By Satish Kumar Bhadani

ITO, MSTU, Nashik

 DISCLAIMER

The materials available in this Power Point
Presentation are for information purposes
only not for the purpose of providing legal
advice. You should contact your attorney
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or refer to Bare Act.
 Background
• Finance Act, 2016 inserted sub-section (7) to Section 271 which
provides that Provisions of Section 271 shall not be applicable on and
after 01.04.2017 i.e. from A.Y. 2017-18

• Further, Finance Act also introduced new section 270A, applicable

with effect from 01.04.2017 i.e. A.Y. 2017-18, governing the penalty
provisions in case of ‘under-reporting’.

• The newly inserted section provides for levy of penalty in cases of

under-reporting and mis-reporting of income instead of concealment
of the particulars of income or for furnishing inaccurate particulars of
income.
• Question:- Section 270A has been inserted by the F.A., 2016 with effect from 1.4.2017,
therefore a question arises as to whether the provisions of section 270A are
applicable to –
• Penalty orders passed on or after 1.4.2017
• Penalty initiated on or after 1.4.2017
• Returns filed on or after 1.4.2017 irrespective of the assessment year to which they
pertain.
• For returns filed on or after 1.4.2017 for AY 2017-18 or thereafter
• Ans:- Sub-section (7) has been inserted to s. 271 w.e.f. 1.4.2017 “ (7) The
provisions of this section shall not apply to and in relation to any assessment
for the assessment year commencing on or after the 1st day of April, 2017.”
• Para 62.1 of the Circular No. 3 of 2017 explaining the provisions of FA, 2016–
“….. Section 271 of the Income-tax Act has been made non-applicable in
relation to any assessment for assessment year commencing on or after 1st day
of April, 2017 and subsequent assessment years and penalty shall be levied
under the newly inserted section 270A of the Income-tax Act with effect from 1st
day of April, 2017.”
 New penalty provisions introduced vide Finance Act 2016 and
Finance Act 2017
Effective from AY 2017-18 Effective from AY 2018-19
• Sec. 270A – Penalty for under reporting and • Sec. 234F – Fee for default in
misreporting of income
• Sec. 270AA – Immunity from imposition of furnishing return of income
penalty, etc.
• Sec. 271AAC – Penalty in respect of certain
income
• Sec. 271DA – Penalty for failure to comply
with the provisions of sec. 269ST
• Sec. 271GB – Penalty for failure to furnish
report or for furnishing inaccurate
information under sec. 286
• Sec. 271J – Penalty for furnishing incorrect
information in reports or certificates .
 New penalty provisions introduced vide F.Act
2018, 2019,2020, & 2021
W.e.f. A.Y. 2019-20 A.Y.2020-21
• Amendment in provision of sec. 271FA • W.e.f. 1st Nov.2019 the provision 269SU
• Failure in furnishing the statement of is applicable.
financial transaction / re-portable In case assesssee who is in business of
account as required under section providing the facility for accepting payment
285BA (1) within the time limit through prescribed electronic mode, fails to
prescribed under section 285BA (2). comply the provision of section 269SU, the
Rs.500/-per day, penalty under section 271DB of the Income
• Failure in furnishing the statement of Tax Act would be imposed to the extent of
financial transaction / reportable INR 5000 per day till the failure continues.
account within the period specified in • However, it is important here to note
the notice issued under section 285BA that the penalty would be effective only
(5). Rs.1000/- per day. from 1st February 2020.
 F.Act.2019- A.Y.2020-21 F.Act.2020- A.Y.2021-22
• Penalty for failure to • Section 271AAD – Penalty
comply with various for false entry / fake
provisions of Permanent invoices [inserted
Account Number (PAN) – vide Finance Act, 2020 –
Section 272B. w.e.f. 01.04.2020],
• The Assessing Officer can • Penalty equivalent to a sum
direct the defaulter to pay equal to the aggregate
the penalty of Rs. 10,000/- amount of such false entry
for each of the default. or omitted entry is levied.
 F.Act.2020- A.Y.2021-22 Finance Act.2020
• Penalty for failure to furnish • Amendment in provision of
statements prescribed u/s sec. 274.
35 and Sec. 80G, etc. • Faceless Penalty: The
• A new section 271K has Central Government
been inserted in the Act vide notification S.O.117(E),
which empowers the dated 12-1-2021, has
Assessing Officer to levy a notified the Faceless
penalty of Rs. 10,000 to Rs. 1 Penalty Scheme, 2021
lakh, if assessee fails to effective from 12-01-2021.
furnish the statement or fails
to furnish a certificate.
 Amendment through F.Act.2021
• Finance Act, 2021 has reduced the time limit to file belated [Sec
139(4)]or revised [Sec 139(5)] return of income from 31st March
to 31st December of the relevant Assessment Year. As return of
income can’t be filed beyond 31st December of the relevant
Assessment Year, late filing fee after amendment shall be payable
in the following manner:
Total Income (Rs.) Date of filing of ITR Late filing Fees (Rs.)
Assessee not liable to file ITR Any time during April to December Nil
Any amount of Income On or before the due date Nil
Up to Rs.5 Lakhs After the due date 1,000
Exceeding Rs.5 Lakhs After the due date 5,000
• Fee for default in linking Aadhaar and PAN – U/s 234H:
• As per Section 139AA, it is mandatory for every person who has
been allotted PAN as on 1st July 2017 and who is eligible to obtain
Aadhaar number, shall link his Aadhaar number with PAN. As per
latest notification, the due date for such linking has been
extended to 30th Sep 2021.
• If any person fails to link his Aadhaar number with PAN on or
before the due date for linking (currently 30th Sep 2021), while
linking Aadhar number with PAN after due date such person has
to pay penalty fee not exceeding Rs.1,000 as introduced under
new Section 234H by Finance Act, 2021.
Penalty on Under-
reporting and Mis-
reporting of
Income
 Introduction
Rationale: It appears that with a view to reduce litigation and remove the discretion of
tax authority, the FA, 2016 has inserted new provisions in section 270A and 270AA in
the Act which will replace the existing provisions of section 271(1)(c).

Introduced by Finance Act, 2016

Introduced with a desire to rationalize penal provisions and bring

Objectivity

Certainty

Clarity

To reduce the litigation arising out of ambiguity in section 271(1)(c)

