ASSIGNMENT

CTP

Submitted to:
Mr. Asim Sahore

Submitted by:
Syed M Shah
MBA
TECNIA INSTITUTE OF ADVANCED STUDIES
PENALTIES AND PROSECUTIONS
No law can be effective and satisfactory implemented unless penalties and prosecutions are provided for. Under the Income-tax Act also, certain penalties
prosecution have been provided for as without such provisions there is a danger of evasion of tax. As the number of Tax payers is increasing, the tax administrat
has necessity to rely more and more on voluntary compliance of tax laws by the assesses and therefore appropriate penal and prosecution provisions form
necessary complement to this approach. Penalty provisions form a necessary complement to this approach. Penalty provisions, which impose additional monet
burden on those who happen to go astray either inadvertently or by design are undergoing considerable change from time to time.

Defaults for which penalties are imposed

No penalty for
the reasonable
cause.i.e,whether
section 273B or
Penalty Default under Minimum Maximum u/s 221(1) Person who can
Sl.No. Section section Nature of Default Penalty Penalty applicable or not impose penalty
1 2 3 4 5 6 7 8
Failure to pay the whole
or any part of self
assessment tax(which Such amount as
alos includes fringe Assessing officer
benefit tax)or interest or may impose for
both in accordance with default or Amount of Yes[Second
the provisions of continuing tax in proviso to section
1 221(1) 140A(3) section140A(1) default arrears 221(1)] Assessing Officer
Failure in making the
payment of tax,interest or
any demand within the Such amount as
prescribed time-limit. Assessing officer
(Penalty is Imposable may impose for
even though the tax has default or Amount of Yes[Second
been paid before the levy continuing tax in proviso to section
2 221(1) 220(1) of such penalty is made) default arrears 221(1)]
 failure to comply with a
notice under section
115WD(2) or 115WE(2)
or 142(1) or 143(2) or
failure to comply with a
115WD(2),115WE(2) direction regarding getting
or 142(1), 143(2), of accounts audited u/s Fixed at rs.10000 for each
3 271(1)(b) 142(2A) 142(2A) failure Yes Assessing Officer
Concealment of 300% of
particulars of income or 100% of the the amount
furnishing inaccurate amount of tax of tax
particulars of such sought to be sought to Assessing
4 271(1)(c) income. evaded be evaded No Officer/CIT(Appeal)/CIT
Concealment of 300% of
particulars of the fringe 100% of the the amount
benefits or furnishing amount of tax of tax
inaccurate particulars of sought to be sought to Assessing
5 271(1)(d) such fringe benefits evaded be evaded No Officer/CIT(Appeal)/CIT
Failure to keep, maintain
or retain books of
account,documents,etc.as
required under section
44AA and rules there Assessing
6 271A 44AA under Fixed at Rs.25000 yes Officer/CIT(Appeal)
Failure to keep, maintain
any such information and
document as required 2% of the value
under section 92D (1) & of each inter-
(2) in relation to national same as Assessing
7 271AA 92D international transaction. transaction minimum yes Officer/CIT(Appeal)
 Income found in course of
search under section 132
which is not recorded on
or before the date of
search in books of
account or other
documents maintained in
the normal course or 10% of the
otherwise not disclosed to undisclosed same as
8 271AAA CCIT orCIT. income minimum no Assessing Officer
0.5% of total
Failure to get accounts sales, turnover
audited or to furnish a or gross receipts,
report of such audit as as the case may
9 271B 44AB required u/s 44AB be. Rs.100000 yes Assessing Officer
Failure to furnish from an
accountant as required
10 271BA 92E u/s92E Fixed at Rs.100000 yes Assessing Officer

Penalty for concealment of income [Section 271(1) (c)]

If the assessing officer or the Commissioner (Appeals) or the commissioner, in the course of any proceedings under this Act, is satisfied that any
person has:
(i) concealed the particulars of his income; or
(ii) furnished inaccurate particulars of such income,
He may, in addition to the tax, if any payable, direct that such person shall pay by way of penalty a sum which shall not be less than, but which
shall not exceed three times the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of
inaccurate particulars of such income.
1. Facts material to the computation of total income are not explained or the explanation given is false or it is not substantiated, etc:
Where in respect of any facts material to the computation of total income of any person, if such person:
(a) (i) Fails to offer an explanation; or
(ii)Offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false; or
(b) (i)Offers an explanation which he is not able to substantiate; and
(ii) Fails to prove that such explanation is bona fide; and
(iii)Fails to prove that all the facts relating to the same and material to the computation of income have been disclosed by him.

2. Intangible additions: The Assessing officer in many cases makes additions to the returned income purely on account of certain technical
reasons. The Assessing officer sometimes disallows a portion of certain expenses on estimated basis.

