Q 1.

Comment on the hierarchy of the Income Tax

Authorities. Also comment on the duties, powers and
jurisdictions of Income Tax Authorities.

INTRODUCTION:

In India, the Central Government has been empowered by Entry 82 of the Union List of Schedule
VII of the Constitution of India to levy tax on all income other than agricultural income. The
Income Tax Law comprises The Income Tax Act 1961, Income Tax Rules 1962, Notifications and
Circulars issued by Central Board of Direct Taxes (CBDT), Annual Finance Acts and Judicial
pronouncements by Supreme Court and High Courts. The Government of India imposes
an income tax on taxable income of all persons including individuals, Hindu Undivided
Families (HUFs), companies, firms, association of persons, body of individuals, local authority
and any other artificial judicial person. Levy of tax is separate on each of the persons. The levy is
governed by the Indian Income Tax Act, 1961. The Indian Income Tax Department is governed by
CBDT and is part of the Department of Revenue under the Ministry of Finance, Govt. of India.
Income tax is a key source of funds that the government uses to fund its activities and serve the
public. The Income Tax Department is the biggest revenue mobilizer for the Government.
 
The Income Tax authorities are required to exercise their powers and perform their functions so
as to prevent harassment of assesses, tax-evasion, unnecessary discrimination in collection of
tax. However, there have been a number of instances of misuse of these rule- making powers
which have the effect of contradicting statutory provisions that have been given binding effect,
displacing the authoritative pronouncements of the Higher Judiciary and causing an erosion of
the constitutionally-mandated effect of Supreme Court declarations under Article 141. In this
scenario, for the purpose of effective financial management it becomes imperative to
understand the functioning, the powers and the limitation on the powers of these tax
authorities.  This paper talks about various tax authorities under the Income Tax Act,
appointment of income tax authorities, the Central Board of Direct Taxes and it’s powers,
powers of other Income Tax authorities, jurisdiction of the Income-Tax Authorities, and a
conclusive analysis of the same.

VARIOUS TAX AUTHORITIES UNDER THE INCOME TAX:

The Government of India has constituted a number of authorities to execute the Income Tax Act and to
control the Income Tax Department efficiently. There shall be the following classes of income-tax
authorities for the purposes of the Act as given under Section 116, namely:
The Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (54 of
1963),
 Directors-General of Income-tax or Chief Commissioners of Income-tax,
 Directors of Income-tax or Commissioners of Income-tax or Commissioners of Income-tax
(Appeals),
 Additional Directors of Income-tax or Additional Commissioners of Income-tax or Additional
Commissioners of Income-tax (Appeals),
 Joint Directors of Income-tax or Joint Commissioners of Income-tax.
  Deputy Directors of Income-tax or Deputy Commissioners of Income-tax or Deputy
Commissioners of Income-tax (Appeals),
 Assistant Directors of Income-tax or Assistant Commissioners of Income-tax,
 Income-tax Officers,
 Tax Recovery Officers,
 Inspectors of Income-tax.
In this connection, it may be noted that under section 2(7A), the term ‘Assessing Officer’ means –
 
(a) The Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy Director; or
(b) The Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders
issued under section 120(1) or (2) or any other provision of the Act; and
(c) The Additional Commissioner or Additional Director or Joint Commissioner or Joint Director who is
directed under section 120(4)(b) to exercise or perform all or any of the powers and functions conferred
on, or assigned to, an Assessing Officer.

APPOINTMENT OF INCOME TAX AUTHORITIES:

The Central Government can appoint those persons whom it thinks are fit to become Income Tax
Authorities. The Central Government can authorize the Board or a Director-General, a Chief
Commissioner or a Commissioner or a Director to appoint income tax authorities below the ranks of a
Deputy Commissioner or Assistant Commissioner, According to the rules and regulations of the Central
Government controlling the conditions of such posts.

THE CENTRAL BOARD OF DIRECT TAXES AND IT’S POWERS:

The Central Board of Direct Taxes is a statutory body constituted under the Central Board of Revenue
Act, 1963. It consists of a number of members appointed by the Central Government for the
performance of such duties, as may be entrusted to the Board from time to time. It is functioning under
the jurisdiction of the Ministry of Finance. The Central Board of Direct Taxes, besides being the highest
executive authority, exercises control and supervision over all officers of the Income-tax Department
and is authorised to exercise certain powers conferred upon it by the Income-tax Act, 1961. In
particular, it has the powers, subject to the control and approval of the Central Government to make
any rules, from time to time for the proper administration of the provisions of the Income-tax Act, 1961.
All the rules under the Act are framed by the Board under section 295 of the ITA, 1961 and placed
before the Parliament. In addition to the general power of making rules and of superintendence, the
Board has been given specific powers on several matters.
The important powers of the Board and the relevant sections granting them have been detailed below.
 
Powers of the Board:

The Board has been empowered under Section 119 to issue instructions and circulars
to it’s subordinates for the proper administration of the Act. Under Section 118, CBDT shall control all
the Income Tax Authorities subject to an overall framework of Central Government. It is, in addition,
obligatory for the various authorities and all other persons employed in the execution of the Act to
observe and follow such orders, instructions and directions of the Board. However, the Board is not
empowered to issue orders, instructions or directions in such a way as to –
1.     Require any income-tax authority to make the assessment of a particular case in a particular
manner, or
2.     Interfere with the discretion of the Commissioner (Appeals) in the exercise of his appellate
functions.
Further, the Board may, if it considers necessary or expedient to do so, for the purpose of proper and
effective management of the work of assessment and collection of revenue, issue general or special
orders from time to time in respect of any class of incomes or class of cases setting the Board may relax
the provisions of Section 115P, 115S, 139, 143, 144, 147, 148, 154, 155, 234A, 234B, 271 and 273. Such
order etc., may be issued by general or special orders in respect of any class of incomes or fringe benefit
or class of cases. Such orders are the guidelines, principles or procedures to be followed by other
income-tax authorities in the work relating to assessment or collection of revenue or the initiation of
proceedings for the imposition of penalties. If the Board thinks it is necessary for public interest to do so
the Board can publish and circulate the document in the prescribed manner. Also, the Board, to avoid
genuine hardship in any case or classes of cases, may by general or specific order authorise any income
tax authority, to admit an application or claim for any exemption, deduction, refund or any other relief
under the Act after the expiry of the period specified under the Act and deal with the same on merits in
accordance with law. However, such order cannot be issued to a Commissioner (Appeals).
 
The Board, in addition, can relax any requirement contained in Sections 14 to 59 and 80A to 80U where
the assessee has failed to comply with any requirement. However, such default in the requirement was
due to circumstances beyond their control or if the assessee has complied with such a requirement
before the completion of assessment in relation to the previous year in which such deduction is claimed.
Every such order is to be laid before each House of Parliament.
 
Moreover, the Board can exercise its powers to remove difficulties in the matter of Sections 201(1A),
210, 211, and 234C.
 
The Scope of the Rule- Making Powers of the Board Under Section 119 of the Income Tax Act:

The scope of the rule-making powers of the Board have been discussed below with respect to their
binding value on the Revenue Department, the assesses, the Courts/ Tribunals and the nature of the
circulars.
 
