Penalty for false or omitted entries in the books under Income Tax Act [271AAD] and GST Act [122(1A)]

-
271AAD: Penalty for false or omitted entries in the books under Income Tax Act and Section 122(1a) of GST Act

New section 271AAD is inserted in the Income Tax Act by finance act 2020 w.r.t penalty for false entries or omitted entries and shall be applicable w.e.f. 01-04-2020.

Penalty for such false or omitted entries will be equal to the aggregate amount of such false or omitted entry.

It is also important to note that penalty under Section 271AAD can also be levied on any other person who is in any manner involved in making such false entries. It is needless to mentioned that reason behind the introduction of section 271AAD is , recently GST department has caught several cases of fraudulent availment of input tax credit (ITC) based on fake invoices.

Relevant provision is as follows
271AAD. (1) Without prejudice to any other provisions of this Act, if during any proceeding under this Act, it is found that in the books of account maintained by any person there is— 
(i) a false entry; or
(ii) an omission of any entry which is relevant for computation of total income of such person, to evade tax liability, 
the Assessing Officer may direct that such person shall pay by way of penalty a sum equal to the aggregate amount of such false or omitted entry.
(2) Without prejudice to the provisions of sub-section (1), the Assessing Officer may direct that any other person, who causes the person referred to in sub-section (1) in any manner to make a false entry or omits or causes to omit any entry referred to in that sub-section, shall pay by way of penalty a sum equal to the aggregate amount of such false or omitted entry.
Explanation.––For the purposes of this section, “false entry” includes use or intention to use—
(a) forged or falsified documents such as a false invoice or, in general, a false piece of documentary evidence; or
(b) invoice in respect of supply or receipt of goods or services or both issued by the person or any other person without actual supply or receipt of such goods or services or both; or 
(c) invoice in respect of supply or receipt of goods or services or both to or from a person who does not exist.’

Amendment in the GST Act 

In same context Government has inserted subsection 1A to section 122 of the CGST Act 2017. Relevant provision is as follows
Any person who retains the benefit of a transaction covered under clauses (i), (ii), (vii) or clause (ix) of sub-section (1) of section 122 and at whose instance such transaction is conducted, shall be liable to a penalty of an amount equivalent to the tax evaded or input tax credit availed of or passed on .
 Clauses (i), (ii), (vii) or clause (ix) of sub-section (1) of section 122 are listed below 
(i) Supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply;
(ii) Issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder;
(vii) Takes or utilises input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder;
(ix) Takes or distributes input tax credit in contravention of section 20, or the rules made thereunder;
Conclusion : Combined reading of the above amendments strictly focusing on true and correct accounting and book keeping. Any error or mistake can result into imposition of heavy penalties.

Popular posts from this blog

PF payment due dates for the FY 2020-21 for tax audit reporting

-
Image
PF payment due dates for the FY 2020-21 for the purpose of tax audit reporting While preparing Tax Audit Report in Form 3CD it is important to fill due date of payment to various Employees contribution fund and actual payment of the contribution. i.e  "Details of contributions received from employees for various funds as referred to in section  36(1)(va)" Most commonly reported funds under the clause are EPF and ESIC. If there is delay in the payment of the contributions of PF and ESI may result in disallowance of the payment of contribution. Here is the chart of the due dates under EPF and ESIC for the FY 2020-21 for quick reference  PF payment due dates for the FY 2020-21 Period Due date Day Extended date Reference Apr-20 15/05/2020 Friday                                -                           -   May-20 15/06/2020 Monday                  
Continue Reading

PF payment due dates for the FY 2021-22 for reporting u/s 36(1)(va)

-
Image
PF payment due dates for the FY 2021-22 for the purpose of tax audit reporting Reporting under clause 20 (b) of Form 3CD requires due dates of payment to various Employees contribution fund. i.e  "Details of contributions received from employees for various funds as referred to in section  36(1)(va) " Here " due date " means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise. Most commonly reported funds under the clause 20(b) are EPF and ESIC. If there is delay in the payment of the contributions of PF and ESI result in disallowance of the payment of contribution. Here is the chart of the due dates under EPF and ESIC for the FY 2021-22 for quick reference. PF payment due dates for the FY 2021-22 Period Due date Day
Continue Reading

Format of shorter notice consent for AGM (Annual General Meeting)

-
Image
Format of shorter notice consent for AGM (Annual General Meeting) Background The Companies Act mandates companies to issue a notice to members calling a general meeting at least 21 clear days before the date of the meeting. Sometimes, the matters in urgency require quick decision making and in such circumstances, the companies may go for calling general meetings at shorter notice. However, in case of the private limited companies the period can be less than 21 days as provided in the Articles of Association (AOA). Provision and Rule As per the provisions of Section 101 (1) of the Companies Act, 2013, every general meeting of a company may be called by giving not less than twenty-one days clear notice in writing or through electronic mode in such manner as provided under Rule 18 of Companies (Management and Administration) Rules 2014. What is Consent for shorter notice? It is permission obtained by the company from its shareholders, in advance, to call a general meeting at an earlier da
Continue Reading

PF payment due dates for the FY 2022-23 for reporting u/s 36(1)(va)

-
Image
PF payment due dates for the FY 2022-23 for the purpose of tax audit reporting Reporting under clause 20 (b) of Form 3CD requires due dates of payment to various Employees contribution fund. i.e  "Details of contributions received from employees for various funds as referred to in section  36(1)(va) " Here " due date " means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise. Most commonly reported funds under the clause 20(b) are EPF and ESIC. If there is delay in the payment of the contributions of PF and ESI result in disallowance of the payment of contribution. Here is the chart of the due dates under EPF and ESIC for the FY 2022-23 for quick reference. PF payment due dates for the FY 2022-23 Period Due Date Day Extended D
Continue Reading

Letter of Authority for Tax Practitioners (Income tax)

-
Image
Letter of Authority for Tax Practitioners (Income Tax) LETTER OF AUTHORITY I/We ________________ , Proprietor/Partner/Director of _______________________ , hereby authorize Mr./Mrs./CA __________________________ to appear, represent, and settle on my/our behalf the Income tax assessment proceedings before the Income Tax Officer / Assistant/Dy. / Commissioner of Income Tax or in appeal before the Appellate Assistant Commissioner of Income Tax, Commissioner of Income Tax (Appeal), or the Appellate Tribunal or the Board of Direct Taxes for the assessment year 20XX-XX . [to produce accounts and documents/statements and to receive on my/our behalf any notice or documents/statements issued in connection with the said proceedings] or/and [to apply for, obtain, and receive refund orders in respect of the said assessment (if any)] or/and [to apply for copies of the Income Tax assessment
Continue Reading