Penalties in Income Tax Act

In an income tax concealment case, the Ahmedabad bench ruled that a penalty can be issued without a limb amount. The tax penalty is a burden to the taxpayers. Tax Revenue plays a prominent role in economic growth. Direct tax is part of tax revenue. It has a relationship with demand, inflation and supply. The deduction for the insurance, loans and equity-linked mutual funds is to encourage the financial services. The tax deduction attracts organisations and individuals. The structure of Income tax improves the stability. Indirect tax thrust the companies to reduce the cost of production and control the selling price. The cost of production reduces the tax payment. Selling prices improves the profit and market competition.

The Mumbai Bench of the Income Tax Tribunal said in the latest news that two hundred per cent of the penalty is in cases where the department specifies the misreporting. Some of the recent penalty cases that make a point to the general public are as follows: Golden Peace Hotels and Resorts, Sahara India Financial Corporation Ltd, Vasan Healthcare P Ltd, Sugar Exim Corporation Ltd, and Ashok Kumar Maneklal Parikh. The IPO market rose by 63 companies in 2021. In 2022, the Indian stock exchange is in third position in the world market due to the IPO listings. The 2023 union budget wants to enhance stability, ease of doing business and compliance framework. The Union budget does not implement changes to the corporate tax structure. The penalties create awareness for the taxpayers. Here is the set of penalty listings from Income tax departments for the various issues.

Different types of penalties:

Taxpayers are requested to pay a penalty. This penalty is to correct the tax payment. A direct relationship exists between tax revenue and GDP growth, inflation, infrastructure and welfare schemes. The following points summarise the tax penalties from the Income tax department.

• Default in tax payment. In this case, the assessing officer is the deciding authority. The penalty amount will not exceed the arrears amount.
• After investigation, the income tax department assessed the under-reporting of income. In such cases, the department has the right to charge two hundred per cent. If the income declared by the assessment and calculations differ, the department charges fifty per cent of such under-reported figure.
• If the organisation fail to maintain the documents and record the transactions. The amount of penalty is 25,000 for domestic transactions. International transactions without books of accounts get a penalty amount of two per cent.
• Organisations produce fake invoices and show false entries for tax evasion. In the GST regime, the false invoices have three types of transactions. One is the issue of invoices without goods and services supply. The company issues invoices to a person. And the actual location of the supply is different. The goods are diverted to another place. Using the shell companies to show invoices and use the input tax credit to increase the turnover. The GST system of taxation is facing problems from these sorts of fake invoices. The assessed may omit entry that is essential for the calculation of total income. In the case of a fake invoice, the assessor has to pay the amount of the omitted entries.
• The undisclosed income falls into two categories. One is before 2016, and the other is after 2016. After 2016, the charge is thirty per cent for late payments. If the payment is not done, the penalty charge is sixty per cent. In the case of cases before 2016 and after 2012, the penalty is ten per cent for late payment. The penalty is sixty per cent for a missed payment. If the payment was made before the end of the previous year, the assessment gets no penalty.
• The tax calculation without an audit report is treated with a penalty of 1, 50,000 or half of the total sale or gross receipts or turnover.
• If the corporate company fail to furnish the audit report of foreign business, the taxpayer gets a penalty of one lakh.
• If a person fails to deduct tax at source, he should pay the same amount of tax that he is liable to pay.
• If a person fails to collect tax at source, he should pay the same amount of tax to the Government.
• If the details of TCS and TDS are not attached to the tax payment or false information is attached, the taxpayer gets a penalty from 10,000 to 1, 00,000.
• If the amount for loan and deposit by way of account payee cheque or ECS or draft exceeds 20,000, the account holder should pay a penalty equal to the amount of the loan or deposit.
• If the account holder receives a sum of two lakh in one single transaction, he is liable to a penalty of an equal amount.
• If the repayment mode is not through account payee cheque or ECS or draft, the payment to the loan or deposit is charged with a penalty of twenty thousand.
• If the taxpayer furnishes an inaccurate statement, he gets fifty thousand as a penalty.
• If the taxpayer fails to furnish information after notice, he should pay a penalty of a thousand for each day of default. If the taxpayer hides financial transactions, he gets a penalty of 500 for each day.
• If the taxpayer hides an international transaction, the penalty is two per cent to such an international transaction.
• If the taxpayer hides the details of the investment fund, he is liable for a penalty of 5, 00,000.
• The incorrect report from a registered valuer merchant banker or accountant is 10,000.
• If the taxpayer takes care of another person’s business or profession, the failure to furnish such information attracts a penalty of 1000.
• If the taxpayer fails to furnish a report from another country, the penalty is 5000 for one month, 50,000 per day after issuing service of order, and five lakh for inaccurate information.
• Apply with a false PAN card attracts a penalty of 10,000.
• Apply with false TAN attract a payment of 10,000.
• If the taxpayer fails to put his signature in the statements, he gets a penalty of 10,000.
• If the taxpayer fails to answer the questions from the income tax authority, the penalty is 10,000.
• If the taxpayer fails to respond to the notice from the income tax department, he gets a penalty of 10,000.

Final Words:

Developed countries provide medical facilities and social security to the citizens. The developed countries help the citizens to overcome unemployment, retirement life issues and other financial problems. In India, the government manages the education and health care for the poor people. The tax rates are becoming less in India. In the eighties, the tax rates were around 97.75 per cent. Now, it is reduced. Tax is the price that every individual pays for civilisation. The report of Credit Suisse Global Wealth says that India has around 1815 numbers of high net-worth individuals. It reflects the inequality. The Indian Government provide quality education, health care system and welfare plans. The tax revenue is the income source of the Government. Tax collection brings equality and economic development.