With Respect to Binding Value of Circulars on the Revenue:

The present view is that all circulars issued by the CBDT under Section 119 of ITA, 1961 would be binding
upon the department even if they deviate from the provisions of the Parent Act. An earlier case decided
by the Supreme Court which dealt with the binding value of circulars on the Revenue was that of K.P.
Varghese. The assessee had entered into a bona fide transaction for the sale of a house, earning no
profit, as it was a related party transaction. Despite the fact that there had been no underestimation of
its value, the Revenue sought to tax the assessee on the basis of the fair market value of the house.
The assessee argued on the basis of a circular issued by the CBDT, stating that the purpose of using fair
market value in certain circumstances was to prevent tax evasion through the understatement of the
full value of consideration on the transfer of a capital asset. It came to the notice of the CBDT that
several Income Tax Officers were, in violation of Section 119 of the Income Tax Act, 1961, taxing bona
fide transactions based on their fair market value. Thus, it became necessary for the Board to issue
another circular, clarifying that Board circulars shall be binding on all Officers in view of the decisions of
the Supreme Court in Navnitlal Javeri and Ellerman Lines. In view of these decisions, the Division Bench
in this case held the circulars to be binding on the Revenue, even if they deviate from the statute,
holding that fair market value must only be used in cases where consideration has been understated.
 
Other cases have also reiterated that it is not open to the Revenue to argue against circulars issued by it:
'It cannot but urge the point of view made binding by the...circular'. Similarly, in Mahavir Aluminium, the
Supreme Court held the CBEC circular exempting agricultural mechanical appliances from the payment
of duty to be binding on the Board. The most recent case that deals with the question of whether
circulars issued by the CBEC shall be binding on the Department is  India Cements. The Supreme Court, in
2011, held that circulars issued for the purpose of providing sales tax deferral (to increase the
production levels of industries in the State of Tamil Nadu) that are not contrary to the provisions of the
Tamil Nadu General Sales Tax Act, 1959 would be binding on the Department. In the instant case, the
circular did not conflict with either the statute or the scheme contemplated thereunder, and the
question of whether they shall be binding was thus inconsequential.
 
While the relevant provisions of various taxing statutes all suggest that circulars issued by taxing
authorities shall be binding on Department authorities, arguments are made that the extent to which
these instructions and directions shall be binding must be restricted in certain circumstances. Thus,
the assessee can challenge the issuance of circulars, and adjudicatory authorities are also afforded the
flexibility to use their independent interpretations which may deviate from Department circulars.
 
With Respect to Binding Nature of Circulars on Assesses:
While the position regarding the binding nature of circulars upon the Revenue is well-settled, a related
question that arises for consideration is whether circulars shall be binding on assessees. It is well-
established that circulars issued by the CBDT do not bind assessees. Thus, the assessee has the right to
challenge the correctness of a circular before a quasi-judicial authority constituted under the relevant
statute if it confers greater burden than the statue permits.
 
A Full Bench in Uco Bank considered the effect of a certain circular issued under Section 119 of the
Income Tax Act, 1961 exempting from income the interest payable on ‘sticky loans’, whose recovery is
doubtful and has not been included in the profit and loss account of the assessee. It stated: ‘Such
instructions may be by way of relaxation of any of the provisions of the sections specified there or
otherwise. The Board thus has power, inter alia, to tone down the rigour of the law and ensure a fair
enforcement of its provisions, by issuing circulars in exercise of its statutory powers under Section 119
of the Income-tax Act which are binding on the authorities in the administration of the Act. Under
Section 119(2)(a), however, the circulars as contemplated therein cannot be adverse to the assesses.’
Therefore, the settled position of law with regard to assesses is that they can challenge the circular if it
has an adverse impact on them that deviates from the statutory position.
 
With Respect to Binding Effect of on Courts and Tribunals:
According to the present position taken by the Courts, CBEC circulars shall be binding on the Courts as
the interpretation of the statue will supersede the interpretation given by Courts.    According to the
earlier point of view held by the Courts, notifications issued by the Government are, in the opinion of
the Court, mere understandings of statutory provisions, and cannot be used to usurp the jurisdiction of
the courts in interpreting statutory provisions. Thus, Bengal Iron suggests that quasi-judicial authorities
shall be bound only by ‘law’, which does not include administrative instructions, opinions, clarifications
and circulars. Nevertheless, the same Court in Kirloskar Oil Engines held that while trade notices issued
by the CBEC generally have no binding value, in the absence of other evidence, the court must consider
trade notices in deciding disputes. The argument that CBEC circulars shall not bind adjudicatory
authorities was raised in Paper Products, wherein the orders of the Customs Excise and Gold (Control)
Appellate Tribunal (CEGAT) were challenged by an assessee who argued that the circulars exempting
certain products of the printing industry include his products of manufacture. The Revenue argued that
the impugned circulars, though binding on the Department, would not bind the CEGAT. The Supreme
Court, in deciding that the circulars were binding on the Department, ultimately held that the
Department does not have the option of making arguments contrary to the impugned circulars.
Unfortunately, it did not actually address this validity of the Revenue’s contention. In Hindustan
Aeronautics Ltd., however, a conclusive decision on this point was made. A government-owned
company aggrieved by the Revenue’s disallowance of certain deductions for its manufacture of
aeroplanes filed a revision petition before the Commissioner of Income Tax. Since the order disallowing
the deduction had been made the subject of a separate appeal before the Appellate Tribunal, the
Commissioner dismissed the petition. This decision was challenged by the assessee, who
used Navnitlal Javeri and Ellerman Lines to argue that the circular requiring the Commissioner to
examine the revision of the assessee on merits would bind him. The Revenue, on the other hand, argued
that while it is unquestionable that circulars shall be binding on the Revenue, the Judiciary cannot direct
that a circular shall be given effect to rather than the Supreme Court or High Courts’ interpretation of
the law in question. The Division Bench agreed with the Revenue’s contention that a circular shall not
bind adjudicatory bodies.
 
In 2002, this decision was effectively overruled by a Constitution Bench requested in Dhiren Chemicals.
Here, a notification had been issued by the CBEC exempting certain products from excise duty, where
duty was ‘already paid’ on the raw materials used in their manufacture, thus preventing the payment of
double duty. The construction of this exemption had, for some time, been the subject of controversy,
raising the question of whether imported raw materials which are either not liable to excise duty, or
have the benefit of nil duty payable, shall be included within the ambit of this notification. The CBEC
had, consequently, issued a number of circulars clarifying that the benefit shall not apply unless excise
duty had actually been paid on the raw materials utilised. On the other hand, a Full Bench of the
Supreme Court had already, in Usha Martin, decided that the notification would apply even when a nil
rate of duty was applicable. Thus, the Court in Dhiren Chemicals was required to choose whether to
follow the precedent set by its Full Bench earlier, or the interpretation rendered by the CBEC circular
issued in this regard. The Court ultimately held: 'We need to make it clear that, regardless of the
interpretation that we have placed on the said phrase, if there are circulars which have been issued by
the Central Board of Excise and Customs which place a different interpretation upon the said phrase,
that interpretation will be binding on the revenue.” This decision was the first to reflect a marked shift in
the Judiciary’s perspective on the extent to which circulars issued by the CBEC shall be binding. In effect,
by holding the Department strictly to the position adopted by it in the circulars it issues, the Court
unwittingly weakened the impact of its own decisions by disregarding the interpretation of the Full
Bench in Usha Martin in favour of the interpretation rendered by the CBEC in the impugned order. This
precedent-setting statement, negating the impact of the decision rendered by a weaker bench earlier
in Hindustan Aeronautics Ltd., was subsequently followed in 2004 in Maruti Foam, when the Supreme
Court reaffirmed that CBEC circulars shall be binding notwithstanding their conflict with the judgment
rendered in Usha Martin.
 
