PENALTY UNDER INCOME TAX ACT 1961 By Haridas Bhat ...

By Haridas BhatPENALTY UNDER INCOME TAX ACT 1961PENALTIESFailure to furnish returns, comply with notices, concealment of income,etc.271.If the Assessing Officer in the course of any proceedings under this Act, issatisfied that any person—(b) has failed to comply with a notice U/s 115WD(2), 115WE(2) 142(1),143(2), or fails to comply with a direction issued U/s 142(2A)(c) has concealed the particulars of his income or furnished inaccurateparticulars of such income, or[(d) has concealed the particulars of the fringe benefits or furnishedinaccurate particulars of such fringe benefits,Explanation 1.—The amount added or disallowed in computing the total income, be deemed torepresent the income in respect of which particulars have been concealed.Where in respect of any facts material to the computation of the total incomeof any person under this Act,—(A) such person fails to offer an explanation or offers an explanationwhich is found by the Assessing Officer to be false, or(B) such person offers an explanation which he is not able tosubstantiate and fails to prove that such explanation is bona fide andthat all the facts relating to the same and material to the computationof his total income have been disclosed by himExplanation 2.—Where the source of any receipt, deposit, outgoing or investment in anyassessment year is claimed by any person to be an amount which had beenadded in computing the income or deducted in computing the loss in theassessment of such person for any earlier assessment year or years but inrespect of which no penalty under clause (iii) of this sub-section had beenlevied, that part of the amount so added or deducted in such earlierassessment year immediately preceding the year in which the receipt,deposit, outgoing or investment appears (such earlier assessment yearhereafter in this Explanation referred to as the first preceding year) which issufficient to cover the amount represented by such receipt, deposit oroutgoing or value of such investment (such amount or value hereafter in this

By Haridas BhatPENALTY UNDER INCOME TAX ACT 1961Explanation referred to as the utilised amount) shall be treated as the incomeof the assessee, particulars of which had been concealed or inaccurateparticulars of which had been furnished for the first preceding year; and wherethe amount so added or deducted in the first preceding year is not sufficient tocover the utilised amount, that part of the amount so added or deducted in theyear immediately preceding the first preceding year which is sufficient to coversuch part of the utilised amount as is not so covered shall be treated to be theincome of the assessee, particulars of which had been concealed orinaccurate particulars of which had been furnished for the year immediatelypreceding the first preceding year and so on, until the entire utilised amount iscovered by the amounts so added or deducted in such earlier assessmentyears.Explanation 3Where any person fails, without reasonable cause, to furnish within the periodspecified in sub-section (1) of section 153 a return of his income which he isrequired to furnish under section 139 in respect of any assessment yearcommencing on or after the 1st day of April, 1989, and until the expiry of theperiod aforesaid, no notice has been issued to him under clause (i) of subsection(1) of section 142 or section 148 and the Assessing Officer or the36 [***] Commissioner (Appeals) is satisfied that in respect of such assessmentyear such person has taxable income, then, such person shall, for thepurposes of clause (c) of this sub-section, be deemed to have concealed theparticulars of his income in respect of such assessment year, notwithstandingthat such person furnishes a return of his income at any time after the expiryof the period aforesaid in pursuance of a notice under section 148.]Explanation 4.—For the purposes of clause (iii) of this sub-section, theexpression “the amount of tax sought to be evaded”,—[(a) in any case where the amount of income in respect of whichparticulars have been concealed or inaccurate particulars have beenfurnished has the effect of reducing the loss declared in the return orconverting that loss into income, means the tax that would havebeen chargeable on the income in respect of which particulars havebeen concealed or inaccurate particulars have been furnished hadsuch income been the total income(b) in any case to which Explanation 3 applies, means the tax on thetotal income assessed as reduced by the amount of advance tax, taxdeducted at source, tax collected at source and self-assessment taxpaid before the issue of notice under section 148;(c) in any other case, means the difference between the tax on the totalincome assessed and the tax that would have been chargeable hadsuch total income been reduced by the amount of income in respect

By Haridas BhatPENALTY UNDER INCOME TAX ACT 1961of which particulars have been concealed or inaccurate particularshave been furnished.Explanation 5.—Where in the course of a search initiated under section 132before the 1st day of June, 2007, the assessee is found to be the owner ofany money, bullion, jewellery or other valuable article or thing (hereafter in thisExplanation referred to as assets) and the assessee claims that such assetshave been acquired by him by utilising (wholly or in part) his income,—(a) for any previous year which has ended before the date of the search,but the return of income for such year has not been furnished beforethe said date or, where such return has been furnished before thesaid date, such income has not been declared therein ; or(b) for any previous year which is to end on or after the date of thesearch,then, notwithstanding that such income is declared by him in any return ofincome furnished on or after the date of the search, he shall, for the purposesof imposition of a penalty under clause (c) of sub-section (1) of this section, bedeemed to have concealed the particulars of his income or furnishedinaccurate particulars of such income, unless,—(1) such income is, or the transactions resulting in such income arerecorded,—(i) in a case falling under clause (a), before the date of the search ;and(ii) in a case falling under clause (b), on or before such date,in the books of account, if any, maintained by him for any source ofincome or such income is otherwise disclosed to the ChiefCommissioner or Commissioner before the said date ; or(2) he, in the course of the search, makes a statement under subsection(4) of section 132 that any money, bullion, jewellery or othervaluable article or thing found in his possession or under his control,has been acquired out of his income which has not been disclosedso far in his return of income to be furnished before the expiry oftime specified in sub-section (1) of section 139, and also specifies inthe statement the manner in which such income has been derivedand pays the tax, together with interest, if any, in respect of suchincome.Explanation 5A.— Where, in the course of a search initiated under section132 on or after the 1st day of June, 2007, the assessee is found to be theowner of—(i) any money, bullion, jewellery or other valuable article or thing(hereafter in this Explanation referred to as assets) and theassessee claims that such assets have been acquired by him byutilising (wholly or in part) his income for any previous year; or(ii) any income based on any entry in any books of account or otherdocuments or transactions and he claims that such entry in the