The Finance (No. 2) Act, 2019 has amended section 270A with retrospective effect
from 1.4.2017.
 Overview of Section 270A
Sub Section What Deals With
1 Levy of penalty
2 What constitutes “under-reporting”
3 Computation of “under-reported” income
4/5 Telescoping of past additions
6 Exclusion from “under-reported” income
7/10 Quantum of penalty for “under-reported” income
8/10 Quantum of penalty for “mis-reported” income
9 What constitutes “mis-reporting”
11 No double levy
12 Order to be passed in writing
 Section 270A(1):
• The AO/CIT(A)/CIT or Pr. CIT may during the
course of any proceedings under this Act,
direct that any person who has under-
reported his income shall be liable to pay a
penalty in addition to tax.
 Analysis of Section 270A(1)
• Following points emerge from Section 270A(1):
1. Penalty can be levied either by A.O. or C.I.T. (Appeals) or by
Pr. C.I.T/C.I.T..
2. Direction for penalty has to be “during the course of any
proceedings under this Act”. The proceedings may be any
assessment proceeding before A.O., Appeals before C.I.T.
(Appeals) or revisionary proceedings before Pr. C.I.T/C.I.T.
3. Though the use of word “may” indicate that penalty is not
automatic in every case and each case needs to be
considered judiciously by the authority before levy of
penalty, the way “under reported income” has been
considered in the subsequent part of section, it may result
into penalty being imposed in every case of addition
during assessment etc.
 Under-reporting' S. 270A(2)
When can it be said that there is ‘Under-Reporting’
• In case of regular assessment where income is taxable
as per the normal provisions:
1. Income assessed is greater than the income
determined u/s 143(1)(a). (Difference between
assessed income and income determined u/s 143(1)
(a).
– E.g.1: If income assessed is Rs. 12.50 Lacs as against income
u/s 143(1)(a) Rs. 3 lacs.
– The above implies that there can not be any penalty for
adjustments made u/s 143(1)(a).
– In this case penalty will be decided on 12.50 -3.00=9.50 lacs.
2. Income assessed is greater than the maximum amount not
chargeable to tax, where no return has been furnished or where the
return has been furnished for the first time under section 148;.
• The amount of income assessed (in case of Firm/Company or Local
Authority) or difference between the income assessed and
maximum amount not chargeable to tax in any other cases.
E.g. 2 : If income assessed is Rs. 12.50 Lacs and no ROI filed by the
individual of the return has been furnished for the first time under
section 148
– In this case since the assessee is an individual hence penalty leveiable on the
sum of Rs.12.50- Rs.2.50=Rs.10.00/-)
– In case of Firm/Compnay or Local Authority Penalty leviable on Rs.12.50 lacs.
• In case of Reassessment :
3. Income reassessed is greater than the income assessed or
reassessed immediately before such reassessment.
– Difference between the amount of income reassessed or
recomputed and the amount of income assessed in preceding
order.
• In case of conversion of loss into income or reduction of
loss :
4.Income assessed or reassessed has the effect of reducing
the loss or converting such loss into income.
– In case of decrease in loss difference between the previous loss
and loss/income determined during assessment.
• In case where the income computed under 115JB/ 115JC is the
deemed total income:
5. 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 u/s 143(1)(a).
6. 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, where no return of income has been furnished
or where return has been furnished for the first time under section 148;
7. Amount of deemed total income reassessed as per the provisions of
section 115JB or section 115JC is greater than the deemed total
income assessed or reassessed immediately before such reassessment.
 Quantum of under-reported income: S. 270A(3)
A. If assessed for the First Time:
• If Return has been furnished: Difference between the
assessed income and the amount of income determined
u/s 143(1)(a). In Ex 1, UI = 12.50 -3.00 = 9.50 Lacs.
• If Return has not been furnished :
(a) In case of Firm, Company or Local Authority: Assessed
Income .
(b) In any other case: difference between the assessed income
and maximum amount not chargeable to tax. In Ex 2, UI =
12.50 -2.50 = 10.00 Lacs.
B. In case where there is Effect of reducing loss or
converting loss into income:
– Difference between the loss claimed and the income or
loss, as the case may be, assessed or reassessed.
– Eg.Returned loss 12lacs, assessed loss 8 lacs UI: -8-(-12)=4lakh
– Returned loss 12 lacs assessed income :3lacs UI: 3-(-12)=15lacs.
C. In any other case:
– Difference between the amount of income reassessed or
recomputed and the amount of income assessed,
reassessed or recomputed in a preceding order.
 Where Sec. 115JB/115JC are applicable-
Under-reported income will be calculated as per the formula: (A – B) + (C – D)
D.

•Where,
–A = the total income assessed as per general provisions of the Act
–B = the total income assessed as per general provisions of the Act less 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 assessed as per the provisions contained in section 115JB
or section 115JC less the amount of under-reported income
•Where amount is considered under both normal provision and MAT/AMT, then
such amount shall not be reduced from total income assessed while
determining the amount under item D.
 Quantification of under-reported income – sub-section (3)

Particulars Rupees

Total income assessed as per normal A 10,00,000

provisions
Income assessed under normal B 8,00,000
provisions reduced by URI

Total income assessed as per S. C 12,00,000

115JB/115JC
Income assessed under S. 115JB/115JC D 10,00,00

Total under-reported income (A-B)+C-D) 4,00,000

• As per the plain reading of proviso to section
270A(3), it is clear that the said provision is
applicable only where the Under-Reported
Income arises out of the determination of
deemed total income in accordance with the
provision of Section 115JB/115JC of the Act.
 Determination of income in case of losses
•The amount of under-reported income will be difference between –
(a) amount of losses assessed/reassessed/recomputed (if it results into reduced
losses); and
(b) the amount of losses determined / assessed / re-assessed / re-computed in
the preceding assessment order
•In case of first assessment, it appears that in view of the language of Explanation
the losses claimed i.e. the losses as per Return of Income need to be considered
and not losses as per Intimation under s.143(1)(a).
•This interpretation leads to a differential treatment between assessees who
have returned income and one who has returned a loss. However, example of
loss to loss situation given in Explanatory Memorandum indicates that the
computation of under-reported income is with reference to loss processed and
not loss claimed in the return of income.
•In case of second and subsequent assessments it will be difference between
losses as per two assessments.
Intangible
Additions

Sec 270A(4) & (5)

 Intangible Additions

The Assessing Officer in many cases makes additions to the
returned income purely on account of certain technical
reasons.

For example, sometimes he calculates the total income of the
assessee by assuming a certain rate of gross profit or yield.
Similarly the Assessing officer sometimes disallows a portion
of certain expenses on estimated basis.

These are commonly referred to as intangible additions. On
such intangible additions, normally penalty is not levied as
adequate material to establish that these additions represent
the assessee's concealed income are not available.

These intangible additions may be exploited by the assessee as a
means of escape from tax and penalty in assessments pertaining
to subsequent years when he is confronted with the need to
explain the source of some of his funds, assets, etc. He may, in
that case, take the plea that the said funds, etc. have come out of
the income represented by intangible additions made in the
earlier assessment.

The Supreme Court in Anantharam Veerasighaiah and Co. v CIT
(1980) 123 ITR 457 (SC) observed that the secret profits or
undisclosed income of an assessee earned in an earlier
assessment year, commonly described as intangible additions, are
also the real income of the assessee. Therefore the assessee can
explain the unexplained investment, etc. of the current year to
have been met out of intangible additions made in the past.

To take care of such eventuality Explanation 2 has
been inserted to enable the Assessing Officer to
initiate penalty proceedings in respect of intangible
additions made in the past which are claimed by the
assessee to be the source of any receipt, deposit or
outgoing or investment. in any subsequent year.

The penalty proceedings shall be initiated for the
assessment year(s) in which such intangible additions
were made and shall be leviable only on such
intangible additions made in past year(s) which have
been claimed to be a source of receipt, deposit or
outgoing or investment of the subsequent year.

To enable the assessing officer to initiate penalty
proceedings in respect of earlier year(s) in which
intangible additions were made, section 271(1A)
has been inserted.

According to this section, where any penalty is
imposable by virtue of Explanation 2 to section
271(1), the proceedings for imposition of such
penalty may be initiated at any time, even if
assessment proceedings in the course of which
such penalty could have been initiated have been
completed.

Year(s) for which penalty proceedings will be initiated: Where the
assessee claims that the unexplained investment, unexplained cash
credit or unexplained expenditure, etc. of the current year is out of
the intangible additions made in the past year(s), penalty
proceedings will be first initiated by the Assessing Officer on the
intangible additions made in the immediate preceding previous year
and if such intangible additions of the immediate preceding previous
year is not sufficient to cover the whole amount of receipt, deposit/
outgoing or investment, penalty proceedings on the balance shall be
initiated on the intangible additions made in the year immediately
earlier to the said proceedings for year and so on.

Further penalty shall be levied as per the rates applicable to the
respective assessment years. The penalty in this case can be
initiated at any time even if the assessment has been completed.
 Example

Example: The unexplained investment for assessment year
2008-09 was found to be Rs. 6,00,000. The following
intangible additions have been made in the past year(s)

Assessment Year Amount (Rs.)

2007-2008- Rs.2,00,000 /-

2006-2007- Rs.3,00,000/-

2005-2006- Rs.2,00,000/-

2004-2005- Rs.1,00,000/-

In the above case penalty proceedings will be initiated on the
intangible additions as follows:

For assessment year

2007-2008- Rs.2,00,000/-

2006-2007- Rs.3,00,000/-

2005-2006- Rs.1,00,000/-

If the entire/part of the intangible additions have
already been subject to penalty in the past then no
such penalty proceedings shall be initiated on such
intangible additions which have been claimed to be
the source of unexplained investment etc. of the
current year.

