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Penalty under Section 271 for Concealment of Income

Last Update Date : September 27, 2018

section 271 penalty

A notice from the Income Tax Department can invite troubles for you and ignoring it can prove to be very expensive. Also, if you try to hide or conceal the income it can be troublesome. Under Section 271, you can be penalised for failing to respond to certain notices and if found guilty of concealing income.
Let us learn in detail about the provisions of the Income Tax Act and the penalties attached to it.

What is the Penalty under Section 271(1)(b)?

The penalty under Section 271(1)(b) is imposed where an assessee fails to comply with the any of the notice issued under Section 115WD(2), Section 115WE(2), Section 142(1) or Section 143(2) or a direction under Section 142(2A).

Quantum of Penalty

  • For the above provision, a penalty of ₹ 10,000 is levied for each failure.
  • However, it should be noted that the above penalties are not applicable to or in relation to any assessment or Assessment Year commencing on or after 1st April 2017.
  • In case, if an assessee furnishes sufficient causes to Assessing Officer for not responding to the mentioned notices, the penalty under Section 271(1)(b) can be deleted.

[ Read: Consequences of not Responding to an Income Tax Notices ]

What is the Penalty under Section 271(1)(c)?

The penalty under Section 271(1)(c) is received where there are sufficient causes to believe that there is a concealment or inaccurate furnishing of particulars of income or fringe benefits on the part of the assessee.

Quantum of Penalty

  • For the above provision, the minimum penalty is 100% of the tax that is sought to be evaded and which may extend up to a maximum of 300% in addition to the tax payable.
  • However, it should be noted that the above penalties are not applicable to or in relation to any assessment or Assessment Year commencing on or after 1st April 2017. This penalty will be replaced by penalty u/s 270A(1) under which a sum equal to 50% of the amount of tax payable on under-reported income will be levied as penalty.
  • However, if under-reported income is in consequence of any misreporting, the penalty shall be equal to 200% of the amount of tax payable on under-reported income.

[ Read: Tax Evasion Penalties and Prosecutions ]

Meaning of ‘Amount of Tax sought to be evaded’

  • For the above explanation, ‘amount of tax sought to be evaded’ shall be the aggregate of tax sought to be evaded under the general provisions and the tax sought to be evaded under the provisions of MAT or AMT.
  • However, if an amount of concealed income is considered both under the general provisions and provisions of MAT or AMT, such amount shall not be considered in computing tax sought to be evaded under provisions of MAT or AMT.
  • Also, it should be noted that, where provisions of MAT or AMT are not applicable, the computation of tax sought to be evaded under the provisions of MAT or AMT shall be ignored.

If you ignore an Income Tax notice, the tax department can levy penalties on you. Therefore, it is important to file your tax return accurately and respond to the notices properly. Outsourcing these tasks to the experts is also not a bad idea. This is where we come into the picture. You can either use our intuitive tax filing platform to easily file your tax return or let our tax experts file it for you. We have a team of in-house tax experts who can file your tax returns accurately while giving you maximum tax benefits. Also, you can reach us to get your tax notices expertly handled.

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