Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: form 3cd :: due date for vat payment :: VAT Audit :: ACCOUNTING STANDARD :: TAX RATES - GOODS TAXABLE @ 4% :: empanelment :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: TDS :: ACCOUNTING STANDARDS :: articles on VAT and GST in India :: ARTICLES ON INPUT TAX CREDIT IN VAT :: cpt :: list of goods taxed at 4% :: VAT RATES :: Central Excise rule to resale the machines to a new company
 
 
News Headlines »
 Directions under section 119 of the Income-tax Act, 1961
 Securities excluded from GST ambit in revised Bill
 GST dilemma: Hope fades for new tax regime
 5nance.com launches tax investment platform
 Is government tapping your phone?
 Income tax department to use analytics to look for discrepancies in bank accounts
 GST Council fails to break deadlock over indirect tax regime, next meet on Dec 11 and 12 to hammer out differences
 Invoking Writ Jurisdiction For Income Tax Matters
 How to file income-tax returns online
 How Income Tax Returns Are Scrutinised
 All About New Income Disclosure Scheme to make Demonetisation successful

Seeking I-T Dept will have your hide
May, 19th 2007
There is now a two-tier system of penalties for concealment one covering cases of search initiated before June 1, 2007, and the other concerning cases of search initiated after this date.

The income-tax law provides for levy of penalty for concealment of income or for furnishing inaccurate particulars of income. The penalty ranges from 100 per cent to three times the amount of tax sought to be evaded. There was a controversy about such levy of penalty in cases of over statement of losses. The Finance Act, 2002 amended Section 271 (1) (c) of the Income-Tax Act, 1961 and laid down that penalty would be levied even in cases of inaccurate computation of losses. The Supreme Court ruled that the amendment is prospective and will not apply to past cases [Virtual Soft Systems Ltd., vs. CIT 289 ITR 83 (SC)].

Problems arise when the Tax Department makes a search of the premises of the taxpayer and thinks there has been an omission to account for income or an attempt to conceal such income. The concealment may be spotted during the search and the assessee may claim that he was going to admit such income in the Return to be filed, though there is no entry in the regular books of accounts with regard to the same. The Explanation 5 to Section 271(1) deems there has been concealment of income though the income may be admitted in the post-search return. The present law is that the taxpayer can escape penalty by admitting the income and explaining how the same was earned. Finance Act, 2007 lays down that the above law will prevail only in cases of search under Section 132 initiated before June 1, 2007.

`Undisclosed income'

In cases involving discovery of concealment in the course of a search initiated under Section 132 on or after June 1, 2007, there is modification of the law by the insertion of Explanation 5A to Section 271(1). A new Section 271AAA has been inserted in the Act. Penalty will be levied at the rate of 10 per cent of the undisclosed income of the specified previous year, which came to light because of the search. There is a definition of the term "undisclosed income" as meaning money, bullion, jewellery or other valuable article or thing or any entry in books of accounts or other documents or transactions found in the course of search but not recorded before the date of search in the books of accounts maintained in normal course. Unrecorded expenses will also fall in this category.

There is also a definition of the term "specified previous year" as meaning the previous year, which has ended before the date of search, but the date of filing the return of income for such year has not expired before the date of search and return is still awaited. For escaping the rigors of this 10 per cent of penalty calculated on income, the assessee must admit the undisclosed income and substantiate the manner in which it was derived. He must also pay the tax thereon. If he admits concealment, he will escape Section 271(1)(c) also.

Imposition of Penalty

The newly inserted Section 271 AAA envisages the imposition of penalty for what the Income-Tax Department thinks may be an attempted concealment. All that has happened for inviting this penalty is that some entry, gold or cash is spotted during the search and the same is not reflected in the regular books of accounts.

The deeming clause is brought into presume concealment. All these years, concealment has been thought of only in relation to a return of income or loss filed in the normal course under the Act. For the first time, tax law has started talking of concealment without reference to the Return of income to be filed on a date after the search. Plenty of cases are on the statute book showing how admissions and confessions during the search are retracted later on. The Chelliah Committee drew the attention of the government to the practice of obtaining forced confessions during search. Victims of search may admit concealment to escape the fury of the tax officials during the search and later on appeal against the levy of penalty under Section 271 AAA.

There is now a two-tier system of penalties for concealment one covering cases of search initiated before June 1, 2007, and the other concerning cases of search initiated after this date. The quantum of penalty will vary between the two depending on the extent of undisclosed income. The new law will give rise to controversies about entries in diaries, memorandum of books, home-chest accounts, etc. Apart from these two types of cases, there will be penalties for concealment brought out by investigation during the course of scrutiny of returns and also because of surveys conducted by the department.

Some simplification of the law indeed.

T. C. A. Ramanujam
(The author is a former Chief Commissioner of Income-Tax.)

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Software Development Software Programming Software Engineering Custom Software Development Requirement Based Software Development Software Solutions Software Serv

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions