Penalty Rationalization and Assessment procedures - What Budget says

Penalty

Rationalization of existing penalty provisions

• Penalty to be levied in case of ‘under-reporting’ and ‘misreporting’ of income (w.e.f. 1 April 2017)
• Under-reported income: Penalty @ 50% of tax payable
• Misreporting of income: Penalty @ 200% of tax payable
• Under reporting defined objectively to be the difference between assessed income and income as per summary assessment
• ‘Misreported’ income defined to cover:

          - Failure to report any international transaction

          - Misrepresentation or suppression of facts

          - Unsubstantiated claim of expenditure

• AO empowered to grant immunity from penalty / prosecution not arising out of ‘misreporting’ if applicable taxes and interest are paid

Assessment procedures

• Increase in scope of “deemed” cases of income escaping assessment - Now Assessing officer has power to reopen cases on the basis of information or documents received from the prescribed income tax authority after processing, where it is noticed that either a return of income has not been filed or where return has been filed, such income has been understated or excess loss/deduction/allowance has been claimed.Effective from 1 June 2016.

• Summary assessment mandatory before detailed scrutiny assessment

• Reduction in time-limit for assessment/ reassessment by 3 months

• Interest receivable by the taxpayer

     - Assessees eligible for interest on refund arising from self- assessment tax

    - Additional interest @ 3% if there is delay in giving effect to appellate orders

• Order of DRP not appealable by tax authorities going forward

• Mandatory stay if assessee pays 15% of disputed demand pending appeal

• Application for stay of tax demand to be disposed off within 12 months