Section 158BFA (2) of the Income Tax Act deals with levy of penalty on undisclosed income for the block period. As per the provisions, the penalty under section 158BFA (2) can be imposed on the direction of the Assessing Officer or the Commissioner (Appeals), during the course of the proceedings.

The current article explains the entire provisions of section 158BFA (2) of the Income Tax Act. It also clarifies the situation under which penalty cannot be levied under section 158BFA (2) and the minimum and maximum amount of penalty leviable under section 158BFA (2) of the Income Tax Act.

Penalty word made with wooden blocks concept

The Penalty under section 158BFA (2)

The Assessing Officer or the Commissioner (Appeals) can direct the defaulter assessee to pay the penalty under section 158BFA (2), during the course of the proceedings.

Order imposing a penalty under section 158BFA (2) cannot be passed under following circumstances

1. The order imposing penalty under section 158BFA(2) cannot be passed unless the defaulter assessee is given a reasonable opportunity of being heard. It should be noted that reasonable opportunity of being heard is mandatorily be given in all the cases, wherein, the amount of penalty exceeds INR 25,000.

2. The order imposing penalty cannot be passed under section 158BFA(2) in the following cases –

Situation Order cannot be passed after expiry of
Cases, wherein, the assessment is subject to appeal to the Commissioner (Appeals) or appeal to the Appellate Tribunal Later of the following –

  • The financial year in which the proceedings are completed; or
  • 6 months from the end of the month in which the order of Commissioner (Appeals) or the Appellate Tribunal is received by the Principal Chief Commissioner / Chief Commissioner / the Principal Commissioner / the Commissioner.
Cases, wherein, the assessment is subject to revision under section 263 6 months from the end of the month in which order of revision is passed
In any other case Later of the following –

  • The financial year in which the proceedings are completed; or
  • 6 months from the end of the month in which the action for imposition of penalty was initiated.

Situation, wherein, a penalty under section 158BFA (2) is not leviable –

The proviso to section 158BFA (2) of the Income Tax Act states that Penalty under section 158BFA (2) is not leviable if all the below mentioned conditions are satisfied by the assessee/ defaulter –

1. The assessee/ defaulter has furnished a return under section 158BC (a); and

2. The tax payable, as per the furnished return under section 158BC (a), has been paid; and

3. The proof of tax paid is submitted along with the return; and

4. No appeal is filed against the assessment of that part of income which is reflected in the furnished return.

It is important to note here that in case the undisclosed income determined by the Assessing Officer (AO) is more than the undisclosed income reflected in the income tax return, then, the penalty under section 158BFA (2) would be leviable to the extent of excess undisclosed income determined by the AO.

Amount of penalty under section 158BFA (2)

The minimum amount of penalty leviable is as under –

100% of tax leviable in respect of undisclosed income as determined by the Assessing Officer under section 158BC (c).

The maximum amount of penalty leviable is as under –

300% of tax leviable in respect of undisclosed income as determined by the Assessing Officer under section 158BC (c).

Read Also:-

S. No. Title
1 Section 272BB Penalty for failure to comply section 203A provisions
2 Section 272B Penalty for failure to comply with provisions of PAN
3 Section 272AA Penalty for failure in complying with provisions of section 133B
4 Section 272A Penalty for failure to answer questions or furnish information / returns/ statements or allow inspections etc
5 Section 271J Penalty on professionals for furnishing incorrect information in reports / certificates
6 Section 271I Penalty for failure in furnishing Form 15CA & Form 15CB
7 Section 271H Penalty for late filing/non-filing of TDS or TCS return
8 Penalty for failure in furnishing report or furnishing inaccurate report under section 286 – Section 271GB
9 Section 271GA Penalty for failure in furnishing the information / document in Form 49D as required under section 285A
10 Section 271G Penalty for failure to furnish information / document as per provisions of section 92D
11 Section 271FB Penalty for default in furnishing return of fringe benefits
12 Section 271FAB Penalty for failure to furnish statement / information / document by an eligible investment fund
13 Penalty for providing inaccurate statement of financial transaction or reportable account- Section 271FAA
14 Section 271FA Penalty for failure in furnishing statement of financial transactions or reportable account
15 Section 271E Penalty for contravening provisions of section 269T
16 Section 271DB | Penalty for contravening provisions of section 269SU
17 Section 271DA Penalty for contravening provisions of section 269ST
18 Section 271CA Penalty for failure to collect tax at source (TCS)
19 Section 271D Penalty for contravening provisions of section 269SS
20 Section 271C Penalty for failure / non-deduction / non-payment of TDS
21 TDS Rate Chart for AY 2020-21 and AY 2021-22
22 Section 271BA Penalty for failure to furnish section 92E report
23 Section 271B Penalty for failure to get accounts audited
24 Section 271AAC Penalty in respect of certain specified income
25 Section 271AA Penalty for failure to maintain Transfer Pricing documents
26 Section 271A Penalty for failure to keep / maintain or retain books of accounts, documents
27 Section 270A(1) Penalty for under-reporting & misreporting of income
28 Section 269SU Acceptance of payment through electronic modes
29 Section 234F Late fees for default in filing of income tax return
30 Section 234E Late Fee for default in filing of TDS / TCS returns
31 Section 158BFA(2) – Penalty on undisclosed income for block period
32 Section 140A(3) Penalty for non-payment of self-assessment tax

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