1. The laws of income tax contain provisions to penalize defaulting taxpayer. In this article, we look at penalty under Section 271 of the Income Tax Act, which deals with penalties with respect to concealment of particulars of income or furnishing of inaccurate particulars of income.

2. Penalty under Section 271

Penalty under Section 271 of the Income Tax Act would be levied in case of concealment of particulars of income or fringe benefits or furnishing of inaccurate particulars of income or fringe benefits.

The minimum penalty for offence charged under Section 271 of the Income Tax Act is 100% of the tax sought to be evaded plus tax payable. The maximum penalty leviable under this section is 300% of tax sought to be evaded in addition to tax payable.

3. Applicability of the Section

To re-iterate, penalty under Section 271 (1) will be imposed on the Assess if the Assessing Officer opines that the Assesse has either concealed the details of income or has furnished incorrect particulars of income.

As a primary condition, the Assessing Officer, during the assessment proceedings should be convinced that the Assessee has concealed his/her income.

The penalty order will not be sustainable in law if the findings of the Assessing Officer is found to be unclear and unambiguous. Issuance of penalty without a particular ground will not be found favorable under law.

A taxpayer shouldn’t be penalized for committing any benefits mistakes.

4. What is a Benefits Mistake?

Benefits mistakes are those mistakes which escapes the attention of the Assess, in contrast to a ‘mala fide’ mistake which was committed with the intention of evading tax. Hence, the applicability of penalty under Section 271 would be dependent on distinguishing between a benefits mistake and concealment of income for the purposes of avoiding income tax.