By Haridas BhatPENALTY UNDER INCOME TAX ACT 1961books of account or other documents or transactions represents hisincome (wholly or in part) for any previous year,which has ended before the date of search and,—(a) where the return of income for such previous year has beenfurnished before the said date but such income has not beendeclared therein; or(b) the due date for filing the return of income for such previous year hasexpired but the assessee has not filed the return,then, notwithstanding that such income is declared by him in any return ofincome furnished on or after the date of search, he shall, for the purposes ofimposition of a penalty under clause (c) of sub-section (1) of this section, bedeemed to have concealed the particulars of his income or furnishedinaccurate particulars of such income.Explanation 6.—Where any adjustment is made in the income or lossdeclared in the return under the proviso to clause (a) of sub-section (1) ofsection 143 and additional tax charged under that section, the provisions ofthis sub-section shall not apply in relation to the adjustment so made.Explanation 7.—Where in the case of an assessee who has entered into aninternational transaction defined in section 92B, any amount is added ordisallowed in computing the total income under sub-section (4) of section92C, then, the amount so added or disallowed shall, for the purposes ofclause (c) of this sub-section, be deemed to represent the income in respectof which particulars have been concealed or inaccurate particulars have beenfurnished, unless the assessee proves to the satisfaction of the AssessingOfficer or the Commissioner (Appeals) or the Commissioner that the pricecharged or paid in such transaction was computed in accordance with theprovisions contained in section 92C and in the manner prescribed under thatsection, in good faith and with due diligence.(1A) Where any penalty is imposable by virtue of Explanation 2 to subsection(1), proceedings for the imposition of such penalty may be initiatednotwithstanding that any proceedings under this Act in the course of whichsuch penalty proceedings could have been initiated under sub-section (1)have been completed.(1B) Where any amount is added or disallowed in computing the total incomeor loss of an assessee in any order of assessment or reassessment and thesaid order contains a direction for initiation of penalty proceedings underclause (c) of sub-section (1), such an order of assessment or reassessmentshall be deemed to constitute satisfaction of the Assessing Officer for initiationof the penalty proceedings under the said clause (c).

By Haridas BhatPENALTY UNDER INCOME TAX ACT 1961(2) When the person liable to penalty is a registered firm or an unregisteredfirm which has been assessed under clause (b) of section 183 50 , thennotwithstanding anything contained in the other provisions of this Act, thepenalty imposable under sub-section (1) shall be the same amount as wouldbe imposable on that firm if that firm were an unregistered firm.(4) If the Assessing Officer in the course of any proceedings under this Act, issatisfied that the profits of a registered firm have been distributed otherwisethan in accordance with the shares of the partners as shown in the instrumentof partnership on the basis of which the firm has been registered under thisAct, and that any partner has thereby returned his income below its realamount, he may direct that such partner shall, in addition to the tax, if any,payable by him, pay by way of penalty a sum not exceeding one and a halftimes the amount of tax which has been avoided, or would have been avoidedif the income returned by such partner had been accepted as his correctincome; and no refund or other adjustment shall be claimable by any otherpartner by reason of such direction.(6) Any reference in this section to the income shall be construed as areference to the income or fringe benefits, as the case may be, and theprovisions of this section shall, as far as may be, apply in relation to anyassessment in respect of fringe benefits also.Penalty for failure to answer questions, sign statements, furnishinformation, returns or statements, allow inspections, etc.272A. (1) If any person,—(a) being legally bound to state the truth of any matter touching thesubject of his assessment, refuses to answer any question put to himby an income-tax authority in the exercise of its powers under thisAct; or(b) refuses to sign any statement made by him in the course of anyproceedings under this Act, which an income-tax authority maylegally require him to sign; or(c) to whom a summons is issued under sub-section (1) of section 131either to attend to give evidence or produce books of account orother documents at a certain place and time omits to attend orproduce books of account or documents at the place or time,he shall pay, by way of penalty, a sum of ten thousand rupees for each suchdefault or failure.(2) If any person fails—

