Rationalization of the provisions of sections 271AAB, 271AAC and 271AAD of the Act

Sections 271AAB, 271AAC and 271AAD of the Act under Chapter XXI contain provisions which give powers to the Assessing Officer to levy penalty in cases involving undisclosed income in cases where search has been initiated u/s 132 or otherwise, or for false entry etc. in books of account.

2. Under Chapter XXI of the Act which deals with penalties, Commissioner (Appeals) has concomitant powers with Assessing Officer to levy penalty in eligible cases under section 270A, section 271, section 271A, section 271AA, section 271G, section 271J which deal with deliberate concealment, non-disclosure and omission by an assessee to evade tax.

3. Similarly, sections 271AAB, 271AAC, 271AAD penalise actions pertaining to undisclosed income, unexplained credits or expenditures, or deliberate falsification or omission in books of accounts. Therefore, in order to improve deterrence against noncompliance among tax payers, it is proposed to amend the sections 271AAB, 271AAC and 271AAD by enabling the Commissioner (Appeals) to levy penalty under these sections to the along with Assessing Officer.

4. These amendments will take effect from 1stApril, 2022. [Clauses73, 74 and 75]

Amendment in the provisions of section 272A of the Act Section 272A of the Act provides for penalty for failure to answer questions, sign statements, furnish information, returns or statements, allow inspections etc. At present, the amount of penalty for failures listed under sub-section (2) of section 272A is one hundred rupees for every day during which the failure continues.

2. Section 272A ensures compliance with various obligations under the Incometax Act by penalising non-compliance and acting as a deterrent.

3. However, the penalty of one hundred rupees had been commented upon by the CAG in their report on the entertainment sector as being too low. The penalty had not been increased since the section was introduced in 1999 and does not have an adequate deterrence value.

4. Therefore, it is proposed to increase the amount of penalty for failures listed under sub-section (2) of section 272A to five hundred rupees from the existing sum of one hundred rupees.

5. This amendments will take effect from 1st April, 2022.

[Clause 78]

 

Penalty authority expanded: Commissioner (Appeals) may now impose penalties for undisclosed income; per day penalty increased. Amendments enable the Commissioner (Appeals) to levy penalties alongside the Assessing Officer for provisions targeting undisclosed income, unexplained credits or expenditures, and falsification or omission in books of account; and increase the per day penalty for failures to answer questions, sign statements, furnish information, returns or allow inspections to strengthen deterrence. These measures are to take effect from 1 April 2022.