Article: Penalty u/s. 271(1)(c)- A boon or a curse?

India has gone digital from groceries to ITR filing online. However, income tax return registration has become easy; there is a cliché to it. The online itr filing has no provision to explain any legal action taken for a particular claim. The transparency of declaring income to get online income tax refund becomes a question. There are many debatable issues in the income tax act. Hence, one takes a legal position on the existing judiciary pronouncements while filing returns.

Hence, the penalty u/s 271(1)(C) has come into picture. Penalty proceedings can start if a taxpayer has furnished more/hide his income. It is applicable by default on assesses failing to justify the declared income. The Penalty u/s. 271(1)(c)  is also applicable when the more / dis-allowance is  due to legally debatable issues.

Conditions for Penalty u/s. 271(1)(c)

• As per the income tax act in section u/s271(c), a penalty is levy f or inaccurate income declaration.
• Inaccurate income furnished. The subsection (1) of u/s 271(C) imposes an amount for the penalty declared. This amounts to a sum of more than 100% and less than a sum of 300% of the tax sought. This further depends on the reason given for furnishing inappropriate income or concealing it.
• Penalty imposed in case of providing false information on income to evade tax. If the depreciation claimed on lease turns out to be bogus.
• If the AO finds spurious income declared in the revised return filed by the taxpayer.
• As per the India gift tax act, gifts exceeding over Rs. 50, 000 in a year is taxable. If, not declared is subjected to penalty.
• Value added tax differs from state to state. Value added tax in Delhi differ from that of Karnataka. It depends on production, goods, and consumers. The required guidelines followed and declared while income tax returns registration. If, undeclared is subjected to penalty.

Non-applicable conditions for Penalty u/s. 271(1)(c)

• No penalty imposed on an individual because of unintentional withheld of information.
• Penalty not imposed in cases where, AO differ in their opinions declaring the income.
• If the traders dealt with have left town or refuse a written confirmation, no penalty is levy. . Such a case is not a case of inappropriate furnishing of information or concealment.
• When the transactions shown in the balance sheet and the same in tax returns.
• When there is a change in the majority of the shareholding and the assessee denies carrying forward the long-term capital loss.
• Penalty denied when the income is under loss.
• When received genuine cash from creditors.
• In cases where there is a benefit avail by treaty and tax is unavoidable.

The Penalty u/s.271(1)(c) is to help the genuine taxpayers in the long run. At the same time, the income tax department can utilise this to track cases of hidden, undeclared, or inaccurate income.