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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