By Haridas BhatPENALTY UNDER INCOME TAX ACT 1961(a) to comply with a notice issued under sub-section (6) of section 94; or(b) to give the notice of discontinuance of his business or profession asrequired by sub-section (3) of section 176; or(c) to furnish in due time any of the returns, statements or particularsmentioned in section 133 or section 206 94 [***] 95 [or section 206C] orsection 285B; or(d) to allow inspection of any register referred to in section 134 or of anyentry in such register or to allow copies of such register or of anyentry therein to be taken; or(e) to furnish the return of income which he is required to furnish undersub-section (4A) or sub-section (4C) of section 139 or to furnish itwithin the time allowed and in the manner required under those subsections;or](f) to deliver or cause to be delivered in due time a copy of thedeclaration mentioned in section 197A; or(g) to furnish a certificate as required by section 203 97 [or section 206C];or(h) to deduct and pay tax as required by sub-section (2) of section 226;(i) to furnish a statement as required by sub-section (2C) of section192;](j) to deliver or cause to be delivered in due time a copy of thedeclaration referred to in sub-section (1A) of section 206C;](k) to deliver or cause to be delivered a copy of the statement within thetime specified in sub-section (3) of section 200 or the proviso to subsection(3) of section 206C;](l) to deliver or cause to be delivered the 2a [statements] within the timespecified in sub-section (1) of section 206A,]he shall pay, by way of penalty, a sum of one hundred rupees for every dayduring which the failure continues:Provided that the amount of penalty for failures in relation to a declarationmentioned in section 197A, a certificate as required by section 203 andreturns under sections 206 and 206C and statements under sub-section (3) ofsection 200 or the proviso to sub-section (3) of section 206C shall not exceedthe amount of tax deductible or collectible 7 , as the case may be.(3) Any penalty imposable under sub-section (1) or sub-section (2) shall beimposed—(a) in a case where the contravention, failure or default in respect ofwhich such penalty is imposable occurs in the course of anyproceeding before an income-tax authority not lower in rank than a

By Haridas BhatPENALTY UNDER INCOME TAX ACT 19618 [Joint] Director or a 8 [Joint] Commissioner, by such income-taxauthority;(b) in a case falling under clause (f) of sub-section (2), by the ChiefCommissioner or Commissioner; and(c) in any other case, by the8 [Joint] Director or the8 [Joint]Commissioner.(4) No order under this section shall be passed by any income-tax authorityreferred to in sub-section (3) unless the person on whom the penalty isproposed to be imposed is given an opportunity of being heard in the matterby such authority.Penalty not to be imposed in certain cases.273B.Notwithstanding anything no penalty shall be imposable on the person or theassessee, as the case may be, for any failure referred to in the said provisionsif he proves that there was reasonable cause for the said failure.Procedure.274.No order imposing a penalty under this Chapter shall be made unless theassessee has been heard, or has been given a reasonable opportunity ofbeing heard.No order imposing a penalty under this Chapter shall be made except with theprior approval of the [Joint] Commissioner.](a) by the Income-tax Officer, where the penalty exceeds ten thousandrupees;(b) by the Assistant Commissioner [or Deputy Commissioner], where thepenalty exceeds twenty thousand rupees,An income-tax authority on making an order under this Chapter imposing apenalty, unless he is himself the Assessing Officer, shall forthwith send a copyof such order to the Assessing Officer.Bar of limitation for imposing penalties.275.in a case where the relevant assessment or other order is the subject-matterof an appeal to the Commissioner (Appeals) or Appellate Tribunal

By Haridas BhatPENALTY UNDER INCOME TAX ACT 1961after the expiry of the financial year in which the proceedings, in the course ofwhich action for the imposition of penalty has been initiated, are completed, orsix months from the end of the month in which the order is received by theChief Commissioner or Commissioner, whichever period expires later :passes the order on or after the 1st day of June, 2003 disposing of suchappeal,an order imposing penalty shall be passed before the expiry of the financialyear in which the proceedings, in the course of which action for imposition ofpenalty has been initiated, are completed, orwithin one year from the end of the financial year in which the order of theCommissioner (Appeals) is received by the Chief Commissioner orCommissioner, whichever is laterin a case where the relevant assessment or other order is the subject-matterof revisionafter the expiry of six months from the end of the month in which such order ofrevision is passed;in any other case,after the expiry of the financial year in which the proceedings, in the course ofwhich action for the imposition of penalty has been initiated, are completed, orsix months from the end of the month in which action for imposition of penaltyis initiated, whichever period expires later.In a case where the relevant assessment or other order is the subject-matterof an appeal to the Commissioner (Appeals) or an appeal to the AppellateTribunal under or an appeal to the High Court or an appeal to the SupremeCourt or revision and an order imposing or enhancing or reducing orcancelling penalty or dropping the proceedings for the imposition of penalty ispassed before the order of the Commissioner (Appeals) or the AppellateTribunal or the High Court or the Supreme Court is received by the ChiefCommissioner or the Commissioner or the order of revision is passed, anorder imposing or enhancing or reducing or cancelling penalty or dropping theproceedings for the imposition of penalty may be passed on the basis ofassessment as revised by giving effect to such order of the Commissioner(Appeals) or, the Appellate Tribunal or the High Court, or the Supreme Courtor order of revision

