2021MBA007

REPORT ON
“ESSENTIAL OF TAXATION”

By-: Rubal Jalan

2021MBA007
Under Supervision of
PRASHANT SIPANI
Submitted in partial fulfilment of the requirements
For the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
INSTITUTION OF MANAGEMENT
JK LAKSHMIPAT UNIVERSITY
2021-23

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Penalties and Prosecution under Income Tax Act, 1961

Under the Income Tax Act, 1961, there are various penalties and prosecutions which may be levied on
a person for various offences. Some of these are as follows:
1. Penalty for failure to furnish return of income: If a person fails to furnish a return of income as
required by this Act, he shall be liable to pay a penalty of five thousand rupees.
2. Penalty for failure to comply with notice for furnishing return of income: If a person fails to
comply with a notice issued under section 139(1) or section 142(1) requiring him to furnish a return
of income, he shall be liable to pay a penalty of one thousand rupees.
3. Penalty for failure to furnish return of income in prescribed form and manner: If a person fails to
furnish a return of income in the prescribed form and manner, he shall be liable to pay a penalty of
five hundred rupees.
4. Penalty for failure to comply with notice for keeping and maintaining books of account: If a person
fails to comply with a notice issued under section 142(2A) requiring him to keep and maintain books
of account, he shall be liable to pay a penalty of twenty-five thousand rupees.
5. Penalty for failure to comply with notice for audit of accounts: If a person fails to comply with a
notice issued under section 142(2B) requiring him to get his accounts audited, he shall be liable to pay
a penalty of fifty thousand rupees.
6. Penalty for failure to furnish report of audit: If a person fails to furnish a report of audit as required
by this Act, he shall be liable to pay a penalty of fifty thousand rupees.
7. Penalty for failure to comply with directions of Commissioner: If a person fails to comply with any
direction given by the Commissioner under this Act, he shall be liable to pay a penalty of fifty
thousand rupees.
8. Prosecution for failure to furnish return of income: If a person wilfully fails to furnish a return of
income as required by this Act, he shall be punishable with imprisonment for a term which may
extend to two years or with fine or with both.
9. Prosecution for failure to comply with notice for furnishing return of income: If a person wilfully
fails to comply with a notice issued under section 139(1) or section 142(1) requiring him to furnish a
return of income, he shall be punishable with imprisonment for a term which may extend to six
months or with fine or with both.
10. Prosecution for failure to furnish return of income in prescribed form and manner: If a person
wilfully fails to furnish a return of income in the prescribed form and manner, he shall be punishable
with imprisonment for a term which may extend to six months or with fine or with both.

PROSECUTIONS UNDER INCOME TAX ACT, 1961

1. For removing any Asset, Books of account, documents etc. found

during search in contravention of order served under [Section 132
(3)]. Such a person shall be punishable with rigorous imprisonment which may
extend upto 2 years and shall also be liable to fine. [Section 275A].

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2.         Removal, Concealment, transfer or delivery of property to avoid

tax recovery [Section 276]. When a person fraudulently removes, conceals,
transfers or delivers an asset with the objective of thwarting recovery of tax,
he shall be liable to rigorous imprisonment upto 2 years and with fine.

3.         Default on the part of Liquidator [Section 276 (A)]. Under the

provisions of Section 178 (1), a liquidator of a company is supposed to inform
the Assessing Officer about his appointment as such within 30 days. Under
Section 178 (3) he is required not to part with any assets or properties without
the permission of the Commissioner. He is further supposed to set aside an
amount equal to the amount of tax payable by the company (as intimated by
the I.T.O.).

If the liquidator contravenes any of these provisions, he shall be punishable

with rigorous imprisonment which may extend upto a maximum of 2 years. If
there are no special reasons, the imprisonment shall not be less than 6
months.

4.         Failure to comply with provisions regarding transfer of

immoveable property [Section 276 AB]. When a person fails to comply with
provisions u/s 269 UC, 269 UE and 269 UL, (covered under acquisition of
immovable property) he shall be liable to a punishment of rigorous
imprisonment up to 2 years and with fine. If there are no special reasons, the
imprisonment shall not be less than 6 months.

5.         Failure to pay the tax deducted at source [Section 276 W]. If a
person fails to pay to the credit of the Central Government the tax deducted at
source by him as required or tax payable by him as required u/s 1150; or
second proviso of section 194B by or under the provision of this Act, he shall
be punishable with rigorous imprisonment for a term which shall not be less
than 3 months but which may extend to 7 years and with fine.

6.         Failure to pay the tax collected at source [Section 276 (BB)]. If a
person fails to pay to the credit of the Central Government, the tax collected
by him as authorize under the provisions of Section 206 C, he shall be
punishable with rigorous imprisonment for a term which shall not be less than
three months but which may extend to seven years and with fine.

