
days from the end of the financial year a statement, in respect of its activities in
a financial year, in the prescribed form containing information relating to
fulfilment of specified conditions and such other information or documents as
may be prescribed.
Penalty to be levied if investment fund failed to comply with the requirement.

26

18 February 2017
Section 271FB:
Failure by an employer to furnish the return of fringe benefits as required

under section 115WD(1)
Section 271G:
Failure to furnish any information or document as required by section 92D(3)
Penalty at 2% of the value of the international transaction/specified domestic

transaction for each failure.
27
Section 271GA:
Section 285A provides for reporting by an Indian concern if following

conditions are satisfied:
1) Shares or interest in a foreign company or entity derive substantial value,

directly or indirectly, from assets located in India and
2) Such foreign company or entity holds such assets in India through or in such
Indian concern.
In this case, the Indian entity shall furnish the prescribed information for the
purpose of determination of any income accruing or arising in India under
Section 9(1)(i). In case of any failure, the Indian concern shall be liable to pay
penalty.
28

18 February 2017
Penalty shall be:
A sum equal to 2% of value of transaction in respect of which such failure has

taken place, if such transaction had effect of, directly or indirectly, transferring
right of management or control in relation to the Indian concern.
A sum of Rs. 5,000 in any other case.
29
Section 271GB(1):
Failure to furnish report under section 286(2).
Penalty of Rs. 5,000 per day up to 30 days and Rs. 15,000 per day beyond 30
days.
Section 271GB(2):
Failure to produce the information and documents within the period allowed
under section 271GB(6)
Rs. 5,000 for every day during which the failure continues.
30

18 February 2017
Section 271GB(3):
Failure to furnish report or failure to produce information/documents under

section 286 even after serving order under section 271GB(1) or 271GB(2)
Penalty at Rs. 50,000 for every day for which such failure continues beginning
from the date of serving such order.
Section 271GB(4):
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).
31
Section 271H:
Failure to deliver/cause to be delivered a statement within the time prescribed

in section 200(3) or the proviso to section 206C(3), or furnishes incorrect
information in the statement
W.e.f. 1-10-2014 Assessing Officer may direct payment of penalty. Penalty shall
not be less than Rs. 10,000 but may extend to Rs. 1,00,000
32

18 February 2017
Section 271-I:
As per section 195(6) of the Act, any person responsible for paying to a non-
resident or to a foreign company, any sum (whether or not chargeable to tax),
shall furnish the information relating to such payment in Form 15CA and 15CB.
Penalty shall be levied in case of any failure.
Penalty is set at Rs.1,00,000/-
33
Section 271-I:
As per section 195(6) of the Act, any person responsible for paying to a non-
resident or to a foreign company, any sum (whether or not chargeable to tax),
shall furnish the information relating to such payment in Form 15CA and 15CB.
Penalty of Rs. 1,00,000/- shall be levied in case of any failure.
34

18 February 2017
Section 272A(1):
Refusal or failure to
1. answer questions,
2. sign statement,
3. attend to give evidence or produce books of account, etc in compliance with

summons under section 131(1),
4. comply with notice u/s 142(1), 143(2) or failure to comply with direction
issued u/s 142(2A).
Penalty at Rs. 10,000 for each failure/default
35
Section 272A(2):
Failure to
A. Furnish requisite information in respect of securities as required under

section 94(6),
B. Give notice of discontinuance of business or profession as required under

section 176(3),
C. Furnish in due time returns, statements or certificates, deliver de-claration,

allow inspection, etc., under sections 133, 134, 139(4A), 139(4C), 192(2C),
197A, 203, 206, 206C, 206C(1A) and 285B,
36

18 February 2017
Section 272A(2):
D. Deduct and pay tax under section 226(2)
E. File a copy of the prescribed statement within the time specified in section
200(3) or the proviso to section 206C(3) (up to 1-7-2012)

F. File the prescribed statement within the time specified in section 206A(1)
G. Failure to deliver or cause to be delivered a statement under Section 200(2A)

or Section 206C(3A) within prescribed time.
37
Section 272A(2):
With effect from June 1, 2015, it is mandatory for an office of the Government,
paying TDS or TCS, as the case may be, without production of a challan, to
deliver a statement in the prescribed form and manner to the prescribed
authority.
Penalty is at Rs. 10,000 for each failure/default. (In respect of penalty for
failure, in relation to a declaration mentioned in section 197A, a certificate as
required by section 203 and returns u/s 206 and 206C and statements under
Section 200(2A) or section 200(3) or proviso to section 206C(3) or section
206C(3A), penalty shall not exceed amount of tax deductible or collectible)
38

18 February 2017
Section 272AA(1):
Failure to comply with section 133B.
Penalty not exceeding Rs. 1,000.
Section 272B:
Failure to comply with provisions of section 139A/139A(5)(c)/(5A)/(5C)
Penalty at Rs. 10,000/-
39
Section 272BB(1):
Failure to comply with section 203A
Penalty at Rs. 10,000 for each failure/default
Section 272BB(1A):
Quoting false tax deduction account number / tax collection account number /
tax deduction and collection account number in challans / certificates /
statements / documents referred to in section 203A(2)
40

