slide 3.

4
Levy of Penalties,Heads of
Income & Aggregation of
Income under Income Tax Act
slide 3.4
INTRODUCTION
Increase in tax payers call for more reliance on
voluntary compliance of tax laws by assessees
Appropriate penal provisions needed to impel
compliance by imposing additional tax burden in
case of non compliance
Penalties to be within reasonable limits to be more
effective
Object should be to bend and not to break the tax
payer
slide 3.4
Penalties in brief
Section Nature of default Minimum
penalty
Maximum
penalty
140A
(3)
Failure to pay
whole or any part
of income-tax or
interest or both in
accordance with
the provisions of
section 140A(1)

Slide 3.2

Such amount
as the
Assessing
Officer may
impose [Sec.
221(1)]
Tax in arrears
slide 3.4
Penalties in brief
Section Nature of default Minimum
penalty
Maximum
penalty
221(1) Default in making
payment of tax
within prescribed
time

Slide 3.2

Such amount
as the
Assessing
Officer may
impose
Tax in arrears
slide 3.4
Penalties in brief
Section Nature of default Minimum
penalty
Maximum
penalty
271(1)
(b)
Failure to comply
with a notice
under section
142(1) or 143(2)
or with a direction
issued under
section 142(2A)

Slide 3.2

Rs. 10,000
(Rs. 1,000
up to May
31, 2001) for
each failure
Rs. 10,000
(25,000 up to
May 31,
2001) for
each failure
slide 3.4
Penalties in brief
Section Nature of default Minimum
penalty
Maximum
penalty
271(1)
(c)
Concealment of
the particulars of
income or
furnishing
inaccurate
particulars of
income
100% of tax
sought to be
evaded
300% of tax
sought to be
evaded
slide 3.4
Penalties in brief
Section Nature of default Minimum
penalty
Maximum
penalty
271(4) Distribution of profit
by registered firm
otherwise than in
accordance with
partnership deed and as
a result of which
partner has returned
income below the real
income
Up to 150%
of difference
between tax
on partners
income
assessed and
tax on
returned
income
----

slide 3.4
Penalties in brief
Section Nature of default Minimum
penalty
Maximum
penalty
271A Failure to keep or
maintain 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)
slide 3.4
Penalties in brief
Section Nature of default Minimum
penalty
Maximum
penalty
271AA Failure to keep and
maintain information
and documents in
respect of international
transaction (applicable
from the assessment
year 2002-03)
2% of value
of each
international
transaction
---
slide 3.4
Penalties in brief
Section Nature of default Minimum
penalty
Maximum
penalty
271B Failure to get accounts
audited under section
44AB or furnish such
report as is required
under section 44AB
2
% of the
total sales,
turnover, or
gross receipts
Rs.100000
slide 3.4
Penalties in brief
Section Nature of default Minimum
penalty
Maximum
penalty
271BA Failure to submit report
under section 92E
(applicable from the
assessment year 2002-
03)
Rs. 1,00,000 -----
slide 3.4
Penalties in brief
Section Nature of default Minimum
penalty
Maximu
m penalty
271C Failure to deduct the whole
or any part of tax as required
under sections 192 to 195 or
(with effect from June 1,
1997) failure to pay the
whole or any part of tax as
required under section
115-O(2) or second proviso
to section 194B
Amount
of tax
such
person
has failed
to deduct
or pay
-----
slide 3.4
Penalties in brief
Section Nature of default Minimum
penalty
Maximum
penalty
271D Taking or accepting any
loan or deposit in
contravention of the
provisions of section 269SS
Amount
of loan/
deposit so
taken or
accepted
-----
slide 3.4
Penalties in brief
Section Nature of default Minimum
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
Amount
of deposit
so repaid
-----
slide 3.4
Penalties in brief
Section Nature of default Minimum
penalty
Maximu
m penalty
271F Failure to furnish return of
income as required by
section 139(1) before the
end of relevant assessment
year
Rs. 5,000
(Rs. 1,000
up to May
31, 2001)
-----
slide 3.4
Penalties in brief
Section Nature of default Minimum
penalty
Maximu
m penalty
271F Failure to furnish return of
income 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)
-----
slide 3.4
Penalties in brief
Section Nature of default Minimum
penalty
Maximu
m penalty
271G Failure to furnish
information or documents
under section 92D applicable
from the assessment year
2002-03
2% of
value of
the
internatio
nal
transactio
n for each
failure
-----
slide 3.4
Penalties in brief
Section Nature of default Minimum
penalty
Maximu
m penalty
272A(1
)(a)
Failure to answer any
question put to a person
(who is legally bound to
state the truth of any matter
touching the subject to his
assessment) by an income-
tax authority
Rs.
10,000
(Rs. 500
up to May
31, 2001)
for each
default
Rs.
10,000
for each
default
slide 3.4
Penalties in brief
Section Nature of default Minimum
penalty
Maximu
m penalty
272A(1
)(b)
Failure to sign any statement
made 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
slide 3.4
Penalties in brief
Section Nature of default Minimum
penalty
Maximu
m penalty
272A(1
)(c)
Failure to comply with
summons issued under
section 131(1) to attend
office to give evidence and
produce books of account or
other documents
Rs.
10,000
(Rs. 500
up to May
31, 2001)
for each
default
Rs.
10,000
for each
default
slide 3.4
Penalties in brief
Section Nature of default Minimum
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
slide 3.4
Penalties in brief
Sec 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/profession
under section 176(3);
Rs. 100 for
every day
during
which
default
continues
Rs. 100 for every
day during which
default continues
slide 3.4
Penalties in brief
Sec Nature of default Min
penalty
Max penalty
272A
(2)
Failure
to furnish
returns/statement
mentioned in section 133,
206, 206C or 285B ;
to allow inspection of
register referred in section
134 (or of any entry in
such register or to allow
copies of such register to
be taken) ;
Rs. 100
for every
day
during
which
default
continues
Rs. 100 for every
day during which
default continues
(the amount of
penalty under
sections 206 and
206C shall not
exceed the
amount of tax
deductible or
collectible)
slide 3.4
Penalties in brief
Sec Nature of default Min
penalty
Max penalty
272A
(2)
Failure
to furnish return of
income under section
139(4A) [or section 139
(4C) from April 1, 2003] or
to deliver in due time a
declaration mentioned in
section 197A ;
Rs. 100
for every
day
during
which
default
continues
Rs. 100 for every
day during which
default continues
(the amount of
penalty in relation
to declaration
under section
197Ashall not
exceed the
amount of tax
deductible or
collectible)
slide 3.4
Penalties in brief
Sec Nature of default Min
penalty
Max penalty
272A
(2)
Failure
to furnish a
certificate as required
in 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
day
during
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 penalty
under section 206C
shall not exceed the
amount of tax
deductible or
collectible)
slide 3.4
Penalties in brief
Sec Nature of default Min penalty Max penalty
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 -----
slide 3.4
Penalties in brief
Sec Nature of default Min penalty Max penalty
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 -----
slide 3.4
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
slide 3.4
Time limit for completion of penalty
proceedings
Time limit for making an order imposing a penalty is :
a. within the financial year in which penalty
proceedings are started ; or
b. within 6 months from the end of month in which
action for imposition of penalty is initiated or within 6
months from the end of month in which order of
appeal of Commissioner (Appeals) under section 246
or 246A or Tribunal under section 253 is received by
Commissioner,
whichever is later.

