A notice under section 271J has come to me, the chartered accountant who signed the report, not to my client. On what can it be levied, and how much?
Section 271J allows the Assessing Officer or the Commissioner (Appeals), in the course of any proceedings under the Act, to direct an accountant, a merchant banker or a registered valuer who has furnished incorrect information in any report or certificate under the Act or the Rules to pay a penalty of Rs 10,000 for each such report or certificate. It reaches only those three classes of person, each defined in the Explanation; it cannot be levied on the assessee who filed the report.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2017-04-01, reported as Income-tax Act, 1961, section 271J, inserted by the Finance Act, 2017 (Act No. 7 of 2017) with effect from 1 April 2017. It bears on section 271J, section 288(2), section 273B, section 274, section 274(1), section 275 of the Income Tax Act 1961, in Penalty, Evidence & Burden of Proof and How Tax Law Is Read matters.
This is the provision that reaches the professional personally, and it is the one most likely to be misapplied — the reported instance is a penalty levied on the company rather than on the professional, which the Delhi Bench deleted in Danfoss Power Solutions on the short ground that the assessee was not an accountant, merchant banker or registered valuer within the Explanation. Four features are worth holding on to. The charge is per report or certificate, so a run of certificates multiplies the exposure. The power is not the Assessing Officer's alone — the Commissioner (Appeals) has it too, and may exercise it in the course of an appeal. 'Accountant' takes its meaning from the Explanation below section 288(2), so it is the chartered accountant entitled to act as an authorised representative. And 'registered valuer' is defined by reference to clause (oaa) of section 2 of the Wealth-tax Act, 1957, a statute otherwise repealed for assessment purposes — a definitional cross-reference worth checking before conceding that a valuer falls within the section. Section 271J is one of the sections named in section 273B, so a reasonable cause defeats it, and section 274(1) means the professional is entitled to be heard before any direction is made.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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The section, as printed on the departmental page, reads: '271J. Without prejudice to the provisions of this Act, where the Assessing Officer or the Commissioner (Appeals), in the course of any proceedings under this Act, finds that an accountant or a merchant banker or a registered valuer has furnished incorrect information in any report or certificate furnished under any provision of this Act or the rules made thereunder, the Assessing Officer or the Commissioner (Appeals) may direct that such accountant or merchant banker or registered valuer, as the case may be, shall pay, by way of penalty, a sum of ten thousand rupees for each such report or certificate. Explanation.—For the purposes of this section,— (a) "accountant" means an accountant referred to in the Explanation below sub-section (2) of section 288; (b) "merchant banker" means Category I merchant banker registered with the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992); (c) "registered valuer" means a person defined in clause (oaa) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).'
Statutory position — no holding is asserted; this entry reproduces statutory text. A penalty under section 271J may be directed only against an accountant, a merchant banker or a registered valuer as defined in the Explanation, only for incorrect information furnished in a report or certificate under the Act or the Rules, only by the Assessing Officer or the Commissioner (Appeals), and only at Rs 10,000 for each such report or certificate. A penalty levied on a person who is not within the Explanation cannot be sustained — the ground on which the Delhi Bench deleted the levy in Danfoss Power Solutions Pvt. Ltd. v CIT(A)-38.
The section is deliberately narrow in its subject and in its object. Its subject is a professional certifier, identified not descriptively but by three closed definitions, one of which borrows from section 288(2) and another from the Wealth-tax Act, 1957. Its object is incorrect information in a report or certificate furnished under the Act or the Rules, so the enquiry is directed at the content of the certification rather than at the assessee's tax position. The measure is fixed rather than variable and attaches to each report or certificate. Because it is a penalty under Chapter XXI it carries the ordinary Chapter XXI machinery with it: the hearing requirement in section 274(1), the reasonable-cause protection in section 273B, and the limitation in section 275.
the Assessing Officer or the Commissioner (Appeals) may direct that such accountant or merchant banker or registered valuer, as the case may be, shall pay, by way of penalty, a sum of ten thousand rupees for each such report or certificate.
