We did not file Form 3CEAA. Which penalty applies, who imposes it, and is it a percentage of anything?
Section 271AA(2) provides: "If any person fails to furnish the information and the document as required under sub-section (4) of section 92D, the prescribed income-tax authority referred to in the said sub-section may direct that such person shall pay, by way of penalty, a sum of five hundred thousand rupees." It is a flat figure — five lakh rupees — not a percentage, and the power is in the PRESCRIBED AUTHORITY under s.286(1), not in the Assessing Officer or the Commissioner (Appeals). That is what distinguishes it from s.271AA(1), which is the older penalty: without prejudice to s.270A, s.271 or s.271BA, where a person in respect of an international transaction or specified domestic transaction fails to keep and maintain the information and document required by s.92D(1) or (2), or fails to report such transaction which he is required to do, or maintains or furnishes an incorrect information or document, the ASSESSING OFFICER OR COMMISSIONER (APPEALS) may direct payment of "a sum equal to two per cent of the value of each international transaction or specified domestic transaction entered into by such person". Both sub-sections are named in s.273B, so no penalty is imposable under either if the person proves there was reasonable cause for the failure.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2017-04-01, reported as Section 271AA of the Income-tax Act, 1961, transcribed from incometaxindia.gov.in/w/section-271aa-16 (heading "Penalty for failure to keep and maintain information and document, etc., in respect of certain transactions", Year: 2017); s.273B read on incometaxindia.gov.in/w/section-273b-30 (Year: 2017). It bears on section 271AA, section 271AA(1), section 271AA(2), section 92D, section 92D(1), section 92D(2), section 92D(4), section 286, section 286(1), section 270A, section 271, section 271BA, section 273B, section Rule 10DA, section Rule 10D of the Income Tax Act 1961, in Penalty, Appeals and How Tax Law Is Read matters.
Three practical consequences. First, because s.271AA(2) is flat, quantum arguments do not run: there is nothing to reduce by pointing to the size of the transaction, and the only defences are that the obligation did not arise, that it was complied with, or reasonable cause under s.273B. Second, because it is imposed by the prescribed authority under s.286(1) and not by the Assessing Officer, a s.271AA(2) penalty appearing in an assessment order or in a notice issued by the Assessing Officer is open to a jurisdictional objection, and the identity of the authority should be checked on the face of the order. Third, the two sub-sections punish different failures and can both be in play: s.271AA(1) reaches failure to keep the transaction-level documentation under Rule 10D and failure to REPORT a transaction, at two per cent of the value of each transaction, while s.271AA(2) reaches only the master file failure under s.92D(4). A constituent entity that has not filed Part A of Form No. 3CEAA — which Rule 10DA(3) requires of every constituent entity regardless of any threshold — is exposed to the five lakh rupee penalty even though it is far below every master file threshold.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
Read aloud by your device. Press again to stop.
Section 271AA, as printed on the departmental page stamped Year 2017, reads: "271AA. (1) Without prejudice to the provisions of section 270A or section 271 or section 271BA, if any person in respect of an international transaction or specified domestic transaction,— (i) fails to keep and maintain any such information and document as required by sub-section (1) or sub-section (2) of section 92D; (ii) fails to report such transaction which he is required to do so; or (iii) maintains or furnishes an incorrect information or document, the Assessing Officer or Commissioner (Appeals) may direct that such person shall pay, by way of penalty, a sum equal to two per cent of the value of each international transaction or specified domestic transaction entered into by such person. (2) If any person fails to furnish the information and the document as required under sub-section (4) of section 92D, the prescribed income-tax authority referred to in the said sub-section may direct that such person shall pay, by way of penalty, a sum of five hundred thousand rupees." The words "section 270A or" in sub-section (1) and the whole of sub-section (2) carry the footnote "Ins. by Act No. 28 of 2016 (w.e.f. 1-4-2017)." Section 273B, on the departmental page stamped Year 2017, names s.271AA among the provisions under which no penalty is imposable if the person proves reasonable cause for the failure.
Not a judgment. The statutory position is that failure to furnish the information and document required by s.92D(4) — the master file — attracts a flat penalty of five hundred thousand rupees, directed by the prescribed income-tax authority referred to in that sub-section and not by the Assessing Officer; that this is distinct from the penalty of two per cent of the value of each international or specified domestic transaction under s.271AA(1), which is directed by the Assessing Officer or Commissioner (Appeals) for failures relating to s.92D(1) and (2), for failure to report a transaction, and for maintaining or furnishing incorrect information or document; and that s.273B makes reasonable cause a complete answer to a penalty under either sub-section.
Not a judgment; no judicial reasoning is stated for the section.
(2) If any person fails to furnish the information and the document as required under sub-section (4) of section 92D, the prescribed income-tax authority referred to in the said sub-section may direct that such person shall pay, by way of penalty, a sum of five hundred thousand rupees.
