If the assessee deposit large amount of cash in the bank account the tax department is likely to seek explanation about source of income. If the assessee is unable to produce sufficient proof to convince the assessing officer (A.O) about the legitimacy of cash then the assessee may face penalties and prosecution as per the Income Tax Act. However, there is some hope. Here are the immunities available from penalties and prosecution as per the provisions under income tax act and how you can try to get them.
If the assessee fully co-operates with the Income Tax department in disclosure of previously hidden income and provides all information and evidence required then the Assessing Officer (A.O) normally grants immunity as permitted under the Income Tax Act. But the final authority is with the tax authorities where your income is assessed.
Immunity from Penalty under Section 270A as per Section 270AA and Immunity from prosecution under section 276C and 276CC
To get immunity from the penalty under section 270A and from prosecution proceedings under section 276C and 276CC:
The assessee will have to agree with the income as assessed (determined) by the A.O under section 143(3) or 147, as the case may be and will have to pay tax and interest within the time period specified in the notice of demand received under section 156.
The Assessee you will not challenge the assessment order by filing any appeal against it
The Assessee should file an application to the Assessing Officer to seek immunity from penalty and prosecution.
The Assessing Officer will pass an order accepting the application if the assessee have complied with all the conditions mentioned above. The order will be passed within 1 month from the end of the month in which he receives the application seeking immunity and you will be immune from the penalty and prosecution proceedings.
If any of the above mentioned conditions are not complied, the Assessing Officer will deny the immunity if any.
Options when penalty under Section 270A is levied @ 200% for misreporting of income
If penalty of 200% levied under section 270A, the Commissioner of Income tax (CIT) has the power to reduce or waive the whole penalty of 200% if the assessee voluntarily disclose the particulars of unaccounted income and pay the taxes and interest payable on such income before the Assessing Officer detects such income. A full and true disclosure by the assessee is required along with cooperation in any enquiry made by the Assessing Officer relating to the assessment. This waiver can be obtained only once in a lifetime and it is the best time to utilize this opportunity. The assessee will have to file application to the Commissioner of Income Tax seeking waiver under Section 273A.
The Commissioner of Income Tax also has the power to reduce or waive any other penalty levied on the assessee if he is satisfied that not giving a waiver would cause genuine hardship to the assessee on the circumstances and cooperation level in all the enquiries made from the assessee for recovery of the amount due.
Provisions under Section 270A of the Income Tax Act
270A. (1) The Assessing Officer or the Commissioner
(Appeals) or the Principal Commissioner or Commissioner may,
during the course of any proceedings under this Act, direct
that any person who has under-reported his income shall be
liable to pay a penalty in addition to tax, if any, on the
under-reported income.
(2) A person shall be considered to have under-reported his
income, if-
(a) the income assessed is greater than the income
determined in the return processed under clause (a) of
sub-section (1) of section 143;
(b) the income assessed is greater than the maximum amount
not chargeable to tax, where no return of income has been
furnished 15[or where return has been furnished for the
first time under section 148];
(c) the income reassessed is greater than the income
assessed or reassessed immediately before such reassessment;
(d) the amount of deemed total income assessed or reassessed
as per the provisions of section 115JB or section 115JC, as
the case may be, is greater than the deemed total income
determined in the return processed under clause (a) of
sub-section (1) of section 143;
(e) the amount of deemed total income assessed as per the
provisions of section 115JB or section 115JC is greater than
the maximum amount not chargeable to tax, where 16[no return
of income has been furnished or where return has been
furnished for the first time under section 148];
(f) the amount of deemed total income reassessed as per the
provisions of section 115JB or section 115JC, as the case
may be, is greater than the deemed total income assessed or
reassessed immediately before such reassessment;
(g) the income assessed or reassessed has the effect of
reducing the loss or converting such loss into income.
(3) The amount of under-reported income shall be,-
(i) in a case where income has been assessed for the first
time,-
(a) if return has been furnished, the difference between the
amount of income assessed and the amount of income
determined under clause (a) of sub-section (1) of section
143;
(b) in a case where 17[no return of income has been
furnished or where return has been furnished for the first
time under section 148],-
(A) the amount of income assessed, in the case of a company,
firm or local authority; and
(B) the difference between the amount of income assessed and
the maximum amount not chargeable to tax, in a case not
covered in item (A);
(ii) in any other case, the difference between the amount of
income reassessed or recomputed and the amount of income
assessed, reassessed or recomputed in a preceding order:
Provided that where under-reported income arises out of
determination of deemed total income in accordance with the
provisions of section 115JB or section 115JC, the amount of
total under-reported income shall be determined in
accordance with the following formula-
(A - B) + (C - D)
where,
A = the total income assessed as per the provisions other
than the provisions contained in section 115JB or section
115JC (herein called general provisions);
B = the total income that would have been chargeable had the
total income assessed as per the general provisions been
reduced by the amount of under-reported income;
C = the total income assessed as per the provisions
contained in section 115JB or section 115JC;
D = the total income that would have been chargeable had the
total income assessed as per the provisions contained in
section 115JB or section 115JC been reduced by the amount of
under-reported income:
Provided further that where the amount of under-reported
income on any issue is considered both under the provisions
contained in section 115JB or section 115JC and under
general provisions, such amount shall not be reduced from
total income assessed while determining the amount under
item D.
