Penalty for false entry, etc., in books of account.
Recently, Finance Act, 2020 introduced penalty provision to curb malpractices of issuing fake invoice. As categorically explained by memorandum to Finance Bill, 2020 that after introduction of GST, several cases are found by GST authority where supplier are fraudulently claiming ITC on the basis of fake invoices to reduce their overall GST liabilities. These invoices are issued by racketeers who do not have any business or profession and invoices issued are without actual supply of goods or services.
FA, 2020 introduced Section 271AAD w.e.f 1st April, 2020. That is provision of this section will apply from FY 2020-21 onwards.
271AAD. “(1) Without prejudice to any other provisions of this Act, if during any proceeding under this Act, it is found that in the books of account maintained by any person there is—
(i) a false entry; or
(ii) an omission of any entry which is relevant for computation of total income of such person, to evade tax liability,
the Assessing Officer may direct that such person shall pay by way of penalty a sum equal to the aggregate amount of such false or omitted entry.”
(12A) “books or books of account” includes ledgers, day-books, cash books, account-books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electro-magnetic data storage device;
Explanation.––For the purposes of this section, “false entry” includes use or intention to use—
(a) forged or falsified documents such as a false invoice or, in general, a false piece of documentary evidence; or
(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 does not exist.
271AAD. (2) Without prejudice to the provisions of sub-section (1), the Assessing Officer may direct that any other person, who causes the person referred to in sub-section (1) in any manner to make a false entry or omits or causes to omit any entry referred to in that sub-section, shall pay by way of penalty a sum equal to the aggregate amount of such false or omitted entry.
Whether provision of this section is constitutionally valid?
Further, as per section 273B penalty shall not be imposed under the list of section mentioned therein if assessee prove that there was reasonable cause for the failure. However, section 271AAD is not included in section 273B.