18 February 2017
Case Laws
Section 271(1)(c):
Concealment due to bonafide error.
Price Waterhouse Coopers Pvt. Ltd v. Commissioner of Income Tax (Supreme Court
Civil Appeal no. 6924 of 2012) (2012) 82 CCH 0263 ISCC
Conclusion: In Favor of Assessee
Imposition of penalty would be unwarranted in a case where the assessee had

committed an inadvertent and bona fide error and had not intended to or
attempted to either conceal its income or furnish inaccurate particulars.
41
Case Laws
Income not offered to tax due to bona fide mistake.
Commissioner of income Tax v. Sania Mirza (2012) 80 CCH 0373 APHC
Conclusion: In Favor of Assessee.
No penalty can be imposed u/s. 271(1) (c) unless and until there is actual
concealment of income or furnishing of inaccurate particulars of income.
42

18 February 2017
Case Laws
Revised Return of income filed after detection but before issue of s. 148
notice.
AMI Estates P Ltd v. Deputy Commissioner of income Tax (2015) 45 CCH 0234
MumTrib
Conclusion: In Favor of Assessee.
Revised declaration of income so filed by Assessee was bonafide and voluntary

and without detection of any irregularities found by department and return
was revised with view to cooperate department and to buy peace and to avoid
litigation, thus disclosure was with specific plea that no penalty proceedings be
initiated u/s.271AAA or 271(1)(c) so no penalty be imposed u/s.271(1)(c).
43
Case Laws
Surrender via filing of revised return before issue of formal notice.
Commissioner of income Tax v. Usha International Ltd (2012) 83 CCH 0055 DelHC.
Conclusion: Varies (Case law in Favor of Revenue).
For the purpose of levying penalty under s 271(1)(c), the question of

concealment of income and whether the revised return was filed voluntarily or
not is to be examined and decided upon the facts and circumstances of each
case.
44

18 February 2017
Case Laws
Shares sold to associate concern below market price.
Varren Financial Services Ltd vs. Commissioner of Income Tax (2013) 84 CCH
0048 PHHC
Conclusion: In Favor of Revenue.
When a false claim of excessive loss is made by the assessee, supported through
specious and spurious contentions, the case squarely falls within the purview of
Sec 271 (1) (c) (iii).
45
Case Laws
Surrender of income without explanation.
Commissioner of Income Tax v. MAK Data Ltd (2013) 84 CCH 0034 DelHC
Conclusion: In Favor of Revenue.
In the absence of any explanation regarding the receipt of the money, which was
in the exclusive knowledge of the assessee, an adverse inference is sought to be
drawn against the assessee as amounting to concealment of income.
46

18 February 2017
QUESTIONS &
COMMENTS
47
CA B.RAMANA KUMAR
ADVOCATE
1 FLOOR, 2/3, 4TH STREET,
GOPALAPURAM CHENNAI-600086
PHONE 9841113024
ramanakumar@ovopaxlegal.com
ramanaechambers@gmail.com
48


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18 February 2017

SEMINAR ON DIRECT TAXATION

Penalties under the Income Tax Act

Two Levels of Penalty:

Penalty of Rs.10,000/- in any other case.

Penalties under the Income Tax Act

Amendments are to be made in Sec. 140A

Amendment shall be made to Sec. 143(1)

Amendments are to be made in Sec. 271F.

The goal is to make provisions so that if a person receives any sum in

Penalties under the Income Tax Act

A new section 271J has been inserted.

It makes provisions in cases where an accountant or a merchant banker or a

In such cases, the Assessing Officer or the Commissioner of Income Tax

Penalties under the Income Tax Act

An amendment shall be made to Sec. 273B, such that penalty cannot be

This amendment will take effect from 1st April, 2017.

Status for AY: 2017-18

Determination of undisclosed income of block period.

Minimum Penalty of 100% of tax leviable in respect to undisclosed income.

Maximum Penalty of 300% of tax leviable in respect to undisclosed income

Penalties under the Income Tax Act

Status for AY: 2017-18....conti

Default in making payment of Tax.

Chargeable at Rs.200 per day of default until date of filing.

Penalty amount cannot exceed amount of tax in arrears.

Status for AY: 2017-18....conti

Under-reporting and misreporting of income.

Penalty is 50% of the amount of tax payable on under-reported income.

If under-reported income is in consequence of any misreporting thereof by any

Penalties under the Income Tax Act

Status for AY: 2017-18....conti

Failure to comply with a notice under section 115WD(2)/115WE(2)/142(1) or

Penalty at Rs.10,000/- for each failure.

However penalty shall not be levied to and in relation to any assessment

Status for AY: 2017-18....conti

Concealment of particulars of income or fringe benefits or furnishing of

Minimum Penalty of 100% of tax sought to be evaded.

Maximum Penalty of 300% of tax sought to be evaded.

Penalties under the Income Tax Act

Status for AY: 2017-18....conti

Distribution of profits by registered firm otherwise than in accordance with

Status for AY: 2017-18....conti

Failure to keep, maintain, or retain books of account, documents, etc., as

Penalties under the Income Tax Act

Status for AY: 2017-18....conti

Failure to keep and maintain information and documents required by section

Failure to report such transaction.

Maintaining or furnishing incorrect information or document.

Penalty of 2% of value of each international transaction/or specified domestic

Status for AY: 2017-18....conti

Failure to furnish information and document as required under Section 92D(4)

Penalty at 10% of undisclosed income.

Penalties under the Income Tax Act

Status for AY: 2017-18....conti

Penalty of 10% of undisclosed income

If the assessee admits the undisclosed income, substantiates the manner in

Status for AY: 2017-18....conti

Penalty of 20% of undisclosed income

Penalty of 60% of undisclosed income

In cases where the previous two options are not applicable.

Penalties under the Income Tax Act

Status for AY: 2017-18....conti