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppSection 271AA(2) provides: "If any person fails to furnish the information and the document as required under sub-section (4) of section 92D, the prescribed income-tax authority referred to in the said sub-section may direct that such person shall pay, by way of penalty, a sum of five hundred thousand rupees." It is a flat figure — five lakh rupees — not a percentage, and the power is in the PRESCRIBED AUTHORITY under s.286(1), not in the Assessing Officer or the Commissioner (Appeals). That is what distinguishes it from s.271AA(1), which is the older penalty: without prejudice to s.270A, s.271 or s.271BA, where a person in respect of an international transaction or specified domestic transaction fails to keep and maintain the information and document required by s.92D(1) or (2), or fails to report such transaction which he is required to do, or maintains or furnishes an incorrect information or document, the ASSESSING OFFICER OR COMMISSIONER (APPEALS) may direct payment of "a sum equal to two per cent of the value of each international transaction or specified domestic transaction entered into by such person". Both sub-sections are named in s.273B, so no penalty is imposable under either if the person proves there was reasonable cause for the failure. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 271AA, section 271AA(1), section 271AA(2), section 92D, section 92D(1), section 92D(2), section 92D(4), section 286, section 286(1), section 270A, section 271, section 271BA, section 273B, section Rule 10DA, section Rule 10D of the Income Tax Act 1961. It is reported as Section 271AA of the Income-tax Act, 1961, transcribed from incometaxindia.gov.in/w/section-271aa-16 (heading "Penalty for failure to keep and maintain information and document, etc., in respect of certain transactions", Year: 2017); s.273B read on incometaxindia.gov.in/w/section-273b-30 (Year: 2017). Three practical consequences. First, because s.271AA(2) is flat, quantum arguments do not run: there is nothing to reduce by pointing to the size of the transaction, and the only defences are that the obligation did not arise, that it was complied with, or reasonable cause under s.273B. Second, because it is imposed by the prescribed authority under s.286(1) and not by the Assessing Officer, a s.271AA(2) penalty appearing in an assessment order or in a notice issued by the Assessing Officer is open to a jurisdictional objection, and the identity of the authority should be checked on the face of the order. Third, the two sub-sections punish different failures and can both be in play: s.271AA(1) reaches failure to keep the transaction-level documentation under Rule 10D and failure to REPORT a transaction, at two per cent of the value of each transaction, while s.271AA(2) reaches only the master file failure under s.92D(4). A constituent entity that has not filed Part A of Form No. 3CEAA — which Rule 10DA(3) requires of every constituent entity regardless of any threshold — is exposed to the five lakh rupee penalty even though it is far below every master file threshold. If it applies to you, the first step is this: Read the penalty notice for the authority that issued it. Section 271AA(2) confers the power on the prescribed income-tax authority referred to in s.92D(4), that is, the authority prescribed under s.286(1); an order by the Assessing Officer under that sub-section is open to challenge on jurisdiction.
Section 271AA, as printed on the departmental page stamped Year 2017, reads: "271AA. (1) Without prejudice to the provisions of section 270A or section 271 or section 271BA, if any person in respect of an international transaction or specified domestic transaction,— (i) fails to keep and maintain any such information and document as required by sub-section (1) or sub-section (2) of section 92D; (ii) fails to report such transaction which he is required to do so; or (iii) maintains or furnishes an incorrect information or document, the Assessing Officer or Commissioner (Appeals) may direct that such person shall pay, by way of penalty, a sum equal to two per cent of the value of each international transaction or specified domestic transaction entered into by such person. (2) If any person fails to furnish the information and the document as required under sub-section (4) of section 92D, the prescribed income-tax authority referred to in the said sub-section may direct that such person shall pay, by way of penalty, a sum of five hundred thousand rupees." The words "section 270A or" in sub-section (1) and the whole of sub-section (2) carry the footnote "Ins. by Act No. 28 of 2016 (w.e.f. 1-4-2017)." Section 273B, on the departmental page stamped Year 2017, names s.271AA among the provisions under which no penalty is imposable if the person proves reasonable cause for the failure. The matter was decided on 2017-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Not a judgment. The statutory position is that failure to furnish the information and document required by s.92D(4) — the master file — attracts a flat penalty of five hundred thousand rupees, directed by the prescribed income-tax authority referred to in that sub-section and not by the Assessing Officer; that this is distinct from the penalty of two per cent of the value of each international or specified domestic transaction under s.271AA(1), which is directed by the Assessing Officer or Commissioner (Appeals) for failures relating to s.92D(1) and (2), for failure to report a transaction, and for maintaining or furnishing incorrect information or document; and that s.273B makes reasonable cause a complete answer to a penalty under either sub-section.
Not a judgment; no judicial reasoning is stated for the section. In the words reproduced by the source cited on this page: "(2) If any person fails to furnish the information and the document as required under sub-section (4) of section 92D, the prescribed income-tax authority referred to in the said sub-section may direct that such person shall pay, by way of penalty, a sum of five hundred thousand rupees."