3. Return Not filled but the assessee had taxable income: This explanation regarding concealment of income is applicable if the following
conditions are satisfied:
(i) the assessee,whether or not assessed earlier, fails without reasonable cause, to furnish the return of his income which he was
required to furnish under section 139 within the period specified in section 153(1)(i.e. within 21 months from the end of the
relevant assessment year).
(ii) No notice has been issued to him either under section 142(1)(i) or 148 within the aforesaid period of 21 months.
(iii) The Assessing Officer/Commissioner (Appeal) is satisfied that in respect of such assessment year, the person has taxable income.
(iv) The taxable income of such assessment year shall be deemed to be concealed income even if such person furnishes a return of his
income at any time after the expiry of the aforesaid period in pursuance of a notice under section 148.

4.Determination of tax sought to be evaded: As already discussed, penalty under section 271(1)(c) is minimum 100% of the tax sought to be
evaded and maximum 300% of the tax sought to be evaded.

Procedure for imposing penalty [Section 274]

(1) Opportunity of being heard: 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) Penalty to be levied with prior approval of joint commissioner in certain cases: No order imposing a penalty under this chapter shall
be made:
(a) By the Income-tax Officer, where the penalty exceeds Rs.10000.
(b) By the Assistant Commissioner/Deputy Commissioner, where the penalty exceeds Rs.20000,
 except with the prior approval of the joint Commissioner
(3) Copy of penalty order to be sent to Assessing Officer: 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.
(4) Penalty on the basis of law on the date of default: The quantum of penalty is to be determined in accordance with the law prevailing
on the date of default and not the date on which penalty is imposed.

Prosecutions
Under certain circumstances, the assessee also becomes liable for prosecution for offences committed under various provisions of the Income-
tax Act. These are summarized in the following table
 No punishment if
proved that there was
reasonable cause for
such failure(section
Minimum period of Maximum Period of 278AA) whether
Section Nature of offence rigorous imprisonment rigorous imprisonment applicable
Dealing with seized assets in contravention of the
order made under second proviso to section 132(1)
(i.e. deemed or constructive seizure) or section
132(3)(restraint order) by the officer conducting Any period up to 2 years and
275A search fine 2 years and fine no
Failure to afford facility for inspection of records Any period up to 2 years and
275B maintained on electronic media[Section132(1)(iib)] fine 2 years and fine no
Fraudulent removal, concealment, transfer or
delivery of property to thwart tax recovery being
taken in execution of a certificate under the
provisions of Second schedule relating to procedure Any period up to 2 years and
276 for recovery of tax. fine 2 years and fine no
Any period up to 2 years
Failure to comply with the provisions of section which will not be less than 6
178(1),(3) i.e. the liquidators failure to: (i) inform mont5hs in the absence of
about his appointment within 30 days, or (ii) set special and adequate
aside assets of the company, or (iii) liquidator parts reasons to the contrary to be
276A with any asset in contravention of the provisions recorded in the judgment 2 years yes
If amount sought to be if tax evaded exceeds
willful attempt in any manner to evade tax, penalty or evaded exceeds Rs.100000, Rs.100000, 7 years and
interest impossible under the Act(non-cognizable) as 6 months and fine; otherwise fine; otherwise 3 years
276C(1) per section 279(A) 3 months and fine. and fine no
willful attempt in any manner to evade the payment
of tax, penalty or interest (non-cognizable) as per
276C(2) section 279(A) 3 months and fine 3 years and fine no
 If tax which would have been
making a statement in any verification or delivering evaded if the statement or
account or statement which is false and which he account had been accepted if it exceeds Rs.100000,
either knows or believes to be false or does not as true exceeds Rs.100000, 7 years and fine;
believe it to be true(non-cognizable as per section 6 months and fine; otherwise 3 years and
277 279A) otherwise 3 months and fine fine no

1. A person shall not be proceeded against for an offence under the above sections except with the previous sanction of the
Commissioner or commissioner (Appeals) or the appropriate authority.
2. Where by an order under section 273A, the Commissioner or Commissioner(Appeals) has reduced or waived the penalty imposed
under section 271(1)(iii) for default committed under section 271(1)(c), prosecution proceedings shall not be proceeded against
for an offence committed under sections 276C and 277.
3. No person shall be punishable under section 276A or 276B for any failure referred to in the said provisions, if he proves that there
was reasonable cause for such failure.
4. An offence under this Chapter may, either before or after the institution of proceedings, be compounded by the chief
commissioner or Director General.
5. A non-cognizable offence is that for which a police officer has no authority to arrest without warrant.