Types of Penalties imposed under Income Tax Act. 1961



Types of Penalties imposed under Income Tax Act. 1961
1.         For failure to pay tax [Section 221 (1)]. If the assessee, on whom notice of demand has been served, fails to pay the specified amount of tax, he shall be liable to a penalty which the AssessingOfficer, may, from time to time, direct, however the total amount of penalty shall not exceed the amount of tax due.

2.         For failure to pay tax on self-assessment [Section 234A and B]. If the assessee fails to paythe amount of tax on the basis of self-assessment he will he liable to a penalty to be imposed @ 1% of the tax due on self-assessment of each month of default.

In both the cases above, the assessee must be given a reasonable opportunity of being heard.

3.         For non-compliance with notice under section 115 WD(2) or 11SWE(2) or 142 (1) or 143 (2) [Section 271(1 )(b)]. If the A.O., D.C. (A) or Commissioner (Appeals), in the course of any proceedings under this Act, is satisfied that any person has without any reasonable cause failed to comply with a notice u/s I 15WD(2) or 115 WE(2) or 142 (1) or 143 (2) or fails to comply with the directions issued u/s 142 (2A) (auditing of accounts by Chartered Accountants) the above mentioned authorities may direct that such person shall pay by way of penalty equal to a sum which shall not be less than Rs. 1,000 of each failure but which shall not exceed Rs. 10,000 for each failure. Such penalty shall be in addition to any tax payable by him in this regard.

4.         For concealment of income [Section 271 (1)]. Where any person has concealed the particulars of his income or has furnished i4naccurate particulars of such income, he will be liable to apenalty. The minimum penalty leviable for concealment has been fixed at not less than 100% but not exceeding 300% of the amount of tax sought to be evaded by reason of concealment of income. Such penalty shall be in addition to tax if any payable.

The Assessing Officer cannot impose a penalty in respect of the additional concealed income discovered by the Commissioner (Appeals) in the course of an appeal against the assessment.

In case unexplained cash credits are added to the assessee’s income, no penalty can be imposed for concealment in respect of such income unless such cash credits constitute income in the relevant year.
 5.         For concealment of particulars of Fringe Benefits [Section 27l(1)]. In case an employer has concealed the particulars relating to fringe benefits or has furnished inaccurate particulars of such fringe benefits; a penalty of minimum of 100% and maximum of 300% of tax sought to be evaded by such employer shall be levied.

6.         Registered firm [Section 271 (2)]. In case penalty is levied on a registered firm or unregistered firm assessed as registered firm u/s 183 (1), then the penalty imposable u/s 271(1) shall he equal to the same amount as would be imposable as if that firm was an unregistered firm.

7.         For wrong distribution of profit by registered firms [Section 271 (4)]. If the profits of aregistered firm are distributed in such way that the share of a partner is shown below the real amount and if such a partner returns his incoiile below the real amount, he shall in addition to tax if any payable by him, be liable to pay a penity of 150% of the difference between tax on partner’s income assessed and tax on income as retuIned. In such a case no refund or other adjustment shall be claimable by any other partner by reason of such direction.

8.         For failure to keep, maintain or retain books of account, documents, etc. [Section 271 A].If any person fails to keep and maintain books or documents as required by Section 44 AA, he will be liable to a peialty which may be equal to a sum which shall not be less than Rs. 25,000.

9.         Failure to maintain information or documents about international transaction [Section271AA]. Where any person fails to keep and maintain any document or information regardinginternational transaction as covered u/s 92E, the Assessing Officer or Commissioner [Appeals] may ask such person to pay a penalty of 2% of the value of each international transaction.

10.       Penalty where search has been initiated [Sec. 27 1AAA]. The Assessing Officer may direct• that in a case where search has been initiated u/s 132 on or after 1-6-2007, the assessee shall pay by way of penalty in addition to tax. The penalty levied shall be 10% of the undisclosed income of the specified previous year.