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Handle my notice → Ask a CA on WhatsAppSection 271J allows the Assessing Officer or the Commissioner (Appeals), in the course of any proceedings under the Act, to direct an accountant, a merchant banker or a registered valuer who has furnished incorrect information in any report or certificate under the Act or the Rules to pay a penalty of Rs 10,000 for each such report or certificate. It reaches only those three classes of person, each defined in the Explanation; it cannot be levied on the assessee who filed the report. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 271J, section 288(2), section 273B, section 274, section 274(1), section 275 of the Income Tax Act 1961. It is reported as Income-tax Act, 1961, section 271J, inserted by the Finance Act, 2017 (Act No. 7 of 2017) with effect from 1 April 2017. This is the provision that reaches the professional personally, and it is the one most likely to be misapplied — the reported instance is a penalty levied on the company rather than on the professional, which the Delhi Bench deleted in Danfoss Power Solutions on the short ground that the assessee was not an accountant, merchant banker or registered valuer within the Explanation. Four features are worth holding on to. The charge is per report or certificate, so a run of certificates multiplies the exposure. The power is not the Assessing Officer's alone — the Commissioner (Appeals) has it too, and may exercise it in the course of an appeal. 'Accountant' takes its meaning from the Explanation below section 288(2), so it is the chartered accountant entitled to act as an authorised representative. And 'registered valuer' is defined by reference to clause (oaa) of section 2 of the Wealth-tax Act, 1957, a statute otherwise repealed for assessment purposes — a definitional cross-reference worth checking before conceding that a valuer falls within the section. Section 271J is one of the sections named in section 273B, so a reasonable cause defeats it, and section 274(1) means the professional is entitled to be heard before any direction is made. If it applies to you, the first step is this: Check first whether the person named in the notice is within the Explanation. A company, a firm or an individual assessee is not an accountant, merchant banker or registered valuer, and a penalty on such a person cannot stand.
The section, as printed on the departmental page, reads: '271J. Without prejudice to the provisions of this Act, where the Assessing Officer or the Commissioner (Appeals), in the course of any proceedings under this Act, finds that an accountant or a merchant banker or a registered valuer has furnished incorrect information in any report or certificate furnished under any provision of this Act or the rules made thereunder, the Assessing Officer or the Commissioner (Appeals) may direct that such accountant or merchant banker or registered valuer, as the case may be, shall pay, by way of penalty, a sum of ten thousand rupees for each such report or certificate. Explanation.—For the purposes of this section,— (a) "accountant" means an accountant referred to in the Explanation below sub-section (2) of section 288; (b) "merchant banker" means Category I merchant banker registered with the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992); (c) "registered valuer" means a person defined in clause (oaa) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).' 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. Statutory position — no holding is asserted; this entry reproduces statutory text. A penalty under section 271J may be directed only against an accountant, a merchant banker or a registered valuer as defined in the Explanation, only for incorrect information furnished in a report or certificate under the Act or the Rules, only by the Assessing Officer or the Commissioner (Appeals), and only at Rs 10,000 for each such report or certificate. A penalty levied on a person who is not within the Explanation cannot be sustained — the ground on which the Delhi Bench deleted the levy in Danfoss Power Solutions Pvt. Ltd. v CIT(A)-38.
The section is deliberately narrow in its subject and in its object. Its subject is a professional certifier, identified not descriptively but by three closed definitions, one of which borrows from section 288(2) and another from the Wealth-tax Act, 1957. Its object is incorrect information in a report or certificate furnished under the Act or the Rules, so the enquiry is directed at the content of the certification rather than at the assessee's tax position. The measure is fixed rather than variable and attaches to each report or certificate. Because it is a penalty under Chapter XXI it carries the ordinary Chapter XXI machinery with it: the hearing requirement in section 274(1), the reasonable-cause protection in section 273B, and the limitation in section 275. In the words reproduced by the source cited on this page: "the Assessing Officer or the Commissioner (Appeals) may direct that such accountant or merchant banker or registered valuer, as the case may be, shall pay, by way of penalty, a sum of ten thousand rupees for each such report or certificate."
It was decided by the CBDT Circulars & Instructions on 2017-04-01 and is reported as Income-tax Act, 1961, section 271J, inserted by the Finance Act, 2017 (Act No. 7 of 2017) with effect from 1 April 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 271J, section 288(2), section 273B, section 274, section 274(1), section 275, 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. Statutory position — no holding is asserted; this entry reproduces statutory text. A penalty under section 271J may be directed only against an accountant, a merchant banker or a registered valuer as defined in the Explanation, only for incorrect information furnished in a report or certificate under the Act or the Rules, only by the Assessing Officer or the Commissioner (Appeals), and only at Rs 10,000 for each such report or certificate. A penalty levied on a person who is not within the Explanation cannot be sustained — the ground on which the Delhi Bench deleted the levy in Danfoss Power Solutions Pvt. Ltd. v CIT(A)-38. It arises in Penalty, Evidence & Burden of Proof and How Tax Law Is Read matters, on section 271J, section 288(2), section 273B, section 274, section 274(1), section 275 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. Count the reports and certificates the notice covers — the charge is Rs 10,000 for each, so the exposure is a multiple, not a single figure. Identify what specific information in the report is said to be incorrect and where; the section requires a finding of incorrect information in a report or certificate, not merely a disagreement with a professional judgement or a position later disallowed. Insist on a hearing under section 274(1) and put a reasonable-cause explanation on record under section 273B, which expressly names section 271J. Check the limitation under section 275 — a section 271J direction is not linked to the assessment of the professional, so it will ordinarily be the residuary clause that runs, and note that the substituted section 275 measures six months from the end of the quarter. Where a merchant banker is named, verify that it is a Category I merchant banker registered with SEBI; where a valuer is named, verify registration in the sense of clause (oaa) of section 2 of the Wealth-tax Act, 1957.