By Haridas BhatPENALTY UNDER INCOME TAX ACT 1961no order of imposing or enhancing or reducing or cancelling penalty ordropping the proceedings for the imposition of penalty shall be passed—(a) unless the assessee has been heard, or has been given areasonable opportunity of being heard;(b) after the expiry of six months from the end of the month in which theorder of the Commissioner (Appeals) or the Appellate Tribunal or theHigh Court or the Supreme Court is received by the ChiefCommissioner or the Commissioner or the order of revision under ispassed:In computing the period of limitation for the purposes of this section, thefollowing shall be excluded(i)the time taken in giving an opportunity to the assessee to be reheard(ii) any period during which the immunity granted under section 245Hremained in force; and(iii) any period during which a proceeding under this Chapter for the levy ofpenalty is stayed by an order or injunction of any court,Power to reduce or waive penalty, etc., in certain cases 273A.Commissioner may, in his discretion, whether on his own motion orotherwise,-(ii)reduce or waive the amount of penalty imposed or imposable ona person under clause (iii) of sub-section (1) of section 271;if he is satisfied that such person-has, prior to the detection by the Assessing Officer, of the concealment ofparticulars of income or of the inaccuracy of particulars furnished in respect ofsuch income, voluntarily and in good faith, made full and true disclosure ofsuch particulars;and also has, co-operated in any enquiry relating to the assessment of hisincome and has either paid or made satisfactory arrangements for thepayment of any tax or interest payable in consequence of an order passedunder this Act in respect of the relevant assessment year.

By Haridas BhatPENALTY UNDER INCOME TAX ACT 1961Failure to furnish returns, comply with notices, concealment of income, etc271.has failed to comply with a noticeunder sub-section (1) of section142 or sub-section (2) of section143 or fails to comply with adirection issued under sub-section(2A) of section 142, ora sum of ten thousand rupees foreach such failure;has concealed the particulars ofhis income or furnished inaccurateparticulars of such income,in addition to tax, if any, payable byhim, a sum which shall not be lessthan, but which shall not exceed threetimes the amount of tax sought to beevadedFailure to keep, maintain or retain books of account, documents, etc.271A.fails to keep and maintain any suchbooks of account and otherdocuments as required by section44AA or the rules made thereunder,in respect of any previous year or toretain such books of account andother documents for the periodspecified in the said rules,a sum of twenty-five thousand rupees

By Haridas BhatPENALTY UNDER INCOME TAX ACT 1961Failure to get accounts auditedIf any person fails to get his accountsaudited in respect of any previousyear or years relevant to anassessment year or furnish a report ofsuch audit as required under section44AB271Ba sum equal to one-half per cent ofthe total sales, turnover or grossreceipts, as the case may be, inbusiness, or of the gross receipts inprofession, in such previous year oryears or a sum of one hundredthousand rupees, whichever is less.Penalty for failure to comply with the provisions of section 269SS271Dtakes or accepts any loan or depositin contravention of the provisions ofsection 269SS,a sum equal to the amount of the loanor deposit so taken or acceptedPenalty for failure to comply with the provisions of section 269T271E.repays any loan or deposit referred toin section 269T otherwise than inaccordance with the provisions of thatsectiona sum equal to the amount of the loanor deposit so repaid.Penalty for failure to answer questions, sign statements, furnish information,returns or statements, allow inspections, etc.272A(1)being legally bound to state the truthof any matter touching the subject ofhis assessment, refuses to answerany question put to him by an incometaxauthority in the exercise of itspowers under this Act; orrefuses to sign any statement madeby him in the course of anyproceedings under this Act, which anincome-tax authority may legallyrequire him to sign; orsum of ten thousand rupees for eachsuch default or failureto whom a summons is issued undersub-section (1) of section 131 eitherto attend to give evidence or producebooks of account or other documentsat a certain place and time omits toattend or produce books of account ordocuments at the place or time

By Haridas BhatPENALTY UNDER INCOME TAX ACT 1961Penalty for failure to272A(1)to comply with a notice issued u/s94(6)to give the notice of discontinuance ofhis business or profession as requiredby 176(3)to furnish in due time any of thereturns, statements or particularsmentioned in section 133 or section206 94 [***] 95 [or section 206C] orsection 285B; orto allow inspection of any registerreferred to in section 134 or of anyentry in such register or to allowcopies of such register or of any entrytherein to be taken; orto furnish the return of income whichhe is required to furnish under subsection(4A) or sub-section (4C) ofsection 139 or to furnish it within thetime allowed and in the mannerrequired under those sub-sections; or]to deliver or cause to be delivered indue time a copy of the declarationmentioned in section 197A;to furnish a certificate as required bysection 203 97 [or section 206C]; orto deduct and pay tax as required bysub-section (2) of section 226to furnish a statement as required bysub-section (2C) of section 192to deliver or cause to be delivered indue time a copy of the declarationreferred to in sub-section (1A) ofsection 206Cto deliver or cause to be delivered acopy of the statement within the timespecified in sub-section (3) of section200 or the proviso to sub-section (3)of section 206C;]a sum of one hundred rupees forevery day during which the failurecontinues:a sum of one hundred rupees forevery day during which the failurecontinues:not exceed the amount of taxdeductible or collectible 7 , as the casemay bea sum of one hundred rupees forevery day during which the failurecontinues:a sum of one hundred rupees forevery day during which the failurecontinues:not exceed the amount of taxdeductible or collectible 7 , as the casemay bea sum of one hundred rupees forevery day during which the failurecontinues:a sum of one hundred rupees forevery day during which the failurecontinues:not exceed the amount of taxdeductible or collectible 7 , as the casemay beto deliver or cause to be delivered the a sum of one hundred rupees for