With Respect to Benevolent Circulars:
Benevolent circulars issued by the Board even if they deviate from the legal position are required to be
followed by the department since such circulars would go to the assistance of the  assessee. Apart from
the fact that the circulars issued by the Board are binding on the department, the department is
precluded from challenging the correctness of the said circulars even on the ground of the same being
inconsistent with the statutory provision.
 
In Navnitlal Javeri, a Constitution Bench of the Supreme Court addressed the question of whether a
circular issued by the Board of Revenue, granting an exemption from income tax on genuine loans
advanced by companies to their shareholders, would be binding on the Board, notwithstanding that its
contents violated the parent statute. Section 2(6A) of the Income Tax Act, 1961 made no distinction
between bona fide transactions and devices used for tax avoidance (by providing shareholders tax-free
loans instead of taxable dividends). The Court held that since the circular was conferring a benefit
upon assessees and diluting the stringent requirements of the Act, the Board was required to comply
with its own instructions, and could not itself contend that the circular could not be enforced. The
decision in Navnitlal Javeri was affirmed by the Division Bench in Ellerman Lines, in which the impugned
notification laid down the principles to be followed in assessing the Indian income of foreign shipping
companies. Accordingly, Ellerman Lines, a British shipping company, was by the said notification
assessed by way of a certificate issued by U.K. authorities (declaring the income of the company),
allowing an investment allowance which had been recognised by the Revenue in India as equivalent to
the development rebate made available under the Income Tax Act, 1922. Interestingly, the Court
recognised the difficulties faced by shipping companies in complying strictly with the income tax
provisions of various countries in which they operate, and, as a result, considered the notification,
waiving strict compliance with the requirements of the Act, to be valid and binding on the Revenue
 
With Respect to Aid to Construction:
Further a circular provides extraneous aid to construction being contemporanea exposito.
With respect to Earlier Orders:  
Where a circular is issued after the date on which the particular order is passed, the later issued circular
can have no application to the earlier passed order unless there is something in the circular making itself
applicable even retrospectively.
 
 
POWERS OF OTHER INCOME TAX AUTHORITIES:
Powers of the Income Tax Authorities vary with the nature of the position acquired. Given below are the
various tax authorities along with the powers they hold under that position.
 
Director General/ Director:
The Director General/ Director, appointed by the Central Government, are required to perform such
functions as maybe assigned by the Central Government, are required to perform such functions as may
be assigned by the Central Board of Direct Taxes. This position enjoys the following powers under
different provisions of the Act:
 
a.     To give instructions to the Income-Tax officers
b.     To enquire or investigate into concealment
c.     To search and seizure
d.    To requisite books of account
e.     To survey
f.     To make any enquiry
 
Commissioners of Income Tax:
Commissioners are appointed by the Central Government. Generally, they are appointed to head
income-tax administration of a specified area. As the head of administration, a Commissioner of income-
tax enjoys certain administrative as well as judicial powers. A commissioner may exercise powers of an
assessing officer. It has the power to transfer any case from one or more assessing officers to any other
assessing officer. It can grant approval for an order issued by the assessing officer. Prior approval is
required for reopening of an assessment. Its, also, has the power to revise an order passed by an
assessing officer in addition to many other powers as given in the Income Tax Act, 1961.
 
Commissioner (Appeals): 
Commissioners of Income-Tax (Appeals) are appointed by the Central Government. It is an appellate
authority vested with the following judicial powers:
a.     Power regarding discovery, production of evidence etc.
b.     Power to call information.
c.     Power to inspect registers of companies.
d.    Power to set off refunds against tax remaining payable.
e.     Power to dispose of appeals.
f.     Power to impose penalty.
 
Joint Commissioners:
Joint Commissioners are appointed by the Central Government. The main function of the authority is to
detect tax- evasion and supervise subordinate officers. Under the different provisions of the Act, the
Joint Commissioner enjoys the power to accord approval to adopt fair market value as full
consideration, instruct income tax officers, exercise powers of income tax officers, the power to call
information, to inspect registers of companies, to make any enquiry among other powers.
 
Income-Tax Officers:
While Income-Tax officers of Class I services are appointed by the Central Government, Income-tax
Officers of Class II services are appointed by the Commissioner of Income-Tax. Powers, functions and
duties of Income-Tax officers are provided in many sections, some of which are Power of search and
seizure, Power of assessment, Power to call for information, Power of Survey etc.
 
Inspectors of Income-Tax:
They are appointed by the Commissioner of Income-Tax. Inspectors of Income-Tax have to perform such
functions as are assigned to them by the Commissioner or any other authority under whom they are
appointed to work.
 
THE SCOPE OF EXERCISE OF THE POWERS GIVEN TO THE INCOME-TAX AUTHORITIES:
The Income Tax Act, 1961 specifies the scope of the powers handed to the income-tax authorities. Given
below are some of the important powers of the Income Tax Authorities and their scope as given in the
Sections provided under the Income Tax Act, 1961:
 
Power to Transfer Cases [Section 127]:
CBDT can transfer the case from Assessing Officer to another A.O. subordinate to him after giving a
reasonable opportunity of being heard to the concerned assessee. However, no opportunity of being
heard shall be required if the case is to be transferred from one A.O. to another A.O. within the same
city, town or locality. Disputes regarding jurisdiction shall be resolved by the concerned CCIT or CIT on
mutual understanding. However, for any disagreement, the matter shall be referred to CBDT and CBDT
shall resolve the dispute by way of issuing a notification in the Official Gazette of India.
 
 
Opportunity of Being Reheard [Section 129]:
Whenever, an Income Tax Authority ceases to exercise jurisdiction over a particular case and is being
succeeded by another Income Tax Authority, then the successor Income Tax Authority shall continue the
pending proceeding from the same stage at which it was left over by the predecessor Income Tax
Authority. There shall be no requirement on the part of the successor Income Tax Authority to reissue
any notice already issued by his predecessor.  However, if the concerned assessee demands that before
the successor Income Tax Authority continues the proceeding, he shall be given an opportunity of being
reheard to explain his case to the successor Income Tax Authority, then in such case, an opportunity of
being reheard has to be given to the assessee. (However, such an opportunity of being reheard is
required to be given only if the concerned assessee demands for it and not otherwise).The time of A.O.
lost in giving such opportunity of being reheard to the assessee, shall be excluded while calculating time
limit to complete the assessment.
 