Example: Unexplained investment of Rs. 12,00,000 was found for
assessment year 2008-09. The following addition has been made and
penalty imposed in the past years:

———————————————————————————————
Asst. year Total addition Amount of addition on which penalty levied
———————————————————————————————

2007-2008 3,00,000 Penalty levied on intangible additions of Rs 1,00,000 only

2006-2007 5,00,000 Nil

2005-2006 4,00,000 Penalty levied on intangible addition of Rs. 2,00,000

———————————————————————————————

In the above case penalty proceedings will be initiated for assessment
year 2008-09 on the amount mentioned in column 4, calculated as
under:
A.Y. Intangible Penalty already Balance amount
additions made levied on which penalty
starting from is liveable in
immediate respective
proceeding years assessment year
in which
intangible
addition is made

2007-08 3,00,000 1,00,000 2,00,000

2006-07 5,00,000 nil 5,00,000

2005-06 4,00,000 2,00,000 2,00,000

 Section 270A (4) & (5):
• 270A(4) provides that subject to sub-section (6), is somewhat similar to
erstwhile explanation 2 to section 271(1) and provides that
– where the source of any receipt(R), deposit (D) or investment (I) in any
assessment year is claimed to be an amount added to income or deducted while
computing loss, as the case may be, in the assessment of such person in any year
prior to the assessment year in which such receipt, deposit or investment appears
and No penalty was levied for such preceding year
– the under-reported income shall include such amount as is sufficient to cover
such receipt, deposit or investment.
– If additions made in > 1 year, then to cover up the R/D/I in subsequent years, - Go
backwards.
– If penalty was initiated, but dropped ? (not ‘levied’)
– Refer Circular 204 dated July 24, 1976 – Additions for technical reasons – eg GP
addition, presumptive, estimated disallowance, shortfalls, wastage.
– In case if penalty was levied than there is no issue.
• Further, section 270A(5) specifies that the amount deemed to be
amount of income under-reported for the preceding year in the
following order—
a) the preceding year immediately before the year in which the
receipt, deposit or investment appears, being the first
preceding year; and
b) where the amount added or deducted in the first preceding
year is not sufficient to cover the receipt, deposit or
investment, the year immediately preceding the first preceding
year and so on.
 Order in which intangible Additions will be deemed to be under- reported
income of preceding year – Ss. (5)
• Provision similar to sub-sections (4) and (5) was made through
Explanation 2 in section 271 of the Act. In relation to the said
Explanation 2, CBDT has in Circular No. 204, dated 24.7.1976 explained
the matter as follows –
• "61.9 New Explanation 2 makes a provision in respect of 'intangible
additions'.
– Additions are sometimes made by the Income-tax Officers for purely
technical reasons, for example, application of a presumptive rate of
gross profit or of yield, or on account of estimated disallowance of
certain expenses, shortfalls, wastage, etc.,
– but no penalty for concealment is levied in respect of these
additions for want of adequate evidence to establish that these
additions represent the assessee's concealed income.

In later assessments, when called upon to explain certain deposits,
etc., the assessees urge at times that such deposits, etc., have come
out of the income represented by the aforesaid additions made
earlier.

Despite this virtual confession of concealment on the part of the
assessee, no penalty was hitherto leviable in such cases as the time
limit for initiating concealment penalty proceedings in respect of the
earlier year in which the addition was made would have expired.

The penalty could also not be imposed in respect of the year in which
the deposit was made, as there was no concealment in that year, the
deposit having been explained as out of an earlier year's income.

New Explanation 2 provides that in such cases, the assessee would
become liable to penalty for concealment in respect of additions
made in the earlier year in which the additions were made."
 Order in which intangible Additions will be deemed to be under-
reported income of preceding year – Ss. (5)
• To state in simple words what sub-section (4) and (5) provide is –
• If in Year 1 an addition was made and in year 2, 3, 4 …. there is a receipt, deposit or
investment, the source of which is claimed to be the addition made in Year 1 then,
• if no penalty was levied in Year 1 on the amount of addition made then the amount
of receipt, deposit or investment shall be deemed to be under-reported income of
the preceding year in which the addition was made.
• If the addition was made in more than one year, then to cover up the amount of
receipt, deposit or investment in subsequent years one has to go backwards.
• Question will arise if in an earlier year penalty was initiated but was dropped (i.e.
not “levied”) Would the situation be different if penalty was levied but was dropped
in an appeal.
• Refer Circular 204 dated July 24, 1976 – Additions for technical reasons – e.g. GP
addition, presumptive additions, estimated disallowance, shortfalls, wastage, etc. In
respect of intangible additions made prior to AY 2017-18, can the section apply and
penalty be levied under this section?
 Exceptions in certain
scenarios- Sec.271A(6)
 The ‘Under-reported’ income shall not include the
following amount:
• Where explanation is offered:
The amount of income in respect of which the
assessee offers an explanation
and
the AO/CIT or Pr. CIT/CIT(A) is satisfied that the
explanation is bona fide
and
the assessee has disclosed all the material facts to
substantiate the explanation offered.
• Under reporting on account of estimated additions:
(1) the amount of under-reported income is determined on the basis of
an estimate,
a.If the accounts are correct and complete to the satisfaction of the
AO/ CIT(A)/ CIT or Pr. CIT, as the case may be,
b. But the method employed is such that the income cannot properly
be deduced there from.
(2) the amount of under-reported income is determined on the basis of
an estimate,
a. If the assessee has, on his own, estimated a lower amount of
addition or dis allowance on the same issue and
b. has included such amount in the computation of his income and
c. has disclosed all the facts material to the addition or disallowance.
• Additions on account of ALP determined by TPO: The
amount of under-reported income is represented by
any TP addition made in conformity with the ALP
determined by the TPO,
– where the assessee had maintained information and
documents as prescribed under section 92D,
– declared the international transaction under Chapter X, and,
– disclosed all the material facts relating to the transaction
• Search cases covered by Section 271AAB: The amount
of undisclosed income referred to in section 271AAB
 Effect of S. 270A(6)
• The formula for Under-reported income as given in Sec.
270A(3) has to be read with Sec. 270A(6).
• In other words, if any of the situations as given in Sec. 270A(6)
are applicable, that much amount is to be excluded from the
formula of Sec. 270A(3).
• In Ex. 1, if the addition includes an amount of say Rs. 4 lacs, in
respect of which assessee has given a bonafide explanation
with disclosure of facts, Under-reported income (UI) will be
reduced by Rs. 4 lacs i.e. UI = 9.50-4.00=5.50 Lacs.
• Similarly, if it is a situation as in Ex. 2, UI = 10.00-4.00 =6.00
Lacs.
 PENALTY FOR UNDER-REPORTING S. 270A(7)

• Penalty = 50% of the amount of

tax payable on under reported
income.
 Tax payable in respect
Section: 270A(10) of the under reported
income
 Section -270A(10) : Tax payable in respect of the under-
reported income shall be:
i.Where no return of income or where the return has been
furnished for the first time under section 148 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.
In Ex. 2, Tax on UI = Tax on Rs. (6 + 2.5) 8.5 Lacs – Tax on Rs. 2.50 Lacs.
ii. where the total income determined u/s 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.
• iii. In other case determined as per the formula
(X-Y), where,
– X – amount of tax calculated on the under-reported
income as increased by the total income determined u/
s 143(1)(a) or assessed, reassessed or recomputed in
the preceding order as if it were the total income and
– Y - amount of tax calculated on the total income
determined u/s 143(1)(a) or assessed, reassessed or
recomputed in the preceding order
– In Ex. 1, Tax on UI = Tax on Rs. (5.5 + 3) 8.5 Lacs – Tax
on Rs. 3.00 Lacs.
MISREPORTI
NG: Sec.
270A(9)
 Background
• 270A(8) provides that in case where the under-
reporting is because of misreporting
• than provision of sub-section(6) shall not apply
(i.e. exceptions not applicable in case of Mis-
reporting)
• and also that the penalty shall be levied at 200%
of the amount of tax payable on under reported
income.
 Misreporting of Income u/s 270A(9)

