Penalties Imposable under Income-tax Act, 1961

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Income Tax Department
Ministry of Finance, Government of India

Penalties under the Income-tax Act

Penalties Imposable

Penalties are imposed on assessees for specific defaults as enumerated under different sections of the Act. Some penalties are mandatory, while others are discretionary. Key penalties include:

Section	Description	Penalty Amount
221	Default in payment of tax within the prescribed time	Up to the tax amount in arrears
270A	Under-reporting of income	50% of tax on underreported income
270A	Misreporting of income	200% of tax on underreported income
271A	Failure to maintain books of account/documents as required under section 44AA	Rs. 25,000
271AA	Failure to maintain or furnish prescribed transfer pricing documents or furnishing incorrect info	2% of transaction value or Rs. 5,00,000 where applicable
271AAB	Undisclosed income in search (15-12-2016 to 31-08-2024)	30% or 60% of undisclosed income
271AAC	Tax on unexplained income under Section 115BBE	10% of tax payable on unexplained income
271AAD	False entries in books or omission to evade tax	Aggregate amount of false or omitted entries
271AAE	Violation by fund/trust reapplication of income under section 13(1)(c)	First violation: income applied; subsequent: double amount
271B	Failure to get accounts audited under section 44AB	0.5% of turnover or Rs. 1,50,000, whichever is less
271BA	Failure to furnish transfer pricing audit report under section 92E	Rs. 1,00,000
271C	Failure to deduct or pay TDS/TCS or tax on income in kind	100% of tax not deducted or paid
271CA	Failure to collect tax at source	100% of tax not collected
271D	Acceptance of loan/deposit in contravention of Section 269SS	100% of amount accepted
271DA	Receipt of Rs. 2,00,000 or more in cash in contravention of Section 269ST	100% of amount received
271DB	Failure to provide electronic payment facility under Section 269SU	Rs. 5,000 per day of default
271E	Repayment of loan/deposit in contravention of Section 269T	100% of amount repaid
271FA	Failure to furnish Statement of Financial Transaction or Reportable Account	Rs. 500 to Rs. 1,000 per day of default
271FAA	Furnishing inaccurate information in the Statement of Financial Transaction or Reportable Account	Rs. 50,000; plus Rs. 5,000 per inaccurate reportable account
271FAB	Failure to furnish Form 3CEK by eligible investment funds	Rs. 5,00,000
271G	Failure to furnish information/documents related to international/specified domestic transactions	2% of transaction value per failure
271GA	Failure by Indian concern to furnish info under Section 285A	2% of transaction value or Rs. 5,00,000
271GB	Failure to furnish/produce reports or info under Section 286	Rs. 5,000 to Rs. 50,000 per day depending on default period
271H	Failure to furnish TDS/TCS statements or inaccurate info	Rs. 10,000 (up to Rs. 1,00,000)
271-I	Failure to furnish info regarding payments to non-residents	Rs. 1,00,000
271J	Furnishing inaccurate reports/certificates by specified professionals	Rs. 10,000 per report/certificate
271K	Failure to furnish donation statement or issue certificate	Rs. 10,000 (up to Rs. 1,00,000)
272A	Failure to cooperate or comply with statutory requirements	Rs. 10,000 per default or Rs. 500 per day continuing default
272AA	Failure to furnish info to tax authorities entering place of business	Up to Rs. 1,000
272B	Failure to obtain or quote PAN/Aadhaar where required	Rs. 10,000 per default
272BB	Failure to obtain or quote TAN	Rs. 10,000

Penalty for Assessee-in-Default

Nature of Default

Penalty is attracted if an assessee fails to pay tax due and is treated as an assessee-in-default. The liability to pay penalty persists even if the tax is paid

before the levy of penalty. However, penalty shall not be imposed for default in payment of penalties imposed under Chapter XXI (Sections 270A to 275). Quantum of Penalty

The Assessing Officer may impose a penalty not exceeding the amount of tax in arrears.
Before levying a penalty, the person must be given an opportunity of being heard.
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty for Under-reporting and Misreporting of Income

Amount of Penalty

Under-reporting of income: 50% of tax payable on under-reported income.
Misreporting of income: 200% of tax payable on misreported income.

Penalty orders are passed by the Assessing Officer, Joint Commissioner (Appeals), Commissioner (Appeals), Principal Commissioner, or Commissioner.

The burden of proof for misreporting lies with the assessing officer. Penalty cannot be levied twice on the same addition or disallowance.

Definition of Under-reporting of Income

Under-reporting arises in cases such as:

Assessed income exceeds returned income (after return processing under Section 143(1)(a)).
Income assessed without filing a return exceeds the maximum exemption limit.
Income reassessed, where return is filed for the first time in reassessment, exceeds the maximum exemption limit.
Income reassessed is higher than the earlier assessment.
Loss reported in return is reduced or converted to income on reassessment.
Special rules apply when income is assessed under MAT/AMT provisions.

Calculation of Tax Payable on Under-reported Income

The tax on under-reported income is computed as the difference between the tax on total income, including under-reporting, and the tax on income as previously assessed or returned.

What is not considered as Under-reporting?

Income for which a bona fide explanation is accepted.
Income determined on estimates with correct and complete accounts.
Additions or disallowances agreed by the assessee and included in the return.
Transfer pricing additions where proper documentation is maintained.
Undisclosed income under search cases (covered by other penalties).
Unexplained income taxable under Sections 68 to 69D (subject to separate penalty under Section 271AAC).

Definition of Misreporting of Income

Misreporting includes:

Misrepresentation or suppression of facts.
Failure to record investments or receipts in books.
Claiming unsupported expenditure.
Recording false entries in books.
Failure to report international or specified domestic transactions.

Immunity from Penalty

Immunity from penalty may be granted on application filed electronically in Form 68 within 1 month from the end of the month in which the assessment/reassessment order is received, subject to payment of tax as per the notice of demand and no appeal has been filed.
The Assessing Officer shall pass the order granting or rejecting immunity after expiry of the appeal period, within 3 months from receipt of the application. No rejection order can be passed without giving the assessee an opportunity to be heard.

Penalty for Failure to Keep, Maintain, or Retain Books of Account

Nature of Default

Failure to keep or maintain books of account and other documents as mandated by Section 44AA.
Failure to retain such books and documents for a period of 6 years.
A separate penalty under Section 271B applies for failure to get accounts audited as required under Section 44AB.

Quantum of Penalty

25,000 may be imposed by the Assessing Officer, Joint Commissioner (Appeals), or Commissioner (Appeals).
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty for Failure to Keep Information in respect of an International Transaction

Nature of Default

Penalty may be imposed for:

Failure to keep and maintain information and documents relating to international or specified domestic transactions under Section 92D.
Failure to report such transactions as required.
Maintaining or furnishing incorrect information or documents with respect to these transactions.

Quantum of Penalty

The Assessing Officer or Commissioner (Appeals) may impose a penalty equal to 2% of the value of each international or specified domestic transaction.
Where a constituent entity of an international group fails to furnish information and documents as per Section 92D(4), a penalty of Rs. 5,00,000 may be imposed by the Director-General of Income-tax (Risk Assessment).
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty in Case of Search

Nature of Default

Penalty may be imposed if a search is initiated under Section 132 between 15-12-2016 and 01-09-2024 and undisclosed income is found. Undisclosed

income includes:

Money, bullion, jewellery, or other valuable articles not recorded in books before the search date.
Entries in books or documents found during the search that were not disclosed before the search date.
Bogus expenditures recorded in books that are found to be false during the search.

Quantum of Penalty

The Assessing Officer or the Commissioner (Appeals) may impose a penalty at the rate of 30% or 60% of the undisclosed income.
Lower rate (30%) applies if the assessee fulfils the following conditions:
- Admits undisclosed income under Section 132(4).
- Substantiates the source of such income.
- Pays tax and interest due.
- Files return declaring such income by the specified due date.

Due Dates for Filing Return to avail Lower Rate of Penalty

Specified Previous Year	Due Date for Filing Return
Previous year ending before search date, the return due date has not expired, and the return has not been filed yet	Due date as per Section 139(1)
Previous year ending before search date, the return due date has expired, and the return has not been filed yet	Expiry date of period in notice under Section 148(3)/153A
Previous year in which the search is conducted	Date on which the period for filing the return as per the notice under Section 148 or 153A expires

Penalty in Case of Undisclosed Income

What Constitutes Unexplained Income?

Unexplained income includes cash credits, investments, expenditures, money, or amounts borrowed or repaid on hundi, where the assessee fails to explain their nature or source satisfactorily.

When is Penalty Levied?

Penalty may be imposed by the Assessing Officer, Joint Commissioner (Appeals), or Commissioner (Appeals) if unexplained income forms part of assessed income and explanation is inadequate.
Penalty is not levied if the income qualifies as under-reporting or misreporting under Section 270A, or the assessee declares the unexplained income in return and pays tax under Section 115BBE before the relevant year-end.

Quantum of Penalty

Penalty is 10% of the tax payable on such unexplained income.

Penalty for False or Omission of Entry in Books of Account

Nature of Default

Penalty may be imposed if, during proceedings, a person is found to have:
- made a false entry in the books of account; or
- omitted a relevant entry in the books to evade tax.
It also applies to any other person who causes such false entry or omission to evade tax liability.

Meaning of False Entry

A false entry includes the use or intended use of:
- forged or falsified documents such as false invoices or other false evidence;
- invoices for goods or services not actually supplied or received; or
- invoices for goods or services to or from a non-existent person.

Quantum of Penalty

A penalty equal to the aggregate amount of false or omitted entries may be imposed by the Assessing Officer, Joint Commissioner (Appeals), or Commissioner (Appeals).

Penalty on Charitable Trust for Providing Benefit to Related Persons

Nature of Default

A penalty is levied if any trust or institution, referred to in Section 11 or 10(23C)(iv)/(v)/(vi)/(via), has applied its income for the benefit of an interested person.

Quantum of Penalty

First violation: Penalty equals the amount of income applied for the benefit
Subsequent violations: Penalty equals twice the amount of such income applied.

Penalty for Failure to Get Accounts Audited

Nature of Default

Failure to get accounts audited under Section 44AB.
Failure to furnish the audit report in Forms 3CA, 3CB, or 3CD by the due date.

Quantum of Penalty

Penalty is 0.5% of total sales, turnover, or gross receipts, as the case may be or Rs. 1,50,000, whichever is less.

Penalty for Failure to Furnish Report of International Transaction

Nature of Default

Failure to file the Chartered Accountant’s report in Form 3CEB on or before the due date as required under Section 92E. Quantum of Penalty

The Assessing Officer may levy a penalty of Rs. 1,00,000.
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty on Failure to Deduct or Pay Tax

Nature of Default

Penalty applies for:

Failure to deduct tax at source wholly or partly.
Failure to pay dividend distribution tax on dividends declared/distributed on or before 31-03-2020.
Failure to pay tax on winnings in kind under Section 194B.
Failure to pay tax on winnings from online games in kind under Section 194BA.
Failure to pay tax on benefit/perquisite in kind under Section 194R.
Failure to pay tax on consideration for transfer of VDAs in kind under Section 194S.

Quantum of Penalty

The Assessing Officer may impose a penalty equal to the amount of tax which the person failed to deduct or pay.
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty for Failure to Collect Tax at Source

Nature of Default

Failure to collect the whole or part of the tax required under Section 206C.

Quantum of Penalty

The Assessing Officer may impose a penalty equal to the amount of tax which the person failed to collect at source.
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty on Receiving Loan or Deposit in Contravention of Section 269SS

Nature of Default

Penalty shall be imposed if a person accepts loan or deposit (or specified sum) in cash or prohibited mode in contravention of Section 269SS.

Quantum of Penalty

The Assessing Officer shall levy a penalty equal to the amount of the loan or deposit or specified fund taken or accepted in contravention.
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty on Receiving Any Sum in Contravention of Section 269ST

Nature of Default

Penalty shall be imposed if a person receives Rs. 2,00,000 or more from a person in cash or prohibited mode in contravention of Section 269ST.

Quantum of Penalty

The Assessing office shall impose a penalty equal to the amount of the sum received in contravention.
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty for Failure to Provide a Facility in Contravention of Section 269SU

Nature of Default

The penalty shall be imposed on a person carrying on a business with total sales, turnover, or gross receipts over Rs. 50 crore in the immediately preceding year.
Such person fails to provide an electronic payment acceptance facility as required by Section 269SU.
Exemption applies to specified persons engaged exclusively in B2B transactions where at least 95% of receipts are non-cash.

Quantum of Penalty

The Assessing Officer shall impose a penalty of Rs. 5,000 for each day during which the failure continues.
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty for Repayment of Loans or Deposits by Means Other Than Specified Means

Nature of Default

The penalty shall be imposed on a person who repays any loan, deposit (including interest), or specified advance in cash or any mode prohibited under Section 269T.

Quantum of Penalty

The Assessing Officer shall impose a penalty equal to the amount of the loan, deposit, or specified advance repaid in contravention.
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty for Failure to Furnish SFT or Reportable Account

Nature of Default

The penalty shall be imposed for non-filing of SFT or Reportable Account under Section 285BA by the due date.

Quantum of Penalty

The Director or Joint Director of Income-tax (Intelligence and Criminal Investigation) may impose a penalty of Rs. 500 per day during which such failure continues.
If a person fails to furnish the statement within the due date, the tax authorities may issue a notice to file the statement within a specified time. If such person fails to file the statement within the specified time limit, a higher penalty of ₹1,000 per day applies from the day immediately following the day on which the time specified in the notice expires.
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty for Furnishing Inaccurate Statement of Financial Transaction or Reportable Account

Nature of Default

The penalty may be imposed if a person provides inaccurate information in the SFT or Reportable Account under Section 285BA. Up to 30th September, 2024, the penalty may be levied if the:

Inaccuracy is due to failure to comply with due diligence or deliberate action.
Inaccuracy due to false or inaccurate information provided by the holder of reportable accounts.
Person knows the inaccuracy when furnishing the statement, but doesn’t inform the tax authorities, or discovers the inaccuracy after furnishing the statement, but fails to inform and furnish correct information within 10 days.

From 1 October 2024, the penalty applies only for failure to furnish correct information within 10 days, inaccuracy due to failure of due diligence, or false or inaccurate information provided by the holder of reportable accounts.

Quantum of Penalty

Penalty of Rs. 50,000 may be imposed by the Director or Joint Director of Income-tax (Intelligence and Criminal Investigation).
An additional penalty of Rs. 5,000 per inaccurate reportable account is imposed on reporting financial institutions if inaccuracies are due to false information submitted by holders.
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty for Failure to Furnish Statement by an Eligible Investment Fund

Nature of Default

Failure to furnish Form 3CEK as required under Section 9A within the prescribed time limit.

Quantum of Penalty

The Assessing Officer may impose a penalty of Rs. 5,00,000.
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty for Failure to Furnish Information or Document Relating to International Transaction

Nature of Default

Failure to furnish information or documents as required by the Assessing Officer or Commissioner (Appeals) in the course of transfer pricing proceedings as referred to in Section 92D.

Quantum of Penalty

The Assessing Officer or TPO or Commissioner (Appeals) may impose a penalty equal to 2% of the value of the international transaction or specified domestic transaction for each such failure.
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty for Failure to Furnish Information or Document under Section 9(1)(i) and Section 285A

Nature of Default

A penalty is levied if an Indian concern fails to furnish any information or document in Form 49D as required under Section 285A.

Quantum of Penalty

2% of transaction value if the right of management or control is transferred (directly or indirectly).
5,00,000 in any other case.
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty for Failure to Furnish Report under Section 286

Penalty for Failure to Furnish Report [Section 271GB(1)]

The penalty may be imposed if a reporting entity fails to furnish a report in Form No. 3CEAD.
The Director-General of Income-tax may levy a penalty of:
- Rs. 5,000 per day where the period of failure does not exceed 1 month.
- Rs. 15,000 per day where the period of failure exceeds 1 month.
- Rs. 50,000 per day from the date of service of the penalty order if failure continues.
Penalty shall not be levied if the assessee proves reasonable cause for the failure

Penalty for Failure to Produce Information [Section 271GB(2)]

The penalty may be imposed if a reporting entity fails to produce the information or documents required by the Director-General of Income-tax within the period allowed for it.
The Director-General of Income-tax may levy a penalty of:
- Rs. 5,000 per day during which the failure continues.
- Rs. 50,000 per day from the date of service of the penalty order if failure continues.
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty for Furnishing Inaccurate Information [Section 271GB(4)]

The penalty may be imposed if the reporting entity furnishes inaccurate information and:
- knew of the inaccuracy when furnishing the report but failed to inform the Director-General of Income-tax;
- discovered the inaccuracy later but did not inform or correct it within 15 days; or
- provided inaccurate information or documents in response to a notice.
Director-General of Income-tax may levy a penalty of Rs. 500,000.
Penalty shall not be levied if the assessee proves reasonable cause for the failure

Penalty for Failure to Submit Statement under Section 285 by a Non-Resident Liaison Office

Nature of Default

A penalty is levied if a non-resident having a liaison office (LO) in India fails to submit an annual statement in Form No. 49C to the jurisdictional Assessing Officer within 8 months from the end of such financial year.

Quantum of Penalty

The Assessing Officer may levy a penalty of Rs. 1,000 per day if the period of failure does not exceed 3 months.
1,00,000 in any other case.
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty for Failure to File the TDS/TCS Statement

Nature of Default

The penalty may be imposed if a person fails to furnish the TDS/TCS Statement on or before the due dates or furnishes inaccurate information in such Statements.

Quantum of Penalty

The Assessing Officer may impose a penalty of Rs. 10,000, which may extend to Rs. 100,000.
No penalty if the TDS/TCS statement is filed within one month from the due date after payment of tax deducted or collected, along with applicable interest and fees. However, this relaxation applies only to the delay in filing, not to furnishing inaccurate information.
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty for Failure to Furnish Information or Furnishing Inaccurate Information under Section 195

Nature of Default

The penalty may be imposed if a person, responsible for paying to a non-resident, fails to furnish information in Form 15CA or Form 15CB or Form 15CC or Form 15CD, as the case may be, or furnishes inaccurate information.

Quantum of Penalty

The Assessing Officer may impose a penalty of Rs. 100,000.
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty for Furnishing Incorrect Information in Reports or Certificates

Nature of Default

A penalty may be imposed if a Chartered Accountant, Merchant Banker, or Registered Valuer furnishes incorrect information in a report or certificate under any provision of the Act or the rules made thereunder.

Quantum of Penalty

The Assessing Officer, the Joint Commissioner (Appeals), or the Commissioner (Appeals) may impose a penalty of Rs. 10,000 for each such report or certificate.
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty for Failure to Furnish a Statement or Certificate of Donation

Nature of Default

Penalty may be levied for failure to deliver a donation statement or furnish a donation certificate by institutions under Section 35(1)(ii)/(iii), or companies under Section 35(1)(iia), or institutions or funds under Section 80G.

Quantum of Penalty

The Assessing Officer may impose a penalty of Rs. 10,000 or more, which may extend to Rs. 100,000.

Penalty for Failure to Co-operate or Comply with Statutory Requirements

Nature of Default and its Penalty

Any person who commits any of the following defaults is liable to pay a penalty of Rs. 10,000 for each such default or failure:
- Refusal to answer questions legally required by the Income Tax Authorities.
- Refusal to sign statements made by him during any proceedings.
- Non-compliance with summons under Section 131(1) to give evidence or produce books of account or other documents.
- Failure to comply with notices under Sections 142(1) or 143(2).
- Failure to comply with directions for special audit under Section 142(2A).
Any person who commits any of the following defaults is liable to pay a penalty of Rs. 500 for every day during which the failure continues:
- Failure to furnish information within the prescribed time limit relating to shares or securities (Section 94(6)).
- Failure to notify discontinuance of business or profession within 15 days (Section 176(3)).
- Failure to furnish information required by the Assessing Officer (Section 133).
- Failure to allow inspection or provide copies of the register (Section 134).
- Failure to file the return of a charitable trust or institution within the prescribed time limit (Sections 139(4A), 139(4C)).
- Failure to furnish perquisite statements or statement of profits in lieu of salary (Section 192(2C)).
- Failure to deliver nil deduction declaration in due time (Section 197A).
- Failure to issue TDS or TCS certificates (Sections 203, 206C).
- Other specified defaults as per Sections 206A, 206C(1A), 226(2), 285B, etc.

For defaults relating to declarations mentioned in Section 197A or TDS/TCS certificates, the penalty shall not exceed the amount of tax deductible or collectable.

Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Authority to Levy Penalty

Defaults occur during any proceeding: the penalty shall be imposed by an authority not lower than the Joint Director or the Joint Commissioner.
Defaults occur in compliance with an enquiry or special audit notices: the penalty shall be imposed by the authority that issued the notice/direction.
Defaults related to non-delivery of Section 197A declarations: the penalty shall be imposed by the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner.
Other defaults: the penalty shall be imposed by the Joint Director or the Joint Commissioner.

Penalty for Failure to Furnish Information Required under Section 133B

Nature of Default

A penalty is levied if any person fails to furnish the information required in Form 45D by the Income Tax Authorities, who have entered into a place of business to collect certain information.

Quantum of Penalty

The Joint Commissioner, Assistant Director, Deputy Director, or Assessing Officer may impose a penalty which may extend to Rs. 1,000.
Before levying a penalty, the person must be given an opportunity of being heard.
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty for Failure to Comply with the Provisions of PAN

Nature of Default

The penalty can be imposed for the following defaults:

Failure to apply for PAN when required.
Failure to quote PAN or Aadhaar in returns, challans, or other documents.
Failure to intimate PAN or Aadhaar to the deductors or collectors of tax.
Quoting or intimating a false or incorrect PAN or Aadhaar knowingly.
Failure to quote PAN or Aadhaar in documents pertaining to financial transactions prescribed under Rule 114B;
Failure to authenticate PAN or Aadhaar.
Obtaining more than one PAN.

Quantum of Penalty

Penalty of Rs. 10,000 for each default may be imposed by the Assessing Officer.
Before levying a penalty, the person must be given an opportunity of being heard.
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Penalty for Failure to Apply or Quote TAN

Nature of Default

The penalty can be imposed in the following circumstances:

Failure to apply for TAN when required under law;
Failure to quote TAN on documents where quoting is mandatory;
Quoting a false TAN, knowingly or with belief that it is false or not believed to be true.

Quantum of Penalty

The Assessing Officer may impose a penalty of ₹10,000 for any of the above defaults.
Before levying a penalty, the person must be given an opportunity of being heard.
Penalty shall not be levied if the assessee proves reasonable cause for the failure.

Power to Reduce or Waive Penalty

For Penalty under Section 270A

Reduction or waiver of penalty under Section 270A may be granted by the Principal Commissioner or Commissioner, subject to the following:

Voluntary Disclosure: The assessee must have made true and full disclosure of under-reported income voluntarily and in good faith before its detection by the Assessing Officer.
Co-operation: The assessee must have cooperated during assessment or other proceedings.
Tax Payment: Tax and interest arising from the relevant order must have been paid or a satisfactory arrangement made.
Approval from the higher authorities: Where the income on which the penalty is imposed exceeds Rs. 5 lakh, prior approval of the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General is required.
Once in a lifetime: The benefit of waiver or reduction is allowed only once in the lifetime of the assessee.

For Other Penalties

The Principal Commissioner or Commissioner may also reduce or waive any other penalty or stay/compound related recovery proceedings, subject to:

Written Reasons: The relief must be supported by reasons recorded in writing.
Genuine Hardship: Relief must be necessary to avoid genuine hardship to the assessee.
Co-operation in Proceedings: The assessee must have co-operated in assessment or recovery proceedings.
Approval Threshold: Where the penalty or aggregate penalty exceeds Rs. 1 lakh, prior approval of the Principal Chief Commissioner, Chief Commissioner, Principal Director General or Director General is required.
Order Timeline: The order must be passed within 12 months from the end of the month in which the application is received. The assessee must be heard before any rejection.
Finality of Order: Orders accepting or rejecting an application shall be final and not subject to challenge.
Once in a lifetime: This relief is also allowed only once in a lifetime.

Procedure to Impose Penalty

Opportunity of Being Heard

Before imposing any penalty, the assessee must be given a reasonable opportunity of being heard.

Approval Requirement for Imposing Penalty

Income-tax Officer requires prior approval of the Joint Commissioner if the proposed penalty exceeds ₹10,000.
Assistant Commissioner or Deputy Commissioner requires prior approval of the Joint Commissioner if the penalty exceeds ₹20,000. Service of Penalty Order

Upon passing the penalty order, a copy must be sent to the Assessing Officer unless the order is passed by the Assessing Officer himself. Quantum of Penalty

The penalty amount is determined based on the law in force at the time the default was committed. Provisions applicable in the relevant assessment year do not apply unless made retrospective.

Faceless Proceedings

The Central Government is empowered to implement a scheme for faceless imposition of penalty to ensure transparency, accountability and efficiency. The scheme may include:

Elimination of direct interface between the assessee and tax authority;
Resource optimisation and functional specialisation;
Dynamic jurisdiction for penalty imposition.

The Faceless Penalty Scheme was notified via Notification No. S.O. 117(E), dated 12-01-2021.

The Central Government may issue directions modifying procedural or jurisdictional provisions for imposing a penalty. No such direction can be issued after 31-03-2022; however, amendments to existing directions may be made by notification in the Official Gazette.

Faceless Penalty Scheme

Scope and Applicability

The scheme applies to penalty proceedings relating to specified territorial areas, persons, income, or cases. The following are excluded:

Penalty proceeding in cases assigned to Central Charges, International Tax Charges, TDS Charges [Order F. NO. 187/4/2021-ITA-I, dated 20-1-2021],
Penalty proceedings arising/pending in the Investigation Wing, and DG (Risk Assessment) [Order F. NO. 187/4/2021-ITA-1, dated 26-2-2021]
Penalty proceedings arising out of other statutes [Order F. NO. 187/4/2021-ITA-1, dated 26-2-2021]
Penalty orders by officers at the level of Commissioner and above [Order F. NO. 187/4/2021-ITA-1, dated 26-2-2021]
Penalty proceedings in cases not having PAN or where pendency could not be created on ITBA due to technical issues [Order F. No. 187/4/2021-ITA-I, dated 10-03-2022]

Key Functional Units

National Faceless Penalty Centre (NFPC): The National Faceless Penalty Centre facilitates centralized conduct of faceless penalty proceedings. All communication related to penalty between units, the assessee, other persons, or tax authorities shall be routed through this Centre.

Penalty Units (PU): The Penalty Unit is responsible for drafting penalty orders, including identifying issues, seeking clarifications, providing the assessee an opportunity of being heard, analysing submitted material, and performing other functions required for imposing penalty. It refers to an Assessing Officer empowered by the CBDT.

Penalty Review Units (PRU): The Penalty Review Unit reviews draft penalty orders to ensure:

all relevant evidence is on record;
facts and legal points are properly incorporated;
penalty issues are adequately discussed;
applicable judicial decisions are duly considered;
penalty computation is arithmetically correct; and
any other necessary review functions are performed.

It refers to an Assessing Officer empowered by the CBDT.