Discovery, Production of Evidence etc. [Section 131]:
The Assessing Officer, Deputy Commissioner (Appeals), Joint Commissioner, Commissioner (Appeals),
the Chief Commissioner and the Dispute Resolution Panel referred to in section 144C have the powers
vested in a Civil Court under the Code of Civil Procedure, 1908 while dealing with the following matters:
(i)    discovery and inspection;
(ii)   enforcing the attendance of any person, including any officer of a banking company and examining
him on oath;
(iii)  compelling the production of books of account and documents; and
(iv)  issuing commissions
 
Search and Seizure [Section 132]:
Today it is not hidden from income tax authorities that people evade tax and keep unaccounted assets.
When the prosecution fails to prevent tax evasion, the department has to take actions like search and
seizure.  Under this section, wide powers of search and seizure are conferred on the income-tax
authorities. The provisions of the Criminal Procedure Code relating to searches and seizure would, as far
as possible, apply to the searches and seizures under this Act. Contravention of the orders issued under
this section would be punishable with imprisonment and fine under section 275A.
 
Power to Requisition Books of Account etc. [Section 132A]:
Where the Director or the Director-General or Commissioner or the Chief Commissioner in consequence
of information in his possession, has reason to believe that (a), (b), or (c) as mentioned under section
132(1) and the book of accounts or other documents or the assets have been taken under custody by
any authority or officer under any other law, then the Chief Commissioner or the Director General or
Director or Commissioner can authorize any Joint Director, Deputy Director, Joint Commissioner,
Assistant Commissioner, Assistant Director, or Income tax Officer to require the authority to provide sue
books of account, assets or any documents to the requisitioning officer, when such officer is of the
opinion that it is no longer necessary to retain the same in his custody.
 
Application of Retained Assets [Section 132B]:
This section provides that the seized assets can be appropriated against all tax liabilities of the assessee.
However, if the nature of source of acquisition of seized assets is explained satisfactorily by
the assessee, then, such assets are required to be released within a period of 120 days from the date on
which last of the authorisations for search under section 132 is executed after meeting any existing
liabilities. For this purpose, it has been provided that the assessee should make an application to the
Assessing Officer within a period of 30 days from the end of the month in which the asset was seized.
The assessee shall be entitled to simple interest at ½% per month or part of a month, if the amount of
assets seized exceeds the liabilities eventually, for the period immediately following the expiry of 120
days from the date on which the last of the authorisations for search under section 132 or requisition
under section 132A was executed to the date of completion of the assessment under section 153A or
under Chapter XIV-B.
 
Power to call for information [Sections 133]:
The Commissioner The Assessing Officer or the Joint
Commissioner may for the purpose of this Act:
(a) Can call any firm to provide him with a return of the addresses and names of partners of the firm and
their shares;
(b) Can ask any Hindu Undivided Family to provide him with return of the addresses and names of
members of the family and the manager;
(c) Can ask any person who is a trustee, guardian or an agent to deliver him with return of the names of
persons for or of whom he is an agent, trustee or guardian and their addresses;
(d) Can ask any person, dealer, agent or broker concerned in the management of stock or any
commodity exchange to provide a statement of the addresses and names of all the persons to whom the
Exchange or he has paid any sum related with the transfer of assets or the exchange has received any
such sum with the particulars of all such payments and receipts;
 
Power of Survey [Section 133A]:
The term 'survey' is not defined by the Income Tax Act. According to the meaning of dictionary 'survey'
means casting of eyes or mind over something, inspection of something, etc. An Income Tax authority
can have a survey for the purpose of this Act. The objectives of conducting Income Tax surveys are:
 
(a)To discover new assessees;
(b)To collect useful information for the purpose of assessment;
(c)To verify that the assessee who claims not to maintain any books of accounts is in-fact maintaining
the books; 
(d)To check whether the books are maintained, reflect the correct state of affairs.
 
Power to Collect Certain Information [Section 133B]:
For the purpose of collection of information which may be useful for any purpose, the Income tax
authority can enter any building or place within the limits of the area assigned to such authority, or any
place or building occupied by any person in respect of whom he exercises jurisdiction.
 
Power to Inspect Registers of Companies [Section 134]:
The Assessing Officer, the Joint Commissioner or the Commissioner (Appeals), or any person
subordinate to him authorised in writing in this behalf by the Assessing Officer, the Joint Commissioner
or the Commissioner (Appeals), as the case may be, may inspect and if necessary, take copies, or cause
copies to be taken, of any register of the members, debenture holders or mortgagees of any company or
of any entry in such register.
 
Other Powers [Sections 135 and 136]:
The Director General or Director, the Chief Commissioner or Commissioner and the Joint Commissioner
are competent to make any enquiry under this act and for all purposes they shall have the powers
vested in an Assessing Officer in relation to the making of enquiries. If the Investigating officer is denied
entry into the premises, the Assessing Officer shall have all the powers vested in him under sections
131(1) and (2). All the proceedings before Income tax authorities are judicial proceedings for purposes
of section 196 of the Indian Penal Code, 1860, and fall within the meaning of sections 193 and 228 of the
Code. An income-tax authority shall be deemed to be a Civil Court for the purposes of section 195 of the
Criminal Procedure Code, 1973.
 

JURISDICTION OF INCOME-TAX AUTHORITIES:

Income Tax authorities are required to exercise their powers and perform their functions in accordance
with directions given by the Board. Tax authority higher in rank, if directed by Board, shall exercise the
powers and perform tie functions of the Income- Tax authority lower in rank. The directions of CBDT
include direction to authorize any Income Tax authority to issue instructions to their subordinates. In
issuing instruction or orders, the Board or the Income-Tax authority may adopt any one or more of the
following criteria -
(a) Territorial area
(b) Person or classes of persons
(c) Incomes or classes of incomes
(d) Cases or classes of cases
 
The Board can also authorize Director General or Chief Commissioner or Commissioner to issue orders in
writing to the effect that the functions conferred or assigned to the Assessing Officer in respect of the
above four criteria shall be exercised or performed by Joint Commissioner or Joint Director.
 
Also, the Assessing Officer has been vested with jurisdiction over any area or limits of such area -
1. If a person carries on business or profession only in that area. In respect of that person; or
2. If a person carries on business or profession in more than one place, then the principal place of
business or profession situated in that area; or
3. In respect of any other person residing within that area.
 
Any dispute relating to jurisdiction to assess any person by an Assessing Officer shall be determined by
Director General /Chief Commissioner/Commissioner of Income Tax If the dispute is relating to areas
within the jurisdiction of different Director General /Chief Commissioner/ Commissioner, then such
issue is to be solved mutually among themselves. If the above authorities are not in agreement among
themselves such matter has to be decided by the Board or Director General/ Chief Commissioner/
Commissioner authorized by the Board.
 
