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The Income-tax
Act contains provisions for interest, penalty and prosecution. While interest
is compensatory in nature, the levy of penalty and launching of prosecution
work as deterrents.
DEFAULTS
WHICH MAY INVITE LEVY OF PENALTY
Chapters
XVII and XXI of Income-tax Act, 1961, contain various provision empowering
an Income-tax authority to levy penalty in case of certain defaults. The
following defaults may invite levy of penalty.
-
When the assessee is in default or is deemed to be in default in deducting
or of tax deduction default in making payment of tax, including the
tax deducted at source, advance tax and the self assessment tax. [Section
221 read with Sec. 201(1)]
- Failure
to comply with a notice issued under section 142(1) or 143(2) or failure
to comply with the directions to get the accounts audited [Section 271(1)(b)]
- Concealment
of particulars of income or furnishing of inaccurate particulars of
income [ Section 271(1)(c)]
- Failure
to maintain prescribed books of accounts and documents by persons carrying
on profession or business. [ Section 271(A)]
- Failure
to get the accounts audited in the prescribed circumstances or failure
to obtain the prescribed audit report within the prescribed time period
or failure to furnish the audit report along with the return. [Section
(271B)]
- Failure
to subscribe to the eligible issue of capital. [Section (271BB]
- Penalty
for failure to deduct tax at source. [Section (271C)
- Accepting
of any loan or deposit of Rs. 20,000 or more otherwise than by account
payee cheque or account payee draft. [section 271D].
-
Repayment of loans in controvention of the conditions imposed in section
269T. [Section 271E]
- Refusal
to answer in contravention of legal obligation [Section 272A(1) (a)]
- Refusal
to sign any statement made in the course of Income Tax proceedings.
[Section 272A(1) (b)]
- Failure
to give evidence or produce books of accounts and documents in compliance
to a summon. [ Section 272A(1)(c)]
- Failure
to apply for allotment of Permanent Account Number or Permanent Tax
Deduction Account Number. [Section 272A(1) (d)]
- Failure
to furnish information regarding securities as required under section
94(6). [Section 272A(2) (a)]
- Failure
to give notice of discontinuance of business or profession. [Section
272(2) (b)]
- Failure
to furnish in due time information sought under section 133 of Income
Tax Act. [Section 272(2)(c) ]
- Failure
to furnish in due time prescribed returns/statements under section .
[Section 272(2)(c)]
- Failure
to allow the inspection or taking copies of registers, of companies.
[Section 272A(2)(d)]
- Failure
to furnish in due time the return of income by charitable or religious
institutions. [Section 272A (2) (e)]
- Failure
to deliver in due time a copy of declaration of non deduction of tax
at source u/s 197-A. [Section 272A(2)(f)]
- Failure
to furnish a certificate of tax deducted at source to the persons on
whose behalf tax has been deducted or collected. [Section 272A(2) (g)]
- Failure
to deduct and pay tax from salary payable to an employee as directed
by the assessing officer or the Tax Recovery Officer.[Section 272A(2)
(h)]
- Failure
to allow an IncomeTax Authority to collect any information useful or
relevant to the purposes of Income Tax Act u/s 133B.[Section 272AA]
- Certain
persons in occupation of immovable property or owner of motor vehicle
or subscriber to telephone etc. are required to file returns failing
which penalty may be imposed.[Section (271F)]
- Failure
to comply with the provisions of section 203A dealing with Tax Deduction
Account Number.[Section (272BB)]
IS
THE LEVY OF PENALTY AUTOMATIC?
No penalty
under the Income Tax Act is imposable unless the persons concerned has
been given reasonable opportunity of being heard.
WHAT
IS THE MINIMUM AND MAXIMUM PENALTY LEVIABLE?
The quantum
of penalty leviable depends upon the nature of defaults. The relevant
sections of Income Tax Act prescribe the minimum and maximum penalties
that can be levied.
CAN
THE PENALTY BE REDUCED OR WAIVED?
The Commissioner
of Income Tax may reduce or waive the amount of penalty levied under section
271(1)(c if prescribed conditions are satisfied. The assessee should voluntarily
and in good faith make full and true disclosure of income prior to the detection
of concealment by the Assessing officer. In certain cases of genuine hardship,
the penalty levied can be reduced/waived if the assessee has co-operated
in any inquiry relating to the assessment and recovery of taxes. The waiver/
reduction of penalties is discretionary and dependent upon satisfaction
of prescribed conditions. No assessee can, as matter of right, claim waiver
or reduction of penalty imposed or imposable upon him. [Section (273A)]
PUNISHABLE
OFFENCES
The following
offences committed by a person are prosecutable:
-
Removal, parting with or otherwise dealing with books of account, documents,
money, bullion, jewelry or other valuable articles or the thing put
under restraint during a search.[Section (275A)]
- Fraudulent
removal, concealment, transfer or delivery of any property or any interest
in the property with the intention to thwart the recovery of tax. [Section
(276)]
- Failure
on the part of a liquidator or receiver of the company to give notice
of his appointment to the Assessing Officer or failure to set apart
the amount notified by the Assessing Officer, or parting away of company's
properties in contravention of income tax provision.[Section (276A)]
- Failure
to enter into written agreement or failure to furnish the statement
of immovable property intended to be transferred u/s 269UC , or failure
to surrender or deliver the property under section 269UE, purchased
by the Appropriate Authority or doing or omitting to do anything u/s
269UL, which will have the effect of transfer of property without the
permission of the Appropriate Authority (under the provision of Chapter
XX-C) [Section (276AB)]
- Failure
to pay to the credit of the Central Government the tax deducted at source.
[Section (276B)]
- a.
Failure to pay the tax deducted at source. [Section 276BB]
- Willful
attempt to evade any tax, penalty or interest.[Section 276C(1)]
- Willful
attempt to evade the payment of any tax, penalty or interest levied
under Income Tax Act. [Section 276C(2)]
- Willful
failure to furnish, in due time, the return of income [Section (276CC)]
- Willful
failure to produce the accounts and documents as directed by issue of
a notice u/s 142(1).[ Section {276D)]
- Willful
failure to get the accounts audited as directed by the Assessing Officer
under section 142(2A).[Section (276D)]
- Making
of a statement in verification or delivery of an account or statement
which is false and which the concerned person knows or believes to be
false or does not believe to be true..[Section (277)]
- Abetting
or inducing other person to make and deliver an account and statement
or declaration relating to any taxable income that is false and which
he either knows or believes to be false. [Section (278)]
- Punishment
for 2nd & subsequent offences in cases of certain defaults.[Section(278A)]
No person
shall be punished for any failure if he proves that there is reasonable
cause for such failure.
WHO
CAN BE PUNISHED ?
Any person
committing an offence is liable to be prosecuted. It is not necessary
that the person should be an assessee under the Income Tax Act. In case
of offences committed by a company, firm, association of persons or body
of individual, every person in charge of or responsible for the conduct
of the business of the concern is deemed to be guilty. Similarly, in the
case of offences by a Hindu Undivided Family , the Karta is deemed to
be guilty of the offence.
CAN
THE OFFENCE BE COMPOUNDED?
Section 279(2)
of Income Tax Act empowers a Chief Commissioner or Director General of
Income Tax to compound an offence either before or after the institution
of prosecution proceedings.
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