Shankar Bose, IIT

MSTU, Puri

Penalty Penalty uu/s.271(1)(c)/s.271(1)(c)

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Penalty u/s 271(1)(c) can be imposed by A.O.,C.I.T(A), C.I.T.

Concealment penalty on two counts:

(A) Concealing particulars of income.

(B) Furnishing inaccurate particulars of income.

Penalty U/s.271(1)(c)

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Law before 1964.

In the case of Anwar Ali 76 ITR 696 the

Supreme Court held that penalty

proceedings are quasi- criminal

proceedings. Conscious and deliberate

concealment (Mens-Rea) had to be proved

by Revenue.

Penalty U/s.271(1)(c)

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F.A. 1964, deleted the word “deliberately”

and added explanation.

Expl.1, Substituted in 1976, amended in

1986, operative now.

Expl.1(B) amended in 1986 by inserting- “fails to prove that such explanation is bonafide ..……..………………………total income has been disclosed by him”.

Penalty U/s.271(1)(c)

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Expl. 1, with proviso ‘A’ & ‘B’

In respect of any fact material to computation of total income:

Assessee fails to explain Explanation offered, held false. Fails to substantiate explanation. Fails to prove its bonafides and that

all facts have been disclosed by him.

Penalty U/s.271(1)(c)

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Explanation 2 : Intangible additions made in earlier

years, no penalty levied. Subsequent reliance to explain

Assets/Investments. Intangible additions to be treated as

concealed income of earlier years.

Sec.271(1A). Empowers penalty proceedings even after limitation.

Penalty U/s.271(1)(c)

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Explanation 3 : Two Dimensions.

Prior to Finance Act, 2002 : Presumption of concealment for non filers only.

Post Finance Act, 2002 : Covers stop filers also.

Penalty U/s.271(1)(c)

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Explanation-4 Tax sought to be evaded defined.

Penalty @ 100% to 300% of tax sought to be evaded.

A) Cases of returned Loss.

Prithipal Singh 249 ITR 670 SC. No penalty if both returned income & assessed income is a Loss.

Penalty U/s.271(1)(c)

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Prithipal Singh no longer holds good in view of amended Expl. 4 (F.A. 2002)

Tax on amount added in loss cases will be “tax sought to be evaded”.

(B) In case of Expl. 3, tax on total income assessed.

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Penalty U/s.271(1)(c)

(C) In other cases –the difference between tax on total income assessed and tax on total income minus concealed income.

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Penalty U/s.271(1)(c)

Time limit Sec 275-Order imposing penalty shall be passed :

(a) within the F.Y. in which the original proceeding was completed,

or

(b) within 6 months from the end of the month of receipt or passing of appellate or revision order by CCIT/CIT,

or11

Penalty U/s.271(1)(c)

(c) within 6 months from the end of the month of initiation of penalty proceeding- whichever expires later.

In case of appellate order passed by CIT(A) on or after 1.6.2003 penalty order shall be passed within one year from the end of F.Y. in which the appellate order was received by the CIT/CCIT.

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Penalty U/s.271(1)(c)

- Concealment detected,

- Additions made,

- Penalty u/s 271(1)(c) imposed,

- Additions are deleted or varied by CIT(A) or ITAT,

- Can penalty be modified on the

basis of such appellate order ?

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Penalty U/s.271(1)(c)

Yes. Sec 275 (1A). (w.e.f.13.7.2006)

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Penalty U/s.271(1)(c)

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