Section 271 of Income Tax Act "Failure to furnish returns, comply with notices, concealment of income, etc"
271. (1) If the Assessing Officer or the Commissioner
(Appeals) or the Principal Commissioner or Commissioner in
the course of any proceedings under this Act, is satisfied
that any person-
(a) [***]
(b) has failed to comply with a notice under sub-section (2)
of section 115WD or under sub-section (2) of section 115WE
or under sub-section (1) of section 142 or sub-section (2)
of section 143 or fails to comply with a direction issued
under sub-section (2A) of section 142, or
(c) has concealed the particulars of his income or
furnished inaccurate particulars of such income, or
(d) has concealed the particulars of the fringe benefits or
furnished inaccurate particulars of such fringe benefits,
he may direct that such person shall pay by way of penalty,-
(i) [***]
(ii) in the cases referred to in clause (b), in addition to
tax, if any, payable by him, a sum of ten thousand rupees
for each such failure ;
(iii) in the cases referred to in clause (c) or clause (d),
in addition to tax, if any, payable by him, a sum which
shall not be less than, but which shall not exceed three
times, the amount of tax sought to be evaded by reason of
the concealment of particulars of his income or fringe
benefits or the furnishing of inaccurate particulars of such
income or fringe benefits.
Explanation 1.-Where in respect of any facts material to the
computation of the total income of any person under this
Act,-
(A) such person fails to offer an explanation or offers an
explanation which is found by the Assessing Officer or the
Commissioner (Appeals) or the Principal Commissioner or
Commissioner to be false, or
(B) such person offers an explanation which he is not able
to substantiate and fails to prove that such explanation is
bona fide and that all the facts relating to the same and
material to the computation of his total income have been
disclosed by him,
then, the amount added or disallowed in computing the total
income of such person as a result thereof shall, for the
purposes of clause (c) of this sub-section, be deemed to
represent the income in respect of which particulars have
been concealed.
Explanation 2.-Where the source of any receipt, deposit,
outgoing or investment in any assessment year is claimed by
any person to be an amount which had been added in computing
the income or deducted in computing the loss in the
assessment of such person for any earlier assessment year or
years but in respect of which no penalty under clause (iii)
of this sub-section had been levied, that part of the amount
so added or deducted in such earlier assessment year
immediately preceding the year in which the receipt,
deposit, outgoing or investment appears (such earlier
assessment year hereafter in this Explanation referred to as
the first preceding year) which is sufficient to cover the
amount represented by such receipt, deposit or outgoing or
value of such investment (such amount or value hereafter in
this Explanation referred to as the utilised amount) shall
be treated as the income of the assessee, particulars of
which had been concealed or inaccurate particulars of which
had been furnished for the first preceding year; and where
the amount so added or deducted in the first preceding year
is not sufficient to cover the utilised amount, that part of
the amount so added or deducted in the year immediately
preceding the first preceding year which is sufficient to
cover such part of the utilised amount as is not so covered
shall be treated to be the income of the assessee,
particulars of which had been concealed or inaccurate
particulars of which had been furnished for the year
immediately preceding the first preceding year and so on,
until the entire utilised amount is covered by the amounts
so added or deducted in such earlier assessment years.
Explanation 3.-Where any person fails, without reasonable
cause, to furnish within the period specified in sub-section
(1) of section 153 a return of his income which he is
required to furnish under section 139 in respect of any
assessment year commencing on or after the 1st day of April,
1989, and until the expiry of the period aforesaid, no
notice has been issued to him under clause (i) of
sub-section (1) of section 142 or section 148 and the
Assessing Officer or the Commissioner (Appeals) is satisfied
that in respect of such assessment year such person has
taxable income, then, such person shall, for the purposes of
clause (c) of this sub-section, be deemed to have concealed
the particulars of his income in respect of such assessment
year, notwithstanding that such person furnishes a return of
his income at any time after the expiry of the period
aforesaid in pursuance of a notice under section 148.