It was decided by the CBDT Circulars & Instructions on 2017-04-01 and is reported as Section 271AA of the Income-tax Act, 1961, transcribed from incometaxindia.gov.in/w/section-271aa-16 (heading "Penalty for failure to keep and maintain information and document, etc., in respect of certain transactions", Year: 2017); s.273B read on incometaxindia.gov.in/w/section-273b-30 (Year: 2017). Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 271AA, section 271AA(1), section 271AA(2), section 92D, section 92D(1), section 92D(2), section 92D(4), section 286, section 286(1), section 270A, section 271, section 271BA, section 273B, section Rule 10DA, section Rule 10D, 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 cuts both ways and is cited by both sides. Not a judgment. The statutory position is that failure to furnish the information and document required by s.92D(4) — the master file — attracts a flat penalty of five hundred thousand rupees, directed by the prescribed income-tax authority referred to in that sub-section and not by the Assessing Officer; that this is distinct from the penalty of two per cent of the value of each international or specified domestic transaction under s.271AA(1), which is directed by the Assessing Officer or Commissioner (Appeals) for failures relating to s.92D(1) and (2), for failure to report a transaction, and for maintaining or furnishing incorrect information or document; and that s.273B makes reasonable cause a complete answer to a penalty under either sub-section. It arises in Penalty, Appeals and How Tax Law Is Read matters, on section 271AA, section 271AA(1), section 271AA(2), section 92D, section 92D(1), section 92D(2), section 92D(4), section 286, section 286(1), section 270A, section 271, section 271BA, section 273B, section Rule 10DA, section Rule 10D of the Income Tax Act 1961, and was decided by Not applicable — statutory text. 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. Separate the charges. If the notice mixes the s.271AA(1) two per cent charge with the s.271AA(2) flat charge, ask for them to be particularised, because they rest on different failures and different provisions of s.92D. Do not argue quantum under sub-section (2). It is a fixed five hundred thousand rupees; the argument has to be that the obligation did not arise, that it was met, or that there was reasonable cause under s.273B. Build the s.273B reasonable-cause case in writing and contemporaneously — s.273B names s.271AA, and the burden of proving reasonable cause is on the person. If you have not filed Part A of Form No. 3CEAA because you were below the master file thresholds, file it now: Rule 10DA(3) requires it regardless of the thresholds and s.271AA(2) is the sanction for not furnishing what s.92D(4) requires.
Validity check could not be completed. Validity check could not be completed. The text is taken from a single departmental page stamped Year 2017; I probed suffixes -2, -5 and -10, all of which returned the pre-2012 text with a different heading and no sub-section (2), and I did NOT locate a page for this section with a later Year stamp. A later amendment therefore cannot be excluded. The footnote dating sub-section (2) to Act No. 28 of 2016 with effect from 1 April 2017 is consistent with the identically dated footnote inserting s.92D(4) on the s.92D page, which is the obligation this penalty enforces. I did not check judicial treatment of s.271AA(2). 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.
Text transcribed from incometaxindia.gov.in/w/section-271aa-16, which prints the Income-tax Act, 1961, the heading "Penalty for failure to keep and maintain information and document, etc., in respect of certain transactions" and "Year: 2017", and carries the footnote "15. Ins. by Act No. 28 of 2016 (w.e.f. 1-4-2017)." against both the words "section 270A or" in sub-section (1) and the whole of sub-section (2). Act No. 28 of 2016 is the Finance Act, 2016, and 1 April 2017 is the `decided_on` value. THREE OTHER /w/section-271aa SUFFIXES ARE STALE and print the ORIGINAL 2001 single-paragraph section with the different heading "Penalty for failure to keep and maintain information and document in respect of international transaction": -2 (Year 2010), -5 (Year 2003) and -10 (Year 2006). None of them carries sub-section (2) and none must be used to state the current position. I did NOT locate a departmental page for s.271AA carrying a "Year:" stamp later than 2017, so the entry rests on a single year-stamped page for this section, corroborated only by the internal consistency of its footnote with the identically dated footnote on the s.92D page (also Act No. 28 of 2016, w.e.f. 1-4-2017) that inserted the obligation this penalty enforces. The s.273B point was checked on incometaxindia.gov.in/w/section-273b-30 (Year: 2017), which lists s.271AA. I did not search for or read any decision on s.271AA(2); the library already holds Tribunal authority on s.271AA(1) in DCIT v Priya Blue Industries P Ltd. 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.
Not a judgment. The statutory position is that failure to furnish the information and document required by s.92D(4) — the master file — attracts a flat penalty of five hundred thousand rupees, directed by the prescribed income-tax authority referred to in that sub-section and not by the Assessing Officer; that this is distinct from the penalty of two per cent of the value of each international or specified domestic transaction under s.271AA(1), which is directed by the Assessing Officer or Commissioner (Appeals) for failures relating to s.92D(1) and (2), for failure to report a transaction, and for maintaining or furnishing incorrect information or document; and that s.273B makes reasonable cause a complete answer to a penalty under either sub-section.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
You took a cash loan and now face penalty equal to the whole amount. Is there any relief?
Must penalty be imposed just because the law permits it?
I asked NFAC for a video hearing in my appeal and never got a link. Can that order stand?
The faceless order says I filed no reply when I did, and my hearing request was ignored. Is it valid?