Misrepresentation or Non-recording of investment in

suppression of facts books of account

Claim of expenditure Recording of false entry in

not substantiated by books of account
evidence

Failure to record any Failure to report any

receipt in books of international transaction or
account which has a specified domestic transaction
bearing on total income under Chapter X
 FROM
IMPOSITION OF
PENALTY, ETC.
–[Section
270AA]
 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 section 276CC, if he fulfils the
following conditions, namely:—
(a) the tax and interest payable as per the order of assessment or
reassessment under sub-section (3) of section 143 or section 147, as the
case may be, has been paid within the period specified in such notice of
demand; and
(b) no appeal against the order referred to in clause (a) has been filed.
(2) An application referred to in sub-section (1) shall be made within one
month from the end of the month in which the order referred to in clause
(a) of sub-section (1) has been received and shall be made in such form and
verified in such manner as may be prescribed.
 AO shall grant immunity subject to the following conditions –

(1) Payment of taxes & interest has been made as

per the order u/s 143 (3) or 147
(2) Time limit for filing the appeal u/s 249(2) has
been elapsed.
(3) No immunity u/s. 270AA shall be granted in
case where ‘under reporting’ is on account of
‘Misreporting’
 Circumstance in which AO can not grant immunity Sec.
270AA(3)
• Immunity shall be granted by AO only if the Penalty proceedings u/s
270A have not been initiated on account of the following:
– Misrepresentation or suppression of facts
– Failure to record investments in the books of account.
– Claim of expenditure not substantiated by any evidence.
– Recording of any false entry in books of accounts.
– Failure to record any receipt in the books of account having a
bearing on total income.
– Failure to report any international transaction or any transaction
deemed to be an international transaction or any specified domestic
transaction.
 Time Barring for immunity
• For Assessee: Application is to be made within One
month from the end of the month in which the
order of assessment or reassessment is received by
the assesse.
• For Assessing Officer/Others: Order, accepting or
rejecting the application, is to be passed within a
period of One month from the end of the month in
which such application is received.
 Clarification issued by the CBDT regarding immunity u/s
270AA
• An Apprehensions were raised before the CBDT that if any assessee avails the
benefit of immunity under section 270AA of the Act and penalty is initiated under
section 271(1)(c) of the Act on same issue in the case of assessee for earlier
year(s), , the tax authority may view the same as acceptance of default by the
assessee for earlier year(s). Hence, the tax authority may take an adverse view in
the penalty proceedings in the case of assessee for earlier year(s) under section
271(1)(c) of the Act.
• The CBDT, vide Circular No. 05/2018 dated 16 August 2018, has clarified that an
application made by an assessee under section 270AA of the Act seeking
immunity,
– will not bar the assessee from contesting the same issue in any earlier assessment year.
– The circular also clarifies that the tax authority shall not take an adverse view in penalty
proceedings for earlier assessment years under old penalty regime merely because the
taxpayer has applied for immunity under the new penalty regime (i.e., section 270AA).
 Other points w.r.t. 270AA
(1) Assessing Officer shall pass an order accepting or rejecting such application within a
period of one month from the end of the month in which such application is received.

(2) Order of Assessing Officer under the said section shall be final. There is no appeal
provided against the same.
• Section 270AA(5) declares the order to be final. Hence, it cannot be re-opened or
revised or reviewed.
(3) Once the application u/s 270AA is accepted, no appeal u/s 246A or revision
application u/s 264 shall be accepted against the assessment or the reassessment
order.
(4) In case of rejection, an opportunity of being heard shall be granted to the assessee.
(5) Further, assessee can file appeal against the assessment order. [Time from the date
of filing the application till the rejection of application by the AO shall be excluded
for counting thirty days u/s 249(2)]
 Finality of the order
• The application implies acceptance of the additions made and payment of tax and
interest accordingly. Further, it may also imply that the additions could attract penalty
under section 270A of the Act and may attract prosecution proceedings (for which
immunity is claimed).
• If pursuant to application for immunity, an order is passed under section 270AA, the
effect thereof would be –
– the assessment or reassessment is accepted; the additions, tax and interest are
also accepted and interest and tax paid are not refundable in any manner;
– the AO has granted immunity from the penalty under section 270A of the Act as
well as from the prosecution under sections 276C and 276CC of the Act;
– no further proceedings against the order of assessment or reassessment or order
under the section;
• accordingly, assessment or reassessment proceedings could be regarded as final and
concluded (as far as the assessee is concerned; the Department may be able to initiate
reassessment proceedings, subject to fulfillment of the applicable conditions).
 Implications of rejection of the application
• If the application is rejected, the implications could be –
– against the order passed under the section, further proceedings may not
lie against the order (save, possibly, a writ petition);
– the assessee is free to file an appeal against the order of assessment /
reassessment and question the additions made therein;
– the Assessing Officer will initiate penalty proceedings under section 270A
of the Act to levy penalty in respect of the under-reported income and/or
misreported income;
– the assessee would be free to agitate the penalty proceedings before the
appropriate authorities;
– finality, if any, would be achieved upon conclusion of the appeal or other
proceedings by the assessee and/or the Tax Department.
 Dual penalty not leviable – sub-section (11)
• Conditions to be satisfied
• In the case of the person
• For same or any other assessment year
• An addition or disallowance –
• has suffered or formed the basis for imposition of penalty then,
• such addition or disallowance cannot be the basis for levying
penalty under the section.
• Illustration : The penalty is levied under s. 271(1)(c) of the Act in
respect of an intangible addition, which is explained as a source for
investment in AY 2018-19; but, not accepted and an addition is made,
apparently, penalty under the section cannot be levied. be levied.
 PENALTY ORDER, SECTION -12

The penalty referred to in sub-section (1)
shall be imposed, by an order in writing,