CONCLUSION:
It is believed that tax-authorities are independent judicial officers who are required to pass reasoned
orders based on their own reasoning un-influenced by instructions or advice from their superior officers.
The Central Excise adjudication manual published in 1988 (that was its last publication), in  para 39
directed that Board Orders and reference numbers should not be quoted in the Adjudication Orders. It
was further advised that Law Ministry’s opinion is confidential and should never be communicated in
the same language to even sub-ordinate officers. There are several Assistant Commissioners who boast
“I am an adjudicating authority and not bound by the Board orders”.
This has resulted in a considerable degree of uncertainty in financial management with respect to taxes.
For example it is hard to determine for the assesses, the binding value of circulars issued by CBDT under
Section 119 of the Income Tax Act, 1961. Also, these circulars blatantly contradict statutory provisions
that have been given binding effect, displace the authoritative pronouncements of the Higher Judiciary
and cause an erosion of the constitutionally-mandated effect of Supreme Court declarations under
Article 141.
 
In recent times the catena of judicial pronouncements and statue provisions are creating quite a
stir.  However, there is still a need to further define and redefine and implement the extent  to which
Income Tax authorities are required to exercise their powers and perform their functions so as to
prevent harassment of assesses, tax-evasion, unnecessary discrimination in collection of tax and to help
assesses effectively manage taxes.
Q2.Explain the various offences and penalties as per the Income Tax Act,
1961
Penalties and Prosecutions
Default in complying with provisions of or with conditions prescribed under the Income-tax Act would
attract certain penalty and in critical cases prosecutions as well. The document will provide you
information about the punishable offences, prosecutions and the quantum of penalties that can be
imposed under the law.
There are three modes built in the fiscal legislation for encouraging tax compliance: (a) Charge of
Interest, (b) imposition of penalty (c) launching of prosecution against tax delinquents. While
charging of interest is compensatory on character, the imposition of penalty and institution of
prosecution proceedings act as strong deterrents against potential tax delinquents.
What are the defaults which may invite levy of penalty?
Chapters XVII and XXI of Income-tax Act, 1961, contain various provisions empowering an Income-
tax Authority to levy penalty in case of certain defaults. The following defaults may invite levy of
penalty:
(i) When the assessee is in default or is deemed to be in default in making payment of tax, including
the tax deducted at source, advance tax and the self assessment tax. [Section 221 read with
Sec.201(1)]
(ii) Failure to pay the advance tax as directed by the Assessing Officer or as estimated by the
assessee. [Section 273(1)]
(iii) Failure to comply with a notice issued under section 142(1) or 143(2) or failure to comply with the
direction issued under section 142(2A) to get the accounts audited. [Section 271(1)(b)]
(iv) Concealment of particulars of income or furnishing of inaccurate particulars of income. [Section
271(1)(c)]
(v) Failure to maintain books of accounts and documents by persons carrying on profession or
business as prescribed under section 44AA. [Section 271A]
(vi) Failure to get the accounts audited in prescribed circumstances or failure to obtain the
prescribed audit report within prescribed time period of failure to furnish the audit report along with
the return, as required under section 44AB. [Section 271B]
(vii) Failure to subscribe to the eligible issue of capital [Section 271BB]
(viia) Penalty for failure to deduct tax at source. [Section 271C]
(viii) Accepting of any loan or deposit or repayment of deposit of Rs.20,000 or more otherwise than
by account payee cheque or account payee draft, in contravention of the provisions of Section
269SS. [Section 271D]
(viiia) Repayment of loan in contravention of the conditions imposed in section 269T. [Section 271E]
(viiib) A. Failure of file the return of income as required under Section 239 (1), shall entail imposition
of penalty. [Section 271F]
B. Failure to file the return as required under the proviso to Section 139(1), in the event of assessee
fulfilling the prescribed conditions, i.e., certain persons in occupation of immovable property or owner
of motor vehicle or subscriber to telephone, one who incurred expenditure on foreign travel, the
holder of the credit card or a member of a club, subject to specific conditions, are required to file the
return as per proviso to Section 139(1), failing which penalty may be imposed. (Proviso to Section
271F)
(ix) Refusal to answer in contravention of legal obligation. [Section 272A(1)(a)]
(x) Refusal to sign any statement made in the course of income-tax proceedings. [Section 272A(1)
(b)]
(xi) Failure to attend or give evidence or produce books of accounts and documents in compliance
with the requirements of summons under section 131(1). [Section 272A(1)(c)]
(xii) Failure to comply with the provisions of section 139A dealing with the application for and
allotment of Permanent Account Number or General Index Register Number. [Section 272A(1)(d)]
(xiii) Failure to furnish information regarding securities. [Section 272A(2)(a)]
(xiv) Failure to give notice of discontinuance of business or profession. [Section 272A(2)(b)]
(xv) Failure to furnish in due time information sought under section 133 of Income-tax Act. [Section
272A(2)(c)]
(xvi) Failure to furnish in due time prescribed returns/statements. [Section 272A(2)(c)]
(xvii) Failure to allow inspection or take copies of registers of registers of companies. [Section
272A(2)(d)]
(xviii) Failure to furnish in due time the return of income by charitable or religious institutions.
[Section 272A(2)(e)]
(xix) Failure to deliver in due time a copy of declaration of non-deduction of tax at source u/s.197A.
[Section 272A(2)(f)]
(xx) Failure to furnish a certificate of tax deducted at source to the person on whose behalf tax has
been deducted or collected as required by Section 203 or Section 206C. [Section 272A(2)(g)]
(xxi) Failure to deduct and pay tax from salary payable to an employee as directed by the Assessing
Officer or the Tax Recovery Officer as required by Section 226(2). [Section 272A(2)(h)]
(xxii) Failure to allow an Income-tax Authority to collect any information useful or relevant to the
purposes of Income-tax Act u/s.133B. [Section 272AA)]
(xxiii) Failure to comply with the provisions of section 203a dealing with tax Deduction Account
Number [Section 272BB]
Is the levy of penalty automatic?
No penalty under the Income-tax Act is imposed unless the person concerned has been given
reasonable opportunity of being heard.
What is the minimum and maximum penalty leviable?
The quantum of penalty leviable depends upon the nature of default. The relevant section of Income-
tax Act prescribe the minimum and maximum penalties which can be levied.
Can the penalty be reduced or waived?
The Commissioner of Income-tax may reduce or waive the amount of any penalty imposed or
imposable, if prescribed conditions are satisfied. The assessee should voluntarily and in good faith
make full and true disclosure of income prior to the detection of concealment by the Assessing
Officer. In certain cases of genuine hardship, the penalty levied can be reduced/waived if the
assessee has co-operated in any enquiry relating to the assessment and recovery of taxes. The
waiver/reduction of penalties is discretionary and dependent upon satisfaction or prescribed
conditions. No assessee can, a matter of right, claim waiver or reduction of penalty imposed or
imposable upon him. [Section 273A]
Office and prosecution under the income tax act. why is prosecution necessary?
In the fight against tax evasion, the imposition of monetary penalty alone is not sufficient. A
calculating tax evader finds it profitable to evade tax for years, if he knows that he may get away with
it by paying penalty in the year in which he is caught. However, the prospect of landing in jail is a far
more dreaded consequence and works as a deterrent. Further, for more serious defaults, sometimes
launching of prosecution is prescribed without prescribing monetary penalties.
The Parliament has, therefore, been enacting deterrent laws for effective implementation of tax laws.
The Income-tax Act contains a separate chapter XXII wherein offences have been defined and
punishment provided.
What are the offences punishable under the income tax act?
The following offences committed by a person are punishable:
(i) Removal, parting with or otherwise dealing with books of accounts, documents, money, bullion,
jewellery or other valuable article or thing put under restraint during the search. [Section 275A]
(ii) Fraudulent removal, concealment, transfer or delivery of any property or any interest in the
property with the intention to thwart recovery of tax. [Section 276]
(iii) Failure on the part of a liquidator or receiver of a company to give notice of his appointment to
the Assessing Officer or failure to set apart amount notified by the Assessing Officer, or parting away
of company’s properties in contravention of income-tax provision. [Section 276A]
(iv) Failure to enter into written agreement or failure to furnish the statement of immovable property
intended to be transferred u/s.269UC, or failure to surrender or deliver the property u/s.269UE,
purchased by the Appropriate Authority or doing or omitting to do anything u/s.269UL, which will
have the effect of transfer of property without the permission of the Appropriate Authority (under the
provisions of Chapter XX-C) [Section 276AB]
(v) Failure to pay to the credit of the Central Government the tax deducted at source. [Section 276B]
(va) Failure to pay the tax collected at source. [Section 276BB]
(vi) Willful attempt to evade any tax, penalty or interest [Section 276C(1)]
(vii) Willful attempt to evade the payment of any tax, penalty or interest levied under Income Tax Act.
[Section 276C(2)]
(viii) Willful failure to furnish in due time return of income. [Section 276CC)]
(viiia) Failure to furnish return of income in Search Cases as required under section 158BC [Section
276CCC]
(ix) Willful failure to produce accounts and documents as directed by issue of notice under section
142(1) [Section 276D]
(x) Willful failure to get the accounts audited as directed by the Assessing Officer under section
142(2A). [Section 276D]
(xi) Making of a statement in verification or delivery of an account or statement which is false and
which the concerned person knows or believes to be false or does not believe to be true. [Section
277]
(xii) Abetting or inducing another person to make and deliver an account or statement or declaration
relating to any taxable income which is false and which he either knows or believes to be false.
[Section 278]
(xiii) Punishment for 2nd & subsequent offences in cases of certain defaults. [Section 278A]
(xiv) No person shall be punished for any failure if he proves that there is reasonable cause failure.
[Section 278AA].
Who is liable to be prosecuted?
Any person, committing the offence is liable to be prosecuted. In this connection it is not necessary
that the person should be an assessee under the Income-tax Act. In the case of an offence
committed by a Company, Firm, Association of Persons or Body of Individuals, every person in
charge of or responsible for the conduct of the business of the concern as well as the concern are
deemed to be guilty. Similarly, in the case of an offence by a Hindu Undivided Family, the karta
thereof is deemed to be guilty of the offence.
Is mens rea or culpable mental state or guilty intention necessary?
In case of willful act of omission or commission, the court shall presume the existence of culpable
mental state. However, the accused can rebut this presumption by producing necessary evidence
before the court. (Section 278E).
Can the offence be compounded?
Section 279(2) of Income-tax Act empowers a Chief Commissioner of Director General of Income-
tax to compound an offence either before or after the institution of prosecution proceeding.
When public servant liable to be prosecuted?
If a public servant furnishes any information in contravention of the provisions of Section 138(2),
prosecution may be instituted against him with the previous sanction of the Central Government.
(Section 280).
PENALTIES
Updated with Amendment made vide Finance Act, 2019 and applicable for A.Y. 2021-22 and
Onwards:

