Penalty under section 271AA

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Last updated on May 9th, 2021 at 06:46 pm

Penalty under section 271 AA under Income Tax Act 1961, for failure to keep and maintain information and document in respect of certain transactions

When penalty u/s 271AA is applicable?

Penalty u/s 271AA is applicable for failure to keep, maintain, report, furnish information and document, etc. in respect of an international transaction or specified domestic transaction.

Why is penalty u/s 271AA(1) imposed?

– If a person fails to keep and maintain any such information and document as required u/s 92D(1) or u/s 92D(2).
– If a person fails to report such transaction which he is required to do so or
– If a person furnishes incorrect information or document.
– If a person maintains incorrect information or document.

Why is penalty u/s 271AA(2) imposed?

If a person fails to furnish the information and the document required u/s 92D(4).

Who can impose the penalty u/s 271AA?

Penalty u/s 271AA can be imposed by the Assessing Officer or the Commissioner (Appeals).

What is the quantum of penalty leviable u/s 271AA?

Assessing Officer or Commissioner (Appeals) may direct the assessee to pay a penalty equal to 2% of the value of the international transaction or specified domestic transaction entered by the assessee.

If the assessee fails to furnish the information & the document as required u/s 92D(4) under sub-section (4) of section 92D, the prescribed income-tax authority referred to in the said sub-section may direct that such person shall pay, by way of penalty, a sum of five hundred thousand rupees.

Sec 271AA(2) – A penalty equal to Rs. 5,00,000/- shall be levied for contravention of section 271AA(2).

Note: Penalty under this section shall not be imposed unless the assessee is given a reasonable opportunity of being heard.

Whether Immunity / Relief from penalty as per section 273B can be provided?

If the taxpayer proves that there was a reasonable cause for failure, then in that case immunity from penalty will be provided in genuine cases.

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CA Ankita Khetan
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