By Haridas BhatPENALTY UNDER INCOME TAX ACT 19612a [statements] within the timespecified in sub-section (1) of section206A,]every day during which the failurecontinues:Penalty for failure to comply with the provisions of section 139A (PAN)272Bfails to comply with the provisions ofsection 139Aquotes or intimates a number which isfalse, and which he either knows orbelieves to be false or does notbelieve to be trueten thousand rupees

PENALTY UNDER INCOME TAX ACT 1961By Haridas Bhat

By Haridas BhatPENALTY UNDER INCOME TAX ACT 19613 [Failure to furnish returns, comply with notices, concealment of income,etc.4 271. (1) If the 5 [Assessing] Officer or the 6 [***] 7 [Commissioner (Appeals)]8 [or the Commissioner] in the course of any proceedings under this Act, issatisfied that any person—(a) 9 [* * *](b) has 10 [* * *] failed to comply with a notice 11 [under sub-section (2) ofsection 115WD or under sub-section (2) of section 115WE or] undersub-section (1) of section 142 or sub-section (2) of section 143 12 [orfails to comply with a direction issued under sub-section (2A) ofsection 142], or(c) has concealed the particulars of his income or 13 [* * *] furnishedinaccurate particulars of 14 [such income, or] 1516 [(d) has concealed the particulars of the fringe benefits or furnishedinaccurate particulars of such fringe benefits,]he may direct that such person shall pay by way of penalty,—(i) 17 [* * *]18 [(ii) in the cases referred to in clause (b), 19 [in addition to tax, ifany, payable] by him, 20 [a sum of ten thousand rupees] for each suchfailure ;]21 [(iii) in the cases referred to in clause (c) 22 [or clause (d)], 23 [in addition totax, if any, payable] by him, a sum which shall not be less than, butwhich shall not exceed 24 [three times], the amount of tax sought tobe evaded by reason of the concealment of particulars of his income25 [or fringe benefits] or the furnishing of inaccurate particulars of suchincome 25 [or fringe benefits].26 [* * *]27 [Explanation 1.—Where in respect of any facts material to the computationof the total income of any person under this Act,—(A) such person fails to offer an explanation or offers an explanationwhich is found by the28 [Assessing] Officer or the29 [***]30 [Commissioner (Appeals)] 31 [or the Commissioner] to be false, or(B) such person offers an explanation which he is not able tosubstantiate 32 [and fails to prove that such explanation is bona fideand that all the facts relating to the same and material to thecomputation of his total income have been disclosed by him],then, the amount added or disallowed in computing the total income of suchperson as a result thereof shall, for the purposes of clause (c) of this subsection,be deemed to represent the income in respect of which particularshave been concealed.33 [* * *]Explanation 2.—Where the source of any receipt, deposit, outgoing orinvestment in any assessment year is claimed by any person to be an amountwhich had been added in computing the income or deducted in computing the

By Haridas BhatPENALTY UNDER INCOME TAX ACT 1961loss in the assessment of such person for any earlier assessment year oryears but in respect of which no penalty under clause (iii) of this sub-sectionhad been levied, that part of the amount so added or deducted in such earlierassessment year immediately preceding the year in which the receipt,deposit, outgoing or investment appears (such earlier assessment yearhereafter in this Explanation referred to as the first preceding year) which issufficient to cover the amount represented by such receipt, deposit oroutgoing or value of such investment (such amount or value hereafter in thisExplanation referred to as the utilised amount) shall be treated as the incomeof the assessee, particulars of which had been concealed or inaccurateparticulars of which had been furnished for the first preceding year; and wherethe amount so added or deducted in the first preceding year is not sufficient tocover the utilised amount, that part of the amount so added or deducted in theyear immediately preceding the first preceding year which is sufficient to coversuch part of the utilised amount as is not so covered shall be treated to be theincome of the assessee, particulars of which had been concealed orinaccurate particulars of which had been furnished for the year immediatelypreceding the first preceding year and so on, until the entire utilised amount iscovered by the amounts so added or deducted in such earlier assessmentyears.34 [Explanation 3.—Where any person 35 [***] fails, without reasonable cause, tofurnish within the period specified in sub-section (1) of section 153 a return ofhis income which he is required to furnish under section 139 in respect of anyassessment year commencing on or after the 1st day of April, 1989, and untilthe expiry of the period aforesaid, no notice has been issued to him underclause (i) of sub-section (1) of section 142 or section 148 and the AssessingOfficer or the 36 [***] Commissioner (Appeals) is satisfied that in respect ofsuch assessment year such person has taxable income, then, such personshall, for the purposes of clause (c) of this sub-section, be deemed to haveconcealed the particulars of his income in respect of such assessment year,notwithstanding that such person furnishes a return of his income at any timeafter the expiry of the period aforesaid in pursuance of a notice under section148.]Explanation 4.—For the purposes of clause (iii) of this sub-section, theexpression “the amount of tax sought to be evaded”,—37 [(a) in any case where the amount of income in respect of whichparticulars have been concealed or inaccurate particulars have beenfurnished has the effect of reducing the loss declared in the return orconverting that loss into income, means the tax that would havebeen chargeable on the income in respect of which particulars havebeen concealed or inaccurate particulars have been furnished hadsuch income been the total income;](b) in any case to which Explanation 3 applies, means the tax on thetotal income assessed 38 [as reduced by the amount of advance tax,tax deducted at source, tax collected at source and self-assessmenttax paid before the issue of notice under section 148];(c) in any other case, means the difference between the tax on the totalincome assessed and the tax that would have been chargeable had