slide 3.4
Time limit for completion of penalty
proceedings
However, 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

slide 3.4
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.


slide 3.4
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 different
heads 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 taxed
under another headKaranpura Development Co.
Ltd. v. CIT [1962] 44 ITR 362 (SC).

slide 3.4
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 computing
section corresponding to that head
Nalinikant Ambalal Mody v. CIT (supra).
n The method of book-keeping followed by
an assessee cannot decide under which head
a particular income should goNalinikant
Ambalal Mody v. CIT (supra



slide 3.4
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 and
source thereof or the explanation offered by him is
not, in the opinion of the Assessing officer,
satisfactory, the sum so credited may be charged to
income-tax as the income of the assessee of that
previous year.


slide 3.4
Section 68 [I.T. Act, 1961]
Cash Credits.

Section 68 enacts deeming provisions : - Section
essentially contains a deeming provision, which
applies when the assessees explanation about a
cash credit found in his books is rejected. There is
no distinction to be drawn between income
resulting from application of section 68 and
income accruing from any other of the heads
indicated in section 14. [CIT v Ganpatrai
Gajanand, (1977) 108 ITR 403] (Orissa

slide 3.4
Section 68 [I.T. Act, 1961]
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 in
relation to an entry in assessees 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 costs
of assets can make no difference. [Dharmavat Provision
Stores v CIT (1983) 139 ITR 700 (Bom)]

slide 3.4
Section 69 [I.T. Act, 1961]
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 books
of account, if any, maintained by him for any
source of income; and


slide 3.4
Section 69 [I.T. Act, 1961]
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 of
the 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).

slide 3.4
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 valuable
article is not recorded in the books of account, if any,
maintained by him for any source of income, and the
assessee offers no explanation about the nature and source
of acquisition of the money, bullion, jewellery or other
valuable article, or the explanation offered by him is not,
in the opinion of the Assessing Officer satisfactory, the
money and the value of the bullion, jewellery or other
valuable article may be deemed to be the income of the
assessee of such financial year.
slide 3.4
Section 69B [I.T. Act, 1961]
Amount Of Investments, Etc., Not Fully
Disclosed 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 other
valuable article, and the Assessing Officer finds that the
amount expended on making such investments or in acquiring
such bullion, jewellery or other valuable article exceeds the
amount recorded in this behalf in the books of account
maintained by the assessee for any source of income, and the
assessee offers no explanation about such excess amount or the
explanation offered by him is not, in the opinion of the
Assessing Officer, satisfactory, the excess amount may be
deemed to be the income of the assessee for such financial
year.
slide 3.4
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 of
such 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 part
thereof, as the case may be, may be deemed to be the income
of the assessee for such financial year;
Provided that, notwithstanding anything contained in any other
provision of this Act, such unexplained expenditure which is
deemed to be the income of the assessee shall not be allowed
as a deduction under any head of income.

slide 3.4
Section 69C [I.T. Act, 1961]
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 even
otherwise an addition could be made in respect of
the amount of expenditure, which the assessee is
found to have actually incurred but not
satisfactorily explained (Yadu Hari Dalmia v CIT
(1980) 126 ITR 48 (Delhi).

slide 3.4
Section 69C [I.T. Act, 1961]
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 expenses
Only unexplained of expenditure incurred by
assessee to be brought to tax


slide 3.4
Section 69D [I.T. Act, 1961]
Amount Borrowed Or Repaid On
Hundi.
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 cheque
drawn on a bank, the amount so borrowed or
repaid shall be deemed to be the income of the
person borrowing or repaying the amount aforesaid
for the previous year in which the amount was
borrowed or repaid, as the case may be :

slide 3.4
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 this
section 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 this
section on repayment of such amount.