by the Assessing Officer,

the Commissioner (Appeals),

the Commissioner or

the Principal Commissioner, as the case
may be.
 Under reporting of penalty u/s 270A
• “Order” ingredients
– Application of mind
– Consideration of assessee’s reply
– Independent Reasons to be given
– Natural Justice to strictly adhered to (giving of
show cause notice and opportunity of being heard
etc)
Sec.271AAC
 Section 271AAC of Income Tax
• Section 271AAC of Income Tax Act pertains to penalty for
possessing unaccounted income. Under Section 271AAC, a
taxpayer will be bound to pay penalties if it is determined by
the Assessing Officer that the taxpayer is holding any income
specified in
Section 68 – Cash Credits
Section 69 – Unexplained investments
Section 69A – Unexplained money etc.
Section 69B – Amount of investment etc. not fully disclosed in books of
accounts.
Section 69C – Unexplained expenditure etc.
Section 69D – Amount borrowed / repaid on hundi
 Crucial points relevant for imposing penalty
under section 271AAC
1. The penalty under section 271AAC can be imposed only after the direction of
the Assessing Officer.
2. The penalty under section 271AAC can be imposed only in case the income
determined includes income referred under section 68 or section 69 / section
69A / section 69B / section 69C / section 69D.
3. The penalty under section 271AAC cannot be levied in case the income referred
to under section 68 or section 69 / section 69A / section 69B / section 69C /
section 69D has been reflected in the income tax return, and appropriate tax has
been paid thereon.
4. Order imposing penalty can be passed only after giving the assessee the
reasonable opportunity of being heard.
5. It is important that provisions of section 274 and section 275 of the Income Tax
Act are satisfied prior to levy of the penalty under section 271AAC.
• Penalty under Section 271AAC
• The defaulting taxpayer will be imposed with a
penalty that is computed at the rate of 10% of tax
payable.
• This will be in addition to the taxes payable under
Section 115BBE.
 Penalty not automatic
• In the light of the above discussion, it may be said that the penalty is not
automatic implying 50% (or 200%) of the tax on under-reported (or mis-
reported) income representing the difference between the assessed income
and the processed income.
• In the Chapter and/or the section itself there is evidence to suggest that the
penalty can be levied if and only if the facts and the circumstances justify and
while considering the initiation and/or imposition of the penalty, the
empowered authority must consider the specific provisions, namely:
– the penalty is discretionary and not mandatory (which has its own obligations as
highlighted earlier);
– the discretion needs to be applied having regard to the facts, circumstances and
the legal position [to illustrate, merely because a legal claim is made and there is a
difference upon assessment, apart from the specific provisions of sub-section (6)],
– the empowered authority needs to exercise restraint and use the discretion
accordingly;
• It is pertinent to maintained here that these
newly inserted sec. 270A, 270AAB have not
been included under the sec 273B( penalty
not to be impose if the assessee proves there
was reasonable cause for said failure.) Hence,
once penalty is initiated it must be levied.
• usual procedure for imposing penalty needs to
be followed in as much as the Chapter obliges
an opportunity of being heard to the assessee;
• opportunity of being heard implies that the
assessee has the rights to explain as to why the
penalty is not leviable; and
• sub-section (6) permits the adjustments to the
difference for final determination of under-
reported income, if any.
 Fee/ Penalty for default in furnishing return of income – Sec 234F
versus Sec 271F
Particulars Old Provision – Sec New Provision – Sec 234F
271F
Who is liable A person required to furnish A person required to furnish return of income under
return of income under section section 139 within the time prescribed thereunder
139 fails to furnish such return
before the end of the relevant
AY

Quantum of Rs.5,000 Amount of Fee Status of return furnished

liability (Rs.)

5,000 If the return is furnished on or

before 31st December of the
relevant assessment year
10,000 In any other case [i.e. return is
furnished after 31st December or
return is not furnished at all
Note: If the total income of the person does not
exceed INR 5,00,000, the fee payable shall not
exceed INR 1,000/-
 Fee/ Penalty for default in furnishing return of income – Sec 234F
versus Sec 271F
Particulars Old Provision – Sec New Provision – Sec 234F
271F
Nature Discretionary by the Mandatory , required to be paid along with
Assessing officer the self assessment tax under sec 140A
Reasonable Penalty not leviable Fee payable, irrespective of showing
cause is reasonable cause for not filing return within
provided the due date

The Finance Act, 2021 has revised the fee for default in furnishing return of income.
W.e.f., Assessment Year 2021-22, fee for default in furnishing return of income shall be
Rs. 5,000 if return has been furnished after the due date prescribed under section 139(1).
However, it shall be Rs. 1,000 if the total income of an assessee does not exceed Rs. 5
lakh.
PENALTY Sec.271AAB
IN THE
CASE OF
Penalty where search has been initiated on or after 01.07.2012
but before 01.07.2012 [Section 271AAA]

• Conditions for applicability of the penalty

– where search has been initiated before 01.07.2012
– undisclosed income found
• Quantum of penalty
– 10% of undisclosed income
• Penalty initiated and imposed by the Assessing Officer.
• It is a Mandatory provision.
Condition for immunity or concessional rate of
penalty
(i) In statement under section 132(4), admits the undisclosed
income and specifies the manner in which such income has been
derived.
(ii) Substantiates the manner in which the undisclosed income was
derived.
(iii) Pays the tax, together with interest, if any, in respect of the
undisclosed income.
• If all of the above conditions are satisfied then no penalty will be
levied. If any of the above is not satisfied then penalty will be 10%
of undisclosed income.
Penalty where search has been initiated on or after 01.07.2012
but before 15.12.2016 [Section 271AAB(1)]
• Section 271AAB(1)(a):
• Conditions for applicability of the penalty:
(a)Assessee must have admitted the undisclosed income in
statement recorded under section 132(4)
(b)Assessee specifies & substantiates the manner in which
such undisclosed income was derived
(c)on or before the specified date—
(i)pays the tax, together with interest, if any, in respect of the
undisclosed income; and
(ii)furnishes the return of income for the specified previous
year declaring such undisclosed income therein.
• Quantum of Penalty as % of
Undisclosed income of specified
previous year:
– 10% of undisclosed income of specified
previous year,
Penalty where search has been initiated on or after 01.07.2012
but before 15.12.2016 [Section 271AAB(1)]
• Section 271AAB(1)(b):
• Conditions for applicability of the penalty:
(a) Assessee does not admit the undisclosed income
in statement recorded under section 132(4)
(b) on or before the specified date—
(i)declares such income in the return of income furnished
for the specified previous year; and
(ii)pays the tax, together with interest, if any, in respect of
the undisclosed income.
• Quantum of Penalty as % of
Undisclosed income of specified
previous year:
– 20% of undisclosed income of specified
previous year,
Penalty where search has been initiated on or after 01.07.2012
but before 15.12.2016 [Section 271AAB(1)]
• Section 271AAB(1)(c):
• Conditions for applicability of the penalty:
In other cases i.e. where undisclosed income of
specified previous year, if it is not covered by the
provisions of clauses (a) and (b) of section
271AAB(1).
• Quantum of Penalty as % of Undisclosed
income of specified previous year:
– 30% to 90% – (Flat 60% w.e.f. 01.04.2017) of
undisclosed income of specified previous
year.
 Penalty where search has been initiated on or
after 15.12.2016 [Section 271AAB(1A)]
• Situation for applicability of section 271AAB(1A):
 The search proceedings have been initiated, against the
assessee, under section 132 of the Income Tax Act.
 Such a search has been undertaken on or after
15th December 2016.
 Undisclosed income has been recorded during the
search proceedings.
 The Assessing Officer has directed the assessee for
payment of penalty under section 271AAB (1A) of the
Income Tax Act.
 Condition and rate of penalty
• Cases, wherein, the following conditions are satisfied –
 The assessee during the search, in a statement, admits the undisclosed
income. The assessee also specifies the manner in which the
undisclosed income has been derived.
 The assessee validates the manner in which the undisclosed income was
derived.
 The assessee pays the required tax, along with interest, in respect of the
undisclosed income on or before the specified date.
 The assessee furnishes the income tax return for the specified previous
year declaring the undisclosed income on or before the specified date.
Rate of Penalty on undisclosed income: 30% of the undisclosed
income of the specified previous year.
• In Any other case: 60% of the undisclosed
income of the specified previous year.
Section Nature of default Quantum of penalty Who can levy Nature of levy

271AAA Where search has been

initiated
10% of undisclosed income AO Mandatory

• before 1-7-2012
• undisclosed income found
271AAB Where search has been
initiated
10% of undisclosed income
of specified previous year, if
AO Mandatory

• on or after 1-7-2012 the following conditions are

• but before 15-12-2016 satisfied:
• Undisclosed income found a) Assessee must have
admitted the undisclosed
income in statement
recorded u/s 132(4)
b) Assessee specifies &
substantiates the manner
in which such undisclosed
income was derived
c) Pays Tax & Interest on
such undisclosed income
before the specified date;
d) Files the ROI for specified
previous year declaring
such undisclosed income
therein
Section Nature of Quantum of penalty Who can levy Nature of levy
default

271AAB 20% of undisclosed income of specified previous year, AO Mandatory

if the following conditions are satisfied:
a) Assessee does not admit the undisclosed income in
statement recorded u/s 132(4)
b)declares such income in the ROI furnished for the
specified previous year on or before the specified date
c) Pays the tax and interest on such undisclosed
income before the specified date;

271AAB 30% to 90% – (Flat 60% w.e.f. 01.04.17) of AO Mandatory

undisclosed income of specified previous year, in
any other case

271AAB(1A) • Where 30% of undisclosed income of specified previous year, if AO Mandatory

the following conditions are satisfied:
search has a) Assessee must have admitted the undisclosed income
been in statement recorded u/s 132(4)
initiated b) Assessee specifies & substantiates the manner in
which such undisclosed income was derived
• on or after c) Pays Tax & Interest on such undisclosed income
15-12-2016 before the specified date;
• undisclosed d) Files the ROI for specified previous year declaring
such undisclosed income therein
income
found 60% of undisclosed income of the specified AO Mandatory
previous year in any other case
Other penalties
Section Nature of default Quantum of penalty Who can Nature of levy
levy

271A* Failure to
maintain or
keep, Rs.25,000
retain
AO/CIT(A) Non-
Mandatory
books or documents u/
44AA

271AA(1) Failure to keep and 2% of value of each AO/CIT(A) Non-

maintain information International Mandatory
and documents u/s92D, Transaction or
Failure to report specified domestic
transactions and transactions.
maintaining or furnish
of incorrect
information/document.

