Kalpesh Classes

Scope of Penalty

Question 1 (Scope of Penalty) (ID - 03)​​ 

Mr. X submitted following details, you are required to discuss​​ penalty provisions for the same.

Compute the under reported income.

Question 2 (Scope of Penalty) (ID - 04) (Revision ​​ / Home work)

Anurag Traders, a partnership firm, for the year, filed its return of income on an income of Rs. 40,000. The assessment was completed on​​ an income of Rs. 1,20,000 in the month of June, 1999. The additions included (a) profit on suppressed sales of Rs. 40,000, (b) disallowances in expenses Rs. 40,000. The assessment became final as no appeal was preferred. Penalty proceedings were initiated​​ on the charge of concealment of income of suppressed profits. After considering the explanation to the notice to the penalty, penalty was levied on the charge that inaccurate particulars were furnished. M/s.Anurag Traders contents that the Order of penalty​​ is bad in law. Is the contention justified.​​ 

Question 3 (Scope of Penalty) (ID - 08) (Revision ​​ / Home work)

A notice to levy penalty was issued. The assessee in response thereto filed a written submission requesting to decide the matter. The Assessing​​ Officer before whom this reply was filed retired and the officer, who succeeded him passed the penalty order without providing any further opportunity, but by taking into cognizance the reply filed by the assessee. Whether the order by the Assessing Officer is valid ?

Question 4 (Scope of Penalty) (ID - 10) (Revision ​​ / Home work)

A trust, set up wholly for charitable purposes, furnishes its return of income in respect of year; declaring an income of Rs. 1,40,000. The Assessing Officer on scrutiny of the return finds that the income of the trust is exempt from tax. Are there any penal consequences for the trust's failure of furnish the return of income within the prescribed time ?

Question 5 (Scope of Penalty) (ID - 09) (Revision ​​ / Home work)

State the conditions, if any, to be satisfied by an assessee in order to get relief under section 273A of the Income-tax Act, 1961 regarding the waiver of penalty. ​​ Can the Commissioner of Income-tax refuse to grant relief when the conditions laid down in the section​​ are complied with by the assessee ?

Question 6 (Scope of Penalty) (ID - 13) (Revision ​​ / Home work)

Specify with reason, whether the following acts can be considered as (I) Tax planning; or (ii) Tax management; or (iii) Tax evasion.

• An individual tax​​ payer making tax saver deposit of 100,000 in a nationalised bank.

• A partnership firm obtaining declaration from lenders/depositors in Form No. 15G/15H and forwarding the same to income-tax authorities.

• A company installed an air-conditioner costing ​​ 75,000​​ at the residence of a director as per terms of his appointment but treats it as fitted in quality control section in the factory. This is with the objective to treat it as plant for the purpose of computing depreciation.

• RR Ltd. issued a credit note for 80,000 as brokerage payable to Mr. Ramana who is the son of the managing director of the company. The purpose is to increase the total income of Mr. Ramana from 4,00,000 to 4,80,000 and reduce the income of RR Ltd. correspondingly.

• A company remitted provident fund contribution of both its own contribution and employees’ contribution on monthly basis before due date.​​ 

Question 7 (Scope of Penalty) (ID - 14) (Revision ​​ / Home work)

Mango Ltd. has inadvertently claimed deduction in respect of provision made for payment of gratuity in its return of income. However, this was shown as disallowance in the tax audit report filed U/s. 44AB. The Assessing Officer initiated proceedings for levy of penalty. The company pleads that the claim was inadvertent as the return was computer filed by its administrative staff. Decide the correctness of action proposed by the Assessing Officer.​​ 

Penalty of 270A

Question 1 (Penalty) (ID - 01)

Mr. X submitted following details, you are required to determine under reported income.

Question 2 (Penalty) (ID - 02)​​ 

X. Ltd. submitted following details, you are required to determine under reported income.

Question 4 (Penalty) (ID - 05) (Revision ​​ / Home work)

KP Madhusudan & Co., a partnership firm, had taken​​ certain bank drafts for payments to suppliers of rice and it had made entries in the accounts a few days later, but not on the dates on which the bank drafts were obtained. ​​ The explanation of the assessee was that since sufficient cash balance was not available on those dates, it had obtained hand loans from friends and, as it had expected to repay such loans within a short time, no entries were made in its books of account in respect thereof. Due to inability to furnish evidence for such loans, the assessee offered the amount of Rs.93,000 as additional income towards unexplained investment. ​​ Penalty proceedings were initiated by Assessing Officer of Income-tax Act and levied a penalty. ​​ Is the levy of penalty justifiable ?

Question 5 (Penalty) (ID - 07)​​ (Revision ​​ / Home work)

Can penalty of the Income-tax Act for concealment of income or particulars thereof be imposed on “intangible” additions to income made by the Assessing Officer. Can these additions be utilised by the assessees to explain investments​​ made in the subsequent years ? Is there any time limit for initiation of penalty proceedings in such cases ? ​​ Discuss.​​ 

Question 6 (Penalty) (ID - 21)

M/s. XYZ is a firm. The following are the particulars furnished by the firm:

(1) As per the return of​​ income furnished 139(1) - 50,00,000

(2) Determined under section 143(1)(a) - 60,00,000

(3) Assessed under section 143(3) - 75,00,000

(4) Reassessed under section 147 – 95,00,000

Can penalty be levied under section 270A.​​ 

Question 7 (Penalty) (ID - 22)

Mr. Ram, a resident individual of the age of 55 years, has not furnished his return of income. However, the total income assessed in respect of such year under section 143(3) is 12 lakh. is penalty under section 270A attracted in this case, and if so, what is the quantum of penalty leviable?

Penalty for past incomes​​ 

Question 3 (Penalty) (ID - 11)

For the previous year, the Assessing Officer makes the following observations:

The assessee has purchased on June 3, gold of Rs. 2 lakh for which he is unable​​ to offer any explanation. On his daughter’s marriage, the assessee spends Rs. 12 lakh on May 15, and the assessee fails to explain the source of expenditure.

1.  ​​​​ Can the Assessing Officer levy penalty ?

2. Is it possible for the assessee to argue in the penalty proceedings that the aforesaid investment/expenditure have been made out of following additions made by the Department in earlier years.

Flat / Specific Penalties

Question 1 (Flat Penalty) (ID - 06) (Revision ​​ / Home work)

GK Ltd. filed its return of income for the assessment year 2011-12 on 1.6.2012. The assessing officer​​ levied a penalty of Rs. 5,000 under Section 271F. The assessee makes a submission to the CIT (Appeals) that he has furnished the return of Income within the due date specified in Section 139(4) and hence no penalty should be levied under 271F. Discuss.

Question 2 (Flat Penalty) (ID - 12) (Revision ​​ / Home work)

X, an individual whose total sales in the business of food grains for the year ending 31.3.2015 was 105 lacs, did not maintain books of account. The Assessing Officer levied penalty of 25,000 under​​ section 271A for non-maintenance of books of account and penalty of 52,500 under section 271B for not getting the books audited as required by section 44AB. Is the Assessing Officer justified in levying penalty under section 271B?

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Wishing You all the best for exams.​​