Explanation 4.-For the purposes of clause (iii) of this
sub-section,-
(a) the amount of tax sought to be evaded shall be
determined in accordance with the following formula-
(A – B) + (C – D)
where,
A = amount of tax on the total income assessed as per the
provisions other than the provisions contained in section
115JB or section 115JC (herein called general provisions);
B = amount of tax that would have been chargeable had the
total income assessed as per the general provisions been
reduced by the amount of income in respect of which
particulars have been concealed or inaccurate particulars
have been furnished;
C = amount of tax on the total income assessed as per the
provisions contained in section 115JB or section 115JC;
D = amount of tax 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
income in respect of which particulars have been concealed
or inaccurate particulars have been furnished:
Provided that where the amount of income in respect of which
particulars have been concealed or inaccurate particulars
have been furnished 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 :
Provided further that in a case where the provisions
contained in section 115JB or section 115JC are not
applicable, the item (C – D) in the formula shall be
ignored;
(b) where in any case the amount of income in respect of
which particulars have been concealed or inaccurate
particulars have been furnished has the effect of reducing
the loss declared in the return or converting that loss into
income, the amount of tax sought to be evaded shall be
determined in accordance with the formula specified in
clause (a) with the modification that the amount to be
determined for item (A – B) in that formula shall be the
amount of tax that would have been chargeable on the income
in respect of which particulars have been concealed or
inaccurate particulars have been furnished had such income
been the total income;
(c) where in any case to which Explanation 3 applies, the
amount of tax sought to be evaded shall be the tax on the
total income assessed as reduced by the amount of advance
tax, tax deducted at source, tax collected at source and
self-assessment tax paid before the issue of notice under
section 148.
Explanation 5.-Where in the course of a search initiated
under section 132 before the 1st day of June, 2007, the
assessee is found to be the owner of any money, bullion,
jewellery or other valuable article or thing (hereafter in
this Explanation referred to as assets) and the assessee
claims that such assets have been acquired by him by
utilising (wholly or in part) his income,-
(a) for any previous year which has ended before the date of
the search, but the return of income for such year has not
been furnished before the said date or, where such return
has been furnished before the said date, such income has not
been declared therein ; or
(b) for any previous year which is to end on or after the
date of the search,
then, notwithstanding that such income is declared by him in
any return of income furnished on or after the date of the
search, he shall, for the purposes of imposition of a
penalty under clause (c) of sub-section (1) of this section,
be deemed to have concealed the particulars of his income or
furnished inaccurate particulars of such income, unless,-
(1) such income is, or the transactions resulting in such
income are recorded,-
(i) in a case falling under clause (a), before the date of
the search; and
(ii) in a case falling under clause (b), on or before such
date,
in the books of account, if any, maintained by him for any
source of income or such income is otherwise disclosed to
the Principal Chief Commissioner or Chief Commissioner or
Principal Commissioner or Commissioner before the said date
; or
(2) he, in the course of the search, makes a statement under
sub-section (4) of section 132 that any money, bullion,
jewellery or other valuable article or thing found in his
possession or under his control, has been acquired out of
his income which has not been disclosed so far in his return
of income to be furnished before the expiry of time
specified in sub-section (1) of section 139, and also
specifies in the statement the manner in which such income
has been derived and pays the tax, together with interest,
if any, in respect of such income.
Explanation 5A.- Where, in the course of a search initiated
under section 132 on or after the 1st day of June, 2007, the
assessee is found to be the owner of-
(i) any money, bullion, jewellery or other valuable article
or thing (hereafter in this Explanation referred to as
assets) and the assessee claims that such assets have been
acquired by him by utilising (wholly or in part) his income
for any previous year; or
(ii) any income based on any entry in any books of account
or other documents or transactions and he claims that such
entry in the books of account or other documents or
transactions represents his income (wholly or in part) for
any previous year,
which has ended before the date of search and,-
(a) where the return of income for such previous year has
been furnished before the said date but such income has not
been declared therein; or
(b) the due date for filing the return of income for such
previous year has expired but the assessee has not filed the
return,
then, notwithstanding that such income is declared by him in
any return of income furnished on or after the date of
search, he shall, for the purposes of imposition of a
penalty under clause (c) of sub-section (1) of this section,
be deemed to have concealed the particulars of his income or
furnished inaccurate particulars of such income.