Section Nature of default Penalty leviable

(1) (2) (3)

140A(3) Failure to pay wholly or partly— Such amount as

Assessing Officer
(a) self-assessment tax, or may impose but not
exceeding tax in
(b) interest and fee, or arrears

(c) both

under section 140A(1)

158BFA(2) Determination of undisclosed income of block period Minimum : 100 per

cent of tax leviable
in respect of
undisclosed income

Maximum : 300 per

cent of tax leviable
in respect of
undisclosed income.

221(1) Default in making payment of tax Such amount as

Assessing Officer
may impose but not
exceeding amount of
tax in arrears
234E Failure to file statement within time prescribed in section Rs. 200 for every
200(3) or in proviso to section 206C(3) day during which
failure continues but
not exceeding tax
deductible/collectible

234F Default in furnishing return of income within time prescribed in a)  Rs. 5000 if return
section 139(1) is furnished on or
before 31 December
of assessment year.
b)  Rs. 10,000 in
any other case
Note: if total
income of the
person does not
exceeds Rs. 5 lakh
then fee payable
shall be Rs. 1000

234G Fee for default in submission of statement/certificate prescribed Rs. 200 per day
under section 35/ Section 80G

270A(1) Under-reporting and misreporting of income A sum equal to 50%

of the amount of tax
payable on under-
reported income.
However, if under-
reported income is
in consequence of
any misreporting
thereof by any
person, the penalty
shall be equal to
200% of the
amount of tax
payable on under-
reported income

271(1)(b) Failure to comply with a notice under section Fixed at Rs. 10,000

115WD(2)/115WE(2)/142(1) or section 143(2) or failure to for each failure.
comply with a direction under section 142(2A) Note:- However,
the above penalty
shall not be levied
to and in relation to
any assessment
for the A.Y
commencing on or
after the 1st day of
April, 2017.

271(1)(c) Concealment of particulars of income or fringe benefits or Minimum : 100 per

furnishing of inaccurate particulars of income or fringe benefits cent

Maximum : 300 per

cent of tax sought to
be evaded in addition
to tax payable

Note:

‘Amount of tax
 sought to be evaded’
shall be 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.
Further, 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.

Note:- However, the

above penalty shall
not be levied to and
in relation to any
assessment for the
A.Y commencing on
or after the 1st day of
April, 2017.

271(4) Distribution of profits by registered firm otherwise than in Not exceeding 150
accordance with partnership deed and as a result of which partner per cent of difference
has returned income below the real income between tax on
partner’s income
assessed and tax on
income returned, in
addition to tax
payable

Note:- However, the

above penalty shall
not be levied to and
in relation to any
assessment for the
A.Y commencing on
or after the 1st day of
April, 2017.