In the course of the search, if the assessee u/s 132(4) admits the undisclosed income and specifies the manner in which such income has been derived and substantiates the manner in which the undisclosed income was derived and pay the tax, together with interest, if any, in respect of the ‘undisclosed income, no penalty shall be imposed.

11.       Failure to get accounts audited [Section 271 B]. If any person fails to get his accounts audited in respect of any previous year or years or furnish the said report along with the return of his income filed u/s 139 (1) or 142 (1) (i), the Assessing Officer may direct that such person shall pay a penalty equal to one-half (1/2) per cent of the total sales, turnover of gross receipts in business or of the gross receipts in profession or a sum of Rs. 1,00,000, whichever is less.

12.       Failure to furnish report u/s 92E [Section 271 BA]. In case a person fails to furnish a report as required u/s 92E, he may be asked to pay a penalty of Rs. 1,00,000.

13.       For failure to subscribe to the eligible issue of capital [Section 271 BB]. In case any mutual fund or U.T.I. fail to subscribe any amount of subscriptions to the units issued under any scheme referred to in section 88 A of the Act, to the eligible issue within the period of 6 months, it may be directed by Deputy Commissioner of Income-tax to pay, by way of penalty, a sum equal to 20% of such amount.

14.       Penalty for failure to deduct tax at source [Section 271 C]. If any person fails to deduct the whole or any part of the tax as required by or under the provisions of the Act, or fails to pay whole or any part of tax deducted at source ; he shall be liable to pay a penalty which shall be a sum equal to the amount of the tax which he failed to deduct or pay as required.

15. Penalty for failure to collect tax at source [Sec. 271CA].

(1)       If any person fails to collect the whole or any part of the tax as require by or under the provision of this act, then, such person shall be liable to pay, by way of penalty, a sum equal to the amount of tax which such person failed to collect as aforesaid.

(2)       Any penalty imposable under this section shall be imposed by the Joint Commissioner.

16. Penalty for failure to comply with the provisions regarding accepting of loans etc. [Sec. 271 D]. If a person takes or accepts any loan or deposit exceeding Rs. 20,000 except through crossed payee’s cheque or draft, he shall be liable to pay penalty which shall be a sum eqial to the amount of the loan or deposit so taken or accepted. /


17. Penalty for failure to comply with the provisions of Sec. 269 T [Section 271 E]. If a person repays any deposit exceeding Rs. 20,000 otherwise than by crossed cheque or draft, he shall be liable to pay penalty which shall be a sum equal to the amount of the deposit so repaid.

Any penalty to be levied u/s 271 C, 271 D and 271 E shall be levied only by Joint Commissioner.

18. Penalty for non filing of return [Section 271 F]. In case a person whose is required to furnish a return of his income u/s 139(1) or by the provisions of that sub-section on or before the end of the relevant assessment year, he shall be liable to a penalty of Rs. 5,000.

19. Penalty for failure to furnish annual information return [Section 271 FA]. If a person who isrequired to furnish an annual information return, as required under sub-section (1) of section 285BA, fails to furnish such return within the time prescribed under that sub-section, the Income-tax authority prescribed under the said-section may direct that such person shall pay, by way of penalty, a sum of one hundred rupees for every day during which the failure continues”.

20. For Failure of furnish return of fringe benefits [Section 271FB1. If an employer who is required to file a return of fringe benefits u/s 11 5WD(1), but fails to file such return within prescribed time the assessing officer shall levy a penalty of 100 rupees for every day of default.

21. Failure to furnish information or documents about international transaction [Section 271G].If a person who has entered into an international transaction, fails to furnish information or documents as required u/s 92D, the Assessing Officer or Commissioner [Appeals] may ask such person to pay a penalty of Rs. 2% of the value of such transaction.