Officers Empowered in Units

The Penalty Unit and Penalty Review Unit shall have the following authorities:

Additional/Joint Commissioners or Additional/Joint Directors
Deputy/Assistant Commissioners or Deputy/Assistant Directors, or Income-tax Officers
Other Income-tax authority, ministerial staff, executive or consultant as authorised by CBDT

Procedure for Levy of Penalty

The faceless penalty proceedings are conducted through the National Faceless Penalty Centre (NFPC) as per the following procedure:

Reference to NFPC – Where any Income-tax Authority or NFAC initiates or recommends penalty, the case is referred to NFPC in the prescribed form.
Case Assignment – NFPC assigns the case to a Penalty Unit using an automated allocation system.
Draft Notice or Rejection of Recommendation – The Penalty Unit issues a draft show-cause notice or records reasons for not initiating penalty proceedings and forwards it to NFPC.
Service of Notice – NFPC serves the show-cause notice to the assessee based on the draft. If initiation is not agreed upon, the penalty is not initiated.
Ongoing Proceedings – If proceedings have already been initiated, the Penalty Unit prepares a draft notice, which is served by NFPC.
Filing of Response – The assessee must respond to the show-cause notice within the specified or extended time. NFPC forwards the response to the Penalty Unit; non-response is also reported.
Request for Additional Inputs – Penalty Unit may request NFPC to gather more information from concerned authorities or the assessee, seek technical assistance, or conduct verification.
Support by NFPC – NFPC issues a notice or requisition to submit such information and forwards filed responses or reports to the Penalty Unit. In case of no response, it is duly informed.
Penalty Proposal – The Penalty Unit proposes either imposition or non-imposition of penalty, with reasons, and sends it to NFPC.
NFPC’s Action on Proposal – NFPC may: Direct passing or dropping of the penalty;

Refer the proposal for review to a Penalty Review Unit.

Penalty Order or Dropping Proceedings – Based on NFPC’s direction, the Penalty Unit issues the penalty order or drops proceedings and communicates the outcome to the assessee via NFPC.
Review by Penalty Review Unit – The Review Unit examines the proposal and may concur or suggest modifications. The review report is sent to NFPC, which forwards it to the Penalty Unit.
Final Order after Review – The Penalty Unit considers the review report, passes the final order imposing a penalty or dropping the penalty proceedings, and serves it to the assessee through NFPC. If suggestions are rejected, the reasons are recorded.
Communication to Initiating Authority – NFPC sends a copy of the order or intimation to the original Income-tax authority for further action.
Transfer of Proceedings – The PCCIT or PDGIT, in charge of NFPC, may transfer such proceedings to the jurisdictional Income-tax authority or NFAC with CBDT approval.

In such cases, proceedings are conducted electronically to the extent possible, and may involve video conferencing, digital tools, and compliance with Section 274(2) for approval. The jurisdictional authority shall consider all prior actions under the faceless regime. [Circular F. No. 225/97/2021/ITA-II, dated 06-09-2021]

Appeal against Penalty Order

An appeal against a penalty order passed by the National Faceless Penalty Centre (NFPC) lies before the jurisdictional JCIT(A) or CIT(A) or the NFAC, as applicable.

Electronic Communication Protocol

All communications between NFPC and the assessee or authorised representative, as well as internal communications between NFPC, NFAC, Income-tax authorities, Penalty Unit, and Penalty Review Unit, shall be conducted electronically.
NFPC shall authenticate records through electronic communication. Penalty-related units shall use digital signatures. The assessee or any other person shall authenticate records by digital signature, electronic verification code (EVC), or login via the e-filing portal.
Electronic communications, such as notices or orders, shall be delivered via the assessee’s registered account, registered email address, or Mobile App, followed by real-time alerts.
The assessee or any other person shall submit their response through the registered account. Upon successful submission, an acknowledgement with a hash result from NFPC shall deem the response as authenticated.

No Physical Appearance Required

No personal appearance is required before NFPC, Penalty Unit, or Penalty Review Unit, either by the assessee or their authorised representative.
An assessee or authorised representative may request a personal hearing. The hearing shall be conducted exclusively via video conferencing or telephony, using suitable telecommunication software.
The CBDT will ensure the availability of video conferencing facilities at designated locations to prevent denial of the scheme’s benefits due to the lack of access on the assessee’s end.

Administrative Powers

The Principal Chief Commissioner or Principal Director General in charge of NFPC, with prior CBDT approval, may specify format, mode, procedure, and processes for the automated operations of the NFPC, Penalty Unit, and Penalty Review Unit, including:

Service of notices, orders, or other communications;
Receipt of information or documents;
Issuance of acknowledgements;
Provision of e-proceeding facilities (login, tracking, display, download);
Access, verification, and authentication of submissions;
Centralised storage and retrieval of data;
General administrative and grievance redressal mechanisms; and
Forms for referring the penalty cases.

Time Limit for Completion of Penalty Proceedings

Section 275 of the Income Tax Act specifies the time limits within which the tax authorities must pass penalty orders. The prescribed time limits vary depending on the appellate or revision status of the related assessment or other proceedings.

Cases where assessment or other order is not subject to appeal – Where the relevant assessment or other order is not challenged before the Joint Commissioner (Appeals), Commissioner (Appeals), or Appellate Tribunal, the penalty order must be passed within 6 months from the end of the quarter in which such proceedings are completed.
Cases where appeal is filed to JCIT(A) or CIT(A) – If the order is appealed before the Joint Commissioner (Appeals) or Commissioner (Appeals), and no further appeal is made to the Appellate Tribunal, the penalty order must be passed within 6 months from the end of the quarter in which the appellate order is received by the Jurisdictional Principal Commissioner or Commissioner.
Cases where appeal is filed to the ITAT – If the order is appealed to the Appellate Tribunal, the penalty order must be passed within 6 months from the end of the quarter in which the order of the Tribunal is received by the Jurisdictional Principal Commissioner or Commissioner.
Cases where assessment order is revised – Where the order is revised under Section 263 or 264, the penalty order must be passed within 6 months from the end of the quarter in which the revision order is passed by the Principal Commissioner or Commissioner.
Giving effect to appellate or revision orders – Where the original penalty order is passed before the appellate or revision order, a revised penalty order (if necessary) may be passed within 6 months from the end of the quarter in which the appellate order is received or the revision order is passed. Such revised order shall not be made without giving the assessee a reasonable opportunity of being heard.
Other cases – In any other case, the penalty order must be passed within 6 months from the end of the quarter in which the notice for imposition of penalty is issued.
Exclusion of time periods – While computing the limitation period for passing the penalty order, the following periods shall be excluded:
The time taken to give the assessee an opportunity of being reheard under Section 129 due to a change in the Assessing Officer; and
The period commencing on the date on which the proceedings for levy of penalty were stayed by any court, and ending on the date the certified copy of the stay vacation order is received by the Jurisdictional Principal Commissioner or Commissioner.

Income-tax Rules

Rule – 129

59[Form of application under section 270AA.

129. An application to the Assessing Officer to grant immunity from imposition of penalty under section 270A and from initiation of proceedings under section 276C or section 276CC shall be made in Form No. 68.]

Note:

59. Inserted by the IT (Twenty-fifth Amdt.) Rules, 2016, w.e.f. 1-4-2017

Income-tax Forms

Form No. : 1

¹[Appendix IV

FORM NO. 1

[See rule 11UE (1)]

Undertaking under sub-rule (1) of rule 11UE of the Income-tax Rules, 1962

To,
Principal Commissioner/Commissione
………………….. ………………………. ……………………

Sir/Madam,

I …………………………………….. (name in block letters) son/daughter of …………………………………………. designation ………………………………….. and nationality …………………………………. and related passport number………………………………….. (hereinafter referred to as “signatory”) having Permanent Account Number/Aadhaar Number (see Note 1) …………………………………………………………………. on behalf of ………………………………………… (name of the declarant) having Permanent Account Number/Aadhaar number/Tax Deduction Account Number (see Note 2) ……………………………………….. and being duly authorised and competent to represent the declarant in this regard pursuant to Board Resolution and legal authorisation (see Note 3), as the case may be ,hereby declare as follows:

a. That specified orders have been passed or made in respect of income accruing or arising through or from the transfer of an asset or a capital asset situate in India in consequence of the transfer of a share or interest in a company or entity registered or incorporated outside India made before the 28th day of May, 2012 and particulars of such specified orders are provided in Part A of the Annexure.

b. The declarant has (strike off the options that are not applicable),

i. not filed any appeal or application or petition or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings constituted under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant orders, and hereby undertakes that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such relevant order or orders are provided in Part B of the Annexure;

ii. filed one or more appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant orders and has irrevocably withdrawn, on a with prejudice basis, all such appeals or applications or petitions or proceeding and evidence thereof is furnished herewith and hereby undertakes that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such appeals or applications or petitions or proceeding filed and irrevocably withdrawn with prejudice by the declarant, are provided in Part C of the Annexure;

iii. filed one or more appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders and all the appeals or applications or petitions or proceeding filed by the declarant have been disposed of and no further appeal or application or petition or proceeding has been filed by the declarant and evidence thereof is furnished herewith and hereby undertake that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such appeals or applications or petitions or proceeding filed and disposed of, are provided in Part C of the Annexure;

iv. filed appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant orders and one or more of such appeals or applications or petitions or proceeding are pending as on the date of this undertaking and hereby undertakes to irrevocably withdraw, terminate and discontinue any and all such appeals or applications or petitions or proceeding that are pending as on the date of signing this undertaking, on a with prejudice basis, in accordance with clause (e) below. The declarant further undertakes that it shall not file any such appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such pending appeals or applications or petitions or proceeding filed by the declarant and their status as on the date of this undertaking, are provided in Part D of the Annexure;

c. The declarant has (strike off the options that are not applicable),

i. not initiated any proceeding for arbitration, conciliation or mediation, and no notice has been given thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant orders, and hereby undertakes that it shall not initiate any such arbitration, conciliation or mediation in future. Particulars of such relevant order or orders are provided in Part B of the Annexure;

ii. initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and has irrevocably, on a with prejudice basis, withdrawn any such proceeding for arbitration, conciliation or mediation, and notices given thereof and evidence thereof is furnished herewith. The declarant hereby undertakes that it shall not reopen in future any such proceeding or initiate or file any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of such proceeding for arbitration, conciliation or mediation and notices given thereof, initiated and irrevocably withdrawn with prejudice by the declarant, are provided in Part E of the Annexure;

iii. initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and all the arbitration, conciliation or mediation filed by the declarant have been disposed of and no further proceeding has been initiated by the declarant and evidence thereof is furnished herewith. The declarant hereby undertakes that it shall not reopen in future any such proceeding or initiate or file any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of such proceeding for arbitration, conciliation or mediation and notices given thereof, initiated and disposed of, are provided in Part E of the Annexure;

iv. initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and one or more of such proceeding or notices are pending on the date of undertaking and hereby undertakes to irrevocably withdraw, terminate and discontinue any and all such proceeding or notices for arbitration, conciliation or mediation that are pending as on the date of signing this undertaking, on a with prejudice basis, in accordance with clause (e) below. Particulars of such pending proceeding and notices filed by the declarant are provided in Part F of the Annexure. The declarant hereby further undertakes that it shall not initiate any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders;

v. received or got any awards, orders, judgments or any other reliefs issued in favour of the declarant, arising out of or in any way relating to the imposition of tax, interest and penalty based on the relevant order or orders, under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise and hereby undertakes to irrevocably waive any right to seek or pursue any claim or costs or declaratory relief in relation to or arising out of such awards, orders or judgments or any other relief that may have been ordered, issued or passed against India and any Indian affiliate, whether it is in proceeding initiated by the declarant or by India and any Indian affiliate. The declarant also undertakes to irrevocably waive any right to seek or pursue any claim for costs or relief in respect of any proceeding initiated by the Republic of India to set aside such award, order or judgment or any other relief issued in favour of the declarant. The declarant hereby undertakes that it shall not initiate or file any such arbitration, conciliation or mediation in future. Particulars of such awards, orders, judgment or any other relief are provided in Part G of the Annexure;

.d. The declarant has (strike off the options that are not applicable),

i. not initiated any proceeding to enforce or pursue attachments in connection with any awards, orders, judgments, any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant as referred in clause (c) of this undertaking either against the Republic of India and any Indian affiliate, and hereby undertakes that it shall not initiate any such proceeding in future. Particulars of such award, order or judgment are provided in Part B of the Annexure;

ii. initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgments or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant, as referred to in clause (c) of this undertaking against the Republic of India and any Indian affiliate. The declarant has irrevocably and with prejudice withdrawn or discontinued any such proceeding and hereby undertakes that it shall not reopen any such proceeding in future or file or initiate fresh proceeding to enforce or pursue attachments and evidence thereof is furnished herewith. Particulars of such proceeding, initiated and withdrawn or discontinued by the declarant, are provided in Part H of the Annexure;

iii. initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgments or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant, as referred to in clause (c) of this undertaking against the Republic of India and any Indian affiliate. All such proceeding filed by the declarant have been disposed of and no further proceeding has been filed by the declarant and evidence is herewith furnished and hereby undertakes that it shall not reopen any such proceeding in future or file or initiate fresh proceeding to enforce or pursue attachments. Particulars of such proceeding, initiated and disposed of, are provided in Part H of the Annexure;

iv. initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgments, or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant as referred to in clause (c) of this undertaking, either against the Republic of India and any Indian affiliate and one or more of such proceeding are pending on the date of undertaking and, the declarant has obtained one or more orders from any court or other authority which remain outstanding against India and any Indian Affiliate. The declarant hereby undertakes that it shall not file in future any such proceeding to enforce or pursue attachments regarding any awards, orders, judgments, or any other relief that may have been ordered , issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant as referenced in clause (c) of this undertaking or to enforce the orders from any court or other authority which remain outstanding against Republic of India and any Indian Affiliate. The declarant further undertakes to fully cooperate with the Republic of India or any Indian affiliate which is subject to such outstanding order, in order to set-aside or otherwise nullify any such outstanding order, and irrevocably and with prejudice waives any rights or remedies arising from such outstanding order. Particulars of such proceeding are provided in Part I of the Annexure. The declarant also undertakes to irrevocably withdraw, terminate and discontinue with prejudice any and all such proceeding to enforce or pursue attachments in accordance with clause (e).

e. The declarant hereby undertakes as follows:

i. to irrevocably and with prejudice withdraw, discontinue, terminate and take all necessary steps to irrevocably and with prejudice close the pending proceeding referred in sub-clause (iv) of clause (b), sub-clause (iv) of clause (c), sub-clause (v) of clause (c) and sub-clause (iv) of clause (d) of this undertaking, as well as any other pending proceeding against India or Indian affiliates relating to the relevant order or orders and not referenced in clauses (b), (c) and (d) above, and not to pursue in any way and by any means in future the pending proceeding as referenced in clauses (b), (c), and (d) above, and any other pending proceeding relating to the relevant order or orders not referred in the above clauses and any other fresh proceeding relating to the relevant order or orders. In so acting, declarant shall act in accordance with this undertaking and in full cooperation with the Republic of India;

ii. to irrevocably terminate, release, discharge, and forever irrevocably waive any right, whether direct or indirect, and any claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorneys’ fees, court’s fees, expenses, damages, judgments, orders, declaratory reliefs and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown previously (or in future discovered), suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist , in relation to any award, order, judgment, or any other relief as referred in clauses (b), (c) and (d) of this undertaking, against the Republic of India and all Indian affiliates, ordered, issued or passed in connection with the relevant order or orders, whether it is in proceeding initiated by the declarant or by Republic of India and any Indian Affiliate. The declarant further undertakes to fully cooperate with the Republic of India or any Indian affiliate which is subject to any outstanding order referenced in clause (d), in order to set-aside or otherwise nullify any such outstanding order, and irrevocably and with prejudice waives any rights or remedies arising from such outstanding order. For the avoidance of doubt, the declarant’s irrevocable waiver includes irrevocable waiver of any right provided by any existing ex parte, provisional, or other kind of court order permitting enforcement or attachment against the Republic of India and any Indian affiliate, in furtherance of any award, order judgment, or any other relief that may have been ordered or issued or passed by any arbitral tribunal as referred in clauses (b), (c) and (d) above. For further avoidance of doubt, the declarant also undertakes to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by Republic of India and any Indian affiliate to set aside such award, order or judgement ordered, issued or passed in favour of the declarant. Such irrevocable waiver includes, but is not limited to, any right under any relevant ex parte order;

iii. to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by the Republic of India to set aside such award, order or judgment, or any other relief issued in favour of the declarant.

f. The declarant specifically represents that all Parts of the Annexure as described in this undertaking are full and complete to the best of its knowledge.

g. The declarant hereby undertakes to irrevocably terminate, release, discharge and forever irrevocably waive any right, whether direct or indirect, and any remedies, claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorneys’ fees, court’s fees, expenses, damages, judgments, orders, compensation, and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist, based on pursuit of any remedy or any and all claims, demands, damages, judgments, awards, costs, expenses, compensation or liabilities of any kind (whether asserted or unasserted) in relation to any facts, events, or omissions occurring from the beginning of time to the date of this undertaking and thereafter in future in relation to taxation of said income or relevant order or orders, or any related award, judgment or court order, which may otherwise be available to the declarant under any law for the time being in force, in equity, under any statute or under any agreement entered into by Republic of India with any country or territory outside Republic of India, whether for protection of investment or otherwise , whether it is in proceeding initiated by the declarant or by Republic of India and any Indian affiliate. For the avoidance of doubt, the declarant’s above waiver includes an irrevocable waiver of any claim against India and any Indian Affiliate to costs incurred or interest accrued in relation to the relevant order or orders, or any related ongoing or completed litigation, arbitration, conciliation or mediation. Moreover, for the avoidance of any doubt, the declarant hereby undertakes (for itself and on behalf of all related parties) to forgo any reliance on any right under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders.

h. The declarant further represents that as of the date of this undertaking, it has not transferred any of its claims under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders, or granted any rights, to third parties, and further undertakes to not transfer any of its claims to third parties after entering this undertaking. Where any such claim or right is transferred, the declarant confirms that it has provided the particulars of all the interested parties in Part L, and the undertakings from each of such interested parties is attached with this undertaking in accordance with Part M of the Annexure.

i. In the event that, notwithstanding the foregoing, any person asserts, brings, files or maintains any claim against the Republic of India or Indian affiliates (hereinafter collectively referred to as “releasees”) at any time on or after the date of furnishing this undertaking, the declarant shall indemnify, defend and hold harmless such releasees from and against any and all costs, expenses (including attorney’s fees and court’s fees), interest, damages, and liabilities of any nature arising out of or in any way relating to the assertion or, bringing, filing or maintaining of such claim. The declarant specifically represents that, to the best of its knowledge, after—

i. the execution of this undertaking;

ii. the execution of any separate related undertaking by any other party in connection with the relevant order or orders; and

iii. irrevocable withdrawal of all pending proceeding as outlined in this undertaking, no other claim regarding the said relevant order or orders referenced above, or any related award, judgment, or court order, shall remain outstanding against the Republic of India or any Indian affiliates. To avoid any doubt, the declarant’s indemnity of releasees under this clause shall include any claim brought by any third party alleging that it has obtained the declarant’s claims under an award, judgment or court order or the relevant order or orders. An indemnity bond to this effect is attached in Part N of the undertaking.

j. For the removal of any doubt, the declarant fully assumes the risk through the indemnity in clause (i) of any omission or mistake with respect to securing releasees against any related claim by any person. If the declarant fails to obtain any release from such person, the declarant warrants that it will indemnify the Republic of India or any Indian affiliates from any defense costs, court costs, and damages. An indemnity bond to the effect of clauses (i) and (j) is annexed to the undertaking.

k. The declarant further undertakes to refrain from facilitating, procuring, encouraging or otherwise assisting any person (including but not limited to any related party or interested party) from bringing any proceeding or claims of any kind referred to in the above clauses, or any proceeding or claim of any kind related to any relevant order or orders referred to above (whether in respect of tax, interest or penalty). The declarant shall notify by a public notice or press release, at any time before furnishing intimation in Form No. 3 where this Form is required to be furnished under rule 11UF and before furnishing this undertaking in other cases, that by signing this undertaking any claims arising out of or relating to the relevant order or orders or any related award, judgment or court order, no longer subsist. Such public notice or press release shall include, among other things, confirmation that,—

i. the declarant (and its related parties) forever irrevocably forgo any reliance on any right and provisions under any award, judgment or court order pertaining to the relevant order or orders or under the relevant order or orders;

ii. the declarant has provided this undertaking, which includes a complete release of the Republic of India and any Indian Affiliates with respect to any award, judgment or court order pertaining to the relevant order or orders or under the relevant order or orders, and with respect to any claim pertaining to the relevant order or orders;

iii. the undertaking also includes an indemnity against any claims brought against the Republic of India or any India affiliate, including by related parties or interested parties, contrary to the release; and

iv. the declarant confirms it will treat any such award, judgment or court order as null and void and without legal effect to the same extent as if it had been set aside by a competent court and will not take any action or initiate any proceeding or bring any claim based on that.

l. The declarant confirms that the undertakings given herein are intended to be enforceable by the Republic of India, including so as to secure the irrevocable waiver, withdrawal or discontinuance (as appropriate) of all the proceeding and claims referred to in any of the clauses of this undertaking.

m. The declarant represents and warrants that:

i. it has full legal power and authority to execute and deliver this undertaking (including but not limited to the issuance of the indemnity described in clauses (i) and (j)under applicable law;

ii. the execution, delivery and performance of this undertaking (including but not limited to the issuance of the indemnity described in clauses (i) and (j) has been duly authorised by all necessary corporate action, including but not limited to any board resolution or similar authorisation under applicable law (see Note 3);

iii. this undertaking constitutes the legal, valid and binding obligation of the declarant, enforceable against the declarant in accordance with its terms;

iv. such authorisations described in the above sub-clauses (i), (ii) and (iii) are effective under applicable law, and to this end, letters from local counsel in the relevant jurisdictions are attached to this undertaking which confirm the legality of such authorisations under applicable law.

n. The declarant confirms that by submitting the present undertaking, it fulfills the conditions specified in the Explanation below the sixth proviso to Explanation 5 to clause (i) of sub-section (1) of section 9.

o. The details of the bank account in which the refund may be credited are provided in Part J of the Annexure.

p. The details of all the interested parties are provided in Part K and Part L of the Annexure. The undertaking in Part M of the Annexure by each of such persons is attached with this undertaking. The declarant represents and warrants that:

i. all such undertakings have been executed and delivered by the person who has full legal power and authority to execute and deliver such undertakings;

ii. the execution, delivery and performance of this undertaking has been duly authorised by all necessary corporate action; and

iii. this undertaking constitutes the legal, valid and binding obligation of the declarant, enforceable against such person in accordance with its terms. Such separate, related undertakings may take the same form as this undertaking.

q. The declarant is or is not covered under sub-rule (6) of rule 11UF and in case if the declarant is not covered under said sub-rule all the conditions provided under sub-rule (2) of rule 11UE have been fulfilled.

r. This undertaking is governed by relevant Indian law and any dispute with respect to this undertaking shall be subject to Indian laws and be decided in accordance with the procedures specified in the Act under the exclusive jurisdiction of the relevant income-tax authorities, tribunals or courts in Republic of India, as the case may be, which are empowered to decide disputes under the Act.

I also confirm that I am aware of all the consequences and implications of this undertaking.

Place:…………………………………

Signature:………………………………….

Date: …………………………………………………………………………………………………………………………….

Attachments

1. The Board Resolution or legal authorisation, as the case may be, as referred to in clause (m) of the undertaking

2. An indemnity bond to the effect of clause (i) and clause (j) of the undertaking attached in Part N of the undertaking.

3. Copy of the public notice referred to in clause (k) of the undertaking, where Form No. 3 is not required to be furnished under sub-rule (6) of rule 11UF.

4. Attachments as required in different parts of the Annexure to this undertaking.

Notes

1. This information is required to be furnished where the Permanent Account Number or Aadhaar Number of the signatory is available.

2. Company Identification Number and Taxpayer Identification Number are to be provided where Permanent Account Number or Aadhaar Number or Tax Deduction Account Number of the declarant are not available.

3. The Board Resolution or legal authorisation, as referred to in clause (m) of the undertaking shall, among other things:

a. record the signatory’s power and authority to give the undertaking on behalf of the declarant; and

b. record the declarant’s power and authority to indemnify defend and hold harmless the Republic of India and the Indian affiliates in accordance with clause (i) of the undertaking.

VERIFICATION

Verified that the contents of this undertaking are true to the best of my knowledge and belief. No part of the undertaking is false and nothing has been concealed or misstated therein.

Verified at________________ place_______________ on this the_________ day________________ of ______ month_______________ , year .

Place: ……………………

Date:……………………..

Signature…………………………

Annexure

Part A– Particulars of the relevant order or orders:

Sl. No.	Assessment Year or Financial year	Income-tax Authority passing the order	Details of the order under consideration		Taxes or penalty determined	Interest	Total demand	Relief, provided in any appeal proceeding , if any	Demand recovered from the declarant	Pending demand or refund due as on date	Details of the attachments made by any Income-tax Authority
			Section and sub-section of the Income-tax Act, 1961	Date of order
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	(12)

Part B– Particulars of the relevant order or orders covered by sub-clause (i) of clauses (b), (c) and (d) of the undertaking:

Sl. No.	Sl. No. in Part A where the relevant order is mentioned	No appeal or application or petition or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court has been filed(refer clause (b)(i) of the undertaking).	No proceeding has been initiated for arbitration, conciliation or mediation, and no notice has been given thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise (refer clause (c)(i) of the undertaking).	No proceeding initiated to enforce or pursue attachments in connection with any award, order or judgment, any other relief that may have been ordered or issued or passed by any tribunal or court or other judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant against the Republic of India and Indian affiliates (refer clause (d)(i) of the undertaking).
(1)	(2)	(3)	(4)	(5)
		Applicable or Not applicable	Applicable or Not applicable	Applicable or Not applicable

Part C: Particulars of the appeals or applications or petitions or proceeding under sub-clauses (ii) and (iii) of clause (b) of the undertaking:

Sl. No.

Sl. No. in Part A where the relevant order is mentioned

Nature of appeals or applications or petitions or proceeding

Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section
245-OB or Income-tax Settlement Commission
constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court before whom such appeals or applications or petitions or proceeding has been filed

Date of filing the appeals or applications or petitions or proceeding

Date of disposing of or withdrawal such appeals or applications or petitions or proceeding (Please attach a copy of order by the Income-tax
authority or Authority for Advance Rulings constituted
under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement
Commission constituted under section 245B or the Interim
Board for Settlement constituted
under section 245AA or any
tribunal or court accepting the
withdrawal or disposing of)

(1)

(2)

(3)

(4)

(5)

(6)

Part D – Particulars of the appeals or applications or petitions or proceeding under sub-clause (iv) of clauses (b) of the undertaking:

Sl. No.	Sl. No. in Part A where the relevant order is mentioned	Nature of appeals or applications or petitions or proceeding	Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court before whom such appeals or applications or petitions or proceeding has been filed	Date of filing the appeals or applications or petitions or proceeding
(1)	(2)	(3)	(4)	(5)

Part E – Particulars of the proceeding for arbitration, conciliation or mediation, or notices under sub-clause (ii) and (iii) of clause (c) of the undertaking:

Sr. No.

Sl. No in Part A where the
relevant
order is mentioned

Nature of proceeding for arbitration,
conciliation or mediation, or notices
thereof with
case number or Notice given

Particulars (including the name of the country) where such proceeding for
arbitration,
conciliation or
mediation are
pending or
notices thereof
have been
issued

Date of initiating the proceeding for arbitration, conciliation or
mediation/issue of notice

Name of the agreement entered into
by India
under which the proceeding for arbitration, conciliation or mediation are pending

Status of the proceeding for arbitration,
conciliation or mediation

Date of disposing of or withdrawal of such proceeding
for arbitration,
conciliation or mediation, or
notices (Please
attach evidence of
such disposing of or withdrawal,
including order of
the Tribunal or court or other
judicial or
quasi-judicial or administrative
authority).

