Section 271AAC Penalty in respect of certain specified income

Section 271AAC of the Income Tax Act imposes penalty in case the income has been determined under section 68 or section 69 / section 69A / section 69B / section 69C / section 69D. The penalty provisions of section 271AAC are thoroughly explained in the present article.

Applicability of penalty provisions of section 271AAC of Income Tax Act

The assessee is accountable to pay the penalty under section 271AAC, in case the income determined includes income referred under any of the following sections –

• Section 68 – Cash Credits
• Section 69 – Unexplained investments
• Section 69A – Unexplained money etc.
• Section 69B – Amount of investment etc. not fully disclosed in books of accounts.
• Section 69C – Unexplained expenditure etc.
• Section 69D – Amount borrowed / repaid on hundi

It is important to mention here that the penalty under section 271AAC is payable only in case the Assessing Officer directs the assessee to do so.

Further, penalty under section 271AAC is not leviable in case the income referred to in section 68 or section 69 / section 69A / section 69B / section 69C / section 69D has been reflected in the income tax return filed under section 139, and the relevant tax on the same has also been paid by the assessee under section 115BBE (1) (i).

It should be noted here that penalty under section 270A (i.e. penalty for under reporting and mis-reporting of income) shall not be imposed on the assessee in respect to income referred to in section 68 or section 69 / section 69A / section 69B / section 69C / section 69D.

Highlighting crucial points relevant for imposing penalty under section 271AAC

1. The penalty under section 271AAC can be imposed only after the direction of the Assessing Officer.

2. The penalty under section 271AAC can be imposed only in case the income determined includes income referred under section 68 or section 69 / section 69A / section 69B / section 69C / section 69D.

3. The penalty under section 271AAC cannot be levied in case the income referred to under section 68 or section 69 / section 69A / section 69B / section 69C / section 69D has been reflected in the income tax return, and appropriate tax has been paid thereon.

4. Order imposing penalty can be passed only after giving the assessee the reasonable opportunity of being heard.

5. It is important that provisions of section 274 and section 275 of the Income Tax Act are satisfied prior to levy of the penalty under section 271AAC.

Quantum of penalty payable under section 271AAC of the Income Tax Act

In case the provisions of section 271AAC gets attracted, the assessee would be liable to pay penalty amounting to a sum computed @ 10% of the tax payable under section 115BBE (1) (i).

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