Explanation.-For the purposes of this section,-
(a) "preceding order" means an order immediately preceding
the order during the course of which the penalty under
sub-section (1) has been initiated;
(b) in a case where an assessment or reassessment has the
effect of reducing the loss declared in the return or
converting that loss into income, the amount of
under-reported income shall be the difference between the
loss claimed and the income or loss, as the case may be,
assessed or reassessed.
(4) Subject to the provisions of sub-section (6), where the
source of any receipt, deposit or investment in any
assessment year is claimed to be an amount added to income
or deducted while computing loss, as the case may be, in the
assessment of such person in any year prior to the
assessment year in which such receipt, deposit or investment
appears (hereinafter referred to as "preceding year") and no
penalty was levied for such preceding year, then, the
under-reported income shall include such amount as is
sufficient to cover such receipt, deposit or investment.
(5) The amount referred to in sub-section (4) shall be
deemed to be amount of income under-reported for the
preceding year in the following order-
(a) the preceding year immediately before the year in which
the receipt, deposit or investment appears, being the first
preceding year; and
(b) where the amount added or deducted in the first
preceding year is not sufficient to cover the receipt,
deposit or investment, the year immediately preceding the
first preceding year and so on.
(6) The under-reported income, for the purposes of this
section, shall not include the following, namely:-
(a) the amount of income in respect of which the assessee
offers an explanation and the Assessing Officer or the
Commissioner (Appeals) or the Commissioner or the Principal
Commissioner, as the case may be, is satisfied that the
explanation is bona fide and the assessee has disclosed all
the material facts to substantiate the explanation offered;
(b) the amount of under-reported income determined on the
basis of an estimate, if the accounts are correct and
complete to the satisfaction of the Assessing Officer or the
Commissioner (Appeals) or the Commissioner or the Principal
Commissioner, as the case may be, but the method employed is
such that the income cannot properly be deduced therefrom;
(c) the amount of under-reported income determined on the
basis of an estimate, if the assessee has, on his own,
estimated a lower amount of addition or disallowance on the
same issue, has included such amount in the computation of
his income and has disclosed all the facts material to the
addition or disallowance;
(d) the amount of under-reported income represented by any
addition made in conformity with the arm's length price
determined by the Transfer Pricing Officer, where the
assessee had maintained information and documents as
prescribed under section 92D, declared the international
transaction under Chapter X, and, disclosed all the material
facts relating to the transaction; and
(e) the amount of undisclosed income referred to in section
271AAB.
(7) The penalty referred to in sub-section (1) shall be a
sum equal to fifty per cent of the amount of tax payable on
under-reported income.
(8) Notwithstanding anything contained in sub-section (6) or
sub-section (7), where under-reported income is in
consequence of any misreporting thereof by any person, the
penalty referred to in sub-section (1) shall be equal to two
hundred per cent of the amount of tax payable on
under-reported income.
18(9) The cases of misreporting of income referred to in
sub-section (8) shall be the following, namely:-
(a) misrepresentation or suppression of facts;
(b) failure to record investments in the books of account;
(c) claim of expenditure not substantiated by any evidence;
(d) recording of any false entry in the books of account;
(e) failure to record any receipt in books of account having
a bearing on total income; and
(f) failure to report any international transaction or any
transaction deemed to be an international transaction or any
specified domestic transaction, to which the provisions of
Chapter X apply.
(10) The tax payable in respect of the under-reported income
shall be-
(a) where no return of income has been furnished 19[or where
return has been furnished for the first time under section
148] and the income has been assessed for the first time,
the amount of tax calculated on the under-reported income as
increased by the maximum amount not chargeable to tax as if
it were the total income;
(b) where the total income determined under clause (a) of
sub-section (1) of section 143 or assessed, reassessed or
recomputed in a preceding order is a loss, the amount of tax
calculated on the under-reported income as if it were the
total income;
(c) in any other case, determined in accordance with the
formula-
(X–Y)
where,
X = the amount of tax calculated on the under-reported
income as increased by the total income determined under
clause (a) of sub-section (1) of section 143 or total income
assessed, reassessed or recomputed in a preceding order as
if it were the total income; and
Y = the amount of tax calculated on the total income
determined under clause (a) of sub-section (1) of section
143 or total income assessed, reassessed or recomputed in a
preceding order.
(11) No addition or disallowance of an amount shall form the
basis for imposition of penalty, if such addition or
disallowance has formed the basis of imposition of penalty
in the case of the person for the same or any other
assessment year.
(12) The penalty referred to in sub-section (1) shall be
imposed, by an order in writing, by the Assessing Officer,
the Commissioner (Appeals), the Commissioner or the
Principal Commissioner, as the case may be.
Section 3 - Previous Year, Section 4, Charge of Income tax
Section 6 - Residence in India, Section 7- Income deemed to be received
Section 9 - Income deemed to accrue or arise in India
Section 9A - meaning of Certain activities not to constitute business connection in India
Section 10 - Incomes not included in total income
Section 10A - Special provision in respect of newly established undertakings in free trade zone, etc
Section 10AA - Special provisions in respect of newly established Units in Special Economic Zones
Section 10BA - Special provisions in respect of export of certain articles or things
Section 10BB - Meaning of computer programmes in certain cases
Section 11 - Income from property held for charitable or religious purposes
Section 12 - Income of trusts or institutions from contributions
Section 12A - Conditions for applicability of sections 11 and 12
Section 12AA - Procedure for registration
Section 13 - Section 11 not to apply in certain cases
Section 15 - Salaries, Section 16 - Deductions from salaries
Section 17 - Salary, perquisite and profits in lieu of salary