271A Failure to keep, maintain, or retain books of account, documents, Rs. 25,000
etc., as required under section 44AA
271AA(1) (1) Failure to keep and maintain information and documents 2% of value of each
required by section 92D(1) or 92D(2) international
transaction/or
(2) Failure to report such transaction specified domestic
transaction entered
(3) Maintaining or furnishing incorrect information or document into

271AA(2) Failure to furnish information and document as required Rs. 5,00,000/-

under Section 92D(4)

271AAA Where search has been initiated before 1-7-2012 and undisclosed 10% of undisclosed
income found income

271AAB(1) Where search has been initiated on or after 1-7-2012 but before (a) 10% of
15-12-2016 and undisclosed income found undisclosed income
of the specified
previous year if
assessee admits the
undisclosed income;
substantiates the
manner in which it
was derived; and on
or before the
specified date pays
the tax, together with
interest thereon and
furnishes the return
of income for the
specified previous
year declaring such
undisclosed income

(b) 20% of
undisclosed income
of the specified
previous year if
assessee does not
admit the
undisclosed income,
and on or before the
specified date
declare such income
in the return of
income furnished for
the specified
previous year and
pays the tax, together
with interest thereon;

(c) 60% of
undisclosed income
of the specified
previous year if it is
not covered by (a) or
(b) above

271AAB(1A) Where search has been initiated on or after 15-12-2016 and (a) 30% of
undisclosed income found undisclosed income
of the specified
previous year if
assessee admits the
 undisclosed income;
substantiates the
manner in which it
was derived; and on
or before the
specified date pays
the tax, together with
interest thereon and
furnishes the return
of income for the
specified previous
year declaring such
undisclosed income
(b) 60% of
undisclosed
income of the
specified previous
year in any other
case.

271AAC Income determined by Assessing Officer includes any income 10% of tax payable
referred to in section 68, section 69, section 69A, section under section
69B, section 69C or section 69D for any previous year. [if such 115BBE.
income is not included by assessee in his return or tax in
accordance with section 115BBE has not been paid]

271AAD Penalty, if during any proceedings under the Act, it is found that 100% of such false
in the books of accounts maintained by assessee, there is: entries or omitted
a) A false entry; or entry.
b) Any entry relevant for computation of total income of
such person has been omitted to evade tax liability.

271B Failure to get accounts audited or furnish a report of audit as One-half per cent of
required under section 44AB total sales, turnover
or gross receipts,
etc., or Rs. 1,50,000,
which-ever is less

271BA Failure to furnish a report from an accountant as required Rs. 1,00,000

by section 92E

271BB Failure to subscribe any amount to units issued under scheme 20 per cent of such
referred to in section 88A(1) amount

271C Failure to deduct tax at source, wholly or partly, under sections Amount equal to tax
192 to 196D (Chapter XVII-B) or failure to pay wholly or partly not deducted or paid
tax u/s 115-O(2) or second proviso to section 194B

271CA Failure to collect tax at source as required under Chapter XVII- Amount equal to tax
BB not collected

271D Taking or accepting any loan or deposit or specified sum in Amount equal to
contravention of the provisions of Section 269SS. loan or deposit or
“Specified sum” means any sum of money receivable, specified sum so
whether as advance or otherwise, in relation to transfer of taken or accepted
an immovable property, whether or not the transfer takes
place.

271DA Receiving an amount of Rs. 2 lakh or more from a person in a Amount equal to
day [section 269ST] such receipt
271DB Failure to provide facility for accepting payment through Rs. 5,000 rupees for
prescribed electronic modes of payment as referred to in section every day of default
269SU

271E Repayment of any loan or deposit or specified advance otherwise Amount equal to
than in accordance with provision of Section 269T. loan or deposit or
“Specified advance” means any sum of money in the specified advance so
nature of advance, by whatever name called, in relation to repaid
transfer of an immovable property, whether or not transfer
takes place.

271F Failure to furnish return as required by section 139(1) or by its Rs. 5,000
provisos before the end of the relevant assessment year Note: Applicable
upto the
Assessment year
2017-18

271FA1 Failure to furnish an annual information return as required Rs. 500 per day of
under section 285BA(1)2 default

271FAA Furnishing of inaccurate information in statement of financial Rs. 50,000

transaction or reportable account

Failure to furnish annual information return within the per iod Rs. 1,000 per day of
specified in notice u/s 285BA(5) default

271FAB Section 9A provides that fund management activity carried out Rs. 5,00,000
by an eligible offshore investment fund through an eligible fund
manager acting on behalf of such fund shall not constitute
business connection in India (subject to certain conditions).
The provision requires that eligible investment fund shall
furnish within 90 days from the end of the financial year a
statement, in respect of its activities in a financial year, in
the prescribed form containing information relating to
fulfilment of specified conditions and such other information
or documents as may be prescribed. Penalty to be levied if
investment fund failed to comply with the requirement.

271FB Failure by an employer to furnish the return of fringe benefits as Rs. 100 for every
required under section 115WD(1) day of default

271G Failure to furnish any information or document as required 2% of the value of

(Refer Note- by section 92D(3) the international
3) transaction/specified
domestic transaction
for each failure

271GA Section 285A provides for reporting by an Indian concern if Penalty shall be:
following two conditions are satisfied: a) a sum equal to
a) Shares or interest in a foreign company or entity derive 2% of value of
substantial value, directly or indirectly, from assets located transaction in
in India; and respect of which
b) Such foreign company or entity holds such assets in such failure has
India through or in such Indian concern. taken place, if such
In this case, the Indian entity shall furnish the prescribed transaction had
information for the purpose of determination of any income effect of, directly or
accruing or arising in India under Section 9(1)(i). indirectly,
In case of any failure, the Indian concern shall be liable to transferring right of
pay penalty. management or
control in relation
to the Indian
 concern;
b) a sum of Rs.
5,000 in any other
case.

271GB(1) Failure to furnish report under section 286(2) Rs. 5,000 per day
upto 30 days and Rs.
15,000 per day
beyond 30 days

271GB(2) Failure to produce the information and documents within the Rs. 5,000 for every
period allowed under section 271GB(6) day during which the
failure continues.

271GB(3) Failure to furnish report or failure to produce Rs. 50,000 for every
information/documents under section 286 even after serving day for which such
order under section 271GB(1) or 271GB(2) failure continues
beginning from the
date of serving such
order.

271GB(4) Failure to inform about inaccuracy in report furnish under section Rs. 5,00,000
286(2)
Or furnishing of inaccurate information or document in
response to notice issued under section 286(6).

271H Failure to deliver/cause to be delivered a statement within the W.e.f. 1-10-2014

(Refer Note- time prescribed in section 200(3) or the proviso to section Assessing Officer
4) 206C(3), or furnishes incorrect information in the statement may direct payment
of penalty. Penalty
shall not be less than
Rs. 10,000 but may
extend to Rs.
1,00,000

271K Penalty of default in submission of statement/certificate Rs. 10,000 to Rs. 1

prescribed under section 35/Section 80G lakh

271-I As per section 195(6) of the Act, any person responsible for Rs. 1,00,000
paying to a non-resident or to a foreign company, any sum
(whether or not chargeable to tax), shall furnish the information
relating to such payment in Form 15CA and 15CB. Penalty shall
be levied in case of any failure.