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

Part F – Particulars of the proceeding for arbitration, conciliation or mediation, or notices under sub-clause (iv) of clause (c) of the undertaking:

Sl. No.	Sl. No in Part A where the relevant order is mentioned	Nature of proceeding for arbitration, conciliation or mediation, or notices thereof with case number or Notice given	Particulars (including the name of the country where such proceeding for arbitration, conciliation or mediation are pending or notices thereof have been issued)	Date of initiating the proceeding for arbitration, conciliation or mediation/issue of notice	Name of the agreement entered into by India under which proceeding for arbitration, conciliation or mediation are pending	Status of the proceeding for arbitration, conciliation or mediation
(1)	(2)	(3)	(4)	(5)	(6)	(7)

Part G – Particulars of the award, order or judgment or any other relief under sub-clause (v) of clause (c) of the undertaking:

Sl. No.	Sl. No. in Part A where the relevant order is mentioned	Nature of such award, order or judgment or any other relief	Particulars (including the name of the country) where proceeding related to such award, order, judgment or any other relief were held	Date of such award, order, judgment or any other relief along with reference number	Status of the award, order, judgment or any other relief
(1)	(2)	(3)	(4)	(5)	(6)

Part H – Particulars of the proceeding to enforce any award, order or judgment or any other relief under sub-clauses (ii) and (iii) of clause (d) of the undertaking:

Sl. No.	Sl. No. in Part A where the relevant order is mentioned	Nature of proceeding to enforce such award, order or judgment or any other relief	Particulars (including the name of the country where such proceeding to enforce any award, order or judgment or any other relief are taking place)	Date of filing proceeding to enforce any award, order or judgment or any other relief	Nature of such award, order or judgment or any other relief (Attach copy thereof)	Status of the proceeding to enforce such award, order or judgment or any other relief	Date of disposing of or withdrawal of proceeding to enforce such award, order or judgment or any other relief (Please attach a copy of evidence of such disposing of/withdrawal, including order of the Court or other judicial authority)
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)

Part I – Particulars of the proceeding to enforce any award, order or judgment or any other relief under sub-clause (iv) of clause (d) of the undertaking:

Sl. No.	Sl. No in Part A where the relevant order is mentioned	Nature of proceeding to enforce such award, order or judgment or any other relief	Particulars (including the name of the country where such proceeding to enforce any award, order or judgment or any other relief are taking place)	Date of filing proceeding to enforce any award, order or judgment or any other relief	Nature of such award, order or judgment or any other relief (Attach copy thereof)	Status of the proceeding to enforce such award, order or judgment or any other relief
(1)	(2)	(3)	(4)	(5)	(6)	(7)

Part J – Details of bank account in Republic of India to which the refund is to be remitted

Sl. No.	Bank Name and Address	Account Number and other required details for remittance
(1)	(2)	(3)

Part K– Details of all the companies or entities in the entire chain of holding of the declarant till the ultimate holding company or entity of the declarant:

Sl. No.	Name of holding company	Percentage of the ownership by such holding company in the declarant as on the date of undertaking	If the ownership in the declarant is not held directly by such holding company, the chain of ownership with the names of all the companies in the chain of ownership
(1)	(2)	(3)	(4)

Part L- Details of all the interested parties other than the interested parties covered under Part K

Sl. No.	Name of such persons whose interest may be affected directly or indirectly by this undertaking	Nature of interest of such person	Amount of interest of such person (Rs), if available
(1)	(2)	(3)	(4)

PART M Undertaking by person(s) declared in Part K and Part L of the Undertaking

To,
Principal Commissioner/Commissioner
……………….. ……………………… ………….

Sir/Madam,

I………………….. (name in block letters) son/daughter of…………………………………………….. designation ……………….. .and nationality …………………………. .and related passport number……………………………… (hereinafter referred to as “signatory”) having Permanent Account Number/Aadhaar Number (see Note 1) ………………………………. on behalf of …………………………………. . (name of the interested party) having Permanent Account Number/Aadhaar number/Tax Deduction Account Number (see Note 2) …………………………………………. . and being duly authorised and competent to represent the interested party in this regard pursuant to Board Resolution and legal authorisation (see Note 3), as the case may be , hereby declare as follows:

(a) The particulars of specified orders that have been passed or made in respect of income accruing or arising through or from the transfer of an asset or a capital asset situate in India in consequence of the transfer of a share or interest in a company or entity registered or incorporated outside Republic of India made before the 28th day of May, 2012 in the case of declarant and the nature of interest of the interested party in such specified orders are provided in Part MA of the Annexure.

(b) The interested party has (strike off options that are not applicable):

i. not filed any appeal or application or petition or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders, and hereby undertakes that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such relevant order or orders are provided in Part MB of the Annexure;

ii. filed one or more appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders and has irrevocably, on a with prejudice basis, withdrawn all such appeals or applications or petitions or proceeding or such appeals or applications or petitions or proceeding have been disposed at any time before the date of filing Form No. 1, and hereby undertake that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such appeals or applications or petitions or proceeding filed and irrevocably withdrawn with prejudice by the interested party, are provided in Part MC of the Annexure.

iii. filed one or more appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders and all the appeals or applications or petitions or proceeding filed by the interested party have been disposed of and no further appeal or application or petition or proceeding has been filed by the interested party and evidence thereof is furnished herewith and hereby undertake that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such appeals or applications or petitions or proceeding filed and disposed of, are provided in Part MC of the Annexure.

iv. filed appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders and one or more of such appeals or applications or petitions or proceeding are pending as on the date of this undertaking and hereby undertakes to irrevocably withdraw, terminate and discontinue any and all such appeals or applications or petitions or proceeding that are pending as on the date of signing this undertaking, on a with prejudice basis, in accordance with clause (e) below. The interested party further undertakes that it shall not file any such appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such pending appeals or applications or petitions or proceeding filed by the interested party and their status as on the date of this undertaking, are provided in Part D of the Annexure. Particulars of any appeals or applications or petitions or proceeding as described in this clause (b) which are not covered by the sub-clauses (i) and (ii) are also provided in Part MD of the Annexure.

i. not initiated any proceeding for arbitration, conciliation or mediation, and no notice has been given thereof under any law for the time being in force or under any agreement entered into by Republic of India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders, and hereby undertakes that it shall not initiate any such arbitration, conciliation or mediation in future. Particulars of such relevant order or orders are provided in Part MB of the Annexure;

ii. initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and has irrevocably, on a with prejudice basis, withdrawn any such proceeding for arbitration, conciliation or mediation, and notices given thereof. The interested party hereby undertakes that it shall not reopen in future any such proceeding or initiate or file any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of such proceeding for arbitration, conciliation or mediation and notices given thereof, initiated and irrevocably withdrawn with prejudice by the interested party, are provided in Part ME of the Annexure.

iii. initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by Republic of India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and all the arbitration, conciliation or mediation filed by the interested party have been disposed of and no further proceeding has been initiated by the interested party and evidence thereof is furnished herewith. The interested party hereby undertakes that it shall not reopen in future any such proceeding or initiate or file any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of such proceeding for arbitration, conciliation or mediation and notices given thereof, initiated and disposed of, are provided in Part ME of the Annexure.

iv. has initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by Republic of India with any other country or territory outside Republic of India, whether for protection of investment or otherwise against the relevant order or orders and one or more of such proceeding or notices are pending on the date of undertaking and hereby undertakes to irrevocably withdraw, terminate and discontinue any and all such proceeding or notices for arbitration, conciliation or mediation that are pending as on the date of signing this undertaking, on a with prejudice basis, in accordance with clause (e). Particulars of such pending proceeding and notices filed by the interested party are provided in Part F of the Annexure. The interested party hereby further undertakes that it shall not initiate any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of any proceeding for arbitration, conciliation or mediation, or notices thereof, which are not covered by the sub-clause (i) and sub- clause (ii), are also provided in Part MF of the Annexure.

v. received or got any awards, orders, judgements or any other reliefs issued in favour of the interested party, arising out of or in any way relating to the imposition of tax, interest and penalty based on the relevant order or orders, under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise and hereby undertakes to irrevocably waive any right to seek or pursue any claim or costs or declaratory relief in relation to or arising out of such awards, orders or judgments or any other relief that may have been ordered, issued or passed against India and any Indian affiliate, whether it is in proceeding initiated by the interested party or by India and any Indian affiliate. The interested party also undertakes to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by the Republic to set aside such award, order or judgment issued in favour of the interested party. The interested party hereby undertakes that it shall not initiate or file any such arbitration, conciliation or mediation in future. Particulars of such awards, orders, judgment or any other relief are provided in Part MG of the Annexure.

(d) The interested party has (strike off options that are not applicable):

i. not initiated any proceeding to enforce or pursue attachments in connection with any awards, orders, judgments, or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party as referred in clause (c) of this undertaking either against the Republic of India and any Indian affiliate, and hereby undertakes that it shall not initiate any such proceeding in future. Particulars of such award, order or judgment are provided in Part MB of the Annexure.

ii. initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgements or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party, as referred to in clause (c) of this undertaking against the Republic of India and any Indian affiliate. The interested party has irrevocably and with prejudice withdrawn or discontinued any such proceeding and hereby undertakes that it shall not reopen any such proceeding in future or file fresh proceeding to enforce or pursue attachments. Particulars of such proceeding, initiated and withdrawn or discontinued by the interested party, are provided in Part MH of the Annexure.

iii. initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgements or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party, as referred to in clause (c) of this undertaking against the Republic of India and any Indian affiliate. All such proceeding filed by the interested party have been disposed of and no further proceeding has been filed by the interested party and evidence is herewith furnished and hereby undertakes that it shall not reopen any such proceeding in future or file or initiate fresh proceeding to enforce or pursue attachments. Particulars of such proceeding, initiated and disposed of, are provided in Part MH of the Annexure.

iv. initiated proceeding to enforce or pursue attachments in respect of any awards, orders, judgments, or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party as referred to in clause (c) of this undertaking, either against the Republic of India and any Indian affiliate and one or more of such proceeding are pending on the date of undertaking and, interested party has obtained one or more orders from any court or other authority which remain outstanding against India and any Indian affiliate. The interested party hereby undertakes that it shall not file in future any such proceeding to enforce or pursue attachments regarding any awards, orders, judgments, or any other relief that may have been ordered , issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party as referenced in clause (c) of this undertaking or to enforce the orders from any court or other authority which remain outstanding against India and any Indian affiliate. The interested party further undertakes to fully cooperate with the Republic of India or any Indian affiliate which is subject to such outstanding order, in order to set-aside or otherwise nullify any such outstanding order, and irrevocably and with prejudice waives any rights or remedies arising from such outstanding order. Particulars of such proceeding, are provided in Part MI of the Annexure. Particulars of any such proceeding, to enforce or pursue attachments in connection with any awards, orders, judgments, or any other relief, which are not covered by the sub-clauses (i) and (ii), are also provided in Part MI of the Annexure. The interested party also undertakes to irrevocably withdraw, terminate and discontinue with prejudice any and all such proceeding to enforce or pursue attachments in accordance with clause (e) below.

(e) The interested party hereby undertakes as follows: –

i. to irrevocably and with prejudice withdraw, discontinue, terminate and take all necessary steps to irrevocably and with prejudice close the pending proceeding referred in sub-clause (iv) of clause (b), sub-clause (iv) of clause (c), sub-clause (v) of clause (c) and sub-clause (iv) of clause (d) of this undertaking, as well as any other pending proceeding against Republic of India or Indian affiliates relating to the relevant order or orders and not referenced in clauses (b), (c) and (d) above, and not to pursue in any way and by any means in future the pending proceeding as referenced in clauses (b), (c) and (d) and any other pending proceeding relating to the relevant order or orders not referred in the above clauses and any other fresh proceeding relating to the relevant order or orders. In so acting, interested party shall act in accordance with this undertaking and in full cooperation with the Republic of India.

ii. to irrevocably terminate, release, discharge, and forever irrevocably waive any right, whether direct or indirect, and any claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorneys’ fees, court’s fees, expenses, damages, judgments, orders, declaratory reliefs, and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown previously (or in future discovered), suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist , in relation to any award, order, judgment, or any other relief as referred in clauses (b), (c) and (d) of this undertaking, against the Republic of India and all Indian affiliates, ordered, issued or passed in connection with the relevant order or orders, whether it is in proceeding initiated by the interested party or by India and any Indian affiliate. For the avoidance of doubt, the interested party’s irrevocable waiver includes irrevocable waiver of any right provided by any existing ex parte, provisional, or other kind of court order permitting enforcement or attachment against the Republic of India and any Indian affiliate, in furtherance of any award, order, judgment, or any other relief that may have been ordered or issued or passed by any arbitral tribunal as referred in clauses (b), (c) and (d). The interested party further undertakes to fully cooperate with the Republic of India or any Indian affiliate which is subject to any outstanding order referenced in clause (d), in order to set aside or otherwise nullify any such outstanding order, and irrevocably and with prejudice waives any rights or remedies arising from such outstanding order. For further avoidance of doubt, the interested party also undertakes to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by Republic of India and any Indian Affiliate to set aside such award, order or judgment ordered, issued or passed in favour of the interested party. Such irrevocable waiver includes, but is not limited to, any right under any relevant ex parte order.

(f) The interested party specifically represents that all Parts of the Annexure as described in this undertaking are full and complete to the best of its knowledge.

(g) The interested party hereby undertakes to irrevocably terminate, release, discharge, and forever irrevocably waive any right, whether direct or indirect, and any remedies, claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorneys’ fees, court’s fees, expenses, damages, judgments, orders, compensation and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist, based on pursuit of any remedy or any and all claims, demands, damages, judgments, awards, costs, expenses, compensation or liabilities of any kind (whether asserted or unasserted) in relation to any facts, events, or omissions occurring from the beginning of time to the date of this undertaking and thereafter in future in relation to taxation of said income or relevant order or orders, or any related award, judgment or court order, which may otherwise be available to the interested party under any law for the time being in force, in equity, under any statute or under any agreement entered into by India with any country or territory outside India, whether for protection of investment or otherwise , whether it is in proceeding initiated by the interested party or by India and any Indian affiliate. For the avoidance of doubt, the interested party’s above waiver includes an irrevocable waiver of any claim against India and any Indian affiliate to costs incurred or interest accrued in relation to the relevant order or orders, or any related ongoing or completed litigation, arbitration, conciliation or mediation. Moreover, for the avoidance of any doubt, the interested party hereby undertakes to forgo any reliance on any right under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders.

(h) The interested party further represents that as of the date of this undertaking, it has not transferred any of its claims under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders, or granted any rights, to third parties, and further undertakes to not transfer any of its claims to third parties after entering this undertaking.

(i) In the event that, notwithstanding the foregoing, any person asserts, brings , files or maintains any claim against the Republic of India or Indian affiliates (hereinafter collectively referred to as “releasees”)at any time on or after the date of furnishing this undertaking, the interested party shall indemnify, defend and hold harmless such releasee from and against any and all costs, expenses (including attorneys’ fees and court’s fees), interest, damages, and liabilities of any nature arising out of or in any way relating to the assertion or, bringing, filing or maintaining of such claim. The interested party specifically represents that, to the best of its knowledge, after

i. the execution of this undertaking;

ii. the execution of any separate related undertaking by any other party in connection with the relevant order or orders; and

iii. irrevocable withdrawal of all pending proceeding as outlined in this undertaking.

no other claim regarding the said relevant order or orders referenced above, or any related award, judgment, or court order, shall remain outstanding against the Republic of India or any Indian affiliate. To avoid any doubt, the interested party’s indemnity of releasees shall include any claim brought by any third party alleging that it has obtained the interested party’s claims under an award, judgment or court order or the relevant order or orders. An indemnity bond to this effect is attached in Part N of the undertaking.

(j) For the avoidance of any doubt, the interested party fully assumes the risk through the indemnity in clause (i) of any omission or mistake with respect to securing releasees against any related claim by any person. If the interested party fails to obtain any release from such person, the interested party warrants that it will indemnify the Republic of India or any Indian affiliates from any defense costs, court costs, and damages. An indemnity bond to the effect of clauses (i) and (j) is annexed to the undertaking.

(k) The interested party further undertakes to refrain from facilitating, procuring, encouraging or otherwise assisting any party (including but not limited to any related party) from bringing any proceeding or claims of any kind referred to in the above clauses, or any proceeding or claim of any kind related to any relevant order or orders referred to above (whether in respect of tax, interest or penalty). The interested party shall notify by a public notice or press release, at any time before furnishing intimation in Form No. 3 where Form No. 3 is required to be furnished under rule 11UF and before furnishing this undertaking in other cases, that by signing this undertaking any claims arising out of or relating to the relevant order or orders or any related award, judgment or court order, no longer subsist. Such public notice shall include, among other things, confirmation that,-

i. the interested party forever irrevocably forgoes any reliance on any right and provisions under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders;

ii. the interested party has provided this undertaking, which includes a complete release of the Republic of India and any Indian Affiliate with respect to any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders, and with respect to any claim pertaining to the relevant order or orders;

iii. the undertaking also includes an indemnity against any claims brought against the Republic of India or any India affiliate contrary to the release; and

iv. the interested party confirms it will treat any such award, judgment, or court order as null and void and without legal effect to the same extent as if it had been set aside by a competent court and will not take any action or initiate any proceeding or bring any claim based on that.

(l) The interested party confirms that the undertakings given herein are intended to be enforceable by the Republic of India, including so as to secure the irrevocable waiver, withdrawal or discontinuance (as appropriate) of all the proceeding and claims referred to in any of the clauses of this undertaking.

(m) The interested party represents and warrants that:

i. it has full legal power and authority to execute and deliver this undertaking (including but not limited to the issuance of the indemnity described in clauses (i) and (j) under applicable law;

iii. this undertaking constitutes the legal, valid and binding obligation of the interested party, enforceable against the interested party in accordance with its terms;

(n) This undertaking is governed by relevant Indian law and any dispute with respect to this undertaking shall be subject to Indian laws and be decided in accordance with the procedures specified in the Act under the exclusive jurisdiction of the relevant Income-tax authorities, tribunals or courts in India, as the case may be, which are empowered to decide disputes under the Act.

I also confirm that, I am aware of all the consequences and implications of this undertaking.

Place: ……………….. .

Date: ……………………….. .

Signature………………………………………….

Attachments

1. The Board Resolution and legal authorisation, as referred to in clause (m) of Part M.

2. An indemnity bond to the effect of clauses (i) and (j) of Part M in Part N of the undertaking in Form No. 1;

3. Copy of the public notice referred to in clause (k) of Part M, where Form No. 3 is not required to be furnished under sub-rule (6) of rule 11UF.

4. Attachments as required in different parts of the Annexure to Part M of this undertaking

Notes:

1. This information is required to be furnished where the Permanent Account Number or Aadhaar Number of the signatory is available.

2. Company Identification Number and Taxpayer Identification Number are to be provided where Permanent Account Number/Aadhaar Number or Tax Deduction Account Number of the interested party are not available.

3. The Board Resolution or legal authorisation, as referred to in clause (m) of the undertaking shall, among other things:

a. record the Signatory’s power and authority to give the undertaking on behalf of the interested party; and

b. record the interested party’s power and authority to indemnify defend and hold harmless the Republic of India and the Indian affiliates in accordance with clause (i) of the undertaking.

VERIFICATION

Verified that the contents of this undertaking are true to the best of my knowledge and belief. No part of the undertaking is false and nothing has been concealed or misstated therein.

Verified at ___________place_________ on this the ___day ____of ___month ______ ,_year ________ .

Place: ……………..

Date: ……………….

Signature…………….

Annexure

Part MA– Particulars of the relevant order or orders:

Sl. No.	Assessment Year or Financial year	Income-tax Authority passing the order	Details of the order under consideration		Nature of interest of the interested party
			Section and sub-section of the Income-tax Act, 1961	Date of order
(1)	(2)	(3)	(4)	(5)	(6)

Part MB– Particulars of the relevant order or orders covered by sub-clause (i) of clauses (b), (c) and (d) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	No appeal or application or petition or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court has been filed(refer clause (b)(i) of the undertaking).	No proceeding has been initiated for arbitration, conciliation or mediation, and no notice has been given thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise (refer clause (c)(i) of the undertaking).	No proceeding initiated to enforce or pursue attachments in connection with any award, order or judgment, any other relief that may have been ordered or issued or passed by any tribunal or court or other judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party against the Republic of India and Indian affiliates (refer clause (d)(i) of the undertaking).
(1)	(2)	(3)	(4)	(6)
		Applicable or Not applicable	Applicable or Not applicable	Applicable or Not applicable

Part MC – Particulars of the appeals or applications or petitions or proceeding under sub-clauses (ii) and (iii) of clause (b) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of appeals or applications or petitions or proceeding	Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court before whom such appeals or applications or petitions or proceeding has been filed	Date of filing the appeals or applications or petitions or proceeding	Date of disposing of or withdrawal of such appeals or applications or petitions or proceeding (Please attach a copy of order by the Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court accepting the withdrawal or disposing of)
(1)	(2)	(3)	(4)	(5)	(6)

Part MD – Particulars of the appeals or applications or petitions or proceeding under sub-clause (iv) of clause (b) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of appeals or applications or petitions or proceeding	Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court before whom such appeals or applications or petitions or proceeding has been filed	Date of filing the appeals or applications or petitions or proceeding
(1)	(2)	(3)	(4)	(5)

Part ME – Particulars of the proceeding for arbitration, conciliation or mediation, or notices under sub-clauses (ii) and (iii) of clause (c) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of proceeding for arbitration, conciliation or mediation, or notices thereof with case number or Notice given	Particulars (including the name of the country where such proceeding for arbitration, conciliation or mediation are pending or notices thereof have been issued)	Date of initiating the proceeding for arbitration, conciliation or mediation/issue of notice	Name of the agreement entered into by India under which the proceeding for arbitration, conciliation or mediation are pending	Status of the proceeding for arbitration, conciliation or mediation	Date of disposing of or withdrawal of such proceeding for arbitration, conciliation or mediation, or notices (Please attach evidence of such disposing or withdrawal, including order of the Tribunal or court or other judicial or quasi-judicial or administrative authority)
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)

Part MF – Particulars of the proceeding for arbitration, conciliation or mediation, or notices under sub-clause (iv) of clause (c) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of proceeding for arbitration, conciliation or mediation, or notices thereof with case number or Notice given	Particulars (including the name of the country where such proceeding for arbitration, conciliation or mediation are pending or notices thereof have been issued)	Date of initiating the proceeding for arbitration, conciliation or mediation/issue of notice	Name of the agreement entered into by India under which the proceeding for arbitration, conciliation or mediation are pending	Status of the proceeding for arbitration, conciliation or mediation
(1)	(2)	(3)	(4)	(5)	(6)	(7)

Part MG – Particulars of the award, order or judgment or any other relief under sub-clause (v) of clause (c) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of such award, order or judgment or any other relief	Particulars (Including the name of the country) where proceeding related to such award, order, judgment or any other relief were held	Date of such award, order, judgment or any other relief along with reference number	Status of the award, order, judgment or any other relief
(1)	(2)	(3)	(4)	(5)	(6)

Part MH – Particulars of the proceeding to enforce any award, order or judgment or any other relief under sub-clauses (ii) and (iii) of clause (d) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of proceeding to enforce such award, order or judgment or any other relief	Particulars (including the name of the country where such proceeding to enforce any award, order or judgment or any other relief are taking place)	Date of filing proceeding to enforce any award, order or judgment or any other relief	Nature of such award, order or judgment or any other relief (Attach copy thereof)	Status of the proceeding to enforce such award, order or judgment or any other relief	Date of disposing of or withdrawal of proceeding to enforce such award, order or judgment or any other relief (Please attach a copy of evidence of such disposing of/withdrawal, including order of the Court or other judicial authority)
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)

Part MI – Particulars of the proceeding under sub-clause (iv) of clause (d) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of proceeding to enforce such award, order or judgment or any other relief	Particulars (including the name of the country where such proceeding to enforce any award, order or judgment or any other relief are taking place)	Date of filing proceeding to enforce any award, order or judgment or any other relief	Nature of such award, order or judgment or any other relief (Attach copy thereof)	Status of the proceeding to enforce such award, order or judgment or any other relief
(1)	(2)	(3)	(4)	(5)	(6)	(7)

Part N

INDEMNITY BOND

This Indemnity Bond (“Bond”) is made on this………….. day of……….. , 2021 by………….. (name in block letters) son/daughter of………………….. designation and nationality……………………… and related passport number…………….. (hereinafter referred to as “Signatory”) having Permanent Account Number/Aadhaar Number/Tax Deduction Account Number (See Note 1)………………. on behalf of……………. (name of the declarant or interested party, as the case may be) having Permanent Account Number/Aadhaar number/Tax Deduction Account Number………………………… (See Note 2) and being duly authorised and competent to represent the declarant or interested party, as the case may be, in this regard pursuant to Board Resolution or legal authorisation (See Note 3), of the FIRST PART.

And

The Republic of India and any Indian affiliate (hereinafter collectively referred to as “releasees”) of the OTHER PART WHEREAS:

A. The Income-tax Rules, 1962 have been amended and the Income-tax (31st Amendment) Rules, 2021 have come into force from the date of their publication in the Official Gazette.

B. The declarant or interested party, as the case may be, has filed an undertaking under sub-rule (1) of rule 11UE of the Income -tax Rules, 1962, to which this indemnity bond is annexed. Any defined terms not defined herein shall have the same meaning as the definitions given under rule 11UE and the undertaking.

C. Pursuant to the above, the declarant or interested party, as the case may be, has agreed to indemnify, defend and hold harmless the Republic of India and Indian affiliates from and against any and all costs, expenses (including attorney fees and court fees), interest, damages, and liabilities of any nature arising out of or in any way relating to the assertion or, bringing, filing or maintaining of any claim at any time after the date of furnishing the undertaking in Form No. 1 by any person, related to any relevant order or orders, or in relation to any award, order, judgment, or any other relief, or to any dispute underlying the award, and the declarant or interested party, as the case may be, has agreed to furnish an indemnity bond to this effect, such that the declarant or interested party, as the case may be, fully assumes the risk of any omission or mistake with respect to identification and procurement of authorisations and undertakings from any related parties or interested parties as provided in the undertaking, and securing the Republic of India and Indian affiliates from any claim related to any relevant order or orders, or in relation to any award, order, judgment, or any other relief or to the dispute underlying the award against the Republic of India or Indian affiliates in connection with the relevant order or orders.

D. Accordingly the declarant or interested party, as the case may be, is executing this Indemnity Bond in favour of the Republic of India on the terms appearing hereunder.

NOW THIS INDEMINTY BOND WITNESSETH AS FOLLOWS:

1. In the event that any person or entity asserts, brings, files or maintains any claim against any releasee at any time on or after the date of furnishing this undertaking, related to any relevant order or orders, or in relation to any award, order, judgment, or any other relief, or to any dispute underlying the award, against the Republic of India or Indian affiliates in connection with the relevant order or orders, the declarant or interested party, as the case may be, shall indemnify, defend and hold harmless such releasees from and against any and all costs, expenses (including attorney fees and court fees), interest, damages, and liabilities of any nature arising out of or in any way relating to the assertion or, bringing, filing or maintaining of such claim.

2. The declarant or interested party, as the case may be, specifically represents that, to the best of
its knowledge, after—

i. the execution of this undertaking;

ii. the execution of any separate related undertaking by any other party in connection with the relevant order or orders; and

iii. withdrawal of all pending proceeding as outlined in this undertaking,

that no other claim regarding the said relevant order or orders referenced above, or any related award, judgment, or court order, or any aspect of the dispute underlying the award shall remain outstanding against the Republic of India or other releasee.

Explanation I.-For the removal of any doubt, the declarant’s or interested party’s indemnity of releasees under this clause shall include any claim brought by any third party alleging that it has obtained declarant’s or interested party’s, as the case may be, claims under an award, judgment or court order or the relevant order or orders.

Explanation II.- the declarant or interested party, as the case may be, fully assumes the risk through this indemnity of any omission or mistake with respect to securing releasees against any related claim by any person. If the declarant or interested party, as the case may be, fails to obtain any release from such person, the declarant or interested party, as the case may be, indemnifies through this document the releasees from any defense costs, court costs, and damages.