7.         Willful attempt to evade Tax, Penalty, Interest etc. [Section 276 C
(1)]. If a person intentionally tries to evade any tax, penalty or interest, he shall
be liable to a punishment of rigorous imprisonment of 6 months to 7 years and
fine if the tax sought to be evaded exceeds Rs. 1,00,000 and 3 months to 3
years and fine if the amount of evasion is less than Rs. One lakh.

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In case a person willfully attempts to evade the payment of tax, penalty or

interest, he shall be punishable with rigorous imprisonment of a term from 3
months to 3 years and with fine [Section 276 C(2)]. The punishment of
imprisonment is without prejudice to any penalty that may be imposable on
him under any other provision of the Act

8.         Failure to furnish return of income (Section 276 CC). If a person

willfully or intentionally fails to furnish in due time the return of income which
he is required to furnish u/s 1 15WD(1) or I I5WH(2) or 139 (1) or 142 (1)(i) or
148, or u/s 153A he shall be punishable:

(i) In a case where the amount of tax which would have been evaded if
the failure had not been discovered, exceeds Rs. 1,00,000 with a
rigorous imprisonment which shall not be less than 6 months but which
may extend to 7 years and with fine

(ii) in any other case, with imprisonment which shall not be less than 3
months but which may extend to 3 years and with fine.

It may be noted that person shall not be proceeded against under this section
in the following cases  :

1. For any assessment year commencing prior to 1-4-1975.

(ii) For any assessment year commencing on or after 1-4-1975 if

(a) the return is furnished by him before the expiry of the

assessment year ; or

(b) the tax payable by him on the total income determined on

regular assessment, as reduced by the advance tax paid, if any,
and any tax deducted at source, does not exceed Rs. 3,000.

9.         Failure to furnish return of income in search cases u/s 158 BC

(Section 276 CCC). In case a person willfully fails to furnish in due time,
return of total income under a notice served u/s 158 BC, he shall be
punishable with imprisonment for 3 months to 3 years and with fine.

10.       Failure to produce accounts and documents [Section 276 (D)]. If a
person willfully fails to comply with the provisions of the notice served under
Section 142 (1) regarding production of accounts, books or other documents,
or willfully fails to comply with a direction issued to him under section 142 (2A)
to get accounts audited by a Chartered Accountant, he shall be punishable
with rigorous imprisonment which may extend upto one year or fine of Rs. 4 to
Rs. 10 per day of default or with both.

11.       False Statement in Verification [Section 277]. A person making a

false statement or delivering a false account or statement, which he either
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knows or believes to be false or does not believe to be true, shall be

punishable with rigorous imprisonment for- 6 months to 7 years, if the amount
of tax evaded would have been more than Rs. One lakh and 3 monjhs to 3
years and fine in any other case.

12.       Falsification of books of account or document, etc. [Section

277A]. If any person (hereafter in this section referred to as the first person)
uthorize and with intent to enable any other person (hereafter in this section
referred to as the second person) to evade any tax or interest or penalty
chargeable and impossible under this Act, makes or cause to be made any
entry or statement which is false and which the first person either knows to be
false or does not believe to be true, in any books of account or other
document relevant to or useful in any proceedings against the first person or
the second person, under this Act, the first person shall be punishable with
rigorous imprisonment for a term which shall not be less than three months
but which may extend to three years and with fine.

It shall be sufficient in any charge under this section to allege a general intent
to enable the second person to evade any tax, penalty or interest, without
specifying any particular instance or sum of tax, penalty or interest which has
been or would have been evaded by such second person.

13.       Abetment in False Return (Section 278). If a person abets or

induces in any manner another person to make and deliver a false account,
statement or declaration relating to any income chargeable to tax or to commit
an offence u/s 276 C (1), he shall be punishable with rigorous imprisonment
for a minimum term of six months and a maximum of seven years, if the
amount of tax evaded would have been more than Rs. 1,00,000 and 3 months
to 3 years in any other case and with fine.

.14.       Punishment of Second and Subsequent Offences (Section 278

A). If a person convicted of an offence under Section 276 B, 278 C(l), 276 CC,
276 DD, 276 D, 276 E, 277 or 278 is again convicted for an offence under any
of these provisions, he shall be punishable for second and every subsequent
offence with rigorous imprisonment of a term of not less than 6 months but
which may extend to 7 years and with fine.

The approval of Commissioner of Income-tax is necessary to launch

prosecution for offences under section 275, 276 A, 276 B, 276 C, 276 CC, 276
D, or 277 or 278 A, against any person. The Commissioner may compound
any such offence (279). All the offences mentioned in Section 279 shall be
deemed to be non-cognizable under the code of Criminal Procedure 1973.

