Penalties for various defaults in the Income Tax Law: An Overview (II)


Penalties for various defaults in the Income Tax Law: An Overview (II)


In the last issue of The Tax Talk, we have discussed some of the penal provisions in the Income Tax Law for concealment of income, failure to give reply to the income tax notices, penalty for false entry in the accounts, etc. No law can exist without the penal provision. Let us know few other provisions wherein penalty is often initiated by the tax authorities:

  1. Accepting or repaying in cash of certain loans, deposits or specified sum of Rs. 20,000/- or more:
    Income Tax law prohibits the acceptance as well as repayment in cash of an amount of Rs 20,000 towards loans, deposits or advance against immovable property.  If any person violates the law by accepting or repaying all this in cash then penalty is applicable U/s 271D which can be an amount equal to loan or deposit taken or


  1. Acceptance of Rs. 2 Lakh or more in Cash:
    Section 269ST prohibits acceptance of Rs. 2 Lakh or more in cash
    a) in a day inaggregate from a person in a day;
    b) in respect of a single transaction; or
    c) in respect of transactions relating to one event or occasion from a
    If any person violates this law then the penalty is applicable U/s 271DA which shall be an amount equal to the amount of such receipt.



  1. Failureto furnish SFT by Banks, Companies, Registrar etc:
    Income tax department collects information from multiple sources by requiring various entities like banks, registrar, etc to file Statement of financial transaction (SFT) [Earlier it was called as ‘Annual Information Statement (AIS)] U/s 285BA(1). Non-furnishing of statement of financial transaction or reportable account attracts penalty u/s 271FA @ Rs. 500 per day of  The penalty can be enhanced to Rs. 1000 if the failure is there even after issuance of the notice. There is a further penalty of Rs. 50,000/- for furnishing inaccurate SFT[Section 271FAA].


  1. Latefiling fees for delay in filing the TDS/TCS statement:
    Non filing of the TDS/TCS return on or before the due  date attracts penalty @ Rs. 200 per day. The late fee is not at the discretion of the tax authorities and is mandatory in nature [Section 234E]. Further, where a person fails to file the statement of tax deducted/ collected  at source i.e. TDS/TCS return on or before the due dates penalty may be levied U/s 271H which may be a minimum of Rs. 10,000 & can go up to Rs. 1,00,000/-.  Incorrect filing of TDS/TCS return may also attract penalty U/s 271H.


  1. Penalty on the professionals for furnishing incorrect certificate or information:
    Section271J provides that if CA or Merchant banker or a registered valuer furnishes incorrect information in a report or certificate under the income tax law then income tax authorities may impose a penalty of Rs. 10,000 for each such report or certificate.


  1. Failureto cooperate with the tax authorities:
    Every citizen is expected to cooperate with the tax authorities. Many times the tax authorities require the attendance of the person or require the information from a person or may require the person to sign the statements. Failure to comply with these directions or notices can attract a penalty under section 272A(1) which is  10,000 for each failure/default.



  1. Penaltyunder section 272A(2):
    Section 272A(2) provides for the penalty @  500 per day for every day during which the default continues for various defaults like Failure to give notice of discontinuance of business or profession within 15 days of discontinuance U/s 176(3), Failure to furnish within due date returns, statements or certificates, deliver declaration, allow inspection, etc., u/s 133, 134, 139(4A), 139(4C), 192(2C), 197A, 203, 206, 206C, 206C(1A), 285B etc.



  1. Penaltyfor failure to cooperate to taxmen while entering in business premises [Section 133B]:
    Section 133B empowers the tax authorities to enter the place of business of the taxpayer to collect information required by the authorities which will be useful under the income tax law. If the taxpayer attempts to restrict or submit the requisite information then the penalty shall be applicable U/s 272AA(1) up to  1,000/-.


  1. Penaltyfor passing unreasonable benefits to trustee or specified person in case of Trust or Institutions:
    FA-2022 has inserted section 271AAE to the Income-tax Act to levy a penalty on trusts or institutions if any unreasonable benefits is passed on to the trustee or specified person. The penalty is to be computed as follows:
    a) For the first violation: to the extent of income applied by the trust for the benefit of any interested party referred to in section 13(3);
    b) For any violation in subsequent years: twice the amount of such income so  This section is applicable with effect from Assessment Year 2023-24.


Relaxation from penalty

Not all but there are few penal provision where the penalty proceeding may be dropped, as under:

  1. Power of Commissioner to waive:
    Principal Commissioner or Commissioner of Income-tax has power to waive or reduce any penalty levied under the Income-tax Act. Penalty can be waived or reduced by the Commissioner of Income-tax if the conditions specified in section 273A(4) in this regard are satisfied.
  2. Reasonable Cause:
    Section 273B empowers authorities to give relief from penalty in genuine cases covered by section 271A, 271AA, 271B, 271BA, 271BB, 271C, 271CA,271D, 271E, 271F, 271FA, 271FAB,271FB, 271G, 271GA, 271GB, 271H, 271 I, 271J, 272A(1)(c) or (d), 272A(2), 272AA(1), 272B, 272BB(1), 272BB(1A), 272BBB(1) or 273(2)(b) or (c) if there is a reasonable cause for such failures .


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