3. This Indemnity Bond shall be governed by the relevant laws of India and the Delhi High Court
shall have sole jurisdiction to entertain and try any dispute or difference arising out of or in connection with the terms of this Bond.

IN WITNESS WHEREOF the undersigned herein has signed and set his hands on this ………………. day of………… , 2021.

For and on behalf of the declarant or interested party, as the case may be,

Name and address of Witness

Signature of the Witness

Place:
Date:
Notes

1. This information is required to be furnished where the Permanent Account Number or Aadhaar Number of the signatory is available.

3. The Board Resolution or legal authorisation, as referred to in clause (m) of the undertaking shall, among other things:

(a) record the signatory’s power and authority to give the undertaking on behalf of the declarant or interested party, as the case may be; and

(b) record the declarant or interested party’s power and authority, as the case may be, to indemnify defend and hold harmless the Republic of India and the Indian affiliates in accordance with clause (i) of the undertaking).]

Form No. : 2

¹[FORM NO. 2
[See rule 11UF]
Form for Certificate Under sub-rule (2) of rule 11UF

<Name of the declarant>
Address of the declarant
Sir/Madam

1. The……………………… (name of the declarant) (hereinafter referred to as the declarant) with Permanent Account Number/Aadhaar number/Tax Deduction Account Number/Company Identification Number and Taxpayer Identification Number……….. has filed an undertaking in Form No. 1 dated………. under sub-rule (1) of the rule 11UE of the rules.

2. Pursuant to the undertaking filed by the declarant in Form No. 1 under sub-rule (1) of rule 11UE, the provisions of fifth proviso to Explanation 5 to clause (i) of sub-section (1) of section 9 of the Act shall be applicable to the orders mentioned below, subject to the fulfilment of the conditions specified in said proviso read with relevant rules and fulfilment of the undertakings by the declarant in Form No. 1:

TABLE

Sl. No.

Sl. No. of the Table in Part A of Form No. 1 where the relevant order is mentioned

Assessment
Year or
Financial
year

Income-tax Authority passing the order

Details of the
order under
consideration

Taxes or
Penalty
determined

Interest

Total demand

Relief, provided in any appeal proceeding,

if any

Demand recovered from the declarant

Pending demand or refund due as on date

Details of
the attachments
made by any Income-tax Authority

Section
and
sub-section
of the
Income-tax
Act, 1961

Date
of
order

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)

(12)

(13)

3. Demand recovered, as per the column (11) of the Table above, shall be refunded to the declarant, subject to the conditions under sub-rule (2) of the rule 11UE and the provisions of the Act, without any interest as per the provisions of the sixth proviso to Explanation 5 to clause (i) of sub-section (1) of section 9 of the Act, attachments, if any, the details whereof are provided in column (13) of the Table, shall be revoked and appeals or applications or petitions or proceeding, if any, filed by any income-tax authority or any other person representing the Republic of India with respect to the specified orders, as per column (2) of the Table, shall be withdrawn or intimation shall be sent to the concerned person, on the issue of Form No. 4, as per the procedure provided in sub-rule (16) of rule 11UF. Further, no interest under section 244A of the Act will be payable to the declarant as per the provisions of sixth proviso to Explanation 5 to clause (i) of sub-section (1) of section 9 of the Act.

Certificate No…….
Place…..
Date………..

………………………….

(Principal Commissioner/Commissioner of Income-tax) ]

Form No. : 2A

FORM NO. 2A [Omitted by the IT (Tenth Amdt.) Rules, 2001, w.e.f. 2-7-2001. Earlier, existing Form No. 2A was inserted by the IT (Third Amdt.) Rules, 1994, w.e.f. 1-6-1994; substituted by the IT (Fourth Amdt.) Rules, 1995, w.e.f. 1-6-1995; amended by the IT (Fourth Amdt.) Rules, 1998, w.e.f. 1-4- 1998 and later on substituted by the IT (Fifth Amdt.) Rules, 2000, w.e.f. 11-5-2000.]

Form No. : 2B

FORM NO. 2B [Omitted by the IT (Twenty-first Amdt.) Rules, 2021, w.e.f. 29-7-2021 (see rule 130). Earlier, Form No. 2B was inserted by the IT (Sixteenth Amdt.) Rules, 1995, w.e.f. 23-8-1995; amended by the IT (Eighth Amdt.) Rules, 1999, w.e.f. 18-5-1999, IT (Sixth Amdt.) Rules, 2000, w.e.f. 11-5-2000 and later on substituted by the IT (Fifteenth Amdt.) Rules, 2001, w.e.f. 27-7-2001.]

Form No. : 2C

FORM NO. 2C [Omitted by the IT (Twenty-first Amdt.) Rules, 2021, w.e.f. 29-7-2021 (see rule 130). Earlier, Form No. 2C was inserted by the IT (Eighth Amdt.) Rules, 1997, w.e.f. 27-6-1997; substituted by the IT (Eleventh Amdt.) Rules, 1998, w.e.f. 25-8-1998; amended by the IT (Seventh Amdt.) Rules, 2000, w.e.f. 11-5-2000 and IT (Eighteenth Amdt.) Rules, 2002, w.e.f. 29-7-2002 and later on substituted IT (Sixteenth Amdt.) Rules, 2001, w.e.f. 27-7-2001.]

Form No. : 2E

FORM NO. 2E [Omitted by the IT (Twenty-first Amdt.) Rules, 2021, w.e.f. 29-7-2021 (see rule 130). Earlier, Form No. 2E was inserted by the IT (Sixth Amdt.) Rules, 2003, w.e.f. 14-5-2003 and later on amended by the IT (Ninth Amdt.) Rules, 2004, w.e.f. 14-7-2004 and IT (Sixteenth Amdt.) Rules, 2005, w.e.f. 20-6-2005.]

Form No. : 3

1 [FORM NO. 3
[See rule 11UF]

Intimation for Withdrawal under sub-rule (3) of rule 11UF of the Income- tax Rules, 1962

To,

The Principal Commissioner/Commissioner

………………………………………. ……………………………….

Sir/Madam,

I……………… (name in block letters) son/daughter of ………………… designation ……………..and nationality ………………..and related passport number………………. (hereinafter referred to as “signatory”) having Permanent Account Number/Aadhaar Number ………………………(see Note 1) on behalf of …………………….. (name of the declarant) having Permanent Account Number/Aadhaar number/Tax Deduction Account Number (see Note 2) ……………………………….. and being duly authorised and competent to represent the declarant in this regard pursuant to Board Resolution and legal authorisation (see Note 3), as the case may be, hereby confirm that the declarant has received an order in Form No. 2 dated________

Pursuant thereto, I confirm that the pending appeals or applications or petitions, arbitration, conciliation, mediation, claims or other proceeding, if any, as referred in Part D, Part F, Part G, Part I and Part M of the undertaking in Form No. 1 dated…… have been irrevocably, on a with prejudice basis, withdrawn or discontinued and are not being pursued. The evidence of action taken in this regard are enclosed herewith.

Place…………….
Date…………….

………………..
Signature/Verification

Attachments

1. Attach the Board Resolution or legal authorisation, as the case may be, as referred to in clause (m) of the undertaking.

2. Attach the evidence of action taken as referred above.

VERIFICATION

Verified that the contents of this intimation are true to the best of my knowledge and belief. No part of the intimation is false and nothing has been concealed or misstated therein.

Verified at……place………. on this the ……. day …………. of…. month……….,…year………..

Place: ……………..
Date: …………….

Signature
………………………………..

Notes

1. This information is required to be furnished where the Permanent Account Number or Aadhaar Number of the signatory is available.

2. Company Identification Number and Taxpayer Identification Number are to be provided where Permanent Account Number or Aadhaar Number or Tax Deduction Account Number of the interested party are not available.

3. The Board Resolution or legal authorisation, as referred to in clause (m) of the undertaking and such Board resolution or legal authorisation shall, among other things:

(a) record the signatory’s power and authority to give the undertaking on behalf of the interested party; and

(b) record the interested party’s power and authority to indemnify defend and hold harmless the Republic of India and the Indian affiliates in accordance with clause (i) of the undertaking.]

Form No. : 3AA

FORM NO. 3AA [Omitted by the IT (Twenty-first Amdt.) Rules, 2021, w.e.f. 29-7-2021 (see rule 130). Earlier, Form No. 3AA was inserted by the IT (Fourteenth Amdt.) Rules, 2002, w.e.f. 1-4-2003 and later on amended by the IT (Fifteenth Amdt.) Rules, 2004, w.e.f. 1-4-2005.]

Form No. : 3AAA

FORM NO. 3AAA [Omitted by the IT (Twenty-first Amdt.) Rules, 2021, w.e.f. 29-7-2021 (see rule 130). Earlier, Form No. 3AAA was inserted by the IT (Sixth Amdt.) Rules, 1986, w.e.f. 1-4-1987 and later on amended by the IT (Ninth Amdt.) Rules, 1987 and IT (Fourteenth Amdt.) Rules, 2002, w.e.f. 1-4-2003.]

Form No. : 3AB

FORM NO. 3AB [Omitted by the IT (Thirty-second Amdt.) Rules, 1999, w.e.f. 19-11-1999. Earlier, Form No. 3AB was inserted by the IT (Amdt.) Rules, 1978 and amended by the IT (Sixth Amdt.) Rules, 1986, w.e.f. 1-4-1987.]

Tax Reference Tables

Penalties

Disclaimer:

The contents of this document are for information purposes only. This aims to enable public to have a quick and an easy access to information and do not purport to be legal documents.

Viewers are advised to verify the content from Government Acts/Rules/Notifications etc.

PENALTIES

[AY 2026-27]

Section

Nature of default

Penalty leviable

(1)

(2)

(3)

140A(3)

158BFA(2)

221(1)

234E

234F

234G

234H

270A(1)

271A

271AA(1)

271AA(2)

271AAA

271AAB(1)

271AAB(1A)

271AAC

271AAD

271AAE

271B

271BA

271C

271CA

271D

271DA

271DB

271E

271FA1

271FAA1

271FAB

271G3

271GA

271GB(1)

271GB(2)

271GB(3)

271GB(4)

271GC

271H4

271K4

271-I

271J

272A(1)

272A(2)

272AA(1)

272B

272BB(1)

272BB(1A)

Failure to pay wholly or partly—

(a) self-assessment tax/fringe benefit tax, or

(b) interest, and fee, or

(c) both

under section 140A(1)

Determination of undisclosed income of block period

Default in making payment of tax

Failure to file statement within time prescribed in section 200(3) or in proviso to section 206C(3)

Default in furnishing return of income within time as prescribed under section 139(1)

Fee for default in submission of statement/certificate prescribed under section 35/Section 80G

Fee for default in intimating the Aadhaar Number

Under-reporting and misreporting of income

Failure to keep, maintain, or retain books of account, documents, etc., as required under section 44AA

(1) Failure to keep and maintain information and documents required by section 92D(1) or 92D(2)

(2) Failure to report such transaction

(3) Maintaining or furnishing incorrect information or document

Failure to furnish information and document as required under Section 92D(4)

Where search has been initiated before 1-7-2012 and undisclosed income found

Where search has been initiated on or after 1-7-2012 but before 15-12-2016 and undisclosed income found

Where search has been initiated on or after 15-12-2016 but before 01-09-2024 and undisclosed income found

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

Penalty, if during any proceedings under the Act, it is found that in the books of accounts maintained by assessee, there is:

a) A false entry; or

b) Any entry relevant for computation of total income of such person has been omitted to evade tax liability.

Penalty for violation of the provisions of 21st proviso to section 10(23C) or section 13(1)(c) pertaining to passing of unreasonable benefits to trustees or specified person

Failure to get accounts audited or furnish a report of audit as required under section 44AB

Failure to furnish a report from an accountant as required by section 92E

Failure to deduct tax at source, wholly or partly, under sections 192 to 196D (Chapter XVII-B), second proviso to section 194B, or failure to pay or ensure payment of tax as required by section 115-O(2), first proviso to section 194R(1), proviso to section 194S(1) or section 194BA(2) .

Failure to collect tax at source as required under Chapter XVII-BB

Taking or accepting any loan or deposit or specified sum in contravention of the provisions of Section 269SS.

“Specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.

Receipt of an amount of Rs. 2 lakh or more in contravention of provisions of Section 269ST.

Failure to provide facility for accepting payment through prescribed electronic modes of payment as referred to in section 269SU

Repayment of any loan or deposit or specified advance otherwise than in accordance with provision of Section 269T.

“Specified advance” means any sum of money in the nature of advance, by whatever name called, in relation to transfer of an immovable property, whether or not transfer takes place.

Failure to furnish an annual information return as required under section 285BA(1)2

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

Failure to furnish a statement under section 285BA or failure to furnish a correction statement within the specified period or failure to comply with the due diligence requirement

Furnishing of inaccurate information by reporting financial institution and such inaccuracy is due to false or inaccurate information submitted by the holder of reportable accounts

Section 9A provides that fund management activity carried out 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.

Failure to furnish any information or document as required by section 92D(3)

Section 285A provides for reporting by an Indian concern if following two conditions are satisfied:

a) Shares or interest in a foreign company or entity derive substantial value, directly or indirectly, from assets located in India; and

b) Such foreign company or entity holds such assets in India through or in such Indian concern.

In this case, the Indian entity shall furnish the prescribed information for the purpose of determination of any income accruing or arising in India under Section 9(1)(i).

In case of any failure, the Indian concern shall be liable to pay penalty.

Failure to furnish report under section 286(2)

Failure to produce the information and documents within the period allowed under section 271GB(6)

Failure to furnish report or failure to produce information/documents under section 286 even after serving order under section 271GB(1) or 271GB(2)

Failure to inform about inaccuracy in report furnish under section 286(2)

Or furnishing of inaccurate information or document in response to notice issued under section 286(6).

Failure to submit statement under section 285 by a non-resident having liaison office in India (applicable with effect from April 1, 2025)

Failure to deliver/cause to be delivered a statement within the time prescribed in section 200(3) or the proviso to section 206C(3), or furnishes incorrect information in the statement

Penalty of default in submission of statement/certificate prescribed under section 35/Section 80G

As per section 195(6) of the Act, any person responsible for 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 No. 15CA and 15CB. Penalty shall be levied in case of any failure.

Furnishing of incorrect information in any report or certificate by an accountant or a merchant banker or a registered valuer

Refusal or failure to :

(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 notices u/s 142(1)/143(2) or failure to comply with direction issued u/s 142(2A).

Failure to :

(a) furnish requisite information in respect of securities as required under section 94(6) ;

(b) give notice of discontinuance of business or profession as required under section 176(3) ;

(c) furnish in due time returns, statements or certificates, deliver declaration, allow inspection, etc., under sections 133, 134, 139(4A), 139(4C), 192(2C), 197A, 203, 206, 206C, 206C(1A) and 285B;

(d) deduct and pay tax under section 226(2)

(e) file a copy of the prescribed statement within the time specified in section 200(3) or the proviso to section 206C(3) (up to 1-7-2012)

(f) file the prescribed statement within the time specified in section 206A(1)

(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.

Failure to comply with section 133B

Failure to comply with provisions relating to PAN or Aadhar as referred to in section 139A/139A(5)(c)/(5A)/(5C)

Failure to comply with section 203A

Quoting false tax deduction account number/tax collection account number/tax deduction and collection account number in challans/certificates/statements/documents referred to in section 203A(2)

Such amount as Assessing Officer may impose but not exceeding tax in arrears

50 per cent of tax leviable in respect of undisclosed income

Such amount as Assessing Officer may impose but not exceeding amount of tax in arrears

Rs. 200 for every day during which failure continues but not exceeding tax deductible/collectible

Rs. 5,000 if return is furnished after due date specified under section 139(1). However if the total income of the person does not exceed Rs. 5 lakhs then Rs. 1,000 shall be the late filing fees.

Rs. 200 per day

a) Rs. 500, if such intimation is made between 01-04-2022 and 30-06-2022; and

Rs. 1,000, in all other cases.

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

Rs. 25,000

2% of value of each international transaction/or specified domestic transaction entered into

Rs. 5,00,000/-

10% of undisclosed income

(a) 10% of 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

(a) 30% of 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.

10% of tax payable under section 115BBE.

100% of such false entries or omitted entry

(a) For the first violation: to the extent of income applied by the institution for the benefit of any interested party referred to in section 13(3);

(b) For any violation in subsequent years: twice the amount of such income so applied (“double penalty”).

One-half per cent of total sales, turnover or gross receipts, etc., or Rs. 1,50,000, which-ever is less

Rs. 1,00,000

Amount equal to tax not deducted or paid

Amount equal to tax not collected

Amount equal to loan or deposit or specified sum so taken or accepted

Amount equal to such receipt

Rs. 5,000 rupees for every day of default

Amount equal to loan or deposit or specified advance so repaid

Rs. 500 per day of default

Rs. 1,000 per day of default

Rs. 50,000

Rs, 5,000 for every inaccurate reportable account

Rs. 5,00,000

2% of the value of the international transaction/specified domestic transaction for each failure

Penalty shall be:

a) a sum equal to 2% of value of transaction in respect of which such failure has taken place, if such transaction had effect of, directly or indirectly, transferring right of management or control in relation to the Indian concern;

b) a sum of Rs. 5,00,00 in any other case.

Rs. 5,000 per day upto 30 days and Rs. 15,000 per day beyond 30 days

Rs. 5,000 for every day during which the failure continues.

Rs. 50,000 for every day for which such failure continues beginning from the date of serving such order.

Rs. 5,00,000

Rs. 1,000 per day of failure, up to 3 months; or
Rs. 1,00,000 in any other case

W.e.f. 1-10-2014 Assessing Officer may direct payment of penalty. Penalty shall not be less than Rs. 10,000 but may extend to Rs. 1,00,000

Rs. 10,000 to Rs. 1 lakh

Rs. 1,00,000

Rs. 10,000 for each incorrect report or certificate

Rs. 10,000 for each failure/default

Rs. 500 for every day during which the failure continues (In respect of penalty for failure, in relation to a declaration mentioned in section 197A, a certificate as required by section 203 and returns u/ss 206 and 206C and statements under Section 200(2A) or section 200(3) or proviso to section 206C(3) or section 206C(3A), penalty shall not exceed amount of tax deductible or collectible)

Not exceeding Rs. 1,000

Rs. 10,000 for each default

Rs. 10,000 for each failure/default

Rs. 10,000

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.

Notes:

¹With effect from assessment year 2015-16 “annual information return” has been changed to “statement of financial transaction or reportable account” and word “return” has been changed to “statement”.

²With effect from assessment year 2015-16 a new section 271FAAhas been inserted to provide for a penalty of Rs. 50,000 for furnishing inaccurate statement of financial transaction or reportable account in certain cases.

³With effect from 1-10-2014 TPO can also levy penalty.

⁴Section 271Has amended with effect from 1-10-2014 provides that penalty shall be levied by Assessing Officer.

Penalties and Prosecutions

Disclaimer:

The contents of this document are for information purposes only. This aims to enable public to have a quick and an easy access to information and do not purport to be legal documents.

Viewers are advised to verify the content from Government Acts/Rules/Notifications etc.

PENALTIES & PROSECUTION

[AY 2026-27]

Section	Nature of default	Penalty leviable
(1)	(2)	(3)
140A(3)	Failure to pay wholly or partly—	Such amount as Assessing Officer may impose but not exceeding tax in arrears
	(a) self-assessment tax, or
	(b) interest and fee, or
	(c) both
	under section 140A(1)
158BFA(2)	Determination of undisclosed income of block period	50 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 200(3) or in proviso to section 206C(3)	Rs. 200 for every day during which failure continues but not exceeding tax deductible/ collectible
234F	Default in furnishing return of income within time prescribed in section 139(1)	Rs. 5,000 if return is furnished after due date specified under section 139(1). However if the total income of the person does not exceed Rs. 5 lakhs then Rs. 1,000 shall be the late filing fees.
234G	Fee for default in submission of statement/certificate prescribed under section 35/ Section 80G	Rs. 200 per day
234H	Fee for default in intimating the Aadhaar Number	a) Rs. 500, if such intimation is made between 01-04-2022 and 30-06-2022; and b) Rs. 1,000, in all other cases.
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
271A	Failure to keep, maintain, or retain books of account, documents, etc., as required under section 44AA	Rs. 25,000
271AA(1)	(1) Failure to keep and maintain information and documents required by section 92D(1) or 92D(2)	2% of value of each international transaction/or specified domestic transaction entered into
	(2) Failure to report such transaction
	(3) Maintaining or furnishing incorrect information or document
271AA(2)	Failure to furnish information and document as required under Section 92D(4)	Rs. 5,00,000/-
271AAA	Where search has been initiated before 1-7-2012 and undisclosed income found	10% of undisclosed income
271AAB(1)	Where search has been initiated on or after 1-7-2012 but before 15-12-2016 and undisclosed income found	(a) 10% of 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 but before 01-09-2024 and undisclosed income found	(a) 30% of 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 or the Commissioner (Appeals) includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D for any previous year. [if such income is not included by assessee in his return or tax in accordance with section 115BBE has not been paid]	10% of tax payable under section 115BBE.
271AAD	Penalty, if during any proceedings under the Act, it is found that in the books of accounts maintained by assessee, there is: a) A false entry; or b) Any entry relevant for computation of total income of such person has been omitted to evade tax liability.	100% of such false entries or omitted entry.
271AAE	Penalty for violation of the provisions of 21st proviso to section 10(23C) or section 13(1)(c) pertaining to passing of unreasonable benefits to trustees or specified person	(a) For the first violation: to the extent of income applied by the institution for the benefit of any interested party referred to in section 13(3); (b) For any violation in subsequent years: twice the amount of such income so applied (“double penalty”).
271B	Failure to get accounts audited or furnish a report of audit as required under section 44AB	One-half per cent of 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 by section 92E	Rs. 1,00,000
271C	Failure to deduct tax at source, wholly or partly, under sections 192 to 196D (Chapter XVII-B) or failure to pay wholly or partly tax u/s 115-O(2) or proviso to section 194B, or failure to pay or ensure payment of tax as required by 115-O(2), first proviso to section 194R(1), proviso to section 194S(1) or section 194BA(2).	Amount equal to tax not deducted or paid
271CA	Failure to collect tax at source as required under Chapter XVII-BB	Amount equal to tax not collected
271D	Taking or accepting any loan or deposit or specified sum in contravention of the provisions of Section 269SS. “Specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.	Amount equal to loan or deposit or specified sum so taken or accepted
271DA	Receiving an amount of Rs. 2 lakh or more from a person in a day [section 269ST]	Amount equal to such receipt
271DB	Failure to provide facility for accepting payment through prescribed electronic modes of payment as referred to in section 269SU	Rs. 5,000 rupees for every day of default
271E	Repayment of any loan or deposit or specified advance otherwise than in accordance with provision of Section 269T. “Specified advance” means any sum of money in the nature of advance, by whatever name called, in relation to transfer of an immovable property, whether or not transfer takes place.	Amount equal to loan or deposit or specified advance so repaid
271FA1	Failure to furnish an annual information return as required under section 285BA(1)2	Rs. 500 per day of default
	Failure to furnish annual information return within the period specified in notice u/s 285BA(5)	Rs. 1,000 per day of default
271FAA	Failure to furnish a statement under section 285BA or failure to furnish a correction statement within the specified period or failure to comply with the due diligence requirement	Rs. 50,000
	Furnishing of inaccurate information by reporting financial institution and such inaccuracy is due to false or inaccurate information submitted by the holder of reportable accounts	Rs, 5,000 for every inaccurate reportable account
271FAB	Section 9A provides that fund management activity carried out 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.	Rs. 5,00,000
271G3	Failure to furnish any information or document as required by section 92D(3)	2% of the value of the international transaction/specified domestic transaction for each failure
271GA	Section 285A provides for reporting by an Indian concern if following two conditions are satisfied: a) Shares or interest in a foreign company or entity derive substantial value, directly or indirectly, from assets located in India; and b) Such foreign company or entity holds such assets in India through or in such Indian concern. In this case, the Indian entity shall furnish the prescribed information for the purpose of determination of any income accruing or arising in India under Section 9(1)(i). In case of any failure, the Indian concern shall be liable to pay penalty.	Penalty shall be: a) a sum equal to 2% of value of transaction in respect of which such failure has taken place, if such transaction had effect of, directly or indirectly, transferring right of management or control in relation to the Indian concern; b) a sum of Rs. 5,00,00 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 period allowed under section 271GB(6)	Rs. 5,000 for every day during which the failure continues.
271GB(3)	Failure to furnish report or failure to produce information/documents under section 286 even after serving order under section 271GB(1) or 271GB(2)	Rs. 50,000 for every day for which such failure continues beginning from the date of serving such order.
271GB(4)	Failure to inform about inaccuracy in report furnish under section 286(2) Or furnishing of inaccurate information or document in response to notice issued under section 286(6).	Rs. 5,00,000
271GC	Failure to submit statement under section 285 by a non-resident having liaison office in India (applicable with effect from April 1, 2025)	Rs. 1,000 per day of failure, up to 3 months; or Rs. 1,00,000 in any other case
271H4	Failure to deliver/cause to be delivered a statement within the time prescribed in section 200(3) or the proviso to section 206C(3), or furnishes incorrect information in the statement	W.e.f. 1-10-2014 Assessing Officer 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 prescribed under section 35/Section 80G	Rs. 10,000 to Rs. 1 lakh
271-I	As per section 195(6) of the Act, any person responsible for 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.	Rs. 1,00,000
271J	Furnished incorrect information in any report or certificate by an accountant or a merchant banker or a registered valuer	Rs. 10,000 for each 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 required under section 94(6) ;	Rs. 500 for every day during which the failure continues. (In respect of penalty for failure, in relation to a declaration mentioned in section 197A, a certificate as required by section 203 and returns u/ss 206 and 206C and statements under Section 200(2A) or section 200(3) or proviso to section 206C(3) or section 206C(3A), penalty shall not exceed amount of tax deductible or collectible)
	(b) give notice of discontinuance of business or profession as required under section 176(3) ;
	(c) furnish in due time returns, statements or certificates, deliver de-claration, allow inspection, etc., under sections 133, 134, 139(4A), 139(4C), 192(2C), 197A, 203, 206, 206C, 206C(1A) and 285B;
	(d) deduct and pay tax under section 226(2)
	(e) file a copy of the prescribed statement within the time specified in section 200(3) or the proviso to section 206C(3) (up to 1-7-2012)
	(f) file the prescribed statement within the time specified in section 206A(1)
	(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 referred to in section 139A/139A(5)(c)/(5A)/(5C)	Rs. 10,000 for each 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 account number/tax deduction and collection account number in challans/ certificates/ statements/ documents referred to in section 203A(2)	Rs. 10,000

OFFENCES AND PROSECUTIONS

*Section*	*Nature of default*	*Punishment (rigorous imprisonment)*	*Fine*
(1)	(2)	(3)	(4)
275A	Contravention of order made under section 132(1) (Second Proviso) or 132(3) in case of search and seizure	Up to 2 years	No limit
275B	Failure to afford necessary facility to authorised officer to inspect books of account or other documents as required under section 132(1)(iib)	Up to 2 years	No limit
276	Removal, concealment, transfer or delivery of property to thwart tax recovery	Up to 2 years	No limit
276A	Failure to comply with provisions of section 178(1) and (3) re : company in liquidation	6 months to 2 years	—
276B	Failure to pay to credit of Central Government (i) tax deducted at source under Chapter XVII-B (non-cognizable offence under section 279A), or proviso to section 194B, or failure to pay or ensure payment of tax as required by section 115O(2), first proviso to section 194R(1), proviso to section 194S(1) or section 194BA(2). Note: The provision of this section shall not apply if payment in respect to TDS has been made to the credit of the Central Government at any time on or before the time prescribed for filing the TDS statement in respect to such payment. (applicable w.e.f 01-10-2024)	3 months to 7 years	No limit
276BB	Failure to pay the tax collected under the provisions of section 206C Note: The provision of this section shall not apply if payment in respect to TCS has been made to the credit of the Central Government at any time on or before the time prescribed for filing the TCS statement in respect to such payment. (applicable w.e.f 01-04-2025)	3 months to 7 years	No limit
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 lakh (Rs. 25 lakh w.e.f. 1-7-2012)	6 months to 7 years	No limit
	(b) in other cases	3 months to 3 years (2 years w.e.f. 1-7-2012)	No limit
276C(2)	Wilful attempt to evade payment of any tax, penalty or interest (non-cognizable offence under section 279A)	3 months to 3 years (2 years w.e.f. 1-7-2012)	No limit
276CC	Wilful failure to furnish returns of fringe benefits under section 115WD/115WH or return of income under section 139(1) or under section 139(8A) 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 (Rs. 25 lakh w.e.f. 1-7-2012)	6 months to 7 years	No limit
	(b) in other cases Note : *** A person shall not be liable to be prosecuted under this section if he furnishes the 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.	3 months to 3 years (2 years w.e.f. 1-7-2012)	No limit
276CCC	Wilful failure to furnish in due time return of total income required to be furnished by notice u/s 158BC(1)(a)	3 months to 3 years	No limit
276D6	Wilful failure to produce accounts and documents under section 142(1) or to comply with a notice under section 142(2A)	Up to 1 year	7Rs. 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 (Rs. 25 lakh w.e.f. 1-7-2012)	6 months to 7 years	No limit
	(b) in other cases	3 months to 3 years (2 years w.e.f. 1-7-2012)	No limit
277A	Falsification of books of account or document, etc., to enable any other person to evade any tax, penalty or interest chargeable/leviable under the Act	3 months to 3 years (2 years w.e.f. 1-7-2012)	No limit
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 exceeds Rs. 1 lakh (Rs. 25 lakh w.e.f. 1-7-2012)	6 months to 7 years	No limit
	(b) in other cases	3 months to 3 years (2 years w.e.f. 1-7-2012)	No limit
278A	Second and subsequent offences under sections 276B, 276BB, 276C(1), 276CC, 276DD, 276E, 277 or 278	6 months to 7 years	No limit
280(1)	Disclosure of particulars by public servants in contravention of section 138(2) [Prosecution to be instituted with previous sanction of Central Government under section 280(2)]	Up to 6 months (simple/rigorous)	No limit

Notes :

1. No person is punishable for any failure under section 276A, 276ABor 276Bif he proves that there was reasonable cause for such failure (vide section 278AA).