22. Penalty on failure to answer questions, or sign statements, etc. [Section 272 A (1)1. In case an assessee is found guilty of any of the following offences, he shall pay, by way of penalty of Rs. 10,000 for each such default:

(a)       A person who is legally bound to state the truth regarding subject to his assessment, refuses to answer any question put to him by an income-tax authority ; or

(b)       A person who is legally required to sign any statement made by him, refuses to sign;

or

( c )A person to whom summons are issued to produce books of account or other evidence or to attend personally to give evidence, at certain place and time, fails to do so

23. Failure to comply with certain notices or to furnish certain returns, statements or to allow inspections [Section 272A(2)]. In case a person fails—

(a)       to comply with notice issued u/s 94 (6) of the Act regarding information about securities held by assessee

(b)       to give a notice of discontinuance of business required u/s 176 (3)

( c )      to furnish in due time following returns, or statements

(i) u/s 133—statement regarding information called for by assessing Officer

(ii) u/s 206—return regarding tax deducted at source

(iii) u/s 206 C—return regarding deduction of tax at source in case of profits from alcoholic liquor etc.

(iv) u/s 285 B—statements by producers of films.

(d)       to allow inspection of any register or to allow copy being taken of any of these registers

(e)       to furnish a return of income by a trust u/s 139 (4A) or u/s 139(4C)

(f)         to deliver in due time a copy of the declaration received from assessee for not deducting the tax at source, u/s 197A

(g)       to furnish a cerifitas required u/s 203 regarding tax deducted at source ; or

(h)       to deduct and ay tax as required u/s 226 (2)

he shall pay, by way of penalty of Rs. 100 for every day of default.

In case of :

(i)         an offence falling under (f) above, the penalty may be levied by the Chief Commissioner or the Commissioner

(ii)        in all other offences it will not be levied by any authority below the.rank of Joint Commissioner or Joint Director [Section 272A (3)].

(i)         to furnish a statement of perks given to employees as required u/s 192C :

(j)         to deliver or cause to be delivered in due time a copy of the declaration referred to in sub-section (1A) of section 206C

(k)        to deliver or cause to be delivered a copy of the statement within the time specified in section 200(3) or under section 206(3)

(1)       to deliver or cause to be delivered the quarterly return as required u/s 206A within prescribed time.

Provided that the amount of penalty for failures in relation to returns under sections 206 and 206 C and statements under section 200(3) or the proviso to section 206C(3) shall not exceed the amount of tax deductible or collectible as the case may be.

24. For failure to comply with the provisions of Section 133 B. The new Section 272 AA provides for penalty for failure to comply with the provisions of Section 133 B regarding entry of income-tax authorities in any building etc. The penalty for noncompliance may extend upto Rs. 1,000. Before levying any penalty the assessee must be given an opportunity of being heard.

25. Failure to comply with the provisions of section 139A i.e., PAN [Section 272B]

(a)       In case a person fails to comply with the provisions of section 139A i.e., to obtain PAN, the Assessing Officer may direct him to pay a penalty of Rs. 10,000.

(b)       In case assessee quotes a false or incorrect permanent account number on any document and which he knows that it is false or incorrect, the Assessing Officer may direct Jum to pay a penalty of Rs. 10,000. Such penalty can be levied only after the person has been given an opportunity of being heard.

26. For failure to comply with provisions of Section 203 A (Section 272 BB). If a person fails to comply with the provision of Section 203 A i.e. to apply for Tax deducted at Source Account number, the Assessing Officer shall impose a penalty which may be equal to Rs. 10,000 ; after giving the assessee an opportunity of being heard.

27. Failure to comply with the provisions of section 206CA i.e., Tax collection account number [Section 272BBB1. In case a person fails to comply with the provisions of section 206CA i.e., to obtain Tax Collection Account Number, the Assessing Officer may direct him to pay a penalty of Rs. 10,000. Such penalty can be levied only after the person has been given an opportunity of being heard.

28. Failure to quote tax deduction or collection number [Section 272BB IA]. A person who is required to quote his “tax deduction account number”, “tax collection account number”, “tax deduction and collection account number” in the challans, or certificates or statements or other documents quotes a number which is false and which he either knows or believes to be false or does not believe to be true, the Assessing officer may direct that such. Person shall pay a penalty of Rs. 10,000.