The Commissioner (Appeals) has levied a penalty under s.271J on my company because my accountant's Form 3CEB was said to contain incorrect information. Can the penalty be levied on me at all?
No. s.271J allows a penalty only against the accountant, merchant banker or registered valuer who furnished the incorrect information, and not against the assessee on whose behalf the report or certificate was furnished. The Tribunal held the penalty could not be levied on the assessee and directed its deletion.
Decided by the ITAT (Sh. Anil Chaturvedi, Accountant Member and Sh. Sanjay Garg, Judicial Member — Income Tax Appellate Tribunal, Delhi Bench 'B') on 2021-10-11, reported as ITA No. 3547/Del/2018; date of hearing 6 October 2021. It bears on section 271J, section 92E of the Income Tax Act 1961, in Penalty matters.
This is the library's only entry on s.271J and it decides the question that actually arises in practice. s.271J is drafted as a penalty on the professional — the Explanation defines "accountant", "merchant banker" and "registered valuer" — but it is being levied on assessees, which is what happened here and what the Tribunal stopped. Two further things a practitioner should carry away. The penalty in this case was levied not by the AO but by the Commissioner (Appeals), which s.271J does permit, so the identity of the authority is not the defect; the identity of the person penalised is. And the year involved was AY 2007-08, whereas s.271J was inserted by the Finance Act 2017 with effect from 1 April 2017 — a point that would have disposed of the penalty on its own but which, on the text I could read, was not argued and not discussed. If you are meeting a s.271J penalty for a year before AY 2017-18, take that point as well as this one; do not assume this decision covers it, because it does not.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee company filed its return for AY 2007-08 on 31 October 2007 declaring total income of Rs 4,31,65,019. In the assessment proceedings the total income was determined at Rs 6,28,17,590. The Commissioner (Appeals)-38, New Delhi took the view that the accountant's report in Form 3CEB, the report on international transactions, disclosed incorrect information, and levied a penalty under s.271J. The penalty was levied on the assessee company itself, and not on the accountant who had furnished the report. The assessee appealed, contending among other things that the order was ultra vires s.271J.
The appeal was allowed and the penalty under s.271J directed to be deleted. s.271J permits the AO or the Commissioner (Appeals), on finding that an accountant, a merchant banker or a registered valuer has furnished incorrect information in a report or certificate furnished under any provision of the Act, to direct that such accountant, merchant banker or registered valuer pay a penalty of ten thousand rupees for each such report or certificate. The penalty in this case had been levied on the assessee, who is not an accountant, a merchant banker or a registered valuer as defined in the Explanation to the section, and in that situation the penalty could not be levied on the assessee at all.
The Tribunal took the section as its starting point and read out what it postulates: the finding required is that an accountant, merchant banker or registered valuer has furnished incorrect information in a report or certificate under any provision of the Act, and the direction the section authorises is that such accountant, merchant banker or registered valuer shall pay a sum of ten thousand rupees by way of penalty for each such report or certificate. The person on whom the liability is imposed is therefore identified by the section itself, and the Explanation defines the three categories. Against that the Tribunal set the fact that the penalty before it had been levied on the assessee, who answered none of the three descriptions. That was the whole of the reasoning: the person penalised was outside the class the section reaches, so the penalty could not be levied on him and had to go.
In the present case, we find that penalty has been levied on the assessee who is not an "accountant" or a "merchant banker" or a "registered valuer" as per the explanation provided under section 271J of the Act. In such a situation, we are of the view that penalty could not be levied on the assessee. We therefore direct its deletion.
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Handle my notice → Ask a CA on WhatsAppNo. s.271J allows a penalty only against the accountant, merchant banker or registered valuer who furnished the incorrect information, and not against the assessee on whose behalf the report or certificate was furnished. The Tribunal held the penalty could not be levied on the assessee and directed its deletion. This was decided by the ITAT (Sh. Anil Chaturvedi, Accountant Member and Sh. Sanjay Garg, Judicial Member — Income Tax Appellate Tribunal, Delhi Bench 'B') and bears on section 271J, section 92E of the Income Tax Act 1961. It is reported as ITA No. 3547/Del/2018; date of hearing 6 October 2021. This is the library's only entry on s.271J and it decides the question that actually arises in practice. s.271J is drafted as a penalty on the professional — the Explanation defines "accountant", "merchant banker" and "registered valuer" — but it is being levied on assessees, which is what happened here and what the Tribunal stopped. Two further things a practitioner should carry away. The penalty in this case was levied not by the AO but by the Commissioner (Appeals), which s.271J does permit, so the identity of the authority is not the defect; the identity of the person penalised is. And the year involved was AY 2007-08, whereas s.271J was inserted by the Finance Act 2017 with effect from 1 April 2017 — a point that would have disposed of the penalty on its own but which, on the text I could read, was not argued and not discussed. If you are meeting a s.271J penalty for a year before AY 2017-18, take that point as well as this one; do not assume this decision covers it, because it does not. If it applies to you, the first step is this: Identify who the penalty order names as the person liable. If it is the assessee rather than the accountant, merchant banker or registered valuer, this decision answers it directly.
