Taxclue is an online news portal for reporting all news, articles, judgments, Circulars, orders, and notifications relating to various corporate and tax laws in India. We use the tagline ‘Simplifying Laws’. Our mission is to Simplify the Laws and make people aware of their rights and duties in relation to tax matters in order to equip them to participate in nation-building.
Default in complying with provisions of or with conditions prescribed under the Income-tax Act would attract certain penalties and in critical cases prosecutions as well. The document will provide you with information about the punishable offences, prosecutions and the quantum of penalties that can be imposed under the law.
There are three modes built in the fiscal legislation for encouraging tax compliance: (a) Charge of Interest, (b) imposition of penalty (c) launching of prosecution against tax delinquents. While charging of interest is compensatory on character, the imposition of penalty and institution of prosecution proceedings act as strong deterrents against potential tax delinquents.
Chapters XVII and XXI of Income-tax Act, 1961, contain various provisions empowering an Income-tax Authority to levy a penalty in case of certain defaults. The following defaults may invite levy of penalty:
No penalty under the Income-tax Act is imposed unless the person concerned has been given reasonable opportunity of being heard.
The quantum of penalty leviable depends upon the nature of default. The relevant section of Income-tax Act prescribe the minimum and maximum penalties which can be levied.
The Commissioner of Income-tax may reduce or waive the amount of any penalty imposed or imposable, 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 enquiry relating to the assessment and recovery of taxes. The waiver/reduction of penalties is discretionary and dependent upon satisfaction or prescribed conditions. No assessee can, a matter of right, claim waiver or reduction of penalty imposed or imposable upon him. [Section 273A]
In the fight against tax evasion, the imposition of monetary penalty alone is not sufficient. A calculating tax evader finds it profitable to evade tax for years, if he knows that he may get away with it by paying penalty in the year in which he is caught. However, the prospect of landing in jail is a far more dreaded consequence and works as a deterrent. Further, for more serious defaults, sometimes launching of prosecution is prescribed without prescribing monetary penalties.
The Parliament has, therefore, been enacting deterrent laws for effective implementation of tax laws. The Income-tax Act contains a separate chapter XXII wherein offences have been defined and punishment provided.
The following offences committed by a person are punishable:
(i) Removal, parting with or otherwise dealing with books of accounts, documents, money, bullion, jewellery or other valuable article or thing put under restraint during the search. [Section 275A]
(ii) Fraudulent removal, concealment, transfer or delivery of any property or any interest in the property with the intention to thwart recovery of tax. [Section 276]
(iii) Failure on the part of a liquidator or receiver of a company to give notice of his appointment to the Assessing Officer or failure to set apart amount notified by the Assessing Officer, or parting away of company’s properties in contravention of income-tax provision. [Section 276A]
(iv) 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 u/s.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 provisions of Chapter XX-C) [Section 276AB]
(v) Failure to pay to the credit of the Central Government the tax deducted at source. [Section 276B]
(va) Failure to pay the tax collected at source. [Section 276BB]
(vi) Willful attempt to evade any tax, penalty or interest [Section 276C(1)]
(vii) Willful attempt to evade the payment of any tax, penalty or interest levied under Income Tax Act. [Section 276C(2)]
(viii) Willful failure to furnish in due time return of income. [Section 276CC)]
(viiia) Failure to furnish return of income in Search Cases as required under section 158BC [Section 276CCC]
(ix) Willful failure to produce accounts and documents as directed by issue of notice under section 142(1) [Section 276D]
(x) Willful failure to get the accounts audited as directed by the Assessing Officer under section 142(2A). [Section 276D]
(xi) 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]
(xii) Abetting or inducing another person to make and deliver an account or statement or declaration relating to any taxable income which is false and which he either knows or believes to be false. [Section 278]
(xiii) Punishment for 2 nd & subsequent offences in cases of certain defaults. [Section 278A]
(xiv) No person shall be punished for any failure if he proves that there is reasonable cause failure. [Section 278AA].
Any person, committing the offence is liable to be prosecuted. In this connection it is not necessary that the person should be an assessee under the Income-tax Act. In the case of an offence committed by a Company, Firm, Association of Persons or Body of Individuals, every person in charge of or responsible for the conduct of the business of the concern as well as the concern are deemed to be guilty. Similarly, in the case of an offence by a Hindu Undivided Family, the karta thereof is deemed to be guilty of the offence.
In case of willful act of omission or commission, the court shall presume the existence of culpable mental state. However, the accused can rebut this presumption by producing necessary evidence before the court. (Section 278E).
Section 279(2) of Income-tax Act empowers a Chief Commissioner of Director General of Income-tax to compound an offence either before or after the institution of prosecution proceeding.
If a public servant furnishes any information in contravention of the provisions of Section 138(2), prosecution may be instituted against him with the previous sanction of the Central Government. (Section 280).
