Common penal provision in the Income Tax Act-1961


Common penal provision in the Income Tax Act-1961

 If you think compliance is expensive, Try non Compliance

Penal provisions are an integral part of every law. Income Tax Act-1961 too have number of penal provisions to ensure authentic & time bound compliance’s from the taxpayers. The penal provisions are normally in the form of (a) Levy of Interest & late fees (b) imposition of penalty (c) Launching of prosecution proceeding against tax defaulters. Levy of interest is purely compensatory in nature whereas imposition of penalty & initiation of prosecution proceedings act as strong deterrents against tax evaders. Penalty is there not only if there is non-filing of income tax return or if there is mis-reporting or under reporting of income. But the penalty is there for various non compliance’s. Some of the common instances which often attract penal consequences are as under:

  1. In case of the following defaults, Penalty of Rs. 10,000 can be imposed:
    i. Failure to comply with any notice issued by the department.
    ii. Refusal to sign statements recorded in any income tax proceedings.
    iii. Non compliance with summons issued for producing books of accounts or other evidences.
    iv Refusal to answer questions raised by the Income Tax Authorities

  1. Failure to apply, quote, intimate PAN or quoting of false PAN attracts penalty of Rs. 10,000/-. Similarly, failure to apply, quote TAN or wrong quoting thereof attracts a penalty of ₹10,000

  1. Where a person is liable to deduct or collect tax at source (TDS) and fails to do so, penalty equal to the amount of tax can be levied. Further, failure to furnish TDS/TCS statement or furnishing incorrect statements can attract penalty from Rs. 10,000/- to Rs. 1,00,000/-.

  1. Failure to maintain books of accounts and other documents attracts penalty of Rs. 25,000/-. In case the taxpayer is a person who has entered into international transaction, penalty will be 2% of the value of such international transaction or specified domestic transactions.

  1. If the taxpayer fails to get accounts audited or furnish audit report, penalty can be levied which could be Rs. 1,50,000 or ½% of the total sale, Turnover or gross receipts, whichever is lesser. If such failure to get accounts audited pertains to taxpayer with foreign transaction, penalty of Rs. 1,00,000/- can be imposed.

  1. If a report or certificate is required to be furnished by an Accountant, Merchant Banker, Registered Valuer and such information is found to be incorrect then penalty of Rs. 10,000 for each such report can be imposed.

  1. Failure to furnish statement of financial transaction (SFT) or reportable account shall attract a penalty of Rs. 500/- for each day of failure. If default continues even after issue of notice then penalty shall be Rs. 1,000/- per day. Inaccurate furnishing attracts penalty of Rs. 50,000/-.

  1. If any person accepts or repays any loan or deposit of an amount of Rs. 20,000/- or more in cash then penalty of an amount equal to such loan or deposit can be imposed.

  1. If any person receives an amount of Rs. 2,00,000/- or more
    (a) in aggregate from a person in a day; or
    (b) in respect of a single transaction; or
    (c) in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account then penalty equivalent to such amount can also be imposed as penalty.

Above are some of the common penal provisions from the exhaustive list contained in the Income Tax Act-1961. Though some of the penalty is discretionary in nature yet the same is now strictly imposed by the income tax department. Levy of penalties is justified on the ground that it motivates taxpayers to comply with their tax obligations. “The law helps those who watch, not those who sleep”- Proverb. Timely & proper compliance will result in not only monetary saving but will also provide peace of mind.