Bailabel Type : bailable
Description
Section 271 of the Income Tax Act, 1961 outlines penalties for failure to comply with the provisions of the Act. It specifically addresses instances where taxpayers fail to furnish their income tax returns, conceal income, fail to comply with notices, or engage in other non-compliant behavior as per the law. This section is a crucial provision that aims to enforce compliance and ensure transparency in the tax process.
Key Provisions of Section 271:
1. Penalty for Failure to Furnish Return of Income (Section 271(1)(a)):
- If a taxpayer fails to file their income tax return within the due date specified under Section 139(1) (the due date for filing returns), a penalty is imposed under Section 271(1)(a).
- The penalty for failure to file a return is ?5,000 for every day of delay until the return is filed.
2. Penalty for Concealment of Income or Inaccurate Statements (Section 271(1)(c)):
- This section also applies if a taxpayer conceals income or provides inaccurate statements regarding income or expenses.
- Penalty under Section 271(1)(c) can be as high as 100% to 300% of the tax sought to be evaded.
- If the taxpayer willfully conceals income, a penalty of 100% to 300% of the tax that would have been payable on the concealed income can be imposed.
- This penalty is imposed when the taxpayer is found guilty of willfully evading tax by concealing income or providing incorrect information about income and deductions.
3. Penalty for Failure to Comply with Notices (Section 271(1)(b)):
- If a taxpayer fails to comply with a notice issued by the Income Tax Officer (ITO) under sections like Section 142(1) (for inquiry), Section 143(2) (for assessment), or Section 147 (reassessment), the tax authorities can impose a penalty under Section 271(1)(b).
- The penalty for failure to comply with such notices is ?10,000 for each failure to comply.
4. Penalty for Failure to Furnish Audit Report (Section 271B):
- If a taxpayer who is required to submit an audit report under Section 44AB fails to do so, a penalty is levied.
- The penalty for failure to furnish the audit report is ?1,50,000 or 0.5% of the total sales, whichever is higher.
5. Penalty for Failure to Pay Tax (Section 271(1)(a)):
- If a person fails to pay tax due, the authorities may impose a penalty for such failure. The penalty can vary depending on the circumstances, including the amount of tax unpaid and the duration of non-compliance.
Punishment
Penalty for Concealment of Income (Section 271(1)(c)):
This section is particularly significant in addressing concealment of income. If the tax authorities discover that a taxpayer has concealed income or has deliberately understated income in their return, they can impose a penalty of 100% to 300% of the tax payable on the concealed income.
Key Scenarios for Penalty under Section 271(1)(c):
- Filing false returns or incorrect statements to evade tax.
- Failing to disclose a part of income to reduce tax liabilities.
- Incorrectly claiming deductions to lower taxable income.
- Deliberate attempts to hide the true source of income.
Penalty Process:
1. Imposition of Penalty:
- The Income Tax Officer (ITO) assesses the situation and determines if there has been a failure in compliance or an attempt at concealment of income.
- If the penalty is imposed, the taxpayer is given an opportunity to explain their actions and defend themselves.
2. Penalty Order:
- If a penalty is to be levied, the Assessing Officer (AO) issues a penalty order, explaining the reasons for the penalty.
- The penalty order provides an opportunity for the taxpayer to appeal if they believe the penalty was unjustly imposed.
Penalty for Non-Compliance (Section 271E) and Related Provisions:
- Section 271E also imposes a penalty for failure to comply with certain provisions related to transactions involving loans, deposits, and repayments. For example, if a taxpayer accepts or repays loans in violation of certain prescribed limits (such as accepting cash in excess of ?20,000), a penalty of the same amount is imposed under Section 271E.