* Note: Without prejudice to section 271 and 270A

Section Nature of default Quantum of penalty Who can Nature of levy
levy

271AA(2 Failure to furnish Rs.50,000/- Prescribed Non-

) information and IT Mandatory
document as required Authority
under section 92D(4) i.e.
report in respect of
International group.

271B Failure to get accounts One half percent of AO Non-

audited or furnish a total sales, turnover Mandatory
report of audit as or gross receipts,
required under section etc or Rs.1,50,000/-
44AB whichever is less

271BA Failure to furnish a Rs.10,000/- AO Non-

report from an Mandatory
accountant as required
by sec. 92E
Section Nature of default Quantum of Who Nature of
penalty can levy levy

271CA Failure to collect tax Amount equal to Range Mandatory

at source as required tax not collected Head
under chapter XVII-BB

271D Failure to comply with Amount equal to Range Mandatory

the provision off loan or deposit or Head
section 269SS specified sum so
taken or accepted

271DA Failure to comply with Amount equal to Range Mandatory

the provisions of such receipt Head
section 269ST
Section Nature of default Quantum of penalty Who can levy Nature of levy

271E Repayment of any loan or Amount equal to loan or Range Head Mandatory
deposit or specified advance deposit or specified
otherwise than in accordance advance so repaid
with provision of section 269T

271F Failure to furnish return as Rs.5,000/- (Applicable up AO Non-

required by section 139(1) on to A.Y. 2017-18) Mandatory
before the end of the relevant
assessment year.

271FA Failure to furnish statement of • Rs.100/day for every Prescribed IT Non-

financial transaction or day during which the Authority Mandatory
reportable account under failure continues.
section 285BA(1) • Rs.500/ day from the
date assessee was
issued notice under
subsection(5) of
section 285BA till the
date of filling the
statement.

271FFA Furnishing inaccurate SFT or Rs.50,000/- Prescribed IT Non-

Reportable Accounts Authority Mandatory
Section Nature of default Quantum of penalty Who can levy Nature of levy

271G Failure to furnish any in 2% of the value of the AO/TPO/ Non-Mandatory

formation or document in international transaction / CIT(A)
pursuant of notice u/s by specified domestic
section92D(3) transaction for each
failure
271GA Section 285A provides for Penalty shall be: Prescribed IT Non-Mandatory
reporting by an Indian concern a)A sum equal to 2% of Authority
if following two conditions are value of transaction in
satisfied: respect of which such
•Shares or interest in a foreign failure has taken place, if
company or entity which derives such transaction had
substantial value, directly or effect of, directly or
indirectly, from assets located in indirectly, transferring
India; and right of management or
•Such foreign company or entity control in relation to the
holds such as sets in India Indian concern;
through or in such Indian b)A sum of Rs.500,000 in
concern. any other case
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 Section9(1)(i). In case of
any failure, the Indian concern
shall be liable to pay penalty.
Section Nature of default Quantum of Who can Nature of
penalty levy levy

271GB(1) Failure to furnish report Rs.5,000 per day up Prescribed Non-

under section 286(2) to 1 month IT Authority Mandatory
Rs.15,000 per day
beyond 1 month
271GB(2) Failure to produce the Rs.5,000/- for every Prescribed Non-
information and day during which the IT Authority Mandatory
documents within the failure continues.
period allowed under
section 286(6)

271GB(3) Failure to furnish report or Rs.5,000/- for every Prescribed Non-

failure to produce day during which the IT Authority Mandatory
information/documents failure continues
under section 286 even beginning from the
after serving order under date of serving such
section 271GB(1) or order.
271GB(2)
Section Nature of default Quantum of Who can Nature of
penalty levy levy

271GB(4) Providing inaccurate Rs.50,000/- Prescribed Non-

information in the report IT Authority Mandatory
furnished in accordance
with section 286(2)

271H* Failure to deliver the Penalty shall be not AO Mandatory till

quarterly return of TDS/TCS less than Rs..10,000/- 01.10.2014
within the time prescribed but may extended to thereon Non-
or furnishing incorrect Rs.1,00,000/- Mandatory
information in the
statement

271I Failure to furnish Rs.1,00,000/- AO Non-

15CA/15CB or furnishing Mandatory
incorrect information
therein

Note: No penalty for failure to deliver quarterly returns of TDS/TCS in time, if quarterly return
submitted before the expiry of one year from the time prescribed and fees under section 234E and
interest under section 201(1A) paid.
Section Nature of default Quantum of penalty Who can Nature of
levy levy

271J Furnished incorrect information Rs.10,000/- for each AO/CIT(A) Non-Mandatory

in any report or certificate by an incorrect report or
accountant or a merchant certificate
banker or a registered valuer.

272AA Failure to comply with section Not exceeding Rs.1,000 JC/AD/DD/AO Non-Mandatory
133B
272B Failure to comply with provisions Rs.10,000/- AO Non-Mandatory
of section
139A/139A(5)(c)/5A/5C or
quoating/intimating false PAN or
Adhar No.

272BB Quoting false tax deduction Rs.10,000/- AO Non-Man

account number/tax collection datory
account number/tax deduction
and collection account number
in
challans/certificates/statements/
documents referred to in section
203A(2)
Section Nature of default Quantum of Who can Nature of
penalty levy levy

272A(1) a. Refusal to answer any Rs.10,000/- for each Respective Mandatory but
question put by an default or failure. income tax provision of
Income Tax authority. authority, section 273B is
not below applicable to
b. Refusal to sing any the rank of sub clause (c)
statement made in the JCIT/JDIT & (d)
course of proceedings
under the act Except for
c. Failure to attend or the provision For sub clause
produce books of of sec. (c) & (d) it is
accounts or documents 271A(1)(d). not Mandatory
required under a It can be
summon issued u/s 131 levied by AO
d. Failure to comply with
notice u/s 142(1)/143(2)
e. Failure to comply with
direction issued u/s
142(2A)
Section Nature of default Quantum of penalty Who can Nature of
levy levy