Updated with Amendment made vide Finance Act, 2021 and applicable for A.Y. 2022-23 and Onwards:
[AY 2021-22]
| Section | Nature of default | Penalty leviable |
| (1) | (2) | (3) |
| 140A(3) | Failure to pay wholly or partly— | Such amount as Assessing Officer may impose but not exceeding tax in arrears |
| (a) self-assessment tax, or | ||
| (b) interest and fee, or | ||
| (c) both | ||
| under section 140A(1) | ||
| 158BFA(2) | Determination of undisclosed income of block period | Minimum : 100 per cent of tax leviable in respect of undisclosed income |
| Maximum : 300 per cent of tax leviable in respect of undisclosed income. | ||
| 221(1) | Default in making payment of tax | Such amount as Assessing Officer may impose but not exceeding amount of tax in arrears |
| 234E | Failure to file statement within time prescribed in section 200(3) or in proviso to section 206C(3) | Rs. 200 for every day during which failure continues but not exceeding tax deductible/collectible |
| 234F | Default in furnishing return of income within time prescribed in section 139(1)ab | Rs. 5,000 if return is furnished after due date specified under section 139(1). However if the total income of the person does not exceed Rs. 5 lakhs then Rs. 1,000 shall be the late filing fees. |
| 234G | Fee for default in submission of statement/certificate prescribed under section 35/ Section 80G | Rs. 200 per day |
| 234H | Fee for default in intimating the Aadhaar Number | Maximum of Rs. 1,000 |
| 270A(1) | Under-reporting and misreporting of income | A sum equal to 50% of the amount of tax payable on under-reported income. |
a) A false entry; or
a) Shares or interest in a foreign company or entity derive substantial value, directly or indirectly, from assets located in India; and
b) Such foreign company or entity holds such assets in India through or in such Indian concern.
In this case, the Indian entity shall furnish the prescribed information for the purpose of determination of any income accruing or arising in India under Section 9(1)(i).
a) a sum equal to 2% of value of transaction in respect of which such failure has taken place, if such transaction had effect of, directly or indirectly, transferring right of management or control in relation to the Indian concern;
Note : No penalty is imposable for any failure under sections 271(1)(b), 271A, 271AA, 271B, 271BA, 271BB, 271C, 271CA, 271D, 271E, 271F, 271FA, 271FAB, 271FB, 271G, 271GA, 271GB, 271H, 271-I, 272A(1)(c) or (d), 272A(2), 272AA(1), 272B, 272BB(1), 272BB(1A), 272BBB(1), 273(1)(b), 273(2)(b) and 273(2)(c) if the person or assessee proves that there was reasonable cause for such failure (section 273B).
Section 273AA provides that a person may make an application to the Principal Commissioner/Commissioner for granting immunity from penalty if (a) he has made an application for settlement under section 245C and the proceedings for settlement have abated, and (b) penalty proceedings have been initiated under this Act. The application shall not be made after the imposition of penalty after abatement.
| Section | Nature of default | Punishment (rigorous imprisonment) | Fine |
| (1) | (2) | (3) | (4) |
| 275A | Contravention of order made under section 132(1) (Second Proviso) or 132(3) in case of search and seizure | Up to 2 years | No limit |
| 275B | Failure to afford necessary facility to the authorised officer to inspect books of account or other documents as required under section 132(1)(iib) | Up to 2 years | No limit |
| 276 | Removal, concealment, transfer or delivery of property to thwart tax recovery | Up to 2 years | No limit |
| 276A | Failure to comply with provisions of section 178(1) and (3) re : company in liquidation | 6 months to 2 years | — |
| 276AB | Failure to comply with provisions of sections 269UC, 269UE and 269UL re : purchase of properties by Government 5 | 6 months to 2 years | No limit |
| 276B | Failure to pay to credit of Central Government (i) tax deducted at source under Chapter XVII-B (non-cognizable offence under section 279A), or (ii) tax payable u/s 115-O(2) or second proviso to section 194B | 3 months to 7 years | No limit |
| 276BB | Failure to pay the tax collected under the provisions of section 206C | 3 months to 7 years | No limit |
| 276C(1) | Wilful attempt to evade tax, penalty or interest or under-reporting of Income (non-cognizable offence under section 279A)— | ||
| (a) where tax sought to be evaded exceeds Rs. 1 lakh (Rs. 25 lakh w.e.f. 1-7-2012) | 6 months to 7 years | No limit | |
| (b) in other cases | 3 months to 3 years (2 years w.e.f. 1-7-2012) | No limit | |
| 276C(2) | Wilful attempt to evade payment of any tax, penalty or interest (non-cognizable offence under section 279A) | 3 months to 3 years (2 years w.e.f. 1-7-2012) | No limit |
| 276CC | Wilful failure to furnish returns of fringe benefits under section 115WD/115WH or return of income under section 139(1) or in response to notice under section 142(1)(i) or section 148 or section 153A (non-cognizable offence under section 279A)— | ||
| (a) where tax sought to be evaded exceeds Rs. 1 lakh (Rs. 25 lakh w.e.f. 1-7-2012) | 6 months to 7 years | No limit | |