2. (a) Prosecution for offences under section 275A, section 275B, section 276, section 276A, section 276B, section 276BB, section 276C, section 276CC, section 276D, section 277, section 277Aand section 278to be instituted with previous sanction of Principal Director General/Principal Chief Commissioner/Principal Commissioner/Director General/Chief Commissioner/Commissioner, except where prosecution is at the instance of the Commissioner (Appeals) or the appropriate authority (vide section 279).

(b) The offences under Chapter XXII can be compounded (either before or after the institution of proceedings) by Principal Director General/Director General or Principal Chief Commissioner/Chief Commissioner.

3. Where an offence under this Act has been committed by a person, being a company, and the punishment for such offence is imprisonment and fine, then, such company shall be punished with fine and every person, referred to in sub-section (1) of section 278B, or the director, manager, secretary or other officer of the company referred to in sub-section (2) of section 278Bshall be liable to be proceeded against and punished in accordance with the provisions of this Act.

4. With effect from 1-4-2008 under section 278ABa person may apply to the Principal Commissioner/Commissioner for granting immunity from prosecution, if he has applied for settlement under section 245Cand the proceedings have abated under section 245HA. The application shall not be made after institution of prosecution proceedings after abatement.

Notes:

³With effect from 1-10-2014 TPO can also levy penalty.

⁴Section 271Has amended with effect from 1-10-2014 provides that penalty shall be levied by Assessing Officer.

⁵Non-operative with effect from 1-7-2002.

⁶With effect from October 1, 2014, if a person wilfully fails to produce accounts and documents as stated or wilfully fails to comply with the direction given, he shall be punishable with rigorous imprisonment for a term which may extend to one year and with fine (quantum of fine has not been specified).

⁷No limit w.e.f. 1-10-2014.

Tutorials

Penalty for concealment of income in respect of specified domestic transaction

Disclaimer:

The contents of this document are for information purposes only. This aims to enable public to have a quick and an easy access to information and do not purport to be legal documents.

Viewers are advised to verify the content from Government Acts/Rules/Notifications etc.

PENALTY FOR CONCEALMENT OF INCOME IN RESPECT OF SPECIFIED DOMESTIC TRANSACTION

Introduction

The provisions of transfer pricing are designed to keep a check on the practice of reducing the tax liability by entering into transactions at prices higher/lower than market prices with one or more associated entity.

As per section 92 when any specified domestic transaction is carried out between associated enterprises, the said transaction should be carried out at arm’s length price. In other words, income arising or allowance of any expenses to an entity resulting from specified domestic transactions with associated enterprise should be computed by having regard to arm’s length price of such transaction.

The provisions of section 92 will apply only if the aggregate value of specified domestic transactions entered into by the taxpayer during the year exceeds Rs. 20Cr.

E.g., Essem Ltd. took services of one of its group company, an associated enterprise enjoying tax holiday. The transaction is a specified domestic transaction). Essem Ltd. paid Rs. 28,40,00,000 for the said service to the group company. The arm’s length price of such service is Rs. 17,00,00,000.

In this case it can be observed that while computing its taxable income Essem Ltd. will claim deduction of Rs. 28,40,00,000 in respect of service charges paid to its associated entity.

The arm’s length price, i.e., the fair value of the service is Rs. 17,00,00,000 but by paying higher charges, Essem Ltd. claimed a higher deduction and reduced its profit by Rs. 11,40,00,000. In this case the provisions of section 92 will be applicable and the income of Essem Ltd. will be recomputed by taking into account the arm’s length price of the specified domestic transaction. In other words, the taxable income of Essem Ltd. will have to be computed by allowing deduction of only Rs. 17,00,00,000 on account of service charges instead of the actually paid amount of Rs. 28,40,00,000.

Suppose in the above example, the transaction is not a specified domestic transaction, then the provisions of section 92 will not apply.

Meaning of specified domestic transaction

For the above purpose, specified domestic transaction means any of the following transactions which is not an international transaction:

*Nature of Transaction*	*Brief description of the transaction*
(i) Any transaction referred to in section 80A.	As per section 80A(6) when a taxpayer claiming deduction under various sections, inter-alia, sections 80-IA, 80-IAB , 80-IB , 80-IC , 80-ID , 80-IE etc., carries certain transactions with its associated entities, these transactions should be carried out at fair market value. So, if a transaction is covered under section 80A, then it will be treated as a specified domestic transaction.
(ii) Any transfer of goods or services referred to in sub-section (8) of Section 80-IA.	Section 80-IA provides for deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, telecommunication services, power generation, etc. Section 80-IA(8) covers inter-unit transfer of goods and services by an entity claiming deduction under section 80-IA.
(iii) Any business transacted between the taxpayer and other person as referred to in sub-section (10) of section 80-IA.	Section 80-IA provides for deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, telecommunication services, power generation, etc. A taxpayer claiming deduction under section 80-IA may enter into business transaction with other person with whom he has close connection. The transaction may be arranged in such a manner that the profit earned by the taxpayer from such transaction is more than the normal profit. By doing so the profit of other entity is diverted to the taxpayer and in tune the taxpayer will not pay tax on the profit so diverted (because he will claim deduction under section 80IA of higher profit). Such type of transactions are covered under section 80-IA(10).
(iv) any transaction, referred to in any other section under Chapter VI-A or section 10AA, to which provisions of sub-section (8) or sub- section (10) of section 80-IA are applicable.	Section 10AA provides for exemption in respect of income generated by a unit located in Special Economic Zone. Under Chapter VI-A there are various sections under which the taxpayer can claim deduction. Only those sections of Chapter VI-A are relevant to which the provisions of section 80-IA(8) and (10) are applicable. Section 80-IA(8) and (10) have already has been discussed above.
(v) Any business transacted between the persons referred to in sub-section (4) of section 115BAB	Section 115BAB provides for a reduced tax rate of 15% in case of those domestic manufacturing companies (including electricity generation Co.) which have been incorporated on or after October 1, 2019 and whose total income is computed without claiming specified exemption, deduction or incentive available under the Act. Sub-section (4) of section 115BAB provides that where course of business between company and any other person are so arranged that it produces to the company more than the ordinary profits, the Assessing Officer can re-compute the profit which may be reasonably deemed to have been derived therefrom. The profit from such transaction shall be determined having regard to arm’s length price if such transaction is covered under the ambit of ‘Specified Domestic Transaction’ as defined under section 92BA.
(vi) Any business transacted between the assessee and other person as referred to in sub-section (4) of section 115BAE	Section 115BAE provides that a new manufacturing co-operative societies set up on or after 01-04-2023, which commence manufacturing or production by 31-03-2024 and do not avail of any specified incentive or deduction, may opt to pay tax at a concessional rate of 15%. Further, Section 115BAE(4) provides that where it appears to the Assessing Officer that owing to the close connection between the assessee to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such business, the Assessing Officer shall, in computing the profits and gains of such business for the purposes of this section, take the amount of profits as may be reasonably deemed to have been derived therefrom. In case the aforesaid arrangement involves a specified domestic transaction referred to in Section 92BA, the amount of profits from such transaction shall be determined having regard to arm’s length price as defined in clause (ii) of Section 92F. [Inserted by the Finance Act 2023 w.e.f. Assessment Year 2024-25]
(vi) Any other transaction as may be prescribed	No other transaction prescribed as yet by CBDT under this clause.

The above transactions will be treated as the specified domestic transaction only if the aggregate value of these transactions entered into by the taxpayer during the year exceeds Rs. 20 Cr.

Methods of computation of arm’s length price

As discussed earlier, a taxpayer should carry out specified domestic transactions at arm’s length price. Arm’s length price is to be determined by applying any of the following methods:

Comparable Uncontrolled Price Method Resale Price Method
Cost Plus Method Profit Split Method
Transactional Net Margin Method
Such other method as may be prescribed by the CBDT.

Penalty under section 270A

Many times a taxpayer may try to reduce his tax liability by furnishing inaccurate particulars of his income. In such a case, by virtue of section 270A, the taxpayer shall be liable to pay penalty for under reporting or misreporting his income.

Section 270A provides that penalty to be levied shall be 50% of amount of tax payable on under- reported income. In case under-reported income is in consequence of any misreporting, the penalty shall be 200% of tax payable on under-reported income.

A person shall be deemed to have under-reported his income if:

a) the income assessed is greater than the income determined in the return processed under section 143(1)(a)

b) the income assessed is greater than the maximum amount not chargeable to tax, where no return of income has been furnished

c) the income reassessed is greater than the income assessed or reassessed immediately before such reassessment

d) the income assessed or reassessed has the effect of reducing the loss or converting such loss into income,

e) the amount of deemed total income assessed or reassessed under section 115JB/115JCis greater than the deemed total income determined in the return processed under section 143(1)(a)

f) the amount of deemed total income assessed as per the provisions of section 115JB/115JCis greater than the maximum amount not chargeable to tax, where no return of income has been furnished

g) the amount of deemed total income reassessed as per the provisions of section 115JB/115JCis greater than the deemed total income assessed or reassessed immediately before such reassessment.

h) the income assessed or reassessed has the effect of reducing the loss or converting such loss into income.

Income shall be deemed to under-reported because of misrepresentation of acts in the following cases:

a) misrepresentation or suppression of facts,

b) failure to record investment in the books of account,

c) claim of expenditure not substantiated by any evidence,

d) recording of any false entry in the books of account,

e) failure to record any receipt in the books of account having a bearing on total income,

f) failure to record any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provision of Chapter X apply.

However, no penalty will be levied in the following cases:

a) the amount of income in respect of which the assessee offers an explanation and the Assessing Officer or the Commissioner (Appeals) is satisfied that the explanation is bona fide and the assessee has disclosed all the material facts to substantiate the explanation offered

b) the amount of under-reported income determined on the basis of an estimate, if the accounts are correct and complete to the satisfaction of the Assessing Officer or the Commissioner (Appeals) but the method employed is such that the income cannot properly be deduced therefrom

c) the amount of under-reported income determined on the basis of an estimate, if the assessee has, on his own, estimated a lower amount of addition or disallowance on the same issue, has included such amount in the computation of his income and has disclosed all the facts material to the addition or disallowance

d) the amount of under-reported income represented by any addition made in conformity with the arm’s length price determined by the Transfer Pricing Officer, where the assessee had maintained information and documents as prescribed under section 92D, declared the international transaction under Chapter X, and, disclosed all the material facts relating to the transaction

e) the amount of undisclosed income referred to in section 271AAB.

Illustration

Essem Ltd., an Indian company, is the subsidiary company of Shyamal Ltd. an Indian company. Essem Ltd. has purchased goods from Shyamal Ltd. @ Rs. 84 per unit. The same goods are purchased from unrelated entities @ Rs. 80 per unit.

Check the applicability of the transfer pricing provisions in the above case and advise the company on penalty provisions, if any, which could be initiated against it by the tax authorities (you may assume that the quantum of transactions exceeds Rs. 20 Cr. in aggregate).

The relationship of holding and subsidiary company is covered under section 40A(2)(b) and the quantum of transaction exceeds Rs. 20 Cr., hence, the transaction of purchase/sale of goods carried between these companies will constitute a specified domestic transaction.

In case of specified domestic transactions, if following conditions are satisfied, then penalty under section 270A can be levied :

Taxpayer enters into any specified domestic transaction exceeding the monetary limit of Rs.20 Cr. (in aggregate).
The said transaction is not carried out at arm’s length price.
Tax authorities recomputed the income of the taxpayer by applying the arm’s length price.

In this case, Essem Ltd. has purchased goods from unrelated parties @ Rs. 80 per unit but the same are purchased from Shyamal Ltd. (related entity) @ Rs. 84 per unit. Hence, it can be observed that Essem Ltd. has purchased goods at a higher price. The higher price of Rs. 4 per unit will be disallowed and the tax authority will re-compute the profit of the company by allowing purchase price at Rs. 80 per unit.

As per section 270A the amount so added or disallowed, shall be deemed as under reporting of income and penalty shall be levied, which shall be 50% or 200% of tax payable on under reported income of the tax sought to be evaded can be levied.

In the above case no penalty will be levied if Essem Ltd. justifies the higher price being charged by its holding company and also satisfies the other conditions specified in this regard. Suppose goods were purchased from Shyamal Ltd. on credit basis whereas goods purchased from other party were on advance payment and, hence, Shyamal Ltd. charged a higher price of Rs. 4 to incorporate the effect of credit period.

In this case, if Essem Ltd. demonstrates that it had maintained information and documents as prescribed under section 92D, declared the international transaction under Chapter X, and, disclosed all the material facts relating to the transaction.

MCQ ON PENALTY FOR CONCEALMENT OF INCOME IN RESPECT OF SPECIFIED DOMESTIC TRANSACTION

Q1. As per section when any specified domestic transaction is carried out between associated enterprises, the said transaction should be carried out at arm’s length price.

(a) 90 (b) 90A

Correct answer : (d)

Justification of correct answer :

As per section 92, when any specified domestic transaction is carried out between associated enterprises, the said transaction should be carried out at arm’s length price. In other words, income arising or allowance of any expenses to an entity resulting from specified domestic transactions with associated enterprise should be computed by having regard to arm’s length price of such transaction.

Thus, option (d) is the correct option.

Q2. The provisions of section 92 will apply only if the aggregate value of specified domestic transactions entered into by the taxpayer during the year exceeds a sum of rupees.

(a) Five thousand (b) Five lakhs

Correct answer : (c)

Justification of correct answer :

The provisions of section 92 will apply only if the aggregate value of specified domestic transactions entered into by the taxpayer during the year exceeds a sum of Twenty crore rupees.

Thus, option (c) is the correct option.

Q3. As per section 92BA, apart from certain other transactions, specified domestic transaction includes any expenditure in respect of which payment has been made or is to be made to a person referred to in of section 40A(2)(b)

(a) True (b) False

Correct answer : (b)

Justification of correct answer :

As per section 92BA specified domestic transaction means the following transactions:

(1) Any transaction referred to in section 80A

(2) Any transfer of goods or services referred to in sub-section (8) of section 80-IA

(3) Any business transacted between the taxpayer and other person as referred to in sub-section (10) of section 80-IA

(4) Any transaction, referred to in any other section under Chapter VI-A or section 10AA, to which provisions of sub-section (8) or sub-section (10) of section 80-IA are applicable

(5) Any business transacted between the persons referred to in sub-section (6) of section 115BAB

(6) Any business transacted between the assessee and other person as referred to in sub-section (4) of section 115BAE

(7) Any other transaction as may be prescribed

Thus, the statement is false. Hence, option (b) is the correct option.

Q4. Section ____________ provides for deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, telecommunication services, power generation, etc.

(a) 80-IA (b) 80-IB

Correct answer : (a)

Justification of correct answer:

Section 80-IA provides for deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, telecommunication services, power generation, etc.

Thus, option (a) is the correct option.

Q5. Section 10AA provides for exemption in respect of income generated by a unit located in Special Economic Zone.

(a) True (b) False

Correct answer : (a)

Justification of correct answer :

Section 10AA provides for exemption in respect of income generated by a unit located in Special Economic Zone.

Thus, the statement given in the question is true and hence, option (a) is the correct option.

Q6. Section _________ deals with methods of computation of arm’s length price.

(a) 80C (b) 90

Correct answer : (d)

Justification of correct answer :

Section 92C deals with methods of computation of arm’s length price.

Thus, option (d) is the correct option.

Q7. Arm’s length price is to be determined by applying _____.

(a) Resale Price Method (b) Fair Market Value Method

Correct answer : (a)

Justification of correct answer :

Arm’s length price is to be determined by applying any of the following methods:

Comparable Uncontrolled Price Method
Resale Price Method
Cost Plus Method
Profit Split Method
Transactional Net Margin Method
Such other method as may be prescribed by the CBDT

Thus, option (a) is the correct option.

Q8. By virtue of section 270A, the taxpayer shall be liable to pay penalty for under-reporting or misreporting of income.

(a) True (b) False

Correct answer : (a)

Justification of correct answer :

Many times a taxpayer may try to reduce the tax liability by under reporting his income. In such a case, by virtue of Section 270A, the taxpayer shall be liable to pay penalty for under-reporting or misreporting of income.

Thus, the statement given in the question is true and hence, option (a) is the correct option.

Q9. Penalty under section 270A shall be levied @ ______ of the taxes evaded.

(a) 100% to 200% (b) 100% to 300%

Correct answer : (d)

Justification of correct answer :

Thus, option (d) is the correct option.

Penalty for failure to keep and maintain documents in respect of specified domestic transactions

Disclaimer:

The contents of this document are for information purposes only. This aims to enable public to have a quick and an easy access to information and do not purport to be legal documents.

Viewers are advised to verify the content from Government Acts/Rules/Notifications etc.

PENALTY FOR FAILURE TO KEEP AND MAINTAIN DOCUMENTS IN RESPECT OF SPECIFIED DOMESTIC TRANSACTIONS

Introduction

The provisions of transfer pricing are designed to keep a check on the practice of reducing the tax liability by an entity by entering into transactions at prices higher/lower than market prices with associated entity. In this part you can gain knowledge about the provisions relating to penalty for failure to keep and maintain documents in respect of specified domestic transactions. However, before understanding the penalty provisions, one should have an overview of the basic provisions of transfer pricing in relation to specified domestic transactions.

Meaning of specified domestic transaction

Specified domestic transaction means any of the following transaction which is not an international transaction:

i. Any transaction referred to in section 80A.

As per section 80A(6) when a taxpayer claims deduction under various sections, inter- alia, sections 80-IA, 80-IAB , 80-IB , 80-IC , 80-ID , 80-IE , etc., and enters into a transaction with its associated entities, these transactions should be carried out at fair market value. So, if a transaction is covered under section 80A, then it will be treated as a specified domestic transaction.

ii. Any transfer of goods or services referred to in section 80-IA(8).

Section 80-IA(8) covers inter unit transfer of goods and services by an entity claiming deduction under section 80-IA.

iii. Any business transacted between the taxpayer and other person as referred to in section 80-IA(10).

A taxpayer claiming deduction under section 80-IA may enter into business transaction with its related person. The transaction may be arranged in such a manner that the profit earned by the taxpayer is more than the normal profit. By doing so the profit of such related person may be diverted to the taxpayer and in tune the taxpayer will not pay tax or pay less taxes on the profit so diverted due to deductions available to him under section 80IA. Such type of transactions are covered under section 80-IA(10).

iv. any transaction referred to in any other section under Chapter VI-A or section 10AAto which provisions of sub-section (8) or sub-section (10) of section 80-IAare applicable.

Section 10AA provides for exemption in respect of income generated by a unit located in the Special Economic Zone.

Under Chapter VI-A there are various sections under which the taxpayer can claim deduction. However, only those sections of Chapter VI-A are relevant here to which the provisions of section 80-IA(8) and (10) are applicable which includes section 80-IA, 80-IB , 80-IC , 80-ID etc.

v. Any business transacted between the persons referred to in sub-section (4) of section 115BAB

Section 115BAB provides for a reduced tax rate of 15% in case of those domestic manufacturing companies which have been incorporated on or after October 1, 2019 and whose total income is computed without claiming specified exemption, deduction or incentive available under the Act.

Sub-section (4) of section 115BAB provides that where course of business between company and any other person are so arranged that it produces to the company more than the ordinary profits, the Assessing Officer can re-compute the profit which may be reasonably deemed to have been derived therefrom. The profit from such transaction shall be determined having regard to arm’s length price if such transaction is covered under the ambit of ‘Specified Domestic Transaction’ as defined under section 92BA.

vi. Any other transaction as may be prescribed.

The above transactions will be treated as specified domestic transactions only if the aggregate value of these transactions entered into by the taxpayer during the year exceeds a sum of twenty crore rupees. [The revised threshold limit of Rs. 20 crores shall be effective from 01-04-2016 i.e. Assessment year 2016-17]

Transaction should be at Arm’s length price

As per section 92 when any specified domestic transaction is carried out between associated enterprises, the said transaction should be carried out at arm’s length price. In other words, income arising or allowance of any expenses to an entity resulting from specified domestic transactions with associated enterprise should be computed having regard to arm’s length price of such transaction.

The provisions of section 92 will apply only if the aggregate value of specified domestic transactions entered into by the taxpayer during the year exceeds a sum of twenty crore rupees.

E.g., Essem Ltd. took service of one of its group company, an associated enterprise enjoying tax holiday. The transaction is a specified domestic transaction. Essem Ltd. paid Rs. 29,80,00,000 for the said service to the group company. The arm’s length price of such service is Rs. 18,40,00,000. No other specified domestic transaction is entered into by Essem Ltd. during the year. Will the provisions of section 92 apply in this case?

As per section 92, any specified domestic transaction carried on with associated enterprise should be at arm’s length price. The transaction entered into by Essem Ltd. with its associated enterprise is a specified domestic transaction and, hence, the provisions of section 92 will apply.

In the present case, it can be observed that while computing its taxable business income, Essem Ltd. will claim deduction of Rs. 29,80,00,000 in respect of service charges paid to its associated entity.

The arm’s length price, i.e., the fair value of the service is Rs. 18,40,00,000 but by paying a higher amount of Rs. 29,80,00,000 Essem Ltd. claimed a higher deduction and reduced its profit by Rs. 11,40,00,000. In this case the provisions of section 92 will be applicable and the income of Essem Ltd. will be recomputed by taking into account the arm’s length price of the specified domestic transaction. In other words, the taxable income of Essem Ltd. will have to be computed by allowing deduction of Rs. 18,40,00,000 on account of service charges.

In the above example, if the transaction is not a specified domestic transaction, then the provisions of section 92 will not apply.

Methods of computation of arm’s length price

As discussed earlier, a taxpayer should carry specified domestic transactions at arm’s length price. Arm’s length price is to be determined by applying any of the following method :

Comparable Uncontrolled
Price Method Resale Price Method
Cost Plus Method
Profit Split Method
Transactional Net Margin Method
Such other method as may be prescribed by the CBDT.

Documents to be maintained in respect of specified domestic transactions

Section 92D provides that every person entering into a specified domestic transaction shall keep and maintain such information and documents as may be prescribed in this regard under rule 10D. The Income-tax Authority may require the taxpayer to produce these documents. On such demand by the Income-tax Authority the taxpayer has to provide these documents within a period of 10 days from the date of receipt of notice in this regard. The income-tax authority may on application made by the taxpayer extend the period of 10 days by a further period of not exceeding 30 days. In view of Rule 10D these documents shall be maintained for a period of 8 years from the end of the relevant assessment year.

The information and documents to be maintained as provided in rule 10D by every person who has entered into a specified domestic transaction are as follows : –

A detailed description of the ownership of the entity with details of shares or other ownership interests held therein by other enterprises.
A profile of the multinational group of which the entity is a part along with the name, address, legal status and tax residence of each of the enterprises comprised in the group with whom specified domestic transactions have been entered into by the entity and ownership linkages among them.
A broad description of the business of the entity and the industry in which the entity operates, and of the business of the associated enterprises with whom the entity has transacted.
The nature and terms (including prices) of specified domestic transactions entered into with each associated enterprise, details of property transferred or services provided and the quantum and the value of each of such transaction or class of such transaction.
A description of the functions performed, risks assumed and assets employed or to be employed by the entity and by the associated enterprises involved in the specified domestic transaction.
A record of the economic and market analyses, forecasts, budgets or any other financial estimates prepared by the entity for the business as a whole and for each division or product separately, which may have a bearing on the specified domestic transactions entered into by the entity.
A record of uncontrolled transactions taken into account for analysing their comparability with the specified domestic transactions entered into, including a record of the nature, terms and conditions relating to any uncontrolled transaction with third parties which may be of relevance to the pricing of the specified domestic transactions.
A record of the analysis performed to evaluate comparability of uncontrolled transactions with the relevant specified domestic transaction.
A description of the methods considered for determining the arm’s length price in relation to each specified domestic transaction or class of transaction, the method selected as the most appropriate method along with explanations as to why such method was so selected, and how such method was applied in each case.
A record of the actual working carried out for determining the arm’s length price, including details of the comparable data and financial information used in applying the most appropriate method, and adjustments, if any, which were made to account for differences between the specified domestic transaction, and the comparable uncontrolled transactions, or between the enterprises entering into such transactions.
The assumptions, policies and price negotiations, if any, which have critically affected the determination of the arm’s length price.
Details of the adjustments, if any, made to transfer prices to align them with arm’s length prices determined under the Income-tax Rules and consequent adjustment made to the total income for tax purposes.
Any other information, data or document, including information or data relating to the associated enterprise, which may be relevant for determination of the arm’s length price.

The CBDT has notified ‘Safe Harbour Rules’ vide Income-tax (Second Amendment) Rules, 2015, w.e.f. 04-2-2015 for specified domestic transactions undertaken by Government companies engaged in business of generation, transmission or distribution of electricity (‘eligible assessee’).

In this regard, Rule 10TH to Rule 10THD were inserted in the Income-tax Rules, 1962 to provide that Government Companies engaged in the business of generation, transmission or distribution of electricity (i.e., eligible assessee) can opt for ‘Safe Harbour Rules’ in respect of transactions of supply, transmission or wheeling of electricity (i.e., eligible specified domestic transaction).