272A(2) a. Failure to give notice of a. Rs.100/- for every Respective

income tax
Mandatory but
provision of
discontinuance of day during which authority,
profession u/s 176. not section 273B is
the default below the applicable to sub
b. Failure to furnish in due
time the information continues. rank of clause (c) & (d)
JCIT/JDIT
required u/s 139(4A) or b. However in respect
139(4c) or to furnish within of (c),(d), (e) and Except under For sub clause (c)
the time allowed therein. returns u/s 206 & clause (f) of & (d) it is not
c. Failure to deliver in due 206C(3A), the sub-section Mandatory
time a copy of declaration (2), by the
amount of penalty PCCIT, CCIT, Or
in section 197A shall not exceed
d. Failure to furnish TDS or PCIT/CIT
TCS certificate
the amount of
e. Failure to deliver or cause TDS/TCS
to be delivered a statement
within the time as may be
prescribed u/s 200(2A) or
206C(3A)
 Sec. 272BBB
• If a person fails to comply with the provisions of
section 206CA
• Who Can Lavy: Assesseing Officer
• Amount of Penalty : Rs.10,000/-.
• Nature of Levy: Discretionary
 Penalty for default in making payment of Self
Assessment Tax u/s 140A
• As per section 140A(3), if a person fails to pay either
– wholly or partly self assessment tax
– or, interest, or fee
– 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.
 Penalty for default in payment of tax
Levied on whom - assessee in default or deemed
Assesse in Default , if the amount specified in
to be in default in making payment of tax.
the notice of demand under sec. 156 is not
By whom – AO can levy (discretionary) paid within 30 days or such time as is
Quantum – Not to exceed the amount of tax extended by AO
arrears

Penalty cannot be levied for non-

Penalty paid under this section is in payment of interest
addition to the amount of arrears of ❖ Since ‘tax’ and ‘interest’ are
tax to be paid and Interest payable different in character
under 220(2) of the Act. ❖ the definition of ‘tax’ in section 2(43)
does not cover interest

221
Shreeniwas & Sons v. ITO [1974] 96 ITR
562 (Cal.).
Penalty cannot be levied for non-
Before levying penalty, the assessee payment of penalty - since the
shall be given a reasonable definition of ‘tax’ does not include
opportunity of being heard. ‘penalty’ Kunhalaumma v. ITO [1968]
68 ITR 840 (Ker.)

Where the AO is satisfied that the default

was for good and sufficient reasons, no Appeal can be made under section 246 of the
penalty can be levied. Act against the order passed under this
section
 Section 273A-Power to reduce or waive penalty
• 273A(1). Income Tax act authorizes the Principal Commissioner or Commissioner of
Income Tax to grant waiver or reduction from penalty imposed under section 270A or
under section 271(1)(c).
• There is no time limit prescribed for accepting or rejecting the petition for waiver of
penalty.
• Consequent to introduction of section 270A, FA, 2016 has made consequential
amendment to section 273A for making reference to section 270A instead of section
271(1)(c) which would stand omitted from 1.4.2017.
• S. 273A, as amended by the FA, 2016, provides that the order granting or rejecting
immunity from penalty under section 273A (for all the penal provisions wherever
applicable), the Pr. CIT or CIT must pass an order within a period of 12 months from
the end of the month in which the application was received.
• No order shall be passed without giving an opportunity of being heard to the taxpayer.
• All applications pending as on 1.6.2016 are to be disposed by 31.5.2017.
Section 273A-Power to reduce or waive penalty
• Conditions for granting relief under section 273A (1)
– Disclosure of particulars: Taxpayers should make voluntarily
and in good faith disclose the full and true details of all
particulars of income to the Assessing Officer
– Co-operation for enquiry: The assessee should have to
cooperate with any enquiry related to the assessment
– Payment of Tax/ Interest: The taxpayer should have paid tax
or interest or he should made satisfactory arrangements for
paying any tax or interest payable in consequence of an order
passed under the Income Tax Act in respect of the relevant
year.
Revised power of waiver of penalty in respect of under-reported and mis-
reported income

Type of income added to returned income AO Pr. CIT / CIT

Under-reported income under s. 270A where Yes Not Applicable

assessee has paid tax and interest and complied
with the conditions of Section 270AA

Under reported income under section 270A Not Yes

where the assessee did not get relief under Applicable
section 270AA from the AO. Seeks waiver under s.
273A

Misreported income under section 270A where No Power Yes

the assessee seeking relief under Section 273A of Waiver
Approval if income exceeds Rs.5 lakh
• If the penalty is imposed for more than one year
• the aggregate amount of income for those years
exceeds Rs. 5,00,000/-
• Penalty can be waived after getting approval
from Pr. CCIT/CCIT/Pr. DGIT/DGIT
• Every order made under section 273A will be
final and cannot be called into question by any
Courts or any other authorities.
 No relief for earlier claimed waiver
• if an assessee has claimed relief (reducing
penalty) under section 273A (1) at any time,
then the assessee cannot claim relief under
section 273A (that is section 273A (1) as well
as section 273A (4)).
 Section 273A (4) – Waiver or reduction of penalty

• It authorizes the Pr. CIT to grant relief for any penalty

imposable under Income-tax Act as well as to stay or
compound any proceeding for the recovery of
penalty.
• Conditions for granting relief under section 273A (4)
– Levy of penalty will cause genuine hardship on the taxpayer.
– The taxpayer has co-operated in any inquiry relating to the
assessment or any proceeding for the recovery of any
amount due from him.
• If the aggregate amount penalties exceed Rs. 1,00,000/-
– order of reducing or
– waiving the amount or
– compounding any proceeding for its recovery
– under section 273 A (4) shall be made with the previous approval of the Pr.
CCIT/CCIT/Pr. DGIT/DGIT.
• Application for waiver under section 273A (4)
– The assessee has to make an application to the Pr. CIT for obtaining waiver or
reduction or stay or compound any proceeding for the recovery of penalty
under section 273A (4).
– The application should have recorded the reasons for misreporting or furnishing
inaccurate particulars of Income.
– The Principal Commissioner will pass an order, either accepting or rejecting
application within a period of 12 months from month of submitting application.
 Section 273AA – Grant immunity from imposition of penalty

• Income Tax Act empowers the Pr. CIT/CIT to grant immunity from imposition
of penalties under the Income-tax Act if an assessee has furnished an
application for case settlement under section 245C
• and the proceedings for case settlement have been made under section
245HA and penalty proceedings are initiated under Income-tax Act.
• For obtaining waiver, the assessee need to furnish an application to the
Commissioner.
• The application to the Commissioner for waiver will not be furnished after the
imposition of penalty after abatement.
• The Principal Commissioner will pass an order, either accepting or rejecting
application within a period of 12 months from month of submitting
application.
 Condition for granting the immunity
• Assessee should have co-operated with the Income-tax
authority in the proceedings before him.
• Taxpayers should make a full and true disclosure of his
income and the details of manner in which such income
has been derived.
• The immunity granted under section 273AA will be
withdrawn, if an assessee fails to follow the condition
related to the immunity was granted and after the
withdrawal of the immunity, the penalty provisions of
the Act will apply as if such immunity had not been
granted.
Penalty Provisions
Related To TDS
Issues
 TDS Interest Penalty for Non-deduction or
Late deduction of TDS Sec.201(1A)(i)
• In case, the deductor (being the payment giver) fails to deduct TDS
on the appropriate date on which it has to be deducted while
making payment to the other party, he shall be charged with the
penal interest of 1% per month. The penal interest to be levied on
the taxpayer will become applicable from the date of tax-deductable
till the date of actual TDS deduction.
• For instance, Date of: Payment/credit is 16.08.2017
• Deduction is 30.04.2018
• Deposit of tax is 05.05.2018
• The interest would be payable for 9 months i.e. from 16.08.2017 to
30.04.2018 @ 1% pm.
TDS interest Penalty for Non-payment or delayed
payment of TDS -Sec.271(1A)(ii)
• For delay or non-payment of TDS amount to the department, a penal
interest of 1.5% on per month basis has been subjected under Section 201
(IA)(ii).
• 0.75% per month or part of the month for delay in remittance beyond due
date only in the case of due dates falling between 20 March 2020 and 29
June 2020.
• If the sum remains unpaid after 30 June, the normal interest of 1.5% is
chargeable.
• For calculation of interest, even a few days of the month
shall be considered as a default of the complete month and
penal interest will be charged on a monthly basis and not on
the number of days. For instance, payment after TDS
deduction to the department was made on 24 July, while it
has to be submitted in June. The TDS penal interest will be
charged for 2 months being both June and July.
• In short, the payment of penal interest has to be made from
the specified date from the date it was deducted and the
date it has to be actually submitted as notified by the
department timely.
• The above interest should be paid before filing of TDS
return.
• For Example :
• Date of payment/credit is 16.08.2017
• Date of deduction is 16.08.2017
• Date of deposit of tax is 31.07.2018
• then interest would be payable for 12 months
i.e. from 16.08.2017 to 31.07.2018 @ 1.5%
pm.
 TDS Penalty for Short Payment of TDS to department
• Prosecution under Section 276B
• In case the taxpayer fails to pay the TDS
deducted to government timely, then subject to
the provisions of Chapter XVII-B, the deductor
or the payer shall be punished with rigorous
imprisonment for a minimum term of 3 months
which might extend up to 7 years including
additional penal fines.
 TDS penalty for Non-furnishing/delayed furnishing of
TDS return or TDS E-Statements
• For not filling of TDS statement as referred in
Section 234E of the IT Act,
– a penalty of Rs 200 per day shall be charged from the
notified due date of the department till the actual
date of furnishing TDS statement.
– The maximum amount to be charged as penalty in
such a case shall not exceed the total amount of TDS
to be paid in such a quarter.
 Penalty Under section 271H
• Under Section 271H of the IT Act, the penalty for
– failure to furnish statements or
– furnishing incorrect information in the statement will result in the penalty of Rs.
10,000 to even Rs 1lakh.
– The penalty under this section in addition to the interest liable under section 234E.
– The competent authority for levying penalty is Assessing Officer.
• The imposed TDS penalty shall have to be paid before filing such a delayed
e-TDS statement.
• For instance, if the due date for furnishing e-TDS statement is 26 July but
was submitted on 25 August and the TDS amount is Rs 5,000 then the
penalty shall become 30*200 = Rs 6000, but is higher than actual TDS
amount, only Rs 5000 has to be paid as penalty. In total Rs. 10,000 is to be
paid while filing the e-TDS statement.
 No penalty under section 271H
• If following condition satisfied:
– The tax deducted/collected at source is paid to the
credit of the Government.
– Late filing fees and interest (if any) is paid to the
credit of the Government.
– The TDS/TCS return is filed before the expiry of a
period of one year from the due date specified on
this behalf.
@1.5% p.m.
 Procedure