By Haridas BhatPENALTY UNDER INCOME TAX ACT 1961such total income been reduced by the amount of income in respectof which particulars have been concealed or inaccurate particularshave been furnished.]39 [Explanation 5.—Where in the course of a 40 [search initiated under section132 before the 1st day of June, 2007], the assessee is found to be the ownerof any money, bullion, jewellery or other valuable article or thing (hereafter inthis Explanation referred to as assets) and the assessee claims that suchassets have been acquired by him by utilising (wholly or in part) his income,—(a) for any previous year which has ended before the date of the search,but the return of income for such year has not been furnished beforethe said date or, where such return has been furnished before thesaid date, such income has not been declared therein ; or(b) for any previous year which is to end on or after the date of thesearch,then, notwithstanding that such income is declared by him in any return ofincome furnished on or after the date of the search, he shall, for the purposesof imposition of a penalty under clause (c) of sub-section (1) of this section, bedeemed to have concealed the particulars of his income or furnishedinaccurate particulars of such income, 41 [unless,—(1) such income is, or the transactions resulting in such income arerecorded,—(i) in a case falling under clause (a), before the date of the search ;and(ii) in a case falling under clause (b), on or before such date,in the books of account, if any, maintained by him for any source ofincome or such income is otherwise disclosed to the 42 [ChiefCommissioner or Commissioner] before the said date ; or(2) he, in the course of the search, makes a statement under subsection(4) of section 132 that any money, bullion, jewellery or othervaluable article or thing found in his possession or under his control,has been acquired out of his income which has not been disclosedso far in his return of income to be furnished before the expiry oftime specified in 43 [* * *] sub-section (1) of section 139, and alsospecifies in the statement the manner in which such income hasbeen derived and pays the tax, together with interest, if any, inrespect of such income.]44 [Explanation 5A.— Where, in the course of a search initiated under section132 on or after the 1st day of June, 2007, the assessee is found to be theowner of—(i) any money, bullion, jewellery or other valuable article or thing(hereafter in this Explanation referred to as assets) and theassessee claims that such assets have been acquired by him byutilising (wholly or in part) his income for any previous year; or(ii) any income based on any entry in any books of account or otherdocuments or transactions and he claims that such entry in the

By Haridas BhatPENALTY UNDER INCOME TAX ACT 1961books of account or other documents or transactions represents hisincome (wholly or in part) for any previous year,which has ended before the date of search and,—(a) where the return of income for such previous year has beenfurnished before the said date but such income has not beendeclared therein; or(b) the due date for filing the return of income for such previous year hasexpired but the assessee has not filed the return,then, notwithstanding that such income is declared by him in any return ofincome furnished on or after the date of search, he shall, for the purposes ofimposition of a penalty under clause (c) of sub-section (1) of this section, bedeemed to have concealed the particulars of his income or furnishedinaccurate particulars of such income.]45 [Explanation 6.—Where any adjustment is made in the income or lossdeclared in the return under the proviso to clause (a) of sub-section (1) ofsection 143 and additional tax charged under that section, the provisions ofthis sub-section shall not apply in relation to the adjustment so made.]46 [Explanation 7.—Where in the case of an assessee who has entered into aninternational transaction defined in section 92B, any amount is added ordisallowed in computing the total income under sub-section (4) of section92C, then, the amount so added or disallowed shall, for the purposes ofclause (c) of this sub-section, be deemed to represent the income in respectof which particulars have been concealed or inaccurate particulars have beenfurnished, unless the assessee proves to the satisfaction of the AssessingOfficer or the Commissioner (Appeals) 47 [or the Commissioner] that the pricecharged or paid in such transaction was computed in accordance with theprovisions contained in section 92C and in the manner prescribed under thatsection, in good faith and with due diligence.]48 [(1A) Where any penalty is imposable by virtue of Explanation 2 to subsection(1), proceedings for the imposition of such penalty may be initiatednotwithstanding that any proceedings under this Act in the course of whichsuch penalty proceedings could have been initiated under sub-section (1)have been completed.]49 [(1B) Where any amount is added or disallowed in computing the totalincome or loss of an assessee in any order of assessment or reassessmentand the said order contains a direction for initiation of penalty proceedingsunder clause (c) of sub-section (1), such an order of assessment orreassessment shall be deemed to constitute satisfaction of the AssessingOfficer for initiation of the penalty proceedings under the said clause (c).](2) When the person liable to penalty is a registered firm or an unregisteredfirm which has been assessed under clause (b) of section 183 50 , thennotwithstanding anything contained in the other provisions of this Act, thepenalty imposable under sub-section (1) shall be the same amount as wouldbe imposable on that firm if that firm were an unregistered firm.(3) 51 [Omitted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.]

