Section 271A – Penalty for failure to keep / maintain or retain books of accounts, documents etc.

Section 44AA of the Income Tax Act read with rule 6F of the Income Tax Rules requires certain specified persons, carrying on business or profession, to mandatorily keep / maintain books of accounts or other documents.

In case such person fails to keep / maintain or retain the required books of accounts or other documents, then, the person would be liable to pay the penalty under section 271A of the Income Tax Act, the same is taken up and explained under the present article.

Applicability of provisions of section 271A of Income Tax Act

The provisions of section 271A apply under the following situations –

  • The person fails to keep or maintain any books of accounts or other documents of any previous year, as required under section 44AA of the Income Tax Act; or
  • The person fails to retain books of accounts / documents for the specified period as mentioned under section 44AA of the Income Tax Act.

It should be noted that, in case of failure, only the Assessing Officer or the Commissioner (Appeals) can direct the defaulter to pay the penalty under section 271A of the Income Tax Act.

Requirement of maintenance of books of accounts / documents –

Section 44AA of the Income Tax Act mandates following professions to maintain books of accounts –

  • Medical;
  • Engineering;
  • Legal;
  • Accountancy;
  • Architectural;
  • Technical Consultancy;
  • Interior Decoration; or
  • Film Artist (like a cameramen, an actor, a singer, a director, a music director, a lyricist etc.) ; or
  • An authorized representative; or
  • Any other profession notified by the Board.

Other than the above profession, following persons, carrying on business or profession, are also required to maintain books of accounts –

  • The persons whose income from business / profession exceeds INR 1,20,000 or the total turnover / sales / gross receipts exceeds INR 10 Lakhs in any of the preceding three years. However, in the case of individual and HUF, the limit is INR 2,50,000 and INR 25 Lakhs, respectively.
  • In case of newly started business / profession, if the income of business / profession is likely to exceed INR 1,20,000 or the total turnover / sales / gross receipts exceeds INR 10 Lakhs. However, in the case of individual and HUF, the limit is INR 2,50,000 and INR 25 Lakhs, respectively.
  • The taxpayer is covered under section 44AE or section 44BB or section 44BBB and the income claimed in the income tax return is lower than the profit or gains deemed under section 44AE or section 44BB or section 44BBB.
  • The taxpayer to whom the provisions of section 44AD(4) are applicable and the income exceeds the maximum amount not chargeable to tax in any previous year.

Requirement to retain books of accounts / documents

Rule 6F of the Income Tax Rules states that the books of accounts / other documents needs to be retained for a period of six years from the end of the relevant Assessment Year.

Amount of penalty payable under section 271A of Income Tax Act, 1961

If the person fails to keep / maintain the books of accounts / documents or fails to retain the required books of accounts / documents, then, such person shall be liable to pay the penalty under section 271A to the extent of INR 25,000.

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