271J Furnished incorrect information in any report or certificate by an Rs. 10,000 for each
accountant or a merchant banker or a registered valuer incorrect report or
certificate

272A(1) Refusal or failure to : Rs. 10,000 for each

failure/default
(a) answer questions

(b) sign statement

(c) attend to give evidence or produce books of account,

etc., in compliance with summons under section 131(1)

(d)  comply with notice u/s 142(1), 143(2) or failure to

comply with direction issued u/s 142(2A).
 272A(2) Failure to :

(a) furnish requisite information in respect of securities as Rs. 10,000 for each
required under section 94(6) ; failure/default. (In
respect of penalty for
(b) give notice of discontinuance of business or profession as failure, in relation to
required under section 176(3) ; a declaration
mentioned in section
(c) furnish in due time returns, statements or certificates, deliver 197A, a certificate as
de-claration, allow inspection, etc., under sections 133, 134, required by section
139(4A), 139(4C),  192(2C),  197A, 203, 206, 206C, 206C(1A) 203 and returns u/s s
and 285B; 206 and 206C and
statements under
(d) deduct and pay tax under section 226(2) Section 200(2A) or
section 200(3) or
(e) file a copy of the prescribed statement within the time proviso to section
specified in section 200(3) or the proviso to section 206C(3) (up 206C(3) or section
to 1-7-2012) 206C(3A), penalty
shall not exceed
(f) file the prescribed statement within the time specified amount of tax
in section 206A(1) deductible or
collectible)
(g) Failure to deliver or cause to be delivered a statement
under Section 200(2A) or Section 206C(3A) within prescribed
time.
With effect from June 1, 2015, it is mandatory for an office
of the Government, paying TDS or TCS, as the case may
be, without production of a challan, to deliver a statement
in the prescribed form and manner to the prescribed
authority.

272AA(1) Failure to comply with section 133B Not exceeding Rs.

1,000

272B Failure to comply with provisions relating to PAN or Aadhaar as Rs. 10,000 for each
referred to in section 139A/139A(5)(c)/(5A)/(5C) default

272BB(1) Failure to comply with section 203A Rs. 10,000 for each

failure/default

272BB(1A) Quoting false tax deduction account number/tax collection Rs. 10,000
account number/tax deduction and collection account number in
challans/certificates/statements/documents referred to in section
203A(2)
Note : No penalty is imposable for any failure under sections 271(1)(b), 271A, 271AA, 271B, 271BA,
271BB, 271C, 271CA, 271D, 271E,  271F, 271FA, 271FAB, 271FB, 271G, 271GA, 271GB, 271H,
271-I, 272A(1)(c) or (d), 272A(2), 272AA(1), 272B, 272BB(1), 272BB(1A), 272BBB(1), 273(1)(b),
273(2)(b) and 273(2)(c) if the person or assessee proves that there was reasonable cause for such
failure (section 273B).
Section 273AA provides that a person may make application to the Principal
Commissioner/Commissioner for granting immunity from penalty, if (a) he has made an application
for settlement under section 245C and the proceedings for settlement have abated; and (b) penalty
proceeding have been initiated under this Act. The application shall not be made after the imposition
of penalty after abatement.
OFFENCES AND PROSECUTIONS

Section Nature of default Punishment Fine

 (rigorous
imprisonment)

(1) (2) (3) (4)

275A Contravention of order made under section Up to 2 years No limit

132(1) (Second Proviso) or 132(3) in case of search
and seizure

275B Failure to afford necessary facility to authorised Up to 2 years No limit

officer to inspect books of account or other documents
as required under section 132(1)(iib)

276 Removal, concealment, transfer or delivery of property Up to 2 years No limit

to thwart tax recovery

276A Failure to comply with provisions of section 6 months to 2 —

178(1) and (3) re : company in liquidation years

276AB Failure to comply with provisions of sections 6 months to 2 No limit

269UC, 269UE and 269UL re : purchase of properties years
by Government
(Refer Note-5)

276B Failure to pay to credit of Central Government (i) tax 3 months to 7 No limit
deducted at source under Chapter XVII-B (non- years
cognizable offence under section 279A), or (ii) tax
payable u/s 115-O(2) or second proviso to section
194B

276BB Failure to pay the tax collected under the provisions 3 months to 7 No limit
of section 206C years

276C(1) Wilful attempt to evade tax, penalty or interest or

under-reporting of Income (non-cognizable offence
under section 279A)—

(a) where tax sought to be evaded exceeds Rs. 1 6 months to 7 No limit

lakh (Rs. 25 lakh w.e.f. 1-7-2012) years

(b) in other cases 3 months to 3 No limit

years (2 years
w.e.f. 1-7-2012)

276C(2) Wilful attempt to evade payment of any tax, penalty or 3 months to 3 No limit
interest (non-cognizable offence under section 279A) years (2 years
w.e.f. 1-7-2012)

276CC Wilful failure to furnish returns of fringe benefits

under section 115WD/115WH or return of income
under section 139(1) or in response to notice
under section 142(1)(i) or section 148 or section
153A (non-cognizable offence under section 279A)—

(a) where tax sought to be evaded exceeds Rs. 1 lakh 6 months to 7 No limit
(Rs. 25 lakh w.e.f. 1-7-2012) years

(b) in other cases 3 months to 3 No limit

Note : *** A person shall not be liable to be years (2 years
prosecuted under this section if he furnishes the w.e.f. 1-7-2012)
 return before expiry of assessment year or the tax
payable by such person, not being a company, as
reduced by the advance tax self-assessment tax
paid before expiry of the assessment year, TDS
and TCS, does not exceed Rs. 10,000.

276CCC Wilful failure to furnish in due time return of total 3 months to 3 No limit
income required to be furnished by notice years
u/s 158BC(a)

276D Wilful failure to produce accounts and documents Up to 1 year (Refer

(Refer Note- under section 142(1) or to comply with a notice Note-7)
6) under section 142(2A) Rs. 4 to
Rs. 10
for every
day of
default

277 False statement in verification or delivery of false

account, etc. (non-cognizable offence under section
279A)

(a) where tax sought to be evaded exceeds Rs. 1 lakh 6 months to 7 No limit
(Rs. 25 lakh w.e.f. 1-7-2012) years

(b) in other cases 3 months to 3 No limit

years (2 years
w.e.f. 1-7-2012)

277A Falsification of books of account or document, etc., to 3 months to 3 No limit

enable any other person to evade any tax, penalty or years (2 years
interest chargeable/leviable under the Act w.e.f. 1-7-2012)

278 Abetment of false return, account, statement or

declaration relating to any income or fringe benefits
chargeable to tax (non-cognizable offence
under section 279A)

(a) where tax, penalty or interest sought to be evaded 6 months to 7 No limit

exceeds Rs. 1 lakh (Rs. 25 lakh w.e.f. 1-7-2012) years

(b) in other cases 3 months to 3 No limit

years (2 years
w.e.f. 1-7-2012)

278A Second and subsequent offences under section 276B, 6 months to 7 No limit
276C(1),  276CC, 277 or 278 years

280(1) Disclosure of particulars by public servants in Up to 6 months No limit

contravention of section 138(2) [Prosecution to be (simple/rigorous)
instituted with previous sanction of Central
Government under section 280(2)]