| (b) in other casesNote: *** A person shall not be liable to be prosecuted under this section if he furnishes the return before expiry of the assessment year or the tax payable by such person, not being a company, as reduced by the advance tax self-assessment tax paid before the expiry of the assessment year, TDS and TCS, does not exceed Rs. 10,000. | 3 months to 3 years (2 years w.e.f. 1-7-2012) | No limit | |
| 276CCC | Wilful failure to furnish in due time return of total income required to be furnished by notice u/s 158BC(a) | 3 months to 3 years | No limit |
| 276D 6 | Wilful failure to produce accounts and documents under section 142(1) or to comply with a notice under section 142(2A) | Up to 1 year | 7 Rs. 4 to Rs. 10 for every day of default |
| 277 | False statement in verification or delivery of false account, etc. (non-cognizable offence under section 279A) | ||
| (a) where tax sought to be evaded exceeds Rs. 1 lakh (Rs. 25 lakh w.e.f. 1-7-2012) | 6 months to 7 years | No limit | |
| (b) in other cases | 3 months to 3 years (2 years w.e.f. 1-7-2012) | No limit | |
| 277A | Falsification of books of account or document, etc., to enable any other person to evade any tax, penalty or interest chargeable/leviable under the Act | 3 months to 3 years (2 years w.e.f. 1-7-2012) | No limit |
| 278 | Abetment of false return, account, statement or declaration relating to any income or fringe benefits chargeable to tax (non-cognizable offence under section 279A) | ||
| (a) where tax, penalty or interest sought to be evaded exceeds Rs. 1 lakh (Rs. 25 lakh w.e.f. 1-7-2012) | 6 months to 7 years | No limit | |
| (b) in other cases | 3 months to 3 years (2 years w.e.f. 1-7-2012) | No limit | |
| 278A | Second and subsequent offences under section 276B, 276C(1), 276CC, 277 or 278 | 6 months to 7 years | No limit |
| 280(1) | Disclosure of particulars by public servants in contravention of section 138(2) [Prosecution to be instituted with the previous sanction of Central Government under section 280(2)] | Up to 6 months (simple/rigorous) | No limit |
Notes :
1. No person is punishable for any failure under section 276A, 276ABor 276Bif he proves that there was reasonable cause for such failure (vide section 278AA).
2. (a) Prosecution for offences under section 275A, section 275B, section 276, section 276A, section 276B, section 276BB, section 276C, section 276CC, section 276D, section 277, section 277Aand section 278to be instituted with previous sanction of Principal Director General/Principal Chief Commissioner/Principal Commissioner/Director General/Chief Commissioner/Commissioner, except where prosecution is at the instance of the Commissioner (Appeals) or the appropriate authority (vide section 279).
(b) The offences under Chapter XXII can be compounded (either before or after the institution of proceedings) by Principal Director General/Director General or Principal Chief Commissioner/Chief Commissioner.
3. Where an offence under this Act has been committed by a person, being a company, and the punishment for such offence is imprisonment and fine, then, such company shall be punished with fine and every person, referred to in sub-section (1) of section 278B, or the director, manager, secretary or other officers of the company referred to in sub-section (2) of section 278Bshall be liable to be proceeded against and punished in accordance with the provisions of this Act.
4. With effect from 1-4-2008 under section 278ABa person may apply to the Principal Commissioner/Commissioner for granting immunity from prosecution if he has applied for settlement under section 245Cand the proceedings have abated under section 245HA. The application shall not be made after institution of prosecution proceedings after abatement.
1. With effect from the assessment year 2015-16 “annual information return” has been changed to “statement of financial transaction or reportable account” and the word “return” has been changed to “statement”.
2. With effect from the assessment year 2015-16 a new section 271FAAhas been inserted to provide for a penalty of Rs. 50,000 for furnishing inaccurate statements of financial transactions or reportable accounts in certain cases.
3. With effect from 1-10-2014 TPO can also levy penalty.
4. Section 271Has amended with effect from 1-10-2014 provides that penalty shall be levied by Assessing Officer.
5. Non-operative with effect from 1-7-2002.
6. With effect from October 1, 2014, if a person wilfully fails to produce accounts and documents as stated or wilfully fails to comply with the direction given, he shall be punishable with rigorous imprisonment for a term which may extend to one year and with fine (quantum of the fine has not been specified).
7. No limit w.e.f. 1-10-2014.
TaxClue TeamTaxclue is an online news portal for reporting all news, articles, judgments, Circulars, orders, and notifications relating to various corporate and tax laws in India. We use the tagline ‘Simplifying Laws’. Our mission is to Simplify the Laws and make people aware of their rights and duties in relation to tax matters in order to equip them to participate in nation-building.