For levying

Penalty
 Section 274
(1) No order imposing a penalty under this Chapter shall be made
unless the assessee has been heard, or has been given a
reasonable opportunity of being heard.
(2) No order imposing a penalty under this Chapter shall be made—
a) by the Income-tax Officer, where the penalty exceeds ten thousand
rupees;
b) by the Assistant Commissioner or Deputy Commissioner, where the
penalty exceeds twenty thousand rupees, except with the prior
approval of the Joint Commissioner.
(3) An income-tax authority on making an order under this Chapter
imposing a penalty, unless he is himself the Assessing Officer,
shall forthwith send a copy of such order to the Assessing Officer.
Bar of limitation for
imposing penalties
Section 275- Bar of limitation of imposing penalty
 Facts regarding Time Barring
Principal CIT v. Mahesh Wood Products Pvt Ltd
• ITA 787/2016 (HC)

Penalty order barred by limitation

The Delhi High Court held that the time limitation for
“initiation” of penalty proceedings under section 275(1)
(c) of the Income Tax Act, starts from the date on
which the AO wrote a letter recommending the
issuance of the Show Cause Notice, and not from the
date mentioned in the Show Cause Notice.
NEW ADDITIONS
ON PENALTY
PROVISIONS
 Penalty for not providing facility for accepting payment through prescribed
electronic modes of payment

• The Finance (No. 2) Act, 2019 has inserted a new

Section 269SU in Income-tax Act with
effect from November 1, 2019.
• The section provides that every person engaged in
business should mandatory provide the facility for
accepting payment through prescribed
electronic mode, if the gross receipts from such
business exceeds Rs. 50 crore during the
immediately preceding previous year.
• Consequential penal provisions have been
inserted in Section 271DB,
• which provides for penalty of Rs. 5,000 rupees
for every day of default in case the person does
not accept payment through notified digital
modes.
• The section also provides for immunity from
penalty in case person proves that there is a
good and sufficient reasons for such default.
 Latest in Income Tax Act. On Penalty
• Failure to quote PAN/Adhar No. in
documents referred to section • Rs.10,000/- for each
139A(6A)
such default.
• Failure to authenticate PAN/Adhar
No. in accordance with section • Penalty imposable by
139A(6A). AO.
• Failure to ensure that PAN/Adhar
No. Has been quoted .
– Duly quoted in documents relating to
transactions referred to in sec. 139A(5)
(c) or 139A(6A)
– Duly authenticated in respect of
transactions referred to u/s 139A(6A)
 Section-271AAD. Penalty for false entry, etc., in
books of account
(1) Without prejudice to any other provisions of this Act, if
during any proceeding under this Act, it is found that in
the books of account maintained by any person there is—
(i) a false entry; or
(ii) an omission of any entry which is relevant for computation of
total income of such person, to evade tax liability,
• The Assessing Officer may direct that such person shall pay
by way of penalty a sum equal to the aggregate amount
of such false or omitted entry.
(2) Without prejudice to the provisions of sub-section (1), the Assessing
Officer may direct that any other person, who causes the person
referred to in sub-section (1) in any manner to make a false entry or
omits or causes to omit any entry referred to in that sub-section,
shall pay by way of penalty a sum equal to the aggregate amount of
such false or omitted entry.
• Explanation.––For the purposes of this section, “false entry” includes
use or intention to use—
(a) forged or falsified documents such as a false invoice or, in general, a false
piece of documentary evidence; or
(b) invoice in respect of supply or receipt of goods or services or both issued
by the person or any other person without actual supply or receipt of such
goods or services or both; or
(c) invoice in respect of supply or receipt of goods or services or both to or
from a person who does not exist.’.
 Consequences of default in submission of statement/certificate prescribed under
section 35/Section 80G

• The Finance Act, 2020 has amended section 35 of

the Income-tax Act to provide that
deduction available under this section shall be
available to
– the research association, university, college or other
institution or the company
– only if the assessee delivers a statement of donations, as
prescribed by the board, and
– also furnishes certificate of the amount of donation to
the donors.
• Similar amendment has also been made in
Section 80G to provide that
– entities receiving donation shall be required to file
a statement of the donation received and
– shall issue a certificate to donor.
• In order to ensure compliance with the provision, the
Finance Act, 2020 has inserted a new section 234G
– which provides for levy of fee of Rs. 200 per day if taxpayer fails to
submit such statement or certificate within prescribed time.
– However, the fee shall not exceed the amount in respect of which
the failure has occurred.
– Such fees shall be paid before submitting such statement or
before furnishing of certificate, as the case may be.

– Consequently, a new section 271K has been inserted in the Act

which empowers the Assessing Officer to levy a penalty of Rs.
10,000 to Rs. 1 lakh, if assessee fails to furnish
the statement or fails to furnish a certificate.
 Faceless Penalty
• With an objective to eliminate the human interface in such cases
also, an e-penalty scheme is to be launched on the lines of e-
assessment scheme.
• Section 274 of the Income-tax Act prescribes procedure for
imposing penalty on the assessee.
• The Finance Act, 2020 has inserted a new sub-section 2(A) to
section 274 to authorize the Central Government to notify an e-
scheme for the purposes of imposing
penalty so as to impart greater efficiency, transparency and
accountability by:
a) eliminating the interface between the Assessing
Officer and the assessee in the course of proceedings
to the extent it is feasible technologically;
b) optimising utilisation of the resources through
economies of scale and functional specialisation;
c) introducing a mechanism for imposing of penalty with
dynamic jurisdiction in which penalty shall be imposed
by one or more tax authorities.
The Central Government vide notification S.O. 117(E),
dated 12-1-2021, has notified the Faceless Penalty
Scheme, 2021 effective from 12-01-2021.