Where an eligible assessee opts for ‘Safe Harbour Rules’, the transfer price declared by the assessee in respect of such transaction for that assessment year shall be accepted by the authorities and no comparability adjustment shall be made to it if:

a) eligible transaction is supply of electricity, transmission of electricity, wheeling of electricity, etc.; and

b) tariff in respect thereof, as the case may be, is determined by the Appropriate Commission in accordance with the provisions of the Electricity Act, 2003 (36 of 2003).

Accordingly, Rule 10D is also amended to provide some relaxation to eligible assessee from maintenance of documents. It provides that eligible assessee who has entered into an eligible specified domestic transaction shall have to keep and maintain only following information and documents for period of 8 years from end of relevant assessment year:

Description of ownership structure of assessee’s enterprise with details of shares and other ownership interests held therein by other enterprises.
Broad description of business of assessee and the industry in which he operates and of the business of associate enterprises with whom the assessee has transacted.
Nature, terms (including prices), quantum and value of specified domestic transactions entered into with each associate enterprise.
Record of proceeding, if any, before regulatory commission and orders of such commission relating to specified domestic transactions.
Record of actual working carried out for determining transfer pricing of specified domestic transactions.
Assumptions, policies and price negotiation, if any, which have critically affected the determination of transfer price.
Any other information or data which may be relevant for determination of transfer price.

The information specified above shall be supported by authentic documents, which may include the following:

Official publications, reports, studies and data bases from the Government.
Reports of market research studies carried out and technical publications brought out by recognised institutions.
Price publications including stock exchange and commodity market quotations.
Published accounts and financial statements relating to the business affairs of the associated enterprises.
Agreements and contracts entered into with associated enterprises or with unrelated enterprises in respect of transactions similar to the specified domestic transactions.
Letters and other correspondences documenting any terms negotiated between the entity and the associated enterprise.
Documents normally issued in connection with various transactions under the accounting practices followed.

Penalty for failure to keep and maintain information and documents in respect of specified domestic transactions

As discussed above, section 92D requires the maintenance of certain information or documents. Failure to maintain such information or documents will attract penalty. The provisions relating to penalty for failure to keep and maintain information and documents in respect of specified domestic transactions are given in section 271AA. Penalty under section 271AA is attracted in the case of any of the following failures:

(1) If a person fails to keep and maintain information and documents in respect of specified domestic transactions as provided in rule 10D read with section 92D.

(2) If a person fails to keep and maintain information and documents in respect of specified domestic transactions as provided in rule 10D read with section 92D for the period prescribed in this behalf (i.e., 8 years from the end of the relevant assessment year).

(3) If a person fails to report the specified domestic transaction which he is required to do.

(4) If a person maintains or furnishes an incorrect information or document in respect of specified domestic transaction.

Penalty will be a sum equal to 2% of the value of each specified domestic transaction entered into by the taxpayer.

By virtue of section 273B penalty under section 271AA will not be imposed if the taxpayer proves a reasonable cause for failure.

Penalty for failure to furnish a report from an accountant as is required by Section 92E

Section 92E provides that every person entering into an international transaction or specified domestic transaction shall obtain a report from a chartered accountant in the prescribed form and shall furnish the same on or before the date prescribed in this regard. If a taxpayer fails to do so, then he can be held liable to pay penalty under section 271BA. Penalty under section 271BA for failure to furnish a report from an accountant as is required by section 92E is Rs. 1,00,000.

By virtue of section 273B penalty under section 271BA will not be imposed if the taxpayer proves a reasonable cause for failure.

Penalty for failure to produce information and document in respect of specified domestic transaction

As per section 92D(3) the tax authorities may, in the course of any proceeding under the Act, require any person who has entered into a specified domestic transaction to furnish any information or document (as discussed in rule 10D). Such information or document is to be produced within a period of 10 days from the date of receipt of a notice issued in this regard (the period can be extended for further 30 days by the tax authorities).

As per section 271G, if any person who has entered into a specified domestic transaction fails to furnish any such information or document as discussed above, then the tax authorities may direct that such person shall pay, by way of penalty, a sum equal to 2% of the value of the specified domestic transaction for each such failure.

By virtue of section 273B penalty under section 271G will not be imposed if the taxpayer proves a reasonable cause for failure.

MCQ ON PENALTY FOR FAILURE TO KEEP AND MAINTAIN DOCUMENTS IN RESPECT OF SPECIFIED DOMESTIC TRANSACTIONS

Q1. Specified domestic transaction also covers an international transaction.

(a) True (b) False

Correct answer : (b)

Justification of correct answer :

Specified domestic transactions means few specific transactions described under section 92BA which are not international transactions.

Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q2. Section _______ provides that every person entering into a specified domestic transaction shall keep and maintain such information and documents as may be prescribed in this regard under rule 10D.

(a) 92 (b) 92A

Correct answer : (d)

Justification of correct answer :

Section 92D provides that every person entering into a specified domestic transaction shall keep and maintain such information and documents as may be prescribed in this regard under rule 10D.

Thus, option (d) is the correct option.

Q3. Every person entering into specified domestic transactions shall keep and maintain documents relating to such transactions for a period of _____ from the end of the relevant assessment year.

(a) 2 years (b) 5 years

Correct answer : (c)

Justification of correct answer :

In view of Rule 10D every person entering into specified domestic transactions shall keep and maintain documents relating to such transactions for a period of 8 years from the end of the relevant assessment year.

Thus, option (c) is the correct option.

Q4. The provisions relating to penalty for failure to keep and maintain information and documents in respect of specified domestic transactions are given in section_____.

(a) 271 (b) 271A

(b) 271B (d) 271AA

Correct answer : (d)

Justification of correct answer :

The provisions relating to penalty for failure to keep and maintain information and documents in respect of specified domestic transactions are given in section 271AA.

Thus, option (d) is the correct option.

Q5. Penalty under section 271AA will be a sum equal to_____.

(a) 2% of the value of each specified domestic transaction entered into by the taxpayer

(b) 1% of the value of each specified domestic transaction entered into by the taxpayer

(d) 4% of the value of each specified domestic transaction entered into by the taxpayer

Correct answer : (a)

Justification of correct answer :

Penalty under section 271AA will be a sum equal to 2% of the value of each specified domestic transaction entered into by the taxpayer.

Thus, option (a) is the correct option.

Q6. By virtue of section 273B penalty under section 271AA will not be imposed if the taxpayer proves a reasonable cause for failure.

(a) True (b) False

Correct answer : (a)

Justification of correct answer :

By virtue of section 273B penalty under section 271AA will not be imposed if the taxpayer proves a reasonable cause for failure.

Thus, the statement given in the question is true and hence, option (a) is the correct option.

Q7. Penalty under section 271BA for failure to furnish a report from an accountant as is required by section 92E is_____.

(a) Rs. 10,000

(b) 2% of the value of each specified domestic transaction entered into by the taxpayer

(d) 1% of the value of each specified domestic transaction entered into by the taxpayer

Correct answer : (c)

Justification of correct answer :

Penalty under section 271BA for failure to furnish a report from an accountant as is required by section 92E is Rs. 1,00,000.

Thus, option (c) is the correct option.

Q8. Penalty under section 271G shall be levied @ 2% of the value of the specified domestic transaction for each such failure if the assessee fails to furnish any such information or document as is required to be furnished under section 92D(3).

(a) True (b) False

Correct answer : (a)

Justification of correct answer :

As per section 271G, if any person who has entered into a specified domestic transaction fails to furnish any such information or document as is required to be furnished under section 92D(3), then the tax authorities may direct that such person shall pay, by way of penalty, a sum equal to 2% of the value of the specified domestic transaction for each such failure.

Thus, the statement given in the question is true and hence, option (a) is the correct option.

Q9. Penalty levied under section 271G cannot be waived by virtue of section 273B even though the taxpayer proves a reasonable cause for failure.

(a) True (b) False

Correct answer : (b)

Justification of correct answer :

By virtue of section 273B penalty under section 271G will not be imposed if the taxpayer proves a reasonable cause for failure.

Thus, the statement given in the question is false and hence, option (b) is the correct option.

Penalties under the Income-tax Law

Disclaimer:

The contents of this document are for information purposes only. This aims to enable public to have a quick and an easy access to information and do not purport to be legal documents.

Viewers are advised to verify the content from Government Acts/Rules/Notifications etc.

PENALTIES UNDER THE INCOME-TAX ACT

Introduction

Under the Income-tax Act, penalties are levied for various defaults committed by the taxpayer. Some of the penalties are mandatory and a few are at the discretion of the tax authorities. In this part, you can gain knowledge about the provisions relating to various penalties leviable under the Income-tax Act.

Penalty for default in making payment of Self Assessment Tax

As per section 140A(1) any tax due (after allowing credit for TDS, advance tax, etc.) along with interest and fee* should be paid before filing the return of income. Tax paid as per section 140A(1) is called ‘self-assessment tax’.

As per section 140A(3), if a person fails to pay either wholly or partly self-assessment tax or, interest, or fee* then he will be treated as assessee in default in respect of unpaid amount. As per section 221(1), if a taxpayer is treated as an assessee in default, then he shall be held liable to pay penalty of such amount as the Assessing Officer may impose and in the case of a continuing default, such further amount or amounts as the assessing officer may, from time to time, direct. However, the total amount of penalty cannot exceed the amount of tax in arrears.

Before charging penalty under section 221(1), the tax authority shall give the taxpayer a reasonable opportunity of being heard. No penalty is levied if the taxpayer proves to the satisfaction of the tax authorities that the default was for good and sufficient reason.

Note: An assessee shall not cease to be liable to any penalty under section 221(1) merely by reason of the fact that he paid the tax before the levy of such penalty.

* Fee for default in furnishing return of income shall be Rs. 5,000 if return has been furnished after the due date prescribed under section 139(1). However, it shall be Rs. 1,000 if the total income of an assessee does not exceed Rs. 5 lakh.

Penalty for default in making payment of Tax

As per section 220(1), when a demand notice under section 156 has been issued to the taxpayer for payment of tax (other than notice for payment of advance tax), then such amount shall be paid within a period of 30 days of the service of the notice at the place and to the person mentioned in the notice. In certain cases, the above period of 30 days can be reduced by the tax authorities with the previous approval of designated authorities. If the taxpayer makes default in payment of any tax due from him, then apart from other penal provisions, he is treated as an assessee in default.

As per section 221(1), if a taxpayer is treated as an assessee in default, then he shall be liable to pay penalty of such an amount as the Assessing Officer may impose. However, penalty cannot exceed the amount of tax in arrears. Thus, penalty under section 221(1) is a general penalty and can be levied in all the cases in which the taxpayer is treated as an assessee in default.

Before charging penalty as discussed above, the tax authorities shall give the taxpayer a reasonable opportunity of being heard. No penalty is levied if the taxpayer proves to the satisfaction of the tax authorities that the default was for good and sufficient reason.

Note: An assessee shall not cease to be liable to any penalty under section 221(1) merely by reason of the fact that he paid the tax before the levy of such penalty.

Late filing fees for delay in filing the TDS/TCS statement

As per section 200(3) every person liable to deduct tax at source is liable to file the statement in respect of tax deducted by him i.e. TDS return. Further, as per proviso to section 206C(3) every person liable to collect tax at source has to furnish statement in respect of tax collected by him i.e. TCS return. Section 234E provides for levy of late filing fees for the delay in filing TDS/TCS return.

As per section 234E, where a person fails to file the TDS/TCS return on or before the due date prescribed in this regard, then he shall be liable to pay, by way of fee, a sum of Rs. 200 for every day during which the failure continues. The amount of late fees however shall not exceed the amount of TDS/TCS. TDS/TCS return cannot be filed (after prescribed due date) without payment of late filing fees as discussed above.

Fee for default in furnishing return of income

If assessee who is required to furnish return of income under section 139 failed to furnish return of income within due date as prescribed under section 139(1) then as per section 234F, he will be required to pay fee of Rs. 5,000 if return has been furnished after the due date prescribed under section 139(1). However, it shall be Rs. 1,000 if the total income of an assessee does not exceed Rs. 5 lakh.

Penalty for failure to comply with notice issued under section 142(1) or 143(2) or direction for audit under section 142(2A)

Penalty under section 272A is levied if a taxpayer fails to comply with notice issued to him under section 142(1) or section 143(2) or fails to comply with a direction issued under section 142(2A). Before understanding the penalty provisions of section 272A we shall take a brief overview of provisions of section 142(1), section 142(2A) and section 143(2).

Under section 142(1), the Assessing Officer can issue notice asking the taxpayer

to file the return of income if he has not filed the return of income or to produce or cause to be produced such accounts or documents as he may require or
to furnish in writing and verified in the prescribed manner, information in such form and on such points or matters (including a statement of all assets and liabilities of the taxpayer, whether included in the accounts or not) as he may require.

Section 142(2A) deals with special audit. As per section 142(2A), if the conditions justifying special audit as given in section 142(2A) are satisfied, then the Assessing Officer can direct the taxpayer to get his accounts audited or re-audited from a chartered accountant nominated by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.

Section 143(2) deals with the provisions relating to the issuance of notice before conducting a scrutiny assessment under section 143(3).

If the taxpayer fails to comply with notice issued to him under section 142(1) or section 143(2) or fails to comply with a direction issued under section 142(2A), then as per section 272A he shall be liable for a penalty of Rs. 10,000 for each failure.

Penalty for underreporting and misreporting of income

Many times a taxpayer may try to reduce his tax liability by underreporting or misreporting of income. In such a case, by virtue of Section 270A, the taxpayer will be held liable for penalty. The rate of penalty shall be fifty per cent of the tax payable on under-reported income. However, in a case where under-reporting of income results from misreporting of income, the taxpayer shall be liable for penalty at the rate of two hundred per cent of the tax payable on such misreported income.

Underreporting of income

A person shall be considered to have under-reported his income in the following cases:

Cases	Income assessed under normal Provisions	Income assessed under MAT/AMT Provisions
Return of Income is filed	Income assessed is greater than the income determined in the return processed u/s. 143(1)(a)	The deemed total income assessed or reassessed as per the provisions of sec. 115JB /115JC , is greater than the deemed total income determined in the return processed under sec 143(1)(a)
No Return of Income is filed or return is filed for the first time under section 148.	The income assessed is greater than the maximum exemption limit	The deemed total income assessed as per the provisions of sec. 115JB /115JC , is greater than the maximum exemption limit.
Case of Reassessment	The income reassessed is greater than the income assessed or reassessed immediately before such reassessment	The deemed total income reassessed as per the provisions of sec. 115JB /115JC , is greater than the deemed total income assessed or reassessed immediately before such reassessment.
Loss Assessed	The income assessed or reassessed has the effect of reducing the loss or converting such loss into income.	The income assessed or reassessed has the effect of reducing the loss or converting such loss into income.

Misreporting of Income

The following cases will be considered as misreporting of income:

1. Misrepresentation or suppression of facts;

2. Failure to record investments in the books of account;

3. Claim of expenditure not substantiated by any evidence;

4. Recording of any false entry in the books of account;

5. Failure to record any receipt in books of account having a bearing on total income; and

6. Failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply.

If a closely held company issues its shares at a price higher than its fair market value (FMV) then it shall be liable to pay tax on difference between the FMV and issue price of the shares as per section 56(2)(viib)* of the Income-tax Act. Such tax is called as ‘Angel Tax’ in common parlance. However, the Department for Promotion of Industry and Internal Trade (DPIIT) has issued a Notification No. 127(E), dated 19-02-2019 whereby an eligible start-up shall be exempted from levy of Angel tax if it satisfies the conditions mentioned in such notification.

With a view to ensure compliance to the conditions specified in the notification, the Finance (No. 2) Act, 2019 reiterates that in case of failure to comply with the conditions specified in the notification, the consideration received from issue of shares as exceeding the fair market value of such shares, shall be deemed to be income of the company chargeable to tax for the previous year in which such failure takes place. Further, it shall be deemed that the company has misreported the said income and, consequently, a penalty of an amount equal to 200% of tax payable on the underreported income (i.e., difference between issue price and fair market value of shares) shall be levied as per section 270A.

* Provisions of Section 56(2)(viib) are not applicable from Assessment Year 2025-26.

Computation of under-reported Income

The amount of under-reported income shall be computed as under:

1. Where income is assessed for the first time and return of income was furnished by the assessee, the difference between the amount of income assessed and the amount of income determined after processing of return under Section 143(1)shall be considered as underreported income.

2. Where income is assessed for the first time and no return of income was furnished by the assessee or return was furnished by the assessee for the first time under section 148, the difference between the amount of income assessed and the basic exemption limit applicable in case of the assessee shall be considered as underreported income.

3. Where income is not assessed for the first time, the difference between the amount of income reassessed or recomputed and the amount of income assessed, reassessed or recomputed in a preceding order shall be considered as underreported income.

4. If an assessment or reassessment has the effect of reducing the loss declared in the return or converting that loss into income, the amount of under-reported income shall be the difference between the loss claimed and the income or loss, as the case may be, assessed or reassessed.

5. Where income assessed as per the provisions of Minimum Alternate Tax (MAT) or Alternate Minimum Tax (AMT), underreported income shall be computed as per the following formulae:

(A — B) + (C — D) where,

A = the total income assessed as per the provisions other than the provisions contained in section 115JB or section 115JC (herein called general provisions);

B = the total income that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of under-reported income;

C = the total income assessed as per the provisions contained in section 115JB or section 115JC;

D = the total income that would have been chargeable had the total income assessed as per the provisions contained in section 115JB or section 115JC been reduced by the amount of under-reported income.

If the amount of under-reported income on any issue is considered both under the provisions contained in section 115JB or section 115JC and under general provisions, such amount shall not be reduced from total income assessed while determining the amount under item D.

Penalty for failure to keep, maintain, or retain books of account, documents, etc., as required under section 44AA

For the purpose of Income-tax Act, a taxpayer is required to maintain the books of account as provided in section 44AA. If the taxpayer fails to maintain books of account as per the provisions of section 44AA, then he shall be liable to pay penalty under section 271A. Penalty under section 271A is Rs. 25,000.

Penalty for failure to keep and maintain information and document etc. in respect of international transaction or specified domestic transaction

Section 92D provides that every person entering into an international transaction or specified domestic transaction shall keep and maintain such information and documents as may be prescribed in this regard under rule 10D. Further a person, being a constituent entity of an international group, shall also keep and maintain such information and documents in respect of an international group as may be prescribed. The Income-tax Authority may require the taxpayer to produce these documents. On such demand by the Income-tax Authority, the taxpayer has to provide these documents within a period of 30 days or such extended period as may be allowed by the tax authorities. These documents should be maintained for a period of 8 years from the end of the relevant assessment year.

The provisions relating to penalty for failure to keep and maintain information and documents in respect of international transaction or specified domestic transaction are given in section 271AA. Penalty under section 271AA is attracted in the case of any of the following failures:

1) If a person fails to keep and maintain information and documents in respect of international transaction or specified domestic transaction as provided in section 92D read with rule 10D.

2) If a person fails to report the international transaction or specified domestic transaction which he is required to do so.

3) If a person maintains or furnishes an incorrect information or document in respect of international transaction or specified domestic transaction.

Penalty will be a sum equal to 2% of the value of each international transaction or specified domestic transaction entered into by the taxpayer.

If any person, being a constituent entity of international group fails to furnish information and documents in respect of international group [as referred to in Section 92D], it may be liable to pay penalty of Rs 5,00,000.

Penalty in case of search

To unearth the undisclosed income, tax authorities generally conduct search at the premises of the taxpayer. Section 132 provides the circumstances in which the tax authorities can initiate a search. If a search has been initiated and any undisclosed income is unearthed in the search, then penalty can be levied under section 271AAB.

The quantum of penalty under section 271AAB shall be as follows:

1) Where search has been initiated on or after 1-7-2012 but before the date on which the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the president (i.e., 16-12-2016) –

a) 10% of 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

2) Where search has been initiated on or after the date on which the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the president (i.e., before 01-09-2024)-

a) 30% of 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 if it is not covered by above provisions

Penalty for ‘false entry’ in the books of account

The Finance Act 2020 has introduced a new section 271AAD under the Act to provide for a levy of penalty on a person, if during any proceedings under the Act, it is found that in the books of accounts maintained by him there is:

a) A false entry; or

b) Any entry relevant for computation of total income of such person has been omitted to evade tax liability.

The penalty payable by such person shall be equal to the aggregate amount of false entries or omitted entry.

It is also provided that any other person, who causes in any manner a person to make or cause to make a false entry or omits or causes to omit any entry, shall also pay by way of penalty a sum which is equal to the aggregate amount of such false entries or omitted entry.

For the purpose of section 271AAD, the false entries to include use or intention to use:

a) Forged or falsified documents such as a false invoice or, in general, a false piece of documentary evidence;

b) Invoice in respect of supply or receipt of goods or services or both issued by the person or any other person without actual supply or receipt of such goods or services or both; or

c) Invoice in respect of supply or receipt of goods or services or both to or from a person who do not exist.

Consequences of default in submission of statement/certificate prescribed under section 35/ Section 80G

The Finance Act, 2020 has amended section 35 of the Income-tax Act to provide that deduction available under this section shall be available to the research association, university, college or other institution or the company only if the assessee delivers a statement of donations, as prescribed by the board, and also furnishes certificate of the amount of donation to the donors.

Similar amendment has also been made in Section 80G to provide that entities receiving donation shall be required to file a statement of the donation received and shall issue a certificate to donor.

In order to ensure compliance with the provision, the Finance Act, 2020 has inserted a new section 234G which provides for levy of fee of Rs. 200 per day if taxpayer fails to submit such statement or certificate within prescribed time. However, the fee shall not exceed the amount in respect of which the failure has occurred. Such fees shall be paid before submitting such statement or before furnishing of certificate, as the case may be.

Consequently, a new section 271K has been inserted in the Act which empowers the Assessing Officer to levy a penalty of Rs. 10,000 to Rs. 1 lakh, if assessee fails to furnish the statement or fails to furnish a certificate.

Faceless Penalty

With an objective to eliminate the human interface in such cases also, an e-penalty scheme is to be launched on the lines of e-assessment scheme.

Section 274 of the Income-tax Act prescribes procedure for imposing penalty on the assessee. The Finance Act, 2020 has inserted a new sub-section 2(A) to section 274 to authorize the Central Government to notify an e-scheme for the purposes of imposing penalty so as to impart greater efficiency, transparency and accountability by:

a) eliminating the interface between the Assessing Officer and the assessee in the course of proceedings to the extent it is feasible technologically;

b) optimising utilisation of the resources through economies of scale and functional specialisation;

c) introducing a mechanism for imposing of penalty with dynamic jurisdiction in which penalty shall be imposed by one or more tax authorities.

The Central Government vide notification S.O. 117(E), dated 12-1-2021, has notified the Faceless Penalty Scheme, 2021 effective from 12-01-2021.

Penalty in case of income from undisclosed sources

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.

Section 271AAC of the Income-tax Act empowers AO or Commissioner (Appeals) 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. 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.

Failure to get accounts audited or furnish a report of audit as required under section 44AB

section 44AB prescribes when the accounts of the taxpayer are to be audited. If a taxpayer, in spite of the requirement of section 44AB, fails to get his accounts audited, then he can be held liable for penalty under section 271B. Penalty under section 271B will be levied for failure to get the accounts audited or failure to furnish a report of audit as required under section 44AB. Penalty shall be one-half per cent of total sales, turnover or gross receipts, etc., or Rs. 1,50,000, whichever is less.

Penalty for failure to furnish a report from an accountant as required by section 92E

section 92E provides that every person entering into an international transaction or specified domestic transaction shall obtain a report from a chartered accountant in the prescribed form and shall furnish the same on or before the date prescribed in this regard. If a taxpayer fails to do so, then he shall be liable to pay penalty under section 271BA. Penalty under section 271BA for failure to furnish a report from a chartered accountant as required by section 92E is Rs. 1,00,000.

Penalty for failure to deduct tax at source

If a person fails to deduct tax at source as required by or under the provisions of chapter XVII-B fails to deduct the tax, then he can be held liable to pay penalty under section 271C.

Further, penalty shall also be levied if a person fails to pay or ensure payment of tax as required by section 115O(2), first proviso to section 194R(1), proviso to section 194S(1) or section 194BA(2).

Penalty under section 271C shall be levied of an amount equal to tax not deducted (in case of TDS), tax not paid (in case of dividend distribution tax) or ensure payment of (in case of sections 194R, 194S , 194BA ).

Penalty for failure to pay tax in respect of winning from lottery or crossword puzzle

The section 194B provides that the person responsible for paying to any person any income by way of winnings from any lottery or crossword puzzle or card game and other game of any sort in an amount exceeding [ten thousand rupees], shall, at the time of payment thereof, deduct income-tax thereon at the rates in force.

Proviso to section 194B provides that in a case where the winnings are wholly in kind or partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect of the winnings.

If any person fails to pay whole or part of the tax as required under proviso to section 194B than, such person shall be liable to pay penalty under section 271C of an amount equal to tax not paid.

Penalty for failure to collect tax at source

Similar to the provisions of tax deducted at source, section 206C provides certain items in respect of which tax is to be collected at source by the person receiving payment in respect of certain specified items. If the person required to collect tax at source fails to collect the tax, then he shall be liable to pay penalty under section 271CA. Penalty shall be levied of an amount equal to tax not collected.

Taking or accepting certain loans or deposits or specified sum in contravention of provisions of section 269SS

Section 269SS provides that no person shall take or accept loan or deposit or specified sum exceeding Rs. 20,000 by any mode other than account payee cheque or account payee demand draft or use of electricity clearing system through a bank account or through such other electronic modes as may be prescribed.

Specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.

Contravention of the provisions of section 269SS will attract penalty under section 271D. Penalty under section 271D shall be levied of an amount equal to loan or deposit taken or accepted.

Penalty on receipt of an amount of Rs. 2 lakh or more in cash

Section 269ST provides that no person shall receive an amount of Rs. 2,00,000 or more,—

(a) in aggregate from a person in a day;

(b) in respect of a single transaction; or

otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, or through such other electronic mode as may be prescribed.

However, the said restriction shall not apply to Government, any banking company, post office savings bank, co-operative bank or a person notified by the Central Government.

Section 271DA provides for levy of penalty on a person who receives a sum in contravention of the provisions of section 269ST. The penalty shall be equal to the amount of such receipt. However, the penalty shall not be levied if the person proves that there were good and sufficient reasons for such contravention.

Penalty for not providing facility for accepting payment through prescribed electronic modes of payment

The Finance (No. 2) Act, 2019 has inserted a new Section 269SU in Income-tax Act with effect from November 1, 2019. The section provides that every person engaged in business should mandatorily provide the facility for accepting payment through prescribed electronic mode, if the gross receipts from such business exceeds Rs. 50 crore during the immediately preceding previous year.

Consequential penal provisions have been inserted in Section 271DB, which provides for penalty of Rs. 5,000 rupees for every day of default in case the person does not accept payment through notified digital modes. The section also provides for immunity from penalty in case person proves that there is a good and sufficient reasons for such default.

Repaying loans or deposits or specified advance in contravention of provisions of section 269T

section 269T provides that no person shall repay any loan or deposit or specified advance exceeding Rs. 20,000 by any mode other than account payee cheque or account payee demand draft in the name of the person who has made the loan or deposit or paid the specified advance or by use of electricity clearing system through a bank account or through such other electronic mode as may be.

“Specified advance” means any sum of money in the nature of advance, by whatever name called, in relation to transfer of an immovable property, whether or not transfer takes place.

Contravention of the provisions of section 269T will attract penalty under section 271E. Penalty under section 271E shall be a sum equal to loan or deposit or specified advance so repaid.

Failure to furnish statement of financial transaction or reportable account (previously called as ‘Annual Information Return (AIR)’) as required under section 285BA(1)

Non-furnishing of statement of financial transaction or reportable account will attract penalty under section 271FA. Penalty shall be levied of Rs. 500 per day of default.

