Penalty for failure in furnishing report or furnishing inaccurate report under section 286 – Section 271GB

Section 271GB Penalty for failure in furnishing report or furnishing inaccurate report under section 286

The provisions of section 286 mandate certain specified entities to furnish a report in respect of the international group. In case such reporting entities fail in providing the requisite report or furnishes the report with inaccurate information, then the prescribed authority can levy a penalty under section 271GB of the Income Tax Act.

Under the present article, we would understand the applicability of penalty provisions of section 271GB; relevant provisions of section 286 and the amount of penalty payable under section 271GB of the Income Tax Act.

Applicability of provisions of section 271GB of Income Tax Act, 1961

The provisions of section 271GB get attracted under the following cases –

1. The reporting entity fails in submitting the report within the prescribed time limit as per provisions of section 286 (2).

2. The reporting entity fails to duly provide the information and document within the time limit allowed under section 286 (6).

3. The reporting entity provides inaccurate information while furnishing the report prescribed under section 286 (2).

4. The reporting entity provides inaccurate information / documents in response to notice issued under section 286 (6).

Under any of the above circumstances, the prescribed income tax authority may direct the defaulter to pay the penalty under section 271GB of the Income Tax Act.

Understanding relevant provisions of section 286 of Income Tax Act, 1961

Provisions of section 286 (2) require every resident parent entity or the alternate reporting entity to furnish a report, in respect of an international group of which it is a constituent.

It should be noted that such a report is to be submitted for every reporting accounting year. The report is to be submitted in Form 3CEAD within a period of 12 months from the end of the respective reporting accounting year.

The provisions of section 286 (6) authorize the prescribed authority (for the purpose of verifying the accuracy of a report submitted) to issue a notice asking the reporting entities to produce necessary information and documents. It is mandatory on the part of the reporting entity to provide such information / documents within a period of 30 days of the receipt of the notice.

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

First of all, let us look at the amount of penalty payable in case of failure in furnishing report as required under section 286 –

It should be noted hereunder that under both the above failure, if the order has already been served to the entity for payment of the penalty, however, the failure still continues. Then, the authority can direct the entity to pay the penalty of INR 50,000 per day from the date of service of order till the failure continues.

Now, let us look into the amount of penalty payable in case the reporting entities provide inaccurate information in the report furnished as per provisions of section 286 (2) or information / documents provided as per section 286 (6).

Section 271GB (4) imposes a penalty of INR 5 Lakhs for inaccurate information under the following circumstances-

1. The entity was aware about the inaccuracy at the time of submitting the report, however, the entity failed to inform the authority.

2. The entity discovers the fact of inaccuracy after submission of the report. However, it fails to inform the authority and submit a correct report within a period of 15 days of discover of the fact.

3. The entity submits inaccurate information / document in response to notice issued under section 286 (6).

It is important to mention here that as per section 273B, in case the defaulter proves the reasonable cause of the failure, then the penalty cannot be imposed under section 271GB.

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