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).

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