By Haridas BhatPENALTY UNDER INCOME TAX ACT 1961(4) If the 52 [Assessing] Officer or the 53 [***] 54 [Commissioner (Appeals)] in thecourse of any proceedings under this Act, is satisfied that the profits of aregistered firm have been distributed otherwise than in accordance with theshares of the partners as shown in the instrument of partnership on the basisof which the firm has been registered under this Act, and that any partner hasthereby returned his income below its real amount, he may direct that suchpartner shall, in addition to the tax, if any, payable by him, pay by way ofpenalty a sum not exceeding one and a half times the amount of tax whichhas been avoided, or would have been avoided if the income returned bysuch partner had been accepted as his correct income; and no refund or otheradjustment shall be claimable by any other partner by reason of suchdirection.](4A) and (4B) [Omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f.1-10-1975. Original sub-sections (4A) and (4B) were inserted by the Incometax(Amendment) Act, 1965, w.e.f. 12-3-1965. Later on sub-section (4A) wassubstituted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.]55 [(5) The provisions of this section as they stood immediately before theiramendment by the Direct Tax Laws (Amendment) Act, 1989 shall apply toand in relation to any assessment for the assessment year commencing onthe 1st day of April, 1988, or any earlier assessment year and references inthis section to the other provisions of this Act shall be construed asreferences to those provisions as for the time being in force and applicable tothe relevant assessment year.]56 [(6) Any reference in this section to the income shall be construed as areference to the income or fringe benefits, as the case may be, and theprovisions of this section shall, as far as may be, apply in relation to anyassessment in respect of fringe benefits also.]91 [Penalty for failure to answer questions, sign statements, furnishinformation, returns or statements, allow inspections, etc.272A. (1) If any person,—(a) being legally bound to state the truth of any matter touching thesubject of his assessment, refuses to answer any question put to himby an income-tax authority in the exercise of its powers under thisAct; or(b) refuses to sign any statement made by him in the course of anyproceedings under this Act, which an income-tax authority maylegally require him to sign; or(c) to whom a summons is issued under sub-section (1) of section 131either to attend to give evidence or produce books of account orother documents at a certain place and time omits to attend orproduce books of account or documents at the place or time,(d) 92 [***]

By Haridas BhatPENALTY UNDER INCOME TAX ACT 1961he shall pay, by way of penalty, 93 [a sum of ten thousand rupees] for eachsuch default or failure.(2) If any person fails—(a) to comply with a notice issued under sub-section (6) of section 94; or(b) to give the notice of discontinuance of his business or profession asrequired by sub-section (3) of section 176; or(c) to furnish in due time any of the returns, statements or particularsmentioned in section 133 or section 206 94 [***] 95 [or section 206C] orsection 285B; or(d) to allow inspection of any register referred to in section 134 or of anyentry in such register or to allow copies of such register or of anyentry therein to be taken; or96 [(e) to furnish the return of income which he is required to furnish undersub-section (4A) or sub-section (4C) of section 139 or to furnish itwithin the time allowed and in the manner required under those subsections;or](f) to deliver or cause to be delivered in due time a copy of thedeclaration mentioned in section 197A; or(g) to furnish a certificate as required by section 203 97 [or section 206C];or(h) to deduct and pay tax as required by sub-section (2) of section 226;98 [(i) to furnish a statement as required by sub-section (2C) of section192;]99 [(j) to deliver or cause to be delivered in due time a copy of thedeclaration referred to in sub-section (1A) of section 206C;]1 [(k) to deliver or cause to be delivered a copy of the statement within thetime specified in sub-section (3) of section 200 or the proviso to subsection(3) of section 206C;]2 [(l) to deliver or cause to be delivered the 2a [statements] within the timespecified in sub-section (1) of section 206A,]he shall pay, by way of penalty, a sum 3 [of one hundred rupees] for every dayduring which the failure continues:4 [Provided that the amount of penalty for failures in relation to 5 [a declarationmentioned in section 197A, a certificate as required by section 203 and]returns under sections 206 and 206C 6 [and statements under sub-section (3)of section 200 or the proviso to sub-section (3) of section 206C] shall notexceed the amount of tax deductible or collectible 7 , as the case may be.](3) Any penalty imposable under sub-section (1) or sub-section (2) shall beimposed—(a) in a case where the contravention, failure or default in respect ofwhich such penalty is imposable occurs in the course of anyproceeding before an income-tax authority not lower in rank than a8 [Joint] Director or a 8 [Joint] Commissioner, by such income-taxauthority;

