Section 271AAC of the Income-tax Act (inserted with
effect from Assessment Year 2017-18 vide Taxation Laws (Second Amendment) Act,
2016) empowers Assessing Officer to levy penalty at the rate of 10% of the tax
payable under section 115BBE if any addition is made under section 68, section
69, section 69A, section 69B, section 69C, section 69D.
The Assessing Officer may make addition to the income of
an assessee under section 68, section 69, section 69A, section 69B, section 69C
or section 69D if assessee fails to explain the nature and source of his income,
the assessee shall
pay by way of penalty, in addition to tax payable under section 115BBE, a sum
computed at the rate of ten per cent of the tax payable under clause (i) of
sub-section (1) of section 115BBE:
However, no penalty shall be levied if such income is
disclosed in the return of income and tax on such income is paid under Section
115BBE on or before the end of the relevant previous year.
Text of Section 271AAC
[1][PENALTY IN
RESPECT OF CERTAIN INCOME.
271AAC. (1)
The Assessing Officer may, notwithstanding anything contained in this Act other
than the provisions of section 271AAB, direct that, in a case where the income
determined includes any income referred to in section 68, section 69, section
69A, section 69B, section 69C or section 69D for any previous year, the
assessee shall pay by way of penalty, in addition to tax payable under section
115BBE, a sum computed at the rate of ten per cent of the tax payable under
clause (i) of sub-section (1) of section 115BBE:
Provided that
no penalty shall be levied in respect of income referred to in section 68,
section 69, section 69A, section 69B, section 69C or section 69D to the extent
such income has been included by the assessee in the return of income furnished
under section 139 and the tax in accordance with the provisions of clause (i)
of sub-section (1) of section 115BBE has been paid on or before the end of the
relevant previous year.
(2) No penalty under the provisions of
section 270A shall be imposed upon the assessee in respect of the income
referred to in sub-section (1).
(3) The provisions of sections 274 and
275 shall, as far as may be, apply in relation to the penalty referred to in
this section.]
KEY NOYE
1. Inserted by the Taxation Laws (Second Amendment) Act, 2016, with
effect from 01.04.2017.
Nature of default
If any addition is made under section 68, section 69,
section 69A, section 69B, section 69C, section 69D. In other words, Income
determined includes any income referred to in section 68- 69D
Authorities empowered
to impose penalty
Only the Assessing Officer is empowered to impose
penalty under section 271AAC
Levy of Penalty in case of addition under following
sections:
(i)
Cash credits
under section 68
(ii)
Unexplained
investments under section 69
(iii)
Unexplained
money etc. under section 69A
(iv)
Undisclosed
investments etc. under section 69B
(v)
Unexplained
expenditure etc. under section 69C
(vi)
Amount borrowed
or repaid on hundi etc. under section 69D.
Income
Tax sections dealing with unaccounted income or investments
(i)
Section 68: This section deals with the cash credits made during a year
into a taxpayer's account that he/she has no satisfactory explanation for.
(ii)
Section 69: All unexplained investments like purchase of a property that
are not recorded in the accounts of the tax payer and the source of income to
fund such an expense is dealt with under this section of the Income Tax Act.
(iii)
Section 69A: Money, bullion, jewellery or any such valuable assets that
are not fixed (unexplained money) that are not recorded.
(iv)
Section 69B: When the value of the investment, cash, bullion or jewellery
is not fully disclosed or if the assessing officer finds that the amount
expended to make the purchase exceeds the number disclosed by the taxpayer.
(v)
Section 69C: This section deals with unexplained expenditures made by a
taxpayer.
(vi)
Section 69D: This section deals with the concept of "Hundi"
despite the absence of it in our economy so as to fill any possible loophole.
Any amount borrowed or repaid in the form of "Hundi" is covered is
included in this section.
Text of Section 115BBE
[1][TAX ON
INCOME REFERRED TO IN SECTION 68 OR SECTION 69 OR SECTION 69A OR SECTION 69B OR
SECTION 69C OR SECTION 69D
115BBE. [2][(1) Where the
total income of an assessee,—
(a) includes any
income referred to in section 68, section 69, section 69A, section 69B, section
69C or section 69D and reflected in the return of income furnished under
section 139; or
(b) determined
by the Assessing Officer includes any income referred to in section 68, section
69, section 69A, section 69B, section 69C or section 69D, if such income is not
covered under clause (a),
the income-tax payable shall be the aggregate of—
(i) the amount of income-tax calculated on the income
referred to in clause (a) and clause (b), at the rate of sixty per cent; and
(ii) the amount of income-tax with which the assessee
would have been chargeable had his total income been reduced by the amount of
income referred to in clause (i).
(2) Notwithstanding anything contained in this Act, no
deduction in respect of any expenditure or allowance or set off of any loss
shall be allowed to the assessee under any provision of this Act in computing
his income referred to in clause (a) [3][and clause (b)]
of sub-section (1).]
KEY NOTE
1. Inserted by
the Finance Act, 2012, with effect from 01.04.2013.
2. Substituted
by the Taxation Laws (Second Amendment) Act, 2016, with effect from 01.04.2017.
Prior to its
substitution, sub –section (1) read as under :
(1) Where the
total income of an assessee includes any income referred to in section 68,
section 69, section 69A, section 69B, section 69C or section 69D, the
income-tax payable shall be the aggregate of—
(a) the amount of income-tax calculated on income
referred to in section 68, section 69, section 69A, section 69B, section 69C or
section 69D, at the rate of thirty per cent.; and
(b) the amount of income-tax with which the
assessee would have been chargeable had his total income been reduced by the
amount of income referred to in clause (a).
3. Inserted by
the Finance Act, 2016, with effect from 01.04.2017.
Quantum of Penalty
Where the income determined includes any income in the
nature of cash credits, unexplained investments, unexplained money, amount of
investments, etc., not fully disclosed in the books of account, unexplained
expenditure, etc., amount borrowed or repaid on hundi, the Assessing Officer
may direct the taxpayer to pay penalty, in addition to tax payable under
Section 115BBE, a sum computed at the rate of 10 per cent of the tax payable
under Section 115BBE of the Act.
However, no penalty shall be levied in respect of such
income where the said income has been included by the taxpayer in the return of
income and the tax in accordance with the provisions of Section 115BBE(1)(i) of
the Act has been paid on or before the end of the relevant previous year.
PROVISIONS ILLUSTRATED
For Instance, income of Rs.10,00,000/- is determined by
the Ld. Assessing Officer after making addition under section 68-69D of the
Act. The liability of tax and penalty would arise as under:
|
(i)
|
Tax @ 60% [as per section 115BBE]
|
6,00,000/-
|
60%
|
|
(ii)
|
Surcharge @ 25% of Tax payable [7th Proviso to Section
2(9) of Finance Act, 2016 as Inserted by the Taxation Laws (Second Amendment)
Act, 2016, with effect from 15.12.2016]
|
1,50,000/-
|
|
|
(iii)
|
Total [(i) +
(ii)]
|
7,50,000/-
|
75%
|
|
(iv)
|
Health and Education cess @4% of Tax and Surcharge
|
30,000/-
|
|
|
(v)
|
Total [(iii) +
(iv)]
|
7,80,000/-
|
78%
|
|
|
Penalty under section 271AAC
[10% of tax-payable under section 115BBE]
|
60,000/-
|
|
|
|
Total
|
8,40,000/-
|
84%
|
KEY NOTE
Interest under sections 234A, 234B and 234C
shall also be chargeable
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