However, section 285BA(5) empower the tax authorities to issue a notice to the person directing him to file the statement within a period not exceeding 30 days from the date of service of such notice and in such a case person shall furnish the statement within the time specified in the notice. If person fails to file the statement within the specified time, then a penalty of Rs. 1,000 per day shall be levied from the day immediately following the day on which the time specified in such notice for furnishing the statement expires.

Penalty for furnishing inaccurate statement of financial transaction or reportable account

Section 271FAA levies penalty penalty for furnishing inaccurate statement of financial transaction or reportable account.

If a prescribed reporting financial institution referred to in Section 285BA(1) who is required to furnish statement of financial transaction or reportable account:

a) provides inaccurate information in the statement or fails to furnish correct information within the specified period; or

b) fails to comply with the prescribed due diligence requirement

then, the prescribed income-tax authority may direct that such person shall pay, by way of penalty, a sum of fifty thousand rupees.

Further, a penalty of Rs. 5,000 would be levied on reporting financial institution if there is any inaccuracy in SFT and such inaccuracy is due to false or inaccurate information submitted by the holder of reportable accounts. The reporting financial institution may also recover such penalty amount from the holder of the reportable account.

Penalty for failure to furnish statement or information or document by an eligible investment fund.

A new section 9A has been inserted by Finance Act, 2015 to provide that fund management activity carried out 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)

One of the condition is that every eligible investment fund shall, in respect of its activities in a financial year, furnish within 90 days from the end of the financial year, a statement in the prescribed form to the prescribed income-tax authority containing information relating to the fulfilment of the specified conditions or any information or document which may be prescribed. Failure to comply with this condition shall result in penalty of Rs. 5,00,000

Failure to furnish any information or document as required by section 92D(3)

As per section 92D(3) the tax authorities may, in the course of any proceeding under the Act, require any person who has entered into an international transaction or specified domestic transaction to furnish any information or document (as provided in section 92D read with rule 10D). Such information or document is to be produced within a period of 10 days from the date of receipt of a notice issued in this regard (the period can be extended for further 30 days by the tax authorities).Failure to comply with these provisions shall attract penalty under section 271G.

As per section 271G, if any person who has entered into an international transaction or specified domestic transaction fails to furnish any such information or document as discussed above, then the tax authorities may direct that such person shall pay, by way of penalty, a sum equal to 2% of the value of the international transaction or specified domestic transaction for each such failure.

Penalty Section 271GB for failure to furnish report or for furnishing inaccurate report under Section 286

If any reporting entity fails to furnish report [as referred to in Section 286(2)] in respect of international group, then it would be liable to penalty of –

a) Rs 5,000 for every day for which failure continues, if the period of failure does not exceed one month; or

b) Rs 15,000 for every day for which the failure continues beyond the period of one month.

Where a reporting entity provides inaccurate information in the report [as referred to in Section 286(2)], then it is liable to pay penalty of Rs 5,00,000, subject to satisfaction of conditions.

Penalty Section 271GC for failure to furnish report under Section 285 (applicable from AY 2025-26)

If a person fail to furnish statement under section 285 within the prescribed period, the AO may levy the following penalty on him:

a) Rs. 1,000 for each day the failure continues, if the period of failure does not exceed three months; or

b) Rs. 1,00,000 in any other case.

Penalty for failure to furnish information or document under section 285A

A new section 285A has been inserted by Finance Act, 2015 to provide for a reporting obligation on Indian concern through or in which the Indian assets are held by the foreign company or the entity.

The Indian entity shall be obligated to furnish information relating to the off-shore transaction having the effect of directly or indirectly modifying the ownership structure or control of the Indian company or entity.

In case of any failure on the part of Indian concern, it shall pay by way of penalty-

(a) a sum equal to 2% of the value of the transaction in respect of which such failure has taken place in case where such transaction had the effect of directly or indirectly transferring the right of management or control in relation to the Indian concern; and

(b) a sum of Rs. 5,000 in any other case.

Penalty for failure to file the TDS/TCS return

As per section 271H, where a person fails to file the statement of tax deducted/collected at source i.e. TDS/TCS return on or before the due dates prescribed in this regard, then he shall be liable to pay penalty under section 271H. Minimum penalty shall be levied of Rs. 10,000 which can go upto Rs. 1,00,000. Penalty under section 271H will be in addition to late filing fee prescribed under section 234E.

No penalty will be levied under section 271H for the failure to file the TDS/TCS return, if the person proves that after paying tax deducted/collected by him, along with the fee andinterest (if any), to the credit of the Central Government, he has filed the TDS/TCS returnbefore the expiry of a period of one year (see note) from the due date of filing the TDS/TCS return.

Note: The limitation period of one year has been reduced to one month with effect from Assessment Year 2025-26.

In other words, with effect from Assessment Year 2025-26, no penalty under section 271H will be levied in case of delay in filing the TDS/TCS return if following conditions are satisfied :

1) The tax deducted/collected at source is paid to the credit of the Government.

2) Late filing fees and interest (if any) is paid to the credit of the Government.

3) The TDS/TCS return is filed before the expiry of a period of one month from the due date specified in this behalf.

It should be noted that the above relaxation is applicable only in case of penalty levied under section 271H for the delay in filing of TDS/TCS return and not for filing incorrect TDS/TCS return.

Penalty on professionals for furnishing incorrect information in statutory report or certificate

The thrust of the Government in recent past is on voluntary compliance. Certification of various reports and certificates by a qualified professional has been provided in the Act to ensure that the information furnished by an assessee under the provisions of the Act is correct. Various provisions exist under the Act to penalise the defaulting assessee in case of furnishing incorrect information. However, there exist no penal provision for levy of penalty for furnishing incorrect information by the person who is responsible for certifying the same.

In order to ensure that the person furnishing report or certificate undertakes due diligence before making such certification, a new section 271J is inserted under Income-tax Act w.e.f 1/4/2017 so as to provide that if an accountant or a merchant banker or a registered valuer, furnishes incorrect information in a report or certificate under any provisions of the Act or the rules made thereunder, the Assessing Officer or the Commissioner (Appeals) may direct him to pay a sum of Rs. 10,000 for each such report or certificate by way of penalty.

Penalty for failure to furnish information or furnishing inaccurate information under section 195

As per section 195(6) of the Act, any person responsible for paying to a non-resident (not being a company) or to a foreign company, any sum (whether or not chargeable to tax), shall furnish the information relating to payment of such sum in Form 15CA and 15CB .

In case of any failure in this regard a penalty of Rs. 1,00,000 shall be leviable.

Failure to co-operate with the tax authorities

Many times the tax authorities requires any information from a person, in such a case, the tax authorities may request such person to answer questions raised by them or may require the person to sign the statements or may issue him a summon for his attendance. Failure to comply with these directions or notices can attract penalty under section 272A(1) Tax authorities also issues notice under Section 142(1)/Section 143(2) or issues direction for special audit under Section 142(2A). In other words, penalty under section 272A(1) shall be levied if a person refused or fails to:

> Answer questions

> Sign statement

> Attend office to give evidence or produce books of account, etc., in compliance with summons under section 131(1)

> Comply with notice under Section 142(1)/Section 143(2) or fails to comply with direction issued under Section 142(2A)

Penalty leviable under section 272A(1) is Rs. 10,000 for each failure/default.

Penalty under section 272A(2)

Penalty under section 272A(2) is levied in respect of following defaults :

1. Failure to furnish requisite information in respect of securities as required under section 94(6). As per section 94(6)the tax authorities can issue notice asking the taxpayer to furnish the particulars of securities owned by him during the year.

2. Failure to give notice of discontinuance of business or profession as required under section 176(3)(within 15 days of discontinuance of business or profession).

3. Failure to furnish in due time returns, statements or certificates, deliver declaration, allow inspection, etc., under sections 133, 134, 139(4A), 139(4C), 192(2C), 197A, 203, 206, 206C, 206C(1A)and 285B.

4. Failure to deduct and pay tax under section 226(2).

5. Failure to file a copy of the prescribed statement within the time specified in section 200(3)or the proviso to section 206C(3) (up to 1-7-2012).

6. Failure to file the prescribed statement within the time specified in section 206A(1). Section 206A(1)deals with filing of quarterly return by banks, co- operative society, etc. in respect of payment of interest to residents without deduction of tax.

7. Failure to deliver or cause to be delivered a statement under Section 200(2A)or Section 206C(3A)within prescribed time. With effect from 01/06/2015, it has been mandatory for an office of the Government paying TDS or TCS, as the case may be, without production of a challan to deliver to the prescribed authority, a statement in such form and manner as may be prescribed.

Penalty in above cases shall be levied at Rs. 500 per day for every day during which the default continues. In respect of penalty for failure, in relation to a declaration mentioned in section 197A, a certificate as required by section 203 and for default under section 200(2A), 200(3), 206, 206C, 206C(3) and 206C(3A), the quantum of penalty shall not exceed the amount of tax deductible or collectible.

Penalty for failure to comply with provisions of 133B

133B empowers the tax authorities to enter the place of business of the taxpayer to collect information required by the authorities which will be useful under the Act. If the taxpayer fails to comply with the provisions of 133B, then penalty shall be levied under section 272AA(1) upto Rs. 1,000.

Penalty for not providing facility for accepting payment through prescribed electronic modes of payment

Failure to comply with provisions relating to Tax Deduction Account Number or Tax Collection Account Number

As per section 203A, every person deducting tax at source or collecting tax at source has to obtain the Tax Deduction Account Number or Tax Collection Account Number (as the case may be).

Section 203A(2) provides that the deductor or collector of tax at source should quote his Tax Deduction Account Number or Tax Collection Account Number (as the case may be) in the challans, certificates, statement and other documents relating to TDS/TCS. Section 272BB(1) provides for penalty for failure to obtain Tax Deduction Account Number or Tax Collection Account Number (as the case may be) and section 272BB(1A) provides for penalty for quoting incorrect Tax Deduction Account Number or Tax Collection Account Number (as the case may be). Penalty under section 272BB is Rs. 10,000.

Relaxation from penalty

Apart from designing penalty provisions, the Income-tax Act also contains provisions for granting relief from penalty in genuine / deserving cases. Relief can be granted in the following manner:

1. Under section 273A(4)the Principal Commissioner or Commissioner of Income- tax has power to waive or reduce any penalty levied under the Income-tax Act. Penalty can be waived or reduced by the Commissioner of Income-tax if the conditions specified in section 273A(4)in this regard are satisfied.

2. Apart from shelter of section 273A(4)as discussed earlier, section 273Balso provides relief from penalty in genuine cases. As per section 273B, no penalty shall be levied under section 271A, 271AA, 271B, 271BA, 271BB, 271C, 271CA, 271D, 271E, 271F, 271FA, 271FAB,271FB, 271G , 271GA , 271GB , 271GC , 271H, 271-I, 271J, 272A(1) c) or (d) , 272A(2), 272AA(1), 272B, 272BB(1), 272BB(1A), 272BBB(1) or 273(2)(b) or (c), if the taxpayer proves that there was reasonable cause for such failure.

Penalty for passing unreasonable benefits to trustee or specified person

The Finance Act, 2022 has inserted a new section 271AAE to the Income-tax Act to levy a penalty on trusts or institutions. Section 271AAE has been inserted to provide as follows:

(a) An institution covered by section 11 to 13 shall be liable to penalty in respect of violation of section 13(1)(c).

(b) An institution covered by section 10(23C)(iv)/(v)/(vi)/(via) shall be liable to penalty in respect of violation of twenty first proviso to section 10(23C) [which is corresponding to section 13(1)(c)].

The penalty is to be computed as follows:

(a) For the first violation: to the extent of income applied by the institution for the benefit of any interested party referred to in section 13(3);

(b) For any violation in subsequent years: twice the amount of such income so applied (“double penalty”).

This section is applicable with effect from Assessment Year 2023-24.

MCQ ON PENALTIES UNDER THE INCOME-TAX ACT

Q1. As per section 140A(1) any tax due (after allowing credit for TDS, advance tax, etc.) along with interest under section 234A, 234B and 234C (if any) and fee should be paid before filing the return of income. Tax paid as per section 140A(1) is called _______.

(a) Advance tax (b) Self assessment tax

Correct answer : (b)

Justification of correct answer :

As per section 140A(1) any tax due (after allowing credit for TDS, advance tax, etc.) along with interest under section 234A, 234B and 234C (if any) and fee should be paid before filing the return of income. Tax paid as per section 140A(1) is called ‘self assessment tax’.

Thus, option (b) is the correct option.

Q2. Section 234E provides for levy of late filing fees for the delay in filing of _____

(a) Return of income (b) TDS return

Correct answer : (d)

Justification of correct answer :

Section 234E provides for levy of late filing fees for the delay in filing TDS/TCS return.

Thus, option (d) is the correct option.

Q3. If the taxpayer fails to maintain books of account as per the provisions of section 44AA, then he shall be liable to pay penalty under section ______ of Rs. 25,000.

(a) 271B (b) 271A

Correct answer : (b)

Justification of correct answer :

If the taxpayer fails to maintain books of account as per the provisions of section 44AA, then he shall be liable to pay penalty under section 271A. Penalty under section 271A is Rs. 25,000.

Thus, option (b) is the correct option.

Q4. If a taxpayer, in spite of the requirement of section 44AB, fails to get his accounts audited, then he shall be liable for penalty under section 271B of one-half per cent of total sales, turnover or gross receipts, etc., or _________, whichever is less.

(a) Rs. 2,00,000 (b) Rs. 1,50,000

Correct answer : (b)

Justification of correct answer :

section 44AB prescribes when the accounts of the taxpayer are to be audited. If a taxpayer, in spite of the requirement of section 44AB, fails to get his accounts audited, then he shall pay penalty under section 271B. Penalty under section 271B will be levied for failure to get the accounts audited or failure to furnish a report of audit as required under section 44AB. Penalty will be one-half per cent of total sales, turnover or gross receipts, etc., or Rs. 1,50,000, whichever is less.

Thus, option (b) is the correct option.

Q5. Section 269SS provides that no person shall take or accept loan or deposit or specified sum exceeding Rs. 50,000 by any mode other than account payee cheque or account payee demand draft or by use of electricity clearing system through a bank account or through such other electronic mode as may be prescribed Contravention of the provisions of section 269SS will attract penalty under section 271D of an amount equal to loan or deposit taken or accepted or specified sum.

(a) True (b) False

Correct answer : (b)

Justification of correct answer :

Section 269SS provides that no person shall take or accept loan or deposit or specified sum exceeding Rs. 20,000 by any mode other than account payee cheque or account payee demand draftor by use of electricity clearing system through a bank account or through such other electronic mode as may be prescribed. Contravention of the provisions of section 269SS will attract penalty under section 271D. Penalty under section 271D shall be levied of an amount equal to loan or deposit taken or accepted or specified sum.

Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q6. Penalty under section 271FA shall be levied for failure to file statement of financial transaction or reportable account (previously called as Annual Information Return). Penalty under section 271FA is Rs. for every day during which the failure continues.

(a) 500 (b) 250

Correct answer : (a)

Justification of correct answer :

Penalty under section 271FA shall belevied for failure to file statement of financial transaction or reportable account. Penalty under section 271FA is Rs. 500 for every day during which the failure continues.

Thus, option (a) is the correct option.

Q 7. What is the rate of penalty for underreporting of income under Section 270A?

(a) 100% (b) 200%

Correct answer : (d)

Justification of correct answer :

The rate of penalty shall be fifty per cent of the tax payable on under-reported income. However, in a case where under-reporting of income results from misreporting of income, the taxpayer shall be liable for penalty at the rate of two hundred per cent of the tax payable on such misreported income.

Q8. As per section 271H, where a person fails to file the statement of tax deducted/collected at source i.e. TDS/TCS return on or before the due dates prescribed in this regard, then he shall be liable to pay penalty under section 271H. Minimum penalty can be levied of Rs. 10,000 which can go upto Rs _____.

(a) 1,00,000 (b) 2,00,000

Correct answer : (a)

Justification of correct answer :

As per section 271H, where a person fails to file the statement of tax deducted/collected at source i.e. TDS/TCS return on or before the due dates prescribed in this regard, then he shall beliable to pay penalty under section 271H. Minimum penalty can be levied of Rs. 10,000 which can go upto Rs. 1,00,000. Penalty under section 271H will be in addition to late filing fee prescribed under section 234E.

Thus, option (a) is the correct option.

Q9.272B provides penalty in case of default by the taxpayer in complying with the provisions of section 139A or knowingly quoting incorrect PAN or Aadhaar Number in any document referred to in section 139A(5)(c) or intimates incorrect PAN or Aadhaar Number for the purpose of section 139A(5A)/(5C). Penalty under section 272B is Rs. ______ for each default.

(a) 1,00,000 (b)50,000

Correct answer : (d)

Justification of correct answer :

Section 272B provides for penalty in case of default in complying with the provisions relating to PAN, i.e., failure to obtain, quote, or authenticate PAN. The amount of penalty shall be Rs. 10000 for each default.

As the Finance (No. 2) Act, 2019 as provided for interchangeability of Aadhaar with PAN, Consequential amendments have been made in the penal provisions of Section 272B so as to levy a penalty of Rs. 10,000 for each default in the following cases:

a) If assessee fails to quote or intimate his PAN or Aadhaar or quotes or intimates invalid PAN or Aadhaar.

b) If assessee fails to quote or authenticate his PAN or Aadhaar in specified transactions.

c) If receiver (i.e., banks, financial institution, etc.) of documents in respect of specified transactions fails to ensure that the PAN or Aadhaar are duly quoted and authenticated.

Thus, option (d) is the correct option.

Q10. Section 272BB(1A) provides for penalty for quoting incorrect Tax Deduction Account Number or Tax Collection Account Number (as the case may be). Penalty under section 272BB is Rs ____________.

(a) 75,000 (b) 50,000

Correct answer : (c)

Justification of correct answer :

Thus, option (c) is the correct option.

Power of Commissioner to reduce or waive penalty

Disclaimer:

The contents of this document are for information purposes only. This aims to enable public to have a quick and an easy access to information and do not purport to be legal documents.

Viewers are advised to verify the content from Government Acts/Rules/Notifications etc.

POWER OF PRINCIPAL COMMISSIONER OR COMMISSIONER TO REDUCE OR WAIVE PENALTY

In the tutorial on “Penalties Under the Income-tax Act”, we discussed various penalties imposable under the Income-tax Act in respect of various defaults. Apart from enacting penalty provisions, the Income-tax Act also designed provisions empowering the Principal Commissioner of Income-tax or Commissioner of Income-tax to grant relief from penalty to taxpayers in genuine cases. Such power is granted under section 273A and section 273AA. In this part you can gain knowledge about the provisions of section 273A and section 273AA.

Overview of major penalties under the Income-tax Act

Before understanding the provisions of section 273A and 273AA it is better to take an overview of the penal provisions under the Income-tax Act. The following table highlights major penalties imposable under the Income-tax Act.

*Nature of default/failure*	*Sections*	*Penalty*
Default in payment of any tax due	Section 221(1)	Such an amount as the Assessing Officer may impose but not exceeding the amount of tax.
Determination of undisclosed income of block period	Section 158BFA(2)	50 per cent of tax leviable in respect of undisclosed income
Under-reporting and misreporting of income	Section 270A(1)	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
Failure to keep, maintain or retain books of account, documents, etc., as are required under section 44AA	Section 271A	Rs. 25,000
Failure to keep and maintain information and documents required in respect of international transaction or specified domestic transaction, failure to report such transaction, etc.	Section 271AA	2% of the value of each international transaction or specified domestic transaction entered into by the taxpayer.
Failure to furnish information and document as required under Section 92D(4)	Section 271AA(2)	Rs. 5,00,000/-
Penalty in case of search (Search is initiated on or after July 1, 2012 but before December 15, 2016)	Section 271AAB	10%, 20% and 60% of the undisclosed income, as the case may be.
Penalty in case of search (if search is initiated on or after December 15, 2016 but before September 01, 2024)	Section 271AAB	30% or 60% of undisclosed income, as the case may be
Penalty where income includes any income referred to in Section 68, Section 69, Section 69A, Section 69B, Section 69C or Section 69D.(if such income is not included by the assesse in his return of income or tax in accordance with section 115BBE has not been paid)	Section 271AAC	10% of tax payable on undisclosed income
‘False Entry’ in the books of account or an entry omitted to evade tax liability	Section 271AAD	An amount equal to the aggregate amount of false entries or omitted entry
Passing unreasonable benefits to trustee or specified person	271AAE	For the first violation: to the extent of income applied by the institution for such benefit. For any violation in subsequent years: twice the amount of such income so applied.
Failure to get accounts audited or furnish a report of audit as required under section 44AB	Section 271B	One-half per cent of total sales, turnover or gross receipts, etc., or Rs. 1,50,000, whichever is less
Failure to furnish a report from an accountant as required by section 92E	Section 271BA	Rs. 1,00,000
Failure to deduct tax at source, wholly or partly or failure to pay wholly or partly tax under section 115-O(2)	Section 271C	An amount equal to tax not deducted (in case of TDS) or tax not paid (in case of dividend distribution tax)
Failure source to collect tax at	Section 271CA	An amount equal to tax not collected.
Taking or accepting certain loans or deposits or specified sum* in contravention of provisions of section 269SS *“Specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.	Section 271D	An amount equal to loan or deposit or specified sum so taken or accepted
Accepting cash of Rs. 2,00,000 or more in contravention to Section 269ST	Section 271DA	An amount equivalent to cash receipt
Failure to provide facility for accepting payment through prescribed electronic modes of payment	Section 271DB	Rs. 5,000 rupees every day for which the default continues.
Repaying loans or deposits or specified advance* in contravention of provisions of section 269T *“Specified advance” means any sum of money in the nature of advance, by whatever name called, in relation to transfer of an immovable property, whether or not transfer takes place	Section 271E	An amount equal to loan or deposit or specified advance so repaid
Failure to furnish statement of financial transaction or reportable account (previously called as Annual Information Return) as required under section 285BA(1)	Section 271FA	Rs. 500 or Rs. 1,000, as the case may be, per day of default
Failure to furnish an accurate statement of financial transaction or reportable account or due diligence requirement	Section 271FAA(1)	Rs. 50,000
Reporting any inaccuracy in SFT and such inaccuracy is due to false or inaccurate information submitted by the holder of reportable accounts.	Section 271FAA(2)	Rs. 5,000 for every inaccurate reportable account Note: The reporting financial institution may also recover such penalty amount from the holder of the reportable account.
Failure to furnish statement or information or document [as required under Section 9A(5)] by an eligible investment fund within the prescribed time-limit.	Section 271FAB	An amount equal to Rs.5,00,000
Failure to furnish any information or document as required by section 92D(3)	Section 271G	2% of the value of the international transaction or specified domestic transaction for each such failure
Failure to furnish information or document under section 285A* by an Indian concern.	Section 271GA	A sum equal to 2% of the value of the transaction in respect of which such failure has taken place, if such transaction had the effect of directly or indirectly transferring the right of management or control in relation to the Indian concern; An amount equal to Rs. 5,00,000 in any other case
*Section 285A provides that where any share or interest of foreign company derives its value substantially from assets located in India, and such company holds such assets in India through Indian Concern then such Indian concern shall furnish the prescribed information to the income-tax authority.	Section 271GA
Failure to report furnish under section 286(2)	Section 271GB(1)	Rs. 5,000 per day if the period of failure does not exceed one month and Rs. 15,000 per day beyond the period of 1 month
Failure to produce the information and documents within the period allowed under section 271GB(6)	Section 271GB(2)	Rs. 5,000 for every day during which the failure continues.
Failure to furnish report or failure to produce information/documents under section 286 even after serving order under section 271GB(1) or 271GB(2)	Section 271GB(3)	Rs. 50,000 for every day for which such failure continues beginning from the date of serving such order.
Failure to inform about inaccuracy in report furnish under section 286(2) Or furnishing of inaccurate information or document in response to notice issued under section 286(6).	Section 271GB(4)	Rs. 5,00,000
Failure to submit statement under section 285	Section 271GC	Rs. 1,000 for each day the failure continues, if the period of failure does not exceed three months; or Rs. 1,00,000 in any other case.
Failure to file the TDS/TCS return	Section 271H	Not less than Rs.10,000 and upto Rs. 1,00,000
Failure to furnish information or furnishing of inaccurate information under Section 195(6) in respect of payment made to non-residents.	Section 271-I	An amount equal to Rs. 1,00,000
Penalty for failure to furnish statements, etc.	Section 271K	Rs. 10,000 to Rs. 1 lakh if assessee fails to furnish the statement or fails to furnish a certificate under section 35 or section 80G
Furnishing of Incorrect information by an Chartered Accountant or a merchant banker or a registered valuer in a report or certificate	Section 271J	Rs. 10,000 for each such report or certificate
Failure to co-operate with the tax authorities, (i.e., not answering any question, not signing statements, etc.) or failure to comply with notice issued under section 142(1)/143(2) or failure to comply with direction issued under section 142(2A).	Section 272A(1)	Rs. 10,000 for each failure/default
Penalty under section 272A(2)	Section 272A(2)	Rs. 500 per day for every day during which the default continues.
Failure to comply with section 133B	Section 272AA(1)	An amount not exceeding Rs. 1,000
Failure to comply with provisions relating to Permanent Account Number (PAN) or Aadhar	Section 272B	Rs. 10,000 for each default
Failure to comply with provisions relating to Tax Deduction Account Number or Tax Collection Account Number	Section 272BB(1)	Rs. 10,000
Failure to comply with the provisions relating to Tax Collection Account Number	Section 272BBB	Rs. 10,000

Power of Principal Commissioner or Commissioner to reduce or waive penalty under sections 273A(1), 273A(4) and 273AA

> Waiver or reduction of penalty under section 273A(1)

Section 273A(1) empowers the Principal Commissioner or Commissioner to grant waiver or reduction from penalty imposed or imposable under section 270A (i.e., penalty for under-reporting and misreporting of income) or under section 271(1)(iii) (i.e., penalty for concealment of particulars of income or furnishing inaccurate particulars of income).

Initiation to be taken by Principal Commissioner or Commissioner or the taxpayer

The waiver or reduction under section 273A(1) can be granted by the Principal Commissioner or Commissioner either on his own motion or otherwise, i.e., on an application made by the taxpayer.

Conditions for granting relief

Relief under section 273A(1) is granted if following conditions are satisfied :

(1) Prior to the detection by the Assessing Officer of the concealment of particulars of income or of the inaccuracy of particulars furnished in respect of such income, the taxpayer voluntarily and in good faith, makes a full and true disclosure of such particulars.

For the purpose of section 273A(1), a person shall be deemed to have made full and true disclosure of his income or of the particulars relating thereto in any case where the excess of income assessed over the income returned is of such a nature as not to attract penalty under section 270A or under section 271(1)(iii).

(2) The taxpayer should have co-operated in any enquiry relating to the assessment.

(3) The taxpayer either should have paid or made satisfactory arrangements for paying any tax or interest payable in consequence of an order passed under the Act in respect of the relevant year.

Previous approval of Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General

If the amount of income in respect of which the penalty is imposed or imposable for the relevant year or, where such disclosure relates to more than one year, the aggregate amount of such income for those years exceeds a sum of Rs. 5,00,000, no order reducing or waiving the penalty under section 273A(1) shall be made by the Principal Commissioner or Commissioner, except with the previous approval of the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General, as the case may be.

Finality of the order

Every order made under section 273A shall be final and shall not be called into question by any Court or any other authority.

No relief if waiver claimed earlier

As per section 273A(3), where an order has been made under section 273A(1) in favour of any person, whether such order relates to one or more years, he shall not be entitled to any relief under section 273A in relation to any other year at any time after the making of such order.

Thus, if a person has claimed relief under section 273A(1) at any time, then he cannot claim relief under section 273A [i.e., 273A(1) as well as section 273A(4)] thereafter.