By Haridas BhatPENALTY UNDER INCOME TAX ACT 1961(b) in a case falling under clause (f) of sub-section (2), by the ChiefCommissioner or Commissioner; and(c) in any other case, by the8 [Joint] Director or the8 [Joint]Commissioner.(4) No order under this section shall be passed by any income-tax authorityreferred to in sub-section (3) unless the person on whom the penalty isproposed to be imposed is given an opportunity of being heard in the matterby such authority.Explanation.—In this section, “income-tax authority” includes a DirectorGeneral, Director, 9 [Joint] Director and an Assistant Director 10 [or DeputyDirector] while exercising the powers vested in a court under the Code of CivilProcedure, 1908 (5 of 1908), when trying a suit in respect of the mattersspecified in sub-section (1) of section 131.]74 [Penalty not to be imposed in certain cases.273B. Notwithstanding anything contained in the provisions of 75 [clause (b) ofsub-section (1) of] 76 [section 271, section 271A, 77 [section 271AA,] section271B 78 [, section 271BA], 79 [section 271BB,] section 271C, 80 [section 271CA,]section 271D, section 271E, 81 [section 271F, 82 [section 271FA,] 83 [section271FB,] 84 [section 271G,]] clause (c) or clause (d) of sub-section (1) or subsection(2) of section 272A, sub-section (1) of section 272AA] or 85 [section272B or] 86 [sub-section (1) 87 [or sub-section (1A)] of section 272BB or] 88 [subsection(1) of section 272BBB or] clause (b) of sub-section (1) or clause (b) orclause (c) of sub-section (2) of section 273, no penalty shall be imposable onthe person or the assessee, as the case may be, for any failure referred to inthe said provisions if he proves that there was reasonable cause 89 for the saidfailure.]Procedure.274. (1) No order imposing a penalty under this Chapter shall be madeunless the assessee has been heard, or has been given a reasonableopportunity of being heard.90 [(2) No order imposing a penalty under this Chapter shall be made—(a) by the Income-tax Officer, where the penalty exceeds ten thousandrupees;(b) by the Assistant Commissioner 91 [or Deputy Commissioner], wherethe penalty exceeds twenty thousand rupees,except with the prior approval of the 92 [Joint] Commissioner.]93 [(3) An income-tax authority on making an order under this Chapterimposing a penalty, unless he is himself the Assessing Officer, shall forthwithsend a copy of such order to the Assessing Officer.]94 [Bar of limitation for imposing penalties.275. 95 [(1)] No order imposing a penalty under this Chapter shall be passed—

By Haridas BhatPENALTY UNDER INCOME TAX ACT 196196 [(a) in a case where the relevant assessment or other order is thesubject-matter of an appeal to the 97 [***] Commissioner (Appeals)under section 246 98 [or section 246A] or an appeal to the AppellateTribunal under section 253, after the expiry of the financial year inwhich the proceedings, in the course of which action for theimposition of penalty has been initiated, are completed 99 , or sixmonths from the end of the month in which the order of the 1 [***]Commissioner (Appeals) or, as the case may be, the AppellateTribunal is received by the Chief Commissioner or Commissioner,whichever period expires later :2 [Provided that in a case where the relevant assessment or otherorder is the subject-matter of an appeal to the Commissioner(Appeals) under section 246 or section 246A, and the Commissioner(Appeals) passes the order on or after the 1st day of June, 2003disposing of such appeal, an order imposing penalty shall be passedbefore the expiry of the financial year in which the proceedings, inthe course of which action for imposition of penalty has beeninitiated, are completed, or within one year from the end of thefinancial year in which the order of the Commissioner (Appeals) isreceived by the Chief Commissioner or Commissioner, whichever islater;](b) in a case where the relevant assessment or other order is thesubject-matter of revision under section 263 2 [or section 264], afterthe expiry of six months from the end of the month in which suchorder of revision is passed;(c) in any other case, after the expiry of the financial year in which theproceedings, in the course of which action for the imposition ofpenalty has been initiated, are completed, or six months from theend of the month in which action for imposition of penalty is initiated,whichever period expires later.]3 [(1A) In a case where the relevant assessment or other order is the subjectmatterof an appeal to the Commissioner (Appeals) under section 246 orsection 246A or an appeal to the Appellate Tribunal under section 253 or anappeal to the High Court under section 260A or an appeal to the SupremeCourt under section 261 or revision under section 263 or section 264 and anorder imposing or enhancing or reducing or cancelling penalty or dropping theproceedings for the imposition of penalty is passed before the order of theCommissioner (Appeals) or the Appellate Tribunal or the High Court or theSupreme Court is received by the Chief Commissioner or the Commissioneror the order of revision under section 263 or section 264 is passed, an orderimposing or enhancing or reducing or cancelling penalty or dropping theproceedings for the imposition of penalty may be passed on the basis ofassessment as revised by giving effect to such order of the Commissioner(Appeals) or, the Appellate Tribunal or the High Court, or the Supreme Courtor order of revision under section 263 or section 264:Provided that no order of imposing or enhancing or reducing or cancellingpenalty or dropping the proceedings for the imposition of penalty shall bepassed—

By Haridas BhatPENALTY UNDER INCOME TAX ACT 1961(a) unless the assessee has been heard, or has been given areasonable opportunity of being heard;(b) after the expiry of six months from the end of the month in which theorder of the Commissioner (Appeals) or the Appellate Tribunal or theHigh Court or the Supreme Court is received by the ChiefCommissioner or the Commissioner or the order of revision undersection 263 or section 264 is passed:Provided further that the provisions of sub-section (2) of section 274 shallapply in respect of the order imposing or enhancing or reducing penalty underthis sub-section.]4 [(2) The provisions of this section as they stood immediately before theiramendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shallapply to and in relation to any action initiated for the imposition of penalty onor before the 31st day of March, 1989.]5 [Explanation.—In computing the period of limitation for the purposes of thissection,—(i) the time taken in giving an opportunity to the assessee to be reheardunder the proviso to section 129;(ii) any period during which the immunity granted under section 245Hremained in force; and(iii) any period during which a proceeding under this Chapter for the levyof penalty is stayed by an order or injunction of any court,shall be excluded.]]