15.       Punishment not to be imposed in certain cases (Section 278

AA). Notwithstanding anything contained in Section 276 A, 276 AB or Sec.
276 B, no person shall be punishable for any failure referred to in the

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aforesaid provisions if he proves that there had been a reasonable cause for
such failure.

Power of Commissioner to grant immunity from Prosecution [Section

278AB]

I. If a person has made an application for settlement, he may make an

application to the commissioner for granting immunity from prosecution.

2. This type of application shall not be made after the institution of the
prosecution proceedings after abatement.

3. If the commissioner is satisfied, that the person has, after the

abatement, co-operated with income-tax authority and has made full
and true disclosures of his income and the manner in which income has
been derived, the commissioner may grant to the person immunity from
prosecution and he may also impose such conditions as he may think
fit.

4. The immunity granted shall stand withdrawn if conditions imposed by

the Commissioner are not complied with.

5. The immunity granted can be withdrawn by the Commissioner at any

time if he is satisfied that the person hasconcealed any particular
material to the assessment or had given false evidence. Such a person
shall be tried for the offence ith respect to which immunity was granted
or for any other offence of which he appears to have been guilty.

16.       Offences by Companies (Section 278 B).

(1)  Where an offence under the Act has been committed, by a

company, eveiy person who, at the time offence was committed, was incharge
of, and was responsible to the company for the conduct of the business as
well as company shall be deemed to be guilty of the offence and shall be
liable to be proceeded against and punished accordingly.

Such a person shall not be held liable to any punishment if he proves that the
offence was committed without his knowledge or that he has exercised all due
diligence to prevent the commission of such offence.

(2)       Section 278B says that notwithstanding anything contained in sub-
section (1) where an offence by a company under this Act is committed and it
is proved that the offence has been committed with the consent or connivance
of or is attributable to any neglect on the part of, any director, manager,
secretary or other officer of the company, such director, manager, secretary,
or other officer shall also be deemed to be guilty of that offence and shall be
liable to be proceeded against and punished accordingly.

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(3)       Section 278B Where an offence under this Act has been committed by
a person, being a company, and the punishment for such offense is
imprisonment and fine, then, without prejudice to the provisions contained in
sub-section (1) or sub-section (2), such company shall be punished with fine
and every person, referred to in sub-section (1), or the director, manager,
secretary or other officer of the company referred to in sub-section (2), shall
be liable to be proceeded against and punished in accordance with the
provisions of this Act.”

 17.       Offences by Hindu Undivided Families. (Section 278 C). For any
offence committed by H.U.F., its Karta shall be liable for punishment and if
any member was also involved, he shall also be punishable.

But if Karta can prove that the offence was committed without his knowledge
or that he has exercised all due diligence to present the commission of such
offence he can escape punishment.

18.       Presumption as to Assets, Books of Account etc. in certain

cases. (Section 278 D). Where during any search conducted u/s 132, any
money, bullion, uthori or other valuable article or thing or any books of account
or other documents has or have been found in the possession or control of
any person and such assets or books or documents are tendered by the
prosecution in evidence against such person the provisions of Section 132
(4A) shall apply to such assets.

19.       Prosecution to be at the instance of commissioner [Section 279]

A person shall not be proceeded against for any offence under Sections 275
A, 276, 276 A, 276 B, 276 BB, 276 C, 276 CC, 276 D, 277, 278 except with
the previous sanction of the Commissioner or Commissioner (Appeals) or the
appropriate authority

It is also provided that the Chief Commissioner or, as the case may be
Director General, may issue such instructions or directions to the aforesaid
income-tax authorities as he may deem fit for the institution of proceeding
under this sub-Section. Appropriate authority shall have the same meaning as
in Section 269

The Income Tax Act, 1961, is the primary legislation governing income tax in India. The Act
is administered by the Central Board of Direct Taxes (CBDT) and applies to all assessees
who are liable to pay tax in India. Under the Income Tax Act, 1961, there are certain
offences which are punishable with imprisonment. These offences are: 1. Concealment of
income or furnishing of inaccurate particulars of income: Any person who conceals any
particulars of his income or furnishes inaccurate particulars of such income shall be
punishable with imprisonment for a term which may extend to seven years and with fine. 2.
Failure to furnish return of income: Any person who fails to furnish a return of his income

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within the time prescribed in the Act or in the rules made thereunder shall be punishable with
imprisonment for a term which may extend to three years and with fine. 3. Failure to pay tax:
Any person who fails to pay any tax due under the Act shall be punishable with
imprisonment for a term which may extend to two years and with fine. 4. Wilful attempt to
evade tax: Any person who wilfully attempts to evade any tax, penalty or interest due under
the Act shall be punishable with imprisonment for a term which may extend to seven years
and with fine.