> Waiver or reduction of penalty under section 273A(4)

Section 273A(4) empowers the Principal Commissioner or Commissioner to waive or reduce any penalty imposable under the Income-tax Act as well as to stay or compound any proceeding for the recovery of penalty.

Initiation to be taken by the taxpayer

For obtaining waiver or reduction or stay or compound any proceeding for the recovery of penalty, the taxpayer has to make an application to the Principal Commissioner or Commissioner.

Conditions for granting relief

Relief under section 273A(4) is granted if following conditions are satisfied :

(1) Levy of penalty will cause genuine hardship on the taxpayer.

(2) The taxpayer has co-operated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him.

Previous approval of Chief Commissioner or Director General

If the amount of any penalty or, where such application relates to more than one penalty, the aggregate amount of such penalties exceeds Rs. 1,00,000, no order of reducing or waiving the amount or compounding any proceeding for its recovery under section 273A(4) shall be made by the Principal Commissioner of Commissioner, except with the previous approval of the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General, as the case may be.

Time-limit for passing order under section 273A(4)

The Principal Commissioner or Commissioner, as the case may be, shall pass order, either accepting or rejecting assessee’s application to reduce or waive penalty, within a period of 12 months from the end of the month in which application is received.

However, order shall be passed on or before May 31, 2017 in case of application pending as on June 1, 2016.

Further, no order rejecting the application shall be passed unless the assessee has been given an opportunity of being heard.

Finality of the order

Every order made under section 273A shall be final and shall not be called into question by any Court or any other authority.

No relief if waiver claimed earlier

Section 273A(1) empowers the Principal Commissioner or Commissioner to grant waiver or reduction from penalty levied under section 270A (i.e., penalty for under-reporting and misreporting of income) or under section 271(1)(iii) (i.e., penalty for concealment of particulars of income or furnishing inaccurate particulars of income).

Thus, if a person has claimed relief under section 273A(1) at any time, then he cannot claim relief under section 273A [i.e., section 273A(1) as well as section 273A(4)] thereafter.

Waiver of penalty under Section 273AA

Section 273AA empowers the Principal Commissioner or Commissioner to grant immunity from imposition of any penalty under the Income-tax Act in a case where the taxpayer has made an application for settlement under section 245C and the proceedings for settlement have been abated under section 245HA and penalty proceedings are initiated under the Income-tax Act.

Initiation to be taken by the taxpayer

For obtaining waiver, the taxpayer has to make an application to the Commissioner.

Time-limit for passing order under section 273AA

However, order shall be passed on or before May 31, 2017 in case of application pending as on June 1, 2016.

Further, no order rejecting the application shall be passed unless the assessee has been given an opportunity of being heard.

Other provisions applicable to the case of waiver under section 273AA

The application to the Commissioner for waiver shall not be made after the imposition of penalty after abatement.

The Commissioner may, subject to such conditions as he may think fit to impose, grant to the person immunity from the imposition of any penalty under the Income-tax Act.

Before granting the waiver, the Commissioner should be satisfied that the taxpayer has, after the abatement, co-operated with the Income-tax authority in the proceedings before him and made a full and true disclosure of his income and the manner in which such income has been derived.

The immunity granted under section 273AAshall stand withdrawn, if such person fails to comply with any condition subject to which the immunity was granted and after the withdrawal of the immunity, the provisions of the Act shall apply as if such immunity had not been granted.

The immunity granted under section 273AA may, at any time, be withdrawn by the Principal Commissioner or Commissioner, if he is satisfied that such person had, in the course of any proceedings, after abatement, concealed any particulars material to the assessment from the income-tax authority or had given false evidence, and thereupon such person shall become liable to the imposition of any penalty under the Act to which such person would have been liable, had not such immunity been granted.

MCQ ON POWER OF COMMISSIONER TO REDUCE OR WAIVE PENALTY

Q1. Principal Commissioner or Commissioner of Income-tax is empowered to grant relief from penalty to taxpayers in genuine cases. Such power is granted under section 273A and section ______.

(a) 274 (b) 273AA

Correct answer : (b)

Justification of correct answer :

Apart from enacting penalty provisions, the Income-tax Act also designed provisions empowering the Principal Commissioner or Commissioner of Income-tax to grant relief from penalty to taxpayers in genuine cases. Such power is granted under section 273A and section 273AA.

Thus, option (b) is the correct option.

Q2. Section 273A(1) empowers the Principal Commissioner or Commissioner to grant waiver or reduction from penalty imposed or imposable under section 271F i.e. penalty for failure to file the return of income.

(a) True (b) False

Correct answer : (b)

Justification of correct answer :

Section 273A(1) empowers the Principal Commissioner or Commissioner to grant waiver or reduction from penalty imposed or imposable under section 270A (i.e., penalty for under-reporting and misreporting of income) or under section 271(1)(c) (i.e., penalty for concealment of particulars of income or furnishing inaccurate particulars of income). The relief is subject to conditions specified in this regard.

Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q3. Section 273A(4) empowers the Principal Commissioner or Commissioner to waive or reduce any penalty levied under the Income-tax Act as well as to stay or compound any proceeding for the recovery of penalty.

(a) True (b) False

Correct answer : (a)

Justification of correct answer :

Section 273A(4) empowers the Principal Commissioner or Commissioner to waive or reduce any penalty levied under the Income-tax Act as well as to stay or compound any proceeding for the recovery of penalty. The relief is subject to conditions specified in this regard.

Thus, the statement given in the question is true and hence, option (a) is the correct option.

Q4. Section 273AA empowers the Principal Commissioner or Commissioner to waive off penalty in a case where the taxpayer has made an application for settlement under section 245C and the proceedings for settlement have been completed and penalty proceedings are initiated under the Income-tax Act.

(a) True (b) False

Correct answer : (b)

Justification of correct answer :

Section 273AA empowers the Principal Commissioner or Commissioner to waive off penalty in a case where the taxpayer has made an application for settlement under section 245C and the proceedings for settlement have been abated under section 245HA and penalty proceedings are initiated under the Income-tax Act.

Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q5. The waiver or reduction under section 273A(1) can be granted by the Principal Commissioner or Commissioner on his own motion but not on an application made by the taxpayer.

(a) True (b) False

Correct answer : (b)

Justification of correct answer :

The waiver or reduction under section 273A(1) can be granted by the Principal Commissioner or Commissioner either on his own motion or otherwise, i.e., on an application made by the taxpayer.

Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q6. If the amount of income in respect of which the penalty is imposed or imposable for the relevant year(s) exceeds Rs. , then no order reducing or waiving the penalty under section 273A(1) shall be made by the Principal Commissioner or Commissioner, except with the previous approval of the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General, as the case may be.

(a) 1,00,000 (b) 5,00,000

Correct answer : (b)

Justification of correct answer :

Thus, option (b) is the correct option.

Q7. Every order made under section 273A shall be final and shall not be called into question by any Court or any other authority.

(a) True (b) False

Correct answer : (a)

Justification of correct answer :

Every order made under section 273A shall be final and shall not be called into question by any Court or any other authority.

Thus, the statement given in the question is true and hence, option (a) is the correct option.

Q8. As per section 273A(3), where an order has been made under section 273A(1) in favour of any person, whether such order relates to one or more years, he shall not be entitled to any relief under section 273A in relation to any other year at any time after the making of such order.

(a) True (b) False

Correct answer : (a)

Justification of correct answer :

Thus, if a person has claimed relief under section 237A(1) at any time, then he cannot claim relief under section 273A [i.e., section 273A(1) as well as section 273A(4)] thereafter.

Thus, the statement given in the question is true and hence, option (a) is the correct option.

Q9. Relief under section 273A(4) is granted if levy of penalty will cause genuine hardship on the taxpayer.

(a) True (b) False

Correct answer : (b)

Justification of correct answer:

Relief under section 273A(4) is granted if following conditions are satisfied :

(1) Levy of penalty will cause genuine hardship on the taxpayer.

(2) The taxpayer has co-operated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him.

Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q10. The immunity granted under section 273AA may, at any time, be withdrawn by the Principal Commissioner or Commissioner, if he is satisfied that such person had, in the course of any proceedings, after abatement, concealed any particulars material to the assessment from the income-tax authority or had given false evidence

(a) True (b) False

Correct answer : (a)

Justification of correct answer :

Thus, the statement given in the question is true and hence, option (a) is the correct option.

Late filing fees and penalty for failure to furnish/delay in furnishing the TDS/TCS statements

Disclaimer:

The contents of this document are for information purposes only. This aims to enable public to have a quick and an easy access to information and do not purport to be legal documents.

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LATE FILING FEES AND PENALTY FOR FAILURE TO FURNISH/DELAY IN FURNISHING THE TDS/TCS STATEMENTS

Before understanding the penalty provisions for failure to furnish the statement of Tax Deducted at Source or statement of Tax Collected as Source (i.e. commonly known as TDS/TCS return) we shall first have a look at the few basic duties of a person liable to deduct/collect tax at source and due dates for filing of TDS/TCS return.

Duties of the person liable to deduct/collect tax at source

He shall obtain Tax Deduction Account Number or Tax Collection Account Number (as the case may be) and quote the same in all the documents pertaining to TDS/TCS.
He shall deduct/collect the tax at source at the applicable rate.
He shall pay the tax deducted/collected by him to the credit of the Government.
He shall file the periodic TDS/TCS statements, i.e., TDS/TCS return.
He shall issue the TDS/TCS certificate in respect of tax deducted/collected by him.

Due Dates for filing of TDS/TCS return

The due dates for filing of TDS/TCS return for different quarters of Financial Year 2025- 26 are as follows:

Quarter ending	Due date for filing of TDS return (Both for Government and other Deductor)	Due date for filing of TCS return
30th June 2025	31st July 2025	15th July 2025
30th September 2025	31st October 2025	15th October 2025
31st December 2025	31st January 2026	15th January 2026
31st March 2026	31th May 2026	15th May 2026

Basic provisions

A person who fails to file the TDS/TCS return or does not file the TDS/TCS return by the due dates prescribed in this regard has to pay late filing fees as provided under section 234E and apart from late filing fees he shall be liable to pay penalty under section 271H. In this part you can gain knowledge about the provisions of section 234E and section 271H.

Late filing fees under section 234E

TDS/TCS return cannot be filed without payment of late filing fees as discussed above. In other words, the late filing fees shall be deposited before filing the TDS return. It should be noted that Rs. 200 per day is not penalty but it is a late filing fee.

Illustration

The quarterly statement of TDS i.e. TDS return for the first quarter of the year 2025-26 is filed by Mr. Kapoor on 4-4-2026. Tax deducted at source during the quarter amounted to Rs. 8,40,000. What will be the amount of late filing fees to be paid by him for delay in filing the TDS return?

The due date for filing of TDS return for the first quarter of the year 2025-26 i.e. April 2025 to June 2025 is 31st July, 2025. The return is filed on 4th April, 2026, thus there is a delay of 247 days as computed below:

*Particulars*	*Days*
August 2025	31
September 2025	30
October 2025	31
November 2025	30
December 2025	31
January 2026	31
February 2026	28
March 2026	31
April 2026	4
*Total*	247

From the above computation it can be observed that there is a delay of 247 days. Late filing fees under section 234E will be charged at Rs. 200 per day, thus for 247 days the late filing fees will come to Rs. 49,400.

Illustration

The quarterly statement of TDS i.e. TDS return for the second quarter of the year 2025-26 is filed by Essem Ltd. on 4-4-2026. Tax deducted at source during the quarter amounted to Rs. 8,400. What will be the amount of late filing fees to be paid by the company for delay in filing the TDS return?

The due date of filing the TDS return for the second quarter of the year 2025-26 i.e. July 2025 to September 2025 is 31st October, 2025. The return is filed on 4th April, 2026, thus there is a delay of 155 days as computed below:

*Particulars*	*Days*
November 2025	30
December 2025	31
January 2026	31
February 2026	28
March 2026	31
April 2026	4
Total	155

From the above computation it can be observed that there is a delay of 155 days. Late filing fees under section 234E will be charged at Rs. 200 per day, thus for 155 days the late filing fees will come to Rs. 31,000. However, the late filing fees cannot exceed the amount of tax deducted at source. TDS for the quarter is Rs. 8,400 and hence late filing fees shall be Rs. 8,400.

Illustration

The quarterly statement of tax collected at source i.e. TCS return for the first quarter of the year 2025-26 is filed by Mr. Krunal on 4-8-2025. Tax collected at source during the quarter amounted to Rs. 84,000. What will be the amount of late filing fees to be paid by him for delay in filing the TCS return?

In case of Non-Government deductor, the due date of filing the TCS return for the first quarter of the year 2025-26 i.e. April 2025 to June 2025 is 15th July, 2025. The return is filed on 4th August, 2025, thus there is a delay of 20 days as computed below:

*Particulars*	*Days*
July 2025	16
August 2025	4
Total	20

From the above computation it can be observed that there is a delay of 20 days. Late filing fees under section 234E will be charged at Rs. 200 per day, thus for 20 days the late filing fees will come to Rs. 4,000.

Illustration

The quarterly statement of tax collected at source i.e. TCS return for the second quarter of the year 2025-26 is filed by Mr. Raja on 4-12-2025. Tax collected at source during the quarter amounted to Rs. 2,520. What will be the amount of late filing fees to be paid by him for delay in filing the TCS return?

The due date of filing the TCS return for the second quarter of the year 2025-26 i.e. July 2025 to September 2025 is 15th October, 2025. The return is filed on 4th December, 2025, thus there is a delay of 50 days as computed below:

*Particulars*	*Days*
October 2025	16
November 2025	30
December 2025	4
Total	50

From the above computation it can be observed that there is a delay of 50 days. Late filing fees under section 234E will be charged at Rs. 200 per day, thus for 50 days the late filing fees will come to Rs. 10,000. However, the late filing fees cannot exceed the amount of tax collected at source. TCS during the quarter amounts to Rs. 2,520 and hence, late filing fees shall be Rs. 2,520.

Illustration

The quarterly statement of Tax deducted at source i.e. TDS return for the last quarter of the year 2025-26 is not filed by Mr. Raj till 31st May, 2026. Can he file the TDS return of last quarter of the year 2025-26 after 31st May, 2026 without payment of any late filing fees?

The due date of filing the TDS return for the last quarter of the year 2025-26 i.e. January 2026 to March 2026 is 31st May, 2026. The return is not filed till 31st May, 2026 and hence late filing fees under section 234E of Rs. 200 per day of default will be levied. TDS return cannot be filed without payment of late filing fees as discussed above. In other words, the late filing fees shall be deposited before filing the TDS return. Hence, in this case, Mr. Raj cannot file the TDS return without payment of late filing fees of Rs. 200 per day.

Computation of fee under Section 234E at the time of processing of TDS/TCS statement

Section 200A of the Income-tax Act provides for processing of TDS statements for determining the amount payable or refundable to the deductor. Provisions of Section 200A has been amended by the Finance Act, 2015 so as to enable computation of fee payable under section 234E at the time of processing of TDS statements.

As the mechanism of TCS statement is similar to TDS statement, a new section 206CB has been inserted by Finance Act, 2015 to provide for processing of TCS statements on the lines of existing provisions for processing of TDS statement contained in section 200A of the Income-Tax Act. The new section 206CB also provides for mechanism for computation of fee payable under section 234E at the time of processing of TCS statement.

Penalty under section 271H

As per section 271H, where a person fails to file the statement of tax deducted/collect at source i.e. TDS/TCS return on or before the due dates prescribed in this regard, then assessing officer may direct such person to pay penalty under section 271H. Minimum penalty can be levied of Rs. 10,000 which can go upto Rs. 1,00,000. Penalty under section 271H will be in addition to late filing fees prescribed under section 234E.

Apart from delay in filing of TDS/TCS return, section 271H also covers cases of filing incorrect TDS/TCS return. Penalty under section 271H can also be levied if the deductor/collector files an incorrect TDS/TCS return. In other words, minimum penalty of Rs. 10,000 and maximum penalty of upto Rs. 1,00,000 can be levied if the deductor/collector files an incorrect TDS/TCS return.

No penalty will be levied under section 271H for the failure to file the TDS/TCS return, if the person proves that after paying tax deducted/collected by him, along with the late- filing fee and interest (if any), to the credit of the Central Government, he had filed the TDS/TCS return before the expiry of a period of one year (see note) from the due date of filing the TDS/TCS return.

Note: The limitation period of one year has been reduced to one month with effect from Assessment Year 2025-26.

In other words, with effect from Assessment Year 2025-26, no penalty under section 271H will be levied in case of delay in filing the TDS/TCS return if following conditions are satisfied:

The tax deducted/collected at source is paid to the credit of the Government.
Late filing fees and interest (if any) is paid to the credit of the Government.
The TDS/TCD return is filed before the expiry of a period of one month from the due date specified in this behalf.

It should be noted that the above relaxation is applicable only in case of penalty levied under section 271H for delay in filing the TDS/TCS return and not in case of filing incorrect TDS/TCS statement.

Apart from above relaxation, in following two cases the taxpayer can get relief from penalty under section 271H:

Under section 273A(4)the Principal Commissioner of Income-tax or Commissioner of Income-tax has power to waive or reduce the penalty levied under the Income-tax Act. Penalty can be waived or reduced by the Commissioner of Income-tax if the conditions specified in section 273A(4)in this regard are satisfied.
Apart from shelter of section 273A(4), section 273Balso provides immunity from penalty in genuine cases. As per section 273B, penalty under section 271Hwill not be levied if the taxpayer proves that there was a reasonable cause for failure.

Illustration

The quarterly statement of tax deducted at source i.e. TDS return for the first quarter of the year 2025-26 is filed by Mr. Krunal on 10-8-2025. Tax deducted at source during the quarter amounted to Rs. 84,000. Before filing the TDS return he has paid the TDS, interest and late filing fees to the credit of the Government. Will he be liable to penalty under section 271H for delay in filing the TDS return?

Penalty under section 271H can be levied for delay in filing the TDS return. In this case, the due date of filing the TDS return for the first quarter of the year 2025-26 i.e. April 2025 to June 2025 is 31st July, 2025. The return is filed on 10th August, 2025, thus there is a delay of 10 days (i.e. less than a month). As per section 271H(3) no penalty under section 271H will be levied in case of delay in filing the TDS/TCS return if following conditions are satisfied :

The tax deducted/collected at source is paid to the credit of the Government.
Late filing fees and interest (if any) is paid to the credit of the Government.
The TDS/TCD return is filed before the expiry of a period of one month from the due date specified in this behalf.

In the present case, all the aforesaid conditions are satisfied because the delay in filing the TDS return is of less than 1 month and interest and late filing fees are paid before filing the TDS return, thus penalty under section 271H will not be levied.

The same provision as discussed above will apply in case of delay in filing the statement of tax collected at source i.e. TCS return.

Illustration

The quarterly statement of tax deducted at source i.e. TDS return for the first quarter of the year 2025-26 is filed by Mr. Rahul on 20-9-2025. Tax deducted at source during the quarter amounted to Rs. 1,84,000. Before filing the TDS return he has paid the TDS, interest and late filing fees to the credit of the Government. Will he be liable to penalty under section 271H for delay in filing the TDS return?

Penalty under section 271H can be levied for delay in filing the TDS return. The due date of filing the TDS return for the first quarter of the year 2025-26 i.e. April 2025 to June 2025 is 31st July, 2025. The return is filed on 20th September, 2024, thus there is a delay of 51 days (i.e. more than a month). As per section 271H(3) no penalty under section 271H will be levied in case of delay in filing the TDS/TCS return if following conditions are satisfied :

The tax deducted/collected at source is paid to the credit of the Government.
Late filing fees and interest (if any) is paid to the credit of the Government.
The TDS/TCD return is filed before the expiry of a period of one month from the due date specified in this behalf.

In the above case, the delay is of more than 1 month and hence the above immunity will not be available. Thus, the Assessing Officer can levy penalty under section 271H. Minimum penalty of Rs. 10,000 and maximum penalty of Rs. 1,00,000 can be levied by the Assessing Officer. However, Mr. Rahul has following two remedies to get relief from penalty:

He can apply to Principal Commissioner of Income-tax or Commissioner of Income-tax under section 273A(4)to seek relief from penalty.
He can seek relief under section 273Bby proving that there was a reasonable cause for failure.

The same provision as discussed above will apply in case of delay in filing the statement of tax collected at source i.e. TCS return.

Illustration

The quarterly statement of tax deducted at source i.e. TDS return for the first quarter of the year 2025-26 is filed by Mr. Sharma on 10-7-2025. The particulars of the tax deducted at source as mentioned in TDS return are incorrect. Will he be liable to pay penalty under section 271H for delay in filing the TDS return and for furnishing the inaccurate particulars in the return?

Penalty under section 271H can be levied for following defaults:

(1) Delay in filing the TDS/TCS quarterly statement i.e. TDS/TCS quarterly return.

(2) Furnishing incorrect TDS/TCS quarterly statement i.e. TDS/TCS quarterly return.

In the present case Mr. Sharma has filed an incorrect TDS return and hence he shall be held liable to pay penalty under section 271H. Minimum penalty of Rs. 10,000 and maximum penalty of up to Rs. 1,00,000 can be levied. Mr. Sharma will have no remedy under Section 271H(3) to claim relief from penalty for furnishing of inaccurate particulars in the return. However, the taxpayer can seek relief in the following way:

He can apply to Principal Commissioner of Income-tax or Commissioner of Income-tax under section 273A(4)to grant relief from penalty.
He can seek relief under section 273Bby proving that there was a reasonable cause for failure.

The same provision as discussed above will apply in case of delay in filing the statement of tax collected at source i.e. TCS return.

MCQ ON LATE FILING FEES AND PENALTY FOR FAILURE TO FURNISH/DELAY IN FURNISHING THE TDS/TCS STATEMENTS

Q1. As per section __________, a person who fails to file the TDS/TCS return on or before the due date prescribed in this regard is liable to pay a specific amount as late filing fees.

(a) 234E (b) 271C

Correct answer : (a)

Justification of correct answer :

As per section 234E, a person who fails to file the TDS/TCS return on or before the due date prescribed in this regard is liable to pay a specific amount as late filing fees.

Thus, option (a) is the correct option.

Q2. As per section 234E, late filing fees will be levied at Rs. 200 for every day during which the failure continues. However, the amount of late filing fees shall not exceed the amount of TDS/TCS.

(a) True (b) False

Correct answer : (a)

Justification of correct answer :

Thus, the statement given in the question is true and hence, option (a) is the correct option.

Q3. TDS/TCS return can be filed without payment of late filing fees.

(a) True (b) False

Correct answer : (b)

Justification of correct answer :

TDS/TCS return cannot be filed without payment of late filing fees. In other words, the late filing fees shall be deposited before filing the TDS/TCS return.

Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q4. If a person fails to file the statement of tax deducted/collect at source i.e. TDS/TCS return on or before the due dates prescribed in this regard, then he can be held liable to pay penalty under section _______.

(a) 234A (b) 271C

Correct answer : (c)

Justification of correct answer :

As per section 271H, where a person fails to file the statement of tax deducted/collect at source i.e. TDS/TCS return on or before the due dates prescribed in this regard, then he can be held liable to pay penalty under section 271H.

Thus, option (c) is the correct option.

Q5. As per section 271H, minimum penalty can be levied of __________ which can go upto __________.

(a) Rs. 5,000, Rs. 10,000 (b) Rs. 10,000, Rs. 20,000

Correct answer : (d)

Justification of correct answer :

As per section 271H, minimum penalty can be levied of Rs. 10,000 which can go upto Rs. 1,00,000.

Thus, option (d) is the correct option.

Q6. If a person pays late filing fees as per section 234E, then he cannot be held liable to pay penalty under section 271H.

(a) True (b) False

Correct answer : (b)

Justification of correct answer :

Penalty under section 271H will be in addition to late filing fees prescribed under section 234E. In other words, where a person fails to file the statement of tax deducted/collect at source i.e. TDS/TCS return on or before the due dates prescribed in this regard, then he can be held liable to pay late fees as per section 234E as well as to pay penalty under section 271H.

Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q7. Apart from delay in filing of TDS/TCS return, section 271H also covers cases of ______.

(a) Failure to deduct tax at source

(b) Failure to collect tax at source

(d) Failure to comply with the provisions of section 269T

Correct answer : (c)

Justification of correct answer :

Apart from delay in filing of TDS/TCS return, section 271H also covers cases of filing incorrect TDS/TCS return. In other words, minimum penalty of Rs. 10,000 and maximum penalty of upto Rs. 1,00,000 can be levied if the deductor/collector does not file a TDS/TCS return or files an incorrect TDS/TCS return.

Thus, option (c) is the correct option.

Q8. No penalty will be levied under section 271H for the failure to file the TDS/TCS return, if the person proves that after paying tax deducted/collected by him, along with the fee and interest (if any), to the credit of the Central Government, he had filed the TDS/TCS return before the expiry of a period of __________ from the due date of filing the TDS/TCS return __________.

(a) 6 months (b) 1 month

Correct answer : (b)

Justification of correct answer :

No penalty will be levied under section 271H for the failure to file the TDS/TCS return, if the person proves that after paying tax deducted/collected by him, along with the fee and interest (if any), to the credit of the Central Government, he had filed the TDS/TCS return before the expiry of a period of one month from the due date of filing the TDS/TCS return.

Thus, option (b) is the correct option.

Q9. Under section __________ the Principal Commissioner of Income-tax or Commissioner of Income-tax has power to waive or reduce the penalty levied under the Income-tax Act.

(a) 273A(4)(b) 273B

Correct answer : (a)

Justification of correct answer :

Under section 273A(4) the Principal Commissioner of Income-tax or Commissioner of Income-tax has power to waive or reduce the penalty levied under the Income-tax Act. Penalty can be waived or reduced by the Commissioner of Income-tax if the conditions specified in section 273A(4) in this regard are satisfied.

Thus, option (a) is the correct option.

Q10. As per section 273B, penalty under section 271H will not be levied if the taxpayer proves that there was a reasonable cause for failure.

(a) True (b) False

Correct answer : (a)

Justification of correct answer :

Apart from shelter of section 273A(4), section 273B also provides relief from penalty in genuine cases. As per section 273B, penalty under section 271H will not be levied if the taxpayer proves that there was a reasonable cause for failure.

Thus, the statement given in the question is true and hence, option (a) is the correct option.

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Penalties Imposable under Income-tax Act, 1961

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Particulars (including the name of the country) where such proceeding for arbitration, conciliation or mediation are pending or notices thereof have been issued

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Name of the agreement entered into by India under which the proceeding for arbitration, conciliation or mediation are pending

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Date of disposing of or withdrawal of such proceeding for arbitration, conciliation or mediation, or notices (Please attach evidence of such disposing of or withdrawal, including order of the Tribunal or court or other judicial or quasi-judicial or administrative authority).

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Name of the agreement entered into by India under which the proceeding for arbitration, conciliation or mediation are pending

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Nature of such award, order or judgment or any other relief (Attach copy thereof)

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Sl. No in Part A where the
relevant
order is mentioned

Nature of proceeding for arbitration,
conciliation or mediation, or notices
thereof with
case number or Notice given

Particulars (including the name of the country) where such proceeding for
arbitration,
conciliation or
mediation are
pending or
notices thereof
have been
issued

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mediation/issue of notice

Name of the agreement entered into
by India
under which the proceeding for arbitration, conciliation or mediation are pending

Status of the proceeding for arbitration,
conciliation or mediation

Date of disposing of or withdrawal of such proceeding
for arbitration,
conciliation or mediation, or
notices (Please
attach evidence of
such disposing of or withdrawal,
including order of
the Tribunal or court or other
judicial or
quasi-judicial or administrative
authority).

Assessment
Year or
Financial
year

Details of the
order under
consideration

Taxes or
Penalty
determined

Details of
the attachments
made by any Income-tax Authority

Section
and
sub-section
of the
Income-tax
Act, 1961

Date
of
order