Still good law. In force from 1 April 2017. The text has been re-verified in the consolidation of the section, with the heading, Act name, chapter, vintage and amendment footnote all printed; a section inserted in 2017 carrying a 2017 vintage with no later footnote is consistent with the text being current, and no amending footnote of any later year appears on it. Its operative content has been corroborated against the Delhi Bench's paragraph 6 in Danfoss Power Solutions Pvt. Ltd. v CIT(A)-38 (11 October 2021). Reported case law on s.271J is very thin. A targeted search returned only that one substantive decision, which is already an entry in this library. One statement on this page should be checked before it is relied on. That s.271J is named in the s.273B list is taken from a party's reproduction of s.273B inside another order, and has not been read from s.273B itself. The reasonable-cause defence is the whole answer to this penalty, so confirm it from the section. Two limits on the charge that do not depend on any of that. The persons who can be penalised are defined exhaustively in the Explanation - an accountant, a merchant banker or a registered valuer - so a company, a firm or an individual assessee is outside it altogether. And the charge is Rs 10,000 for each report or certificate containing incorrect information, so the exposure in a notice is a multiple and not a single figure. For a year governed by the Income-tax Act 2025 the successor of s.271J should be identified; that correspondence has not been established here. 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.
ON THE TEXT AND ITS CORROBORATION. The section has been read in its consolidated text, which prints the heading 'Penalty for furnishing incorrect information in reports or certificates', names the Act as the Income-tax Act, 1961, places the section in 'CHAPTER XXI - PENALTIES IMPOSABLE', carries a 2017 vintage and the footnote 'Ins. by Act No. 7 of 2017 (w.e.f. 1-4-2017)'. Its operative content - who may levy, on whom, for what, and at what rate - has been independently corroborated against the Delhi Bench's paragraph 6 in Danfoss Power Solutions Pvt. Ltd. v CIT(A)-38, New Delhi (11 October 2021). That decision is already an entry in this library. WHAT HAS NOT BEEN ESTABLISHED. Whether s.271J has been amended since 2017. A 2017 vintage on a section inserted in 2017 is consistent with the text being current but does not prove it. And that s.271J is named in s.273B has been taken from a reproduction of s.273B inside another order rather than from the section itself; confirm it before the reasonable-cause defence is pleaded on the strength of this page. ON WHO IS WITHIN THE EXPLANATION, because that is where most notices fail. A merchant banker must be a Category I merchant banker registered with the Securities and Exchange Board of India, and a valuer must be registered in the sense of clause (oaa) of section 2 of the Wealth-tax Act, 1957. Verify the registration before answering on the merits; a person outside those descriptions cannot be penalised under this section at all. ON THE FIELDS. 'tier' is set to 'cbdt' because the fixed vocabulary for that field has no value for a statutory entry; the source is the Department's own consolidated text of the section, not a Board circular. 'decided_on' is the date the provision takes effect and not a decision date. WHAT TO CHECK ON A NOTICE, because the section is narrow and notices under it often are not. Whether the person named is within the Explanation at all. How many reports or certificates the notice covers, since the charge is Rs 10,000 for each. What specific information is said to be incorrect and where - the section requires a finding of incorrect information in a report or certificate, not merely a disagreement with a professional judgement or a position later disallowed. Whether a hearing under s.274(1) has been given. And the limitation under s.275, which, since a s.271J direction is not linked to the assessment of the professional, will ordinarily run under the residuary clause, the substituted section measuring six months from the end of the quarter. 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.
Statutory position — no holding is asserted; this entry reproduces statutory text. A penalty under section 271J may be directed only against an accountant, a merchant banker or a registered valuer as defined in the Explanation, only for incorrect information furnished in a report or certificate under the Act or the Rules, only by the Assessing Officer or the Commissioner (Appeals), and only at Rs 10,000 for each such report or certificate. A penalty levied on a person who is not within the Explanation cannot be sustained — the ground on which the Delhi Bench deleted the levy in Danfoss Power Solutions Pvt. Ltd. v CIT(A)-38.
TaxSphere, “Statutory position — s.271J: the Rs 10,000 penalty on the accountant, merchant banker or registered valuer personally”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-271j-penalty-on-the-accountant-merchant-banker-or-registered-valuer/ (validity last checked 2026-09-08)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
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