Explanation 6.-Where any adjustment is made in the income or
loss declared in the return under the proviso to clause (a)
of sub-section (1) of section 143 and additional tax charged
under that section, the provisions of this sub-section shall
not apply in relation to the adjustment so made.
Explanation 7.-Where in the case of an assessee who has
entered into an international transaction or specified
domestic transaction defined in section 92B, any amount is
added or disallowed in computing the total income under
sub-section (4) of section 92C, then, the amount so added or
disallowed shall, for the purposes of clause (c) of this
sub-section, be deemed to represent the income in respect of
which particulars have been concealed or inaccurate
particulars have been furnished, unless the assessee proves
to the satisfaction of the Assessing Officer or the
Commissioner (Appeals) or the Principal Commissioner or
Commissioner that the price charged or paid in such
transaction was computed in accordance with the provisions
contained in section 92C and in the manner prescribed under
that section, in good faith and with due diligence.
(1A) Where any penalty is imposable by virtue of Explanation
2 to sub-section (1), proceedings for the imposition of such
penalty may be initiated notwithstanding that any
proceedings under this Act in the course of which such
penalty proceedings could have been initiated under
sub-section (1) have been completed.
(1B) Where any amount is added or disallowed in computing
the total income or loss of an assessee in any order of
assessment or reassessment and the said order contains a
direction for initiation of penalty proceedings under clause
(c) of sub-section (1), such an order of assessment or
reassessment shall be deemed to constitute satisfaction of
the Assessing Officer for initiation of the penalty
proceedings under the said clause (c).
(2) When the person liable to penalty is a registered firm
or an unregistered firm which has been assessed under clause
(b) of section 183, then notwithstanding anything contained
in the other provisions of this Act, the penalty imposable
under sub-section (1) shall be the same amount as would be
imposable on that firm if that firm were an unregistered
firm.
(3) [Omitted by the Direct Tax Laws (Amendment) Act, 1989,
w.e.f. 1-4-1989.]
(4) If the Assessing Officer or the Commissioner (Appeals)
in the course of any proceedings under this Act, is
satisfied that the profits of a registered firm have been
distributed otherwise than in accordance with the shares of
the partners as shown in the instrument of partnership on
the basis of which the firm has been registered under this
Act, and that any partner has thereby returned his income
below its real amount, he may direct that such partner
shall, in addition to the tax, if any, payable by him, pay
by way of penalty a sum not exceeding one and a half times
the amount of tax which has been avoided, or would have been
avoided if the income returned by such partner had been
accepted as his correct income; and no refund or other
adjustment shall be claimable by any other partner by reason
of such direction.
(4A) and (4B) [Omitted by the Taxation Laws (Amendment) Act,
1975, w.e.f. 1-10-1975. Original sub-sections (4A) and (4B)
were inserted by the Income-tax (Amendment) Act, 1965, w.e.f.
12-3-1965. Later on sub-section (4A) was substituted by the
Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.]
(5) The provisions of this section as they stood immediately
before their amendment by the Direct Tax Laws (Amendment)
Act, 1989 shall apply to and in relation to any assessment
for the assessment year commencing on the 1st day of April,
1988, or any earlier assessment year and references in this
section to the other provisions of this Act shall be
construed as references to those provisions as for the time
being in force and applicable to the relevant assessment
year.
(6) Any reference in this section to the income shall be
construed as a reference to the income or fringe benefits,
as the case may be, and the provisions of this section
shall, as far as may be, apply in relation to any assessment
in respect of fringe benefits also.
(7) The provisions of this section shall not apply to and in
relation to any assessment for the assessment year
commencing on or after the 1st day of April, 2017.