The assessee company filed its return for AY 2007-08 on 31 October 2007 declaring total income of Rs 4,31,65,019. In the assessment proceedings the total income was determined at Rs 6,28,17,590. The Commissioner (Appeals)-38, New Delhi took the view that the accountant's report in Form 3CEB, the report on international transactions, disclosed incorrect information, and levied a penalty under s.271J. The penalty was levied on the assessee company itself, and not on the accountant who had furnished the report. The assessee appealed, contending among other things that the order was ultra vires s.271J. The matter was decided on 2021-10-11 by the ITAT (Sh. Anil Chaturvedi, Accountant Member and Sh. Sanjay Garg, Judicial Member — Income Tax Appellate Tribunal, Delhi Bench 'B'). On those facts the ITAT held as follows. The appeal was allowed and the penalty under s.271J directed to be deleted. s.271J permits the AO or the Commissioner (Appeals), on finding that an accountant, a merchant banker or a registered valuer has furnished incorrect information in a report or certificate furnished under any provision of the Act, to direct that such accountant, merchant banker or registered valuer pay a penalty of ten thousand rupees for each such report or certificate. The penalty in this case had been levied on the assessee, who is not an accountant, a merchant banker or a registered valuer as defined in the Explanation to the section, and in that situation the penalty could not be levied on the assessee at all.
The Tribunal took the section as its starting point and read out what it postulates: the finding required is that an accountant, merchant banker or registered valuer has furnished incorrect information in a report or certificate under any provision of the Act, and the direction the section authorises is that such accountant, merchant banker or registered valuer shall pay a sum of ten thousand rupees by way of penalty for each such report or certificate. The person on whom the liability is imposed is therefore identified by the section itself, and the Explanation defines the three categories. Against that the Tribunal set the fact that the penalty before it had been levied on the assessee, who answered none of the three descriptions. That was the whole of the reasoning: the person penalised was outside the class the section reaches, so the penalty could not be levied on him and had to go. In the words reproduced by the source cited on this page: "In the present case, we find that penalty has been levied on the assessee who is not an "accountant" or a "merchant banker" or a "registered valuer" as per the explanation provided under section 271J of the Act. In such a situation, we are of the view that penalty could not be levied on the assessee. We therefore direct its deletion."
It was decided by the ITAT on 2021-10-11 and is reported as ITA No. 3547/Del/2018; date of hearing 6 October 2021. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 271J, section 92E, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed and the penalty under s.271J directed to be deleted. s.271J permits the AO or the Commissioner (Appeals), on finding that an accountant, a merchant banker or a registered valuer has furnished incorrect information in a report or certificate furnished under any provision of the Act, to direct that such accountant, merchant banker or registered valuer pay a penalty of ten thousand rupees for each such report or certificate. The penalty in this case had been levied on the assessee, who is not an accountant, a merchant banker or a registered valuer as defined in the Explanation to the section, and in that situation the penalty could not be levied on the assessee at all. It arises in Penalty matters, on section 271J, section 92E of the Income Tax Act 1961, and was decided by Sh. Anil Chaturvedi, Accountant Member and Sh. Sanjay Garg, Judicial Member — Income Tax Appellate Tribunal, Delhi Bench 'B'. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Check the Explanation to s.271J and confirm the person penalised does not fall within any of the three defined categories. Check the year. s.271J took effect from 1 April 2017; a penalty for an earlier year is open to a separate and stronger objection, which was not taken in this case. Note the quantum the section fixes — ten thousand rupees for each such report or certificate — and check the penalty order has not been computed on some other basis. If you act for the accountant and it is he who is named, this decision does not help him; the defence there is on whether the information was in fact incorrect, and on s.273B, which covers s.271J.
Validity check could not be completed. Validity check could not be completed. I did not search for an appeal against this order or for any later decision on s.271J, and no such check should be assumed. Searching indiankanoon for decisions on s.271J turned up very little: this appears to be one of only a small number of orders in which a s.271J penalty has actually been adjudicated rather than merely mentioned, which is itself worth knowing but means the proposition rests on a single Tribunal order with no High Court authority behind it. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The quoted paragraph was retrieved twice from indiankanoon ?type=print with identical wording, and was independently confirmed by exact-phrase retrieval: the phrase "penalty has been levied on the assessee who is not an" returned exactly one document on indiankanoon, this one. There is a genuine oddity on the face of the report that the reader must be told about: the assessment year is recorded as 2007-08 and the return as filed on 31 October 2007, yet s.271J was inserted by the Finance Act 2017 with effect from 1 April 2017. The order, on the text I could read, neither raises nor discusses that. I have not been able to resolve whether the year is a reporting error or whether the penalty really was levied under s.271J for a year before the section existed, and the entry says so rather than choosing between them. The order also records a second ground, that the order was ultra vires s.271J and that the Commissioner (Appeals) erred in holding Form 3CEB contained incorrect information; the Tribunal decided the appeal on the ground quoted and I did not confirm any separate finding on whether the information was in fact incorrect. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed and the penalty under s.271J directed to be deleted. s.271J permits the AO or the Commissioner (Appeals), on finding that an accountant, a merchant banker or a registered valuer has furnished incorrect information in a report or certificate furnished under any provision of the Act, to direct that such accountant, merchant banker or registered valuer pay a penalty of ten thousand rupees for each such report or certificate. The penalty in this case had been levied on the assessee, who is not an accountant, a merchant banker or a registered valuer as defined in the Explanation to the section, and in that situation the penalty could not be levied on the assessee at all.
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