No penalty leviable for cash in high denomination notes

No Penalty Leviable For Cash In High Denomination Notes Deposited In Bank Account On Payment Of Applicable Taxes And On Making Requisite Declaration In The Return Of Income

1) The provisions of section 270A are inserted by the Finance Act 2016 w.e.f 1 April 2017.

2) The provisions of section 271 are applicable upto AY 2016-17 as per sub-section (7) of section 271 inserted by Finance Act 2016 and the provisions of section 270A and section 270AA are applicable w.e.f AY 2017-18.

3) Section 270A is applicable when there is difference between income as per order passed u/s 143(3) and income determined u/s 143(1)(a) and penalty is provided @ 50% of tax if case is covered by circumstances prescribed as under reporting as per sub-section (2) of section 270A. Further the penalty is levied @ 200% of tax if it is covered by circumstances to be treated as misreporting as per provisions of sub-section (8).

4) Under the provisions of section 271, the tax authority had to prove the fact that assessee has concealed the particulars of income or furnished the inaccurate particulars of income. Under the new scheme, there is no such requirement in case of under reporting of income since difference between the assessed income and income determined u/s. 143(1)(a) is presumed to be under-reporting of income or difference between the assessed income and maximum amount not chargeable to tax, where no return is filed by the assessee. However, in case of misreporting of income, the tax authority will have to prove or demonstrate that case of assessee falls within the criteria mentioned in sub- Section(9).

5) Penalty is to be computed on the tax payable on difference between assessed income u/s 143(3) and income determined u/s 143(1)(a). If there is no difference between both the incomes, section 270A is not applicable.

6) Combined reading of the sub sections (1), (2), (8) and (9) of section 270A reveals that misreporting of income will be only where there is under-reported income. A combined reading of sub-sections (8) & (9) shows that it is the under-reported income which is to be treated as misreporting of income if under-reported income is in consequence of items specified under subsection (9). So, firstly, under-reported income is to be computed and then A.O has to give a finding that such under-reported income is in consequence of the items specified under sub section (9). So, if any addition or disallowance does not fall within the scope of “under-reported income” then question of treating the same as misreporting of income does not arise.

7) If an assessee has declared any income in a particular AY and the AO feels that this is the income of some other AY or some other person he has to prove while if an assessee claims an expenditure then the burden is on the assessee to prove the evidences and also to prove that this is the expenditure of this year and incurred for the purpose of business.

8) The provisions of section 271AAB are applicable on the person in whose case search is initiated w.e.f 1.7.2012. Further as per sub-section (2) of this section in case of the person who is searched the old provisions of section 271(1)(c) and the new provisions of section 270A are not applicable. As per section 271AAB, penalty is leviable as follows:

9) As per the provisions of section 270AA if an addition is made in the assessment order the AO can grant an immunity from the imposition of penalty u/s 270A and initiation of prosecution u/s 276C or section 276CC only where the case is that of under reporting of income and not in case of misreporting and if the assessee satisfies following conditions:

1) tax along with interest as per order u/s 143(3) is paid within the period specified

2) no appeal is filed against 143(3) order and application is made within 1 month from the month in which order is received.

Courtesy